Supreme Court New South Wales

• Medium Neutral Citation: L&B Linings Pty Ltd v WorkCover Authority of New South Wales [2011] NSWSC 474
• Hearing dates: 14/03/2011, 15/03/2011
• Decision date: 24 May 2011
• Jurisdiction: Common Law - Administrative Law
• Before: Rothman J

Decision

(i) Summons dismissed;

(ii) The plaintiff pay the defendant's costs of and incidental to the proceedings, as agreed or assessed.

• Catchwords: ADMINISTRATIVE LAW - workers' compensation premiums - deemed worker assessment under Schedule 1 of the Workplace Injury Management and Workers Compensation Act 1998 - no error of law or jurisdictional error - certiorari (or orders in the nature thereof) and declarations refused
• Legislation Cited: Home Building Act 1980; Industrial Arbitration Act 1940; Industrial Relations Act 1996; Workers Compensation Amendment (Insurance Reform) Act 2003; Workers' Compensation Act 1942; Workers Compensation Act 1987; Workplace Injury Management and Workers Compensation Act 1998
• Cases Cited: Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) 126; Australian Mutual Provident Society v Allan (1978) 52 A.L.J.R. 407; Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139; Bell Bros Pty Ltd v Shire of Serpentine-Jarrahdale [1969] HCA 63; (1969) 121 CLR 137; Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372; Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163; Fish v Solution 6 Holdings Limited [2006] HCA 22; (2006) 225 CLR; Frauenfelder v Reid [1963] HCA 3; (1963) 109 CLR 42; Haberfield v Department of Veterans' Affairs as Delegate for Comcare [2002] FCA 1579; Haider v JP Morgan Holdings Aust Ltd Trading as JP Morgan Operations Australia Ltd [2007] NSWCA 158; Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21; Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389; Kostas v HIA Insurance Services Pty Limited [2010] HCA 32; (2010) 241 CLR 390; Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24; Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259; Minister for Immigration and Citizenship v SZIAI [2009] HCA 39; (2009) 83 ALJR 1123; Minister for Immigration v Eshetu [1999] HCA 21; (1999) 197 CLR 611; Moir v Schrader [1936] HCA 69; (1936) 56 CLR 310; Neale v Atlas Products (Vic) Pty Ltd [1955] HCA 18; (1955) 94 CLR 419; NRMA Insurance Limited v Ainsworth [2011] NSWSC 344; Parisienne Basket Shoes Pty Ltd v Whyte [1938] HCA 7; (1938) 59 CLR 369; Project Blue Sky Inc & Ors v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355; Public Service Board of NSW v Osmond [1986] HCA 7; (1986) 159 CLR 656; Re Minister for Immigration and Multicultural Affairs; Ex parte S154/2002 [2003] HCA 60; (2003) 77 ALJR 1909; Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497; Riverina Wines Pty Ltd v Registrar of The Workers Compensation Commission of NSW & Ors [2007] NSWCA 149; Sinclair v Maryborough Mining Warden [1975] HCA 17; (1975) 132 CLR 473; Solution 6 Holdings Limited v Industrial Relations Commission of NSW [2004] NSWCA 200; (2004) 60 NSWLR 558; Soulenezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Staging Connections P/L v Workcover Authority of New South Wales [2004] NSWCA 357; Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16; Sydney Ferries v Morton [2010] NSWCA 156; Turner v Stewardson [1961] WCR 169; Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561
• Texts Cited: H Arthurs, Reinventing Labor Law for the Global Economy (2001) 22 Berkeley J. Emp. & Lab. L. 271; G Davidov, The (Changing?) Idea of Labour Law (2007) 146 International Labour Review 311; G Davidov and B Langille, Boundaries and Frontiers of Labour Law: Goals and Means in the Regulation of Work (2006) Heart Publishing (in particular A Trebilcock, Using Development Approaches to Address the Challenge of the Informal Economy for Labour Law at 63-76); M Freedland, Application of Labour and Employment Law Beyond the Contract of Employment (2007) 146 International Labour Review 3; M Freedland, The Personal Employment Contract (2003), Oxford University Press; J Fudge and R Owens, Precarious Work, Women and the New Economy: The Challenge to Legal Norms (2006) Hart Publishing; R Owens and J Riley, The Law of Work (2007) OUP; A Stewart, Redefining Employment? Meeting the Challenge of Contract and Agency Labour (2002) 15 AJLL 246; K Stone, Flexibilisation, Globalisation and Privatisation: Three Challenges to Labour Rights in Our Time, GALS Working Paper (2005); K Stone, From Widgets to Digits: Employment Regulation for the Changing Workplace (2004) Cambridge University Press
• Category: Principal judgment
• Parties: L&B Linings Pty Ltd (Plaintiff); WorkCover Authority of New South Wales (Defendant)
• Representation: Counsel: S Epstein SC / J Dodd (Plaintiff); A Mitchelmore (Defendant); Solicitors: Thompson Eslick Solicitors (Plaintiff); WorkCover Authority of New south Wales (Defendant)
• File Number(s): 2010/258252

Judgment

1 The plaintiff, L&B Linings Pty Ltd (hereinafter "L&B"), challenge the determination and/or assessment by the WorkCover Authority of New South Wales (hereinafter "WorkCover") of L&B's premiums for insurance under the Workers Compensation Act 1987 (hereinafter "the Act"). The amended summons seeks declarations and orders effectively declaring invalid the insurance premiums assessed by WorkCover for the years ending 13 September 2004, 13 September 2005 and 13 September 2006.

2 On 14 May 2010, WorkCover adjusted upwards L&B's insurance premiums to reflect WorkCover's determination that persons for whom insurance premiums had not previously been paid were workers or deemed workers within the meaning of the Act and L&B were liable for insurance premiums in relation to them. The insurance company, Allianz Australia Workers' Compensation (NSW) Limited (hereinafter "Allianz"), while not a party to the proceedings, is required to charge in accordance with the determination of WorkCover, and is the payee for any premium required to be paid.

Jurisdiction of the Court

3 The amended summons, as previously stated, seeks to have the Court issue a declaration that the determination of WorkCover of 14 May 2010 is "invalid", and orders in the nature of mandamus requiring WorkCover determine L&B's application for review under s 170 of the Act in accordance with law.

4 Declarations are a proper tool for judicial review, and I will treat the declaration of invalidity as including an order that the determination, whether or not valid, was affected by error of law. Further, it would seem, if such a finding were made, an order quashing the determination would be appropriate.

5 I therefore approach the task before the Court on the basis that the determination should be quashed (or is invalid) if error of law is disclosed or there has been jurisdictional error in the determination or in the process of reaching the determination.

6 Thus, relevantly, error will be disclosed at least where WorkCover has: not taken into account a criterion required by law; or taken into account an irrelevant criterion; utilised, or asked itself the wrong test or question; or misapprehended the nature or limits of its powers as a consequence of which it has performed an act or made a decision (or not done so), which is not sanctioned by authority: see, inter alia, Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163; Minister for Aboriginal Affairs v Peko-Wallsend Ltd [1986] HCA 40; (1986) 162 CLR 24. Further, jurisdictional error will have occurred if there has been a denial of procedural fairness. Error of law will be dealt with later in these reasons but, relevantly, includes, if there be an obligation to provide reasons, insufficiency of reasons. Lastly, in the case of both jurisdictional error and error of law, I accept the legal foundation that the plaintiff alleges, namely, that, even if identifiable error were not disclosed, the determination may be quashed for manifest unreasonableness, being a decision so unreasonable that error is manifest and, for jurisdictional error, such that no reasonable decision-maker could have to come to it: see Peko-Wallsend , supra, at 41-42.

Procedural facts

7 L&B has for some time carried, as is required by law, a workers' compensation insurance policy for whom the insurer was Allianz. Allianz was the insurer for each of the relevant years. A premium was charged in relation to each year in accordance with the prescribed calculation based upon the schedule and returns of L&B.

8 On or about 1 September 2007, Allianz appointed auditors, AEA & Associates (hereinafter "AEA"), to carry out a wage audit for the relevant years. On or about 30 November 2007, AEA reported to Allianz (which report included a number of annexures) and assessed the total insurable wages for the three-year period at $2,247,019.

9 On 30 December 2007, the chartered accountants (Byrons) acting on behalf of L&B wrote to AEA (again with annexures) complaining about the increase in total wages assessed for insurance purposes. The annexures to the letter from Byrons included certain decisions of the Administrative Decisions Tribunal (hereinafter "ADT") relating to the status of a number of persons performing work for L&B.

10 On 27 February 2008, Allianz wrote to L&B and claimed additional premium of $102,033.97 based upon the foregoing wage assessment carried out by AEA. On 26 March 2008, Byrons "appealed" the wage audit assessment under s 170 of the Act. On 15 August 2008, Allianz sought additional premium of $97,772.88. On 16 December 2008, WorkCover wrote to L&B in relation to its appeal under s 170 of the Act. In that letter, after referring to the appeal, WorkCover stated:

"As a result of my investigations and in consultation with Emma of Clark Pacific Insurance Brokers it was agreed to reverse the findings of the audit conducted by AEA & Associates in 2007 and have a different auditor review the same policy periods. As such, your appeal is no longer required and has been closed.

I understand that WorkCover's Compliance Branch has arranged for a new audit to take place in the near future. In the event that you are not satisfied with the outcome of this audit, in the first instance, please liaise with the auditor and agent to resolve any issues. Failing this, please lodge a new Appeal with the WorkCover Appeals Branch."

11 On 8 January 2009, the new auditors, referred to above, Coulton Isaac Barber (hereinafter "CIB"), appointed by WorkCover, reported. The report included annexures and assessed an alleged total wages bill of $3,579,102 over the three-year period.

12 On 28 January 2009, Allianz, pursuant to the CIB audited wage assessment, wrote to L&B informing them that an additional premium of $178,109.74 was payable. That premium was based upon the direction of WorkCover, which, in turn, was based on information resulting from the conduct of the CIB audit.

13 On 30 April 2009, Byrons, on behalf of L&B, wrote to WorkCover attaching an Application for Review (also referred to by the parties as an appeal under s 170 of the Act) and annexures thereto. (Notwithstanding the reference by the parties to the term "appeal", s 170 of the Act refers to the process as a review, which it clearly is and it is a review of the disputed aspect of a premium determination.) By letter dated 30 October 2009, WorkCover responded to Byrons and reduced the total wages assessed by CIB to $2,682,965. The response, in part, stated:

"WorkCover has received all the available information and is satisfied that 17 of the contractors previously included by the auditor are operating independent businesses....

Indicators examined by the Commission and WorkCover in determining whether a contractor is a deemed worker are whether the:

• arrangement is evidenced in writing
• contractor/deemed worker measures and inspects the site and provides a fixed price quotation inclusive of labour and material
• contractor/deemed worker deals directly with the client requesting the work or the principal contractor for whose benefit the work is to be done
• contractor/deemed worker has an opportunity to make a profit or loss over and above an hourly rate
• contractor/deemed worker supplies the materials, plant and equipment used in completion of the job
• contractor/deemed worker pursuant to any contract is subject to statutory and/or common law liability or loss as a result of bad workmanship
• contractor/deemed worker employs and/or sublets any of the contracted work.

 

...

 

While the indicia used in any decision made by the Commission are given consideration in our deliberations, the decision on whether any contractor is a deemed worker must be made having regard to the individual circumstances of each case."

14 To that letter was annexed a schedule setting out the persons that WorkCover had classified as deemed workers for the purpose of the Act. Following the letter of 30 October 2009, there was correspondence, predominantly through emails, between WorkCover and Byrons regarding these issues. On 1 December 2009, Byrons wrote to WorkCover objecting to the proposed determination of 30 October 2009. The letter in part stated:

"We submit that your reference to factors and information taken into account gives no indication of the reasoning process adopted which has resulted in 17 contractors being excluded from the proposed calculation of wages and 46 contractors being included.

We submit that, as a decision maker affecting our client's rights and liabilities, you have an obligation to provide sufficient reasons to enable our client to understand why it is to be imposed with additional premiums."

15 The foregoing letter of 1 December 2009, also referred to a number of comments that, it seems, Byrons considered WorkCover had not taken into account. They included: the delay of over six months in WorkCover's response and the effect on premiums of withholding the determination of their application; that there is no statutory basis for a "proposed decision"; and certain matters relating to the contractors, and inquiries made by WorkCover in relation thereto. Particularly, in relation to the last mentioned matter, reference was made to the holding of contractor licences to which Byrons made the following comment:

"a. Contractors undertaking commercial installation need no such licence and contractors may rely upon such a licence held by a head contractor. The absence of such a licence should therefore not be viewed as a determining factor.

b. The holding of a contractor's licence is not included as an indicator at page 3 of your correspondence but notwithstanding was relied upon in as such [sic] in the exclusion of Wayne Fonari and the inclusion of Mr Zhao. The indicators referred to at page 3 appear to have been otherwise ignored.

c. The reliance upon the holding or absence of a contractors [sic] licence as a determining factor suggests consideration of matters outside the list on page 1 of your letter and indicators other than those at page 3. What other information have you based your decisions upon?"

16 Further, Byrons referred, in relation to the letter of 30 October 2009, to the fact that they had provided WorkCover with further information and were unaware of the use, if any, that had been made of that material. They also referred to a further aspect of the failure, in their view, to provide reasons, which included the absence of reasons for persons to be placed on the excluded list, the absence of an explanation or indication of the use made of additional information provided by Byrons in assessing the persons on the included list, and the inclusion, in particular, of three contractors who have their own workers' compensation policies (resulting effectively in the double payment of premiums). Particular reference was also made to one contractor, Jing Sheng, who had earned over $183,172 in 2005/2006 and the assertion made that the amount involved (together with the amounts of other persons of similar kind) meant that the person could not have been a deemed worker. Objection was also taken to the arbitrary inclusion of 80% of the payments made to such persons. Other matters were raised, but I do not repeat each and every one of them.

17 By letter dated 11 December 2009, WorkCover responded to Byrons. Given the relevance of this letter to the issues in these proceedings, it is appropriate to repeat the substance of the letter. It should be noted that the letter attached a compact disc that included the auditors' report, working papers and documentary evidence obtained during the audit and invited L&B to provide further information in support of its s 170 Appeal by no later than 1 February 2010. WorkCover also informed L&B that it would determine the wages as detailed in their proposed determination of 30 October 2009, in the absence of any further written information. The substance of the response to the arguments provided by L&B was in the following terms:

"1. WorkCover acknowledges and again apologises for the delay between the receipt of your submissions and the issue of a proposed determination.

However, in regards to your comments in relation to your client being 'forced to pay the premium' and that the delay in our response somehow contributed to this, we wish to advise you that in accordance with s 172(4) of the Workers Compensation Act 1987 ("the Act") your client is required to pay any premium identified as a result of the audit, despite the lodging of an appeal.

If, as a result of WorkCover's determination under s170 of the Act, your client is due a refund of premium already paid, your client will also be entitled to interest on the refunded amount.

2. WorkCover issues a Proposed Determination in relation to s170 appeals as a matter of procedural fairness, not in an attempt to avoid our statutory obligations. This affords you / your client the opportunity to provide additional information in support of any contentions that arise from our Proposed Determination, prior to finalising the appeal.

In addition, we advise that the inclusion of any contractor deemed to be a worker did have regard to the individual circumstances of each case and had regard to the information provided by you, your client, the auditor, legislation, case law and legal precedence.

3a). While acknowledging that a contractor licence is not required for commercial work, the evidence (invoicing etc) available to WorkCover and the Auditor appears to predominantly relate to residential work. To undertake this type of work a contractor licence is required.

b) The list of indicia on p3 is intended to be a guide to the types of indicia taken into consideration. As advised in our Proposed Determination, "the decision on whether any contractor is a deemed worker must be made having regard to the individual circumstances of each case" and is based on the available information.

c) The holding or otherwise of a contractor licence is just one of the many factors taken into consideration.

 

4. All documentary evidence provided by you was considered. In addition, the compact disc included with this response contains all the documentation supplied by the auditor and taken into consideration in our deliberations.

5. In regards to the various contractors who have been excluded, WorkCover was provided with sufficient evidence that supported the fact that they were not reliant on the principal to undertake the type of work they performed. As such, we are satisfied that they are operating independent businesses.

Some of the primary considerations were:

• Operated, as a Pty Ltd company
• Traded under a business name
• Had a workers compensation policy
• Employed workers
• Held contractor licences
• Advertised their services
• Worked for others
• Held an ABN
• Were registered for, and charged GST

 

In regards to some of the specific contractors you have identified, we offer the following:

3) Were not included by either the auditor or WorkCover.

4) Please refer to Anatoly Shishkin, reference number 16 on the attachment to our proposal of 30 October 2009.

9) Invoiced in the partnership name of E Zhang & X Zhang T/As Crystal Interior Linings, not Crystal Interior Linings Pty Ltd.

11) Invoiced in the partnership name of Milorad & Jelka Romanic prior to operating as M J Ceiling Partitions Pty Ltd. All invoices in the name of the Pty Ltd company have been excluded from the audited totals.

14) Were not included by either the auditor or WorkCover.

15) Juebao Pty Ltd has been excluded by WorkCover and should have been included on the list of excluded contractors.

Note: WorkCover excludes payments made to Pty Ltd companies in the first instance, on the basis that they are either employers in their own right or alternatively they further sub-contract the work.

In instances where no workers compensation policy is identified for a Pty Ltd company, the matter is referred to WorkCover's Compliance Improvement Branch for investigation and potential recovery of premium.

However, there are provisions within the Act that allows for WorkCover to recover unpaid premiums from a principal contractor in the event they cannot be recovered from an uninsured employer. In addition, the Act allows for injured workers to lodge a claim against the principal contractor in instances whereby their employer does not hold a workers compensation policy.

6. In relation to Jing Sheng Zhao we again note your contention. However, no direct evidence has been provided to verify that he was an employer or sub- contracted the work during the relevant periods. If evidence is made available to verify that he was an employer or sub-contracted the work, WorkCover would re-consider his inclusion.

In regards to Milorad & Jelka Romanic, any invoices / payments made out in the name of partnership (ABN 34 654 643 620) have been included. However, both WorkCover and the auditor have excluded any invoices in the name of M J Ceiling Partitions Pty Ltd.

7. The percentage applied to the contractors in your client's case is in accordance with page 32 of WorkCover's Wages Definition Manual (October 2003), Chapter E - Contractors. The percentage used is a default value applied in the absence of information to the contrary. In the case of your client, no evidence has been provided to support the use of an alternative percentage rate for any of the included deemed workers.

If you or your client is able to produce documentary evidence that support a different rate being used, WorkCover will give further consideration to the rate.

8. As stated in our Proposed Determination, the concerns you raised in relation t o the auditor and their report will be dealt with by WorkCover's Compliance Improvement Branch.

In regards to the information used in our deliberations, the enclosed compact disc contains a copy of all the information provided to us by the auditor.

9. Under workers compensation legislation, payment made to both workers and deemed workers are included in the Agent's calculation of premium. In the case of your client, both categories of workers were identified making this a correct statement.

In arriving at our Proposed Determination, WorkCover considers all the factual information contained within the audit report.

However, in determining the inclusion or otherwise of various types of payments, we take into account all supporting documentary evidence gathered by the auditor, WorkCover and any submissions from the employer or their representative.

As a result of our review, and in consideration of the additional information provided, a number of contractors previously included by the auditor as deemed workers were excluded from our Proposed Determination.

10. As outlined in our Proposed Determination, the decision to undertake a new audit for the same period was made in consultation with Emma of Clark Pacific Insurance Brokers over a number of conversations.

During the abovementioned conversations, WorkCover was led to believe that this course of action was at the insistence of your client. If this was not the case, we apologise for the inference.

However, we stand by our comment that we were prepared to issue a Proposed Determination based on the initial audit findings."

18 By letter dated 12 March 2010, Byrons, on behalf of L&B, responded to the above letter from WorkCover. That response again asserted a failure to give reasons for the inclusion of certain contractors and remarked that "blandly referring to a list of indicia ... does not assist us to understand your reasoning or be in a position to advise our client or make sensible further submissions". As to the failure to give reasons, it also criticised the letter because it asserted that all documentary evidence had been considered but gave no indication of the reasoning in each individual case. The response further criticises the indication by WorkCover because it referred to considerations not previously notified and took a broad-brush approach to the predominance of residential work for which the alleged contractors tendered.

19 The response letter of 12 March 2010 referred to numbered criteria by which WorkCover suggested it was determining the status of each of the "contractors" and remarked that there were no entries in relation to any contractor regarding numbered questions 3, 4, 6, 7, 8, 9, 11, 13, 14, 15 and 17. The letter then accused WorkCover of failing to make inquiries on the "very indicators" that WorkCover had notified it was considering as relevant to the decision it was required to make. The letter complained that WorkCover had not used its powers under the legislation to require information on particular contractors, but, instead, relied on simple limited internet searches. Byrons made the following comments as to each of the contractors:

(1) Every invoice was for a fixed amount or a rate per meter, not an hourly rate.

(2) One of the alleged deemed workers submitted invoices for jobs at 24 different suburbs, sometimes in respect of work done by other staff. The geographic range extends from East Bowral to Wentworth Falls, Woolooware to Manly and to Kellyville. This, it is said, would make instruction or supervision by L&B "well-nigh impossible".

(3) Jin Sheng Shao, trading as ZJ Plastering, has submitted invoices for work done in at least 43 suburbs between April 2005 and November 2006. It again noted that Mr Sheng must have been employing workers, seemingly on the basis that he was paid over $183,000 in one year. The letter further complained about the absence of understandable reasons for decision.

20 On 14 May 2010, WorkCover wrote to Byrons, referring to its second appeal under s 170 of the Workers Compensation Act , the correspondence of 30 October 2009, 10 November 2009, 11 November 2009, 1 December 2009, 11 December 2009, 16 December 2009, 21 December 2009, 16 February 2010 and 12 March 2010, and assessing for each of the three-year period the total wages for workers and deemed workers, which assessment formed the basis for the calculation of insurance premiums for the year in question. This letter, which is the determination that is sought to be challenged, states:

"WorkCover advises that some of the issues you raised have been addressed in previous correspondence and therefore we do not intend to address them again. However, we offer the following responses.

In relation to your contention that various 'errors' were contained in the Coulton Isaac Barber ('CIB') report, as previously advised, the matter has been referred to the WorkCover Compliance Improvement Branch for their review. However, in relation to the parts of the report WorkCover relied upon in our determination, we advise that the only information that was taken at 'face value' within the audit report were the 'wage' figures used for-each of the audited periods. We note that these amounts have not been disputed.

In reaching a decision in relation to the status of each contractor, WorkCover gave consideration to the evidence contained on the compact disc (as provided to you) and the subsequent evidence provided by you / your client in your various submissions.

In regards to the so-called 'Contractor Questionnaire' completed by CIB, WorkCover did not give any consideration to its contents. Furthermore, we advise that WorkCover is unaware of the circumstances behind the documents creation and can only assume it is used by the Auditor as reference material.

We note that you are of the opinion that WorkCover, as the Regulator, have powers under legislation to obtain information from the contractors in dispute. Please be advised that WorkCover does not have any legislative power to compel an uninsured person to do anything except in instances where an authorised officer has reasonable grounds to believe the person is capable of giving information, producing documents or giving evidence in relation to a possible contravention of the Workers Compensation Ac 1987 or the Workplace Injury Management and Workers Compensation Act 1998. No evidence has been made available to determine that this is the case.

It is the employer's responsibility to make themselves aware of workers compensation legislation and to produce, on request, the evidence that they rely upon in support of their contention that a particular contractor should be excluded from the calculation of wages. In instances whereby an employer is unsure about the status of a worker, they should seek independent advice, or alternatively seek a Private Ruling from WorkCover's Worker Status Rulings Branch.

In previous correspondence, WorkCover advised you of some of the more common indicia considered when determining the status of a contractor and provided examples of the types of documentation that could be provided to support their exclusion. Further, we advised that any decision concerning the inclusion of contractor wages must be in accordance with workers compensation law and precedent cases, having regard to the individual circumstances of each case.

WorkCover is not in a position to know what evidence your client is in possession of, nor can we give any indication whether particular documents / evidence will have any bearing on the decision of whether a particular contractor is deemed to be a worker. All evidence is considered in its entirety having regard to the individual circumstances of each case.

On the basis that the decision of whether a contractor is deemed to be a worker is based on common law principles, and that case law does not provide any indication of the weighting applied to particular indicia, it is not appropriate for WorkCover to attempt to do so.

Nevertheless, we accept that for the majority of the 47 contractors that WorkCover has included as deemed workers, you provided an ABN and copies of invoices. Also, for a limited number you provided additional documentary evidence in relation to advertising and other insurances (i.e. Sickness & Accident and Public Liability).

In addition, WorkCover, through its research was able to establish that most held an ABN, were registered for GST, but did not hold workers compensation policies nor contractor licences.

However, the evidence as detailed above on its own is not sufficient to support that the contractors deemed to be workers were conducting independent businesses.

In our letter of 30 October 2009 we advised you of the types of evidence we would require. Consequently, we would have expected to receive documentary evidence in the form of, but not necessarily limited to, the following:

• details of Contractor Licences;
• workers compensation policies that supports payment of wages;
• other insurances (i.e. Sickness & Accident and Public Liability);
• advertising of their business;
• subletting of the contract or employment of workers; and
• copies of quotes issued prior to the commencement of work.

As stated previously, WorkCover must review the facts on a case by case basis on the evidence presented for each individual contractor deemed to be a worker.

In the absence of this additional documentary evidence, WorkCover has determined that the wages as outlined above are to be used in the Agent's calculation of premium for the 13 September 2003 to 13 September 2006 policy periods.

The Agent has been advised of WorkCover's determination. This concludes WorkCover's review and our file has now been closed."

Relationship between WorkCover and Allianz

21 It is appropriate to describe the relationship between WorkCover and Allianz. In one sense, it is sufficient to state, as was agreed between the parties, that WorkCover calculates the amounts upon which premiums are based and the premiums that are payable and that calculation is binding on Allianz which, in turn, charges the client, in this case L&B. The strict relationship is slightly more complicated. WorkCover is constituted by the Workplace Injury Management and Workers Compensation Act 1998 (hereinafter "the 1998 Act") as a body corporate representing the Crown. The nominal insurer is established by the Workers Compensation Amendment (Insurance Reform) Act 2003 (hereinafter "the 2003 Act"). The Nominal Insurer is the legal entity responsible for the Scheme and its functions are set out in Part 7, Division 1A of the 2003 Act.

22 The funds of the Scheme are held in a fund called the Workers Compensation Insurance Fund and the Nominal Insurer manages the Insurance Fund also in accordance with Part 7 of the 2003 Act.

23 WorkCover administers the Scheme. The Scheme is a compulsory, no fault insurance Scheme that provides workers' compensation insurance for certain NSW employers and workers. It provides certain financial support, medical, rehabilitation and other services to persons injured at work. The principal legislation, as earlier discussed, is the Workers Compensation Act 1987, but each of the Workplace Injury Management and Workers Compensation Act 1998 and the Workers Compensation Amendment (Insurance Reform) Act 2003 is, at least in part, relevant.

24 WorkCover acts for the Nominal Insurer and, in so doing, may exercise all of the functions under any of the three statutes to which reference has been made. The 2003 Act allows for the Nominal Insurer to enter into arrangements with Scheme Agents (i.e. insurance companies) to exercise the functions of the Nominal Insurer, subject to its direction and control. Those functions include premium collection and claims management.

25 Pursuant to the foregoing, a Scheme Agent arrangement was made between the Nominal Insurer (represented by WorkCover) and Allianz, under which Deed Allianz levies or charges workers' compensation premiums to employers operating in NSW. Under the Scheme Agent arrangement, the Nominal Insurer issues the Scheme Agent (in this case WorkCover issues Allianz) with an Operational Document Set, which may be altered from time-to-time (Clause 6.19 of the Scheme Agent Deed). Under Schedule 2 of the Scheme Agent Deed, there is a requirement that the Scheme Agent must, at a minimum, collect all information necessary for the calculation of premiums included in the business activity, wages estimated and declared, cost of claims to be included in the calculation and any input tax credit.

26 Once that information has been ascertained, the Scheme Agent must calculate the premium in accordance with the correct Insurance Premiums Order (hereinafter "IPO"), which is an order made by the Governor on the recommendation of WorkCover under s 168 of the Act and specifies a different rate of calculation depending upon the industry in which the employer is engaged. The Scheme Agent then issues the employer with a premium demand and must adjust that premium when information is made available that will affect the premium and, once adjusted, notifies the employer.

27 Further, the Scheme Agent (in this case Allianz) is required to review information supporting the premium calculation on a targeted systematic basis in order to ensure the employers are paying the correct premium in accordance with the correct IPO. This process includes regular premium compliance audits, as required by the nominal insurer, which must be conducted in a timely manner and following which the scheme agent must review findings, assess recommendations, ensure appropriate action is taken in a timely manner, and calculate statutory fees and other charges, as appropriate, and charge those to the employer.

28 The foregoing describes the formal process, which, as a matter of practice, means that WorkCover (acting as the Nominal Insurer) has concluded a Scheme Agent Deed with Allianz, under which Allianz was required to perform all of the tasks referred to above in relation to its relationship with L&B.

The Workers Compensation Act 1987

29 I have already set out in brief some aspects of the scheme promulgated by the Workers Compensation Act 1987 and the Workplace Injury Management and Workers Compensation Act 1998. Some of that is described in the Scheme Agent Deed, to which reference has been made. The Act establishes the Nominal Insurer (s 154A), which is a legal entity and is not and does not represent the State or any authority of the State. Its functions are those that are necessary or convenient for enabling it to function and operate to the fullest extent as a Licensed Insurer and it may issue directions to any employer with respect to the insurance arrangements of the employer. WorkCover acts for the Nominal Insurer in all respects (s 154C).

30 By operation of s 155 of the Act, an employer must obtain from a Licensed Insurer (relevantly, in this case, Allianz) and maintain in force a policy of insurance that complies with Division 1 of Part 7 of the 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 for any injury to any such worker". Non-compliance with that provision is a criminal offence.

31 Section 169 of the Act, as previously stated, requires the premium for insurance to be calculated in accordance with the IPO issued by the Governor under s 168 of the Act.

32 An employer from whom an insurer has demanded a premium may dispute one or more aspects of the determination of that premium on the basis that it is not in accordance with the relevant Insurance Premiums Order. This right is conferred by s 170 of the Act. Where such an application or dispute arises, WorkCover must notify the insurer of the application by the employer, must consider the application and may have regard to such oral or written evidence or representation as it thinks fit and by operation of s 170(3)(c), WorkCover:

"(c) must dismiss the application if [it] decides that:

(i) the policy is not a policy to which a relevant insurance premiums order applies, or

(ii) the disputed aspect was determined by the insurer in accordance with the relevant insurance premiums order,

or must in any other case determine the disputed aspect in accordance with the relevant insurance premiums order, and

(d) shall, in such manner as it thinks fit, inform the employer and the insurer of its dismissal of the application or its determination, as the case may require."

33 As a consequence of the foregoing, WorkCover was required to determine the "appeal" under s 170 of the Act, being an appeal from the premium demanded by Allianz, which in turn is based on the determination/calculation that WorkCover itself had issued.

Classification of persons performing work

34 At the heart of the issue between WorkCover and L&B is the classification of persons performing work for L&B. The Act (s 155 and s 156) requires that a workers' compensation policy be obtained and maintained and that the premiums be paid in relation to each person performing work who is a worker within the meaning of the 1998 Act (see s 4) or a deemed worker pursuant to the provisions of Clause 2 of Schedule 1 to the 1998 Act. It is necessary to recite the relevant extracts of those definitions.

35 Section 4 defines "worker", relevantly, as meaning "a person who has entered into or works under a contract of service ... with an employer". There are exceptions, which are currently irrelevant. Section 5 of the 1998 Act renders binding Schedule 1 to the 1998 Act which, relevantly, defines "worker" to include deemed employees, being certain contractors in the following terms:

"(i) where a contract:

(a) to perform any work exceeding $10 in value (not being work incidental to a trade or business regularly carried on by the contractor in the contractor's own name, or under a business or firm name), or

(b) (Repealed)

is made with the contractor, who neither sublets the contract nor employs any worker, the contractor is, for the purposes of this Act, taken to be a worker employed by the person who made the contract with the contractor."

Again, there is an exclusion provision in relation to sporting organisations, which is currently irrelevant. There are other, currently irrelevant, provisions dealing with lent labour and labour hire arrangements.

36 The mischief to which Clause 2 of Schedule 1 (hereinafter "the deemed worker provisions") is directed is plain and is of longstanding. It is aimed at the provision of workers' compensation benefits to persons who do not work under contracts that fit the traditional definitions of contracts of service. Since at least 1926, the legislature has sought to overcome some of the more arcane distinctions in the common law between contracts of service and contracts for services by extending workers' compensation, and other benefits, to persons performing work who are not servants or employees under the common law.

37 In its earliest manifestation, the deemed worker provisions required even employers to be the subject of a workers' compensation insurance policy if the employer were performing work in fulfilment of a contract with the principal.

38 The similar provision in the 1926 Act was repealed in 1929 and a provision, almost identical to the current provision, was inserted by the Workers' Compensation Act 1942: see Turner v Stewardson [1961] WCR 169, per Rainbow J for a history of the legislation.

39 These types of provisions seek to overcome the difficulty associated with providing benefits to workers on the basis of the existence of a contract of service, in circumstances where the employer/principal has a significantly greater bargaining power and an ability to construct the relationship between the parties in a way that puts the relationship outside common law notions of employment. The contract of employment derives, historically, from notions of serfdom and, for that and other reasons, historically differentiated itself from other contracts by the ability of the employer to control. This discrimen has created enormous difficulties for the law and attempts have been made to identify contracts of employment by different criteria. Generally, those attempts have simply swapped one set of problems for another.

40 In legislative terms, many attempts have been made to define the kind of relationship that warrants particular regulatory schemes and those attempts have, themselves, been the subject of interpretation by the Courts: see, for example, the promulgation of s 88F of the Industrial Arbitration Act 1940 (which, through a number of changes, became s 106 of the Industrial Relations Act 1996) and the judgment of the High Court in Fish v Solution 6 Holdings Limited [2006] HCA 22; (2006) 225 CLR 180 and in the Court of Appeal Solution 6 Holdings Limited v Industrial Relations Commission of NSW [2004] NSWCA 200; (2004) 60 NSWLR 558. In Australia where there has been extensive regulation of contracts for the performance of work, including contracts of employment, there has been less incentive to develop alternative tests for what we refer to as a contract of employment or expand to other contracts for personal service those common law attributes of a contract of employment.

41 In other jurisdictions, where contractual rights in employment do not depend upon legislative intervention, different debates have occurred. In academic circles there has been much incentive to look critically at the way in which we define personal contracts of employment: see J Fudge and R Owens, Precarious Work, Women and the New Economy: The Challenge to Legal Norms (2006) Hart Publishing; K Stone, From Widgets to Digits: Employment Regulation for the Changing Workplace (2004) Cambridge University Press; K Stone, Flexibilisation, Globalisation and Privatisation: Three Challenges to Labour Rights in Our Time , GALS Working Paper (2005); G Davidov, The (Changing?) Idea of Labour Law (2007) 146 International Labour Review 311; H Arthurs, Reinventing Labor Law for the Global Economy (2001) 22 Berkeley J. Emp. & Lab. L. 271 ; G Davidov and B Langille, Boundaries and Frontiers of Labour Law: Goals and Means in the Regulation of Work (2006) Heart Publishing (in particular A Trebilcock, Using Development Approaches to Address the Challenge of the Informal Economy for Labour Law at 63-76); A Stewart, Redefining Employment? Meeting the Challenge of Contract and Agency Labour (2002) 15 AJLL 246; R Owens and J Riley, The Law of Work (2007) OUP; M Freedland, The Personal Employment Contract (2003), Oxford University Press; M Freedland, Application of Labour and Employment Law Beyond the Contract of Employment (2007) 146 International Labour Review 3.

42 As can be seen, the issues are not confined to Australia. Because, amongst other things, of our autochthonous (and somewhat peculiar) system of industrial regulation, we have not in the past considered the experience of others as particularly relevant. But the problem is almost universal (at least within developed economies): see " The Employment Relationship", International Labour Conference, 95th Session, 2006, Report V(1) and, in the U.S., National Labour Relations Board v Hearst Publications 322 US 111; 64 S.Ct. 851 (1944); U.S. v Silk 67 S. Ct. 1463 (1947).

43 As earlier stated, while the academic discussion on these issues has, in jurisdictions outside Australia, climaxed in the last few years, the attempts to broaden regulation outside employment to personal contracts for work has been a long-time feature of Australian legislation. The early provisions of the Workers' Compensation Act , to which reference has already been made, have been the subject of judicial pronouncement. The terms of the deemed worker provisions, recited above, are in almost identical terms to legislation that has existed in every State of Australia for many years.

44 The legislation considered by the High Court in Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389 has a familiar ring. It included the following deemed worker provision:

"Notwithstanding anything in this Act or any law where any person (in this sub-section referred to as 'the principal') in the course of and for the purposes of his trade or business enters into a contract with any other person (in this sub-section referred to as 'the contractor') - (a) under or by which the contractor agrees to perform any work not being work incidental to a trade or business regularly carried on by the contractor in his own name or under a firm or business name; and (b) in the performance of which the contractor does not either sublet the contract or employ workers or although employing workers actually performs some part of the work himself - then for the purposes of this Act the contractor shall be deemed to be working under a contract of service with an employer and the principal shall be deemed to be that employer."

45 In the course of the judgment in Humberstone , supra, Latham CJ, at 397, said:

"The idea of this provision is evidently to extend the benefits of the Act to persons who agree to do work which is not work belonging to a trade or business carried on by them, even though they may regularly carry on a trade or business."

46 In the judgment of Dixon J, in Humberstone , supra, widely cited with approval and/or relied upon in other judgments, his Honour, at 401-402, said:

"There are two difficulties in applying the provision to the facts. The first is to say whether, upon the true meaning of the phrase in the sub-section, the work the deceased performed for the respondents was or was not 'work incidental to a trade or business regularly carried on by the contractor in his own name or under a firm or business name.' ...

... I think that the purpose of the exception or exclusion expressed by the words in question was to confine the benefit of the conclusive presumption which it establishes to persons who do not conduct an independent trade or business, who are not holding themselves out to the public under their own or a firm or business name as carrying on such a trade or business and who do not in the course of that trade or business, as an incident of its exercise, undertake the work by entering into the contract. The provision will thus cover men [sic] who work for the principal but have no independent business or trade and men [sic] who though carrying on an independent trade or business undertake a contract outside the scope or course of that trade or business. The word 'trade' is capable of including any handicraft and in that sense it may seem to lack the element of systematic practice or holding out which the idea of openly conducting a distinct or independent trade or business and seeking custom implies. But a consideration of the policy of the provision as well as of its text appears to me to show that the distinction it seeks to draw is between on the one hand an independent contractor whose relation with the principal is special or particular either because it is outside the course of the general business of the contractor or the general practice of his trade or because he has no such general business or is not a general practitioner of his trade, and on the other hand an independent contractor who performs work successively or perhaps concurrently for his customers or others in the course of a definite trade or business carried on systematically or who holds himself out as ready to do so. ... No doubt the policy is a matter of inference but it seems reasonable to suppose that it was considered proper that a person conducting a business in the course of which he contracted to perform work should himself carry the risk of personal injury as one of the hazards of his business, while the man who worked under contract but only for the employer or without any general trade or business or outside his trade or business should, like an ordinary employee, be insured by the Act against the risk of injury in his work."

47 It is in that historical context that one should examine the terms of the legislation that is required to be applied by WorkCover. There are differences between the legislation describing deemed workers under the current legislation and that considered by the High Court in Humberstone , supra. Leaving aside that the High Court in Humberstone was considering an Act of the Victorian Parliament, the style of legislative drafting has altered. Prior to 1946 it was unusual to insert commas in any style of drafting (and in some circumstances it still is). The legislation here under consideration inserts commas in a manner, which, on one view, may be significant. While, in most instances, the punctuation is inserted to make reading easier, there are circumstances where the insertion of a comma can make a significant difference to the meaning of a text.

48 I can relevantly ignore the requirement that the contract must be for the performance of work exceeding $10 in value. But the work must also not be work "incidental to a trade or business regularly carried on by the contractor in the contractor's own name, or under a business or firm name". The insertion of a comma after the words "own name" may arguably affect the construction of the provision and give it a meaning different from that considered by the High Court in Humberstone , supra. The disjunctive "or" joins the term "under a business or firm name" and the question arises as to whether that is an alternative to the carrying on of the work "in the contractor's own name", or whether it is an alternative to the whole phrase "incidental to ... the contractor's own name".

49 I take the view that the more obvious reading of the text is to make the term "under a business or firm name" an alternative to "in the contractor's own name" and thereby deny any real significance to the use of the comma after the first phrase in the provision.

50 I should also mention that the word "or" appearing at the end of paragraph 2(1)(a) in the Schedule to the 1998 Act is otiose. It seems to be a remaining vestige of the previous alternative contained in paragraph 2(1)(b) of the Schedule, which paragraph has since been repealed.

51 As a consequence of the foregoing, there are a number of aspects to the definition, which require specification. First, the definition applies to impose liability on the principal for persons performing work for the principal under each contract. Obviously the singular can include the plural, but it is the relationship between principal and contractor under each contract that determines whether the contractor is deemed to be an employee for the purposes of the 1998 Act and therefore a person for whom an insurance policy is required under the 1987 Act.

52 As earlier stated, I ignore, for present purposes, the requirement that the value of the contract exceed $10. Secondly, in order for a contract to be one to which this provision of the Schedule applies, the work to be performed under the contract must not be "incidental to a trade or business regularly carried on by the contractor". Thirdly, the business (which I hereafter use to include trade) carried on must be in the contractor's own name or under a business or firm name.

53 Fourthly, in relation to each such contract, the contractor must neither sublet the contract nor employ any worker. This last provision requires that the contractor be the only person performing the work for which the contractor has contracted.

The first exclusion

54 The first-mentioned condition requires that the work not be incidental to a trade or business regularly carried on by the contractor (hereinafter "the first exclusion"). As a consequence of the earlier mentioned construction relating to the alternative and the use of the comma, it follows that unless the work being carried out is work incidental to a business carried on by the contractor, it is, subject to the conditions that arise thereafter, a contract to which Clause 2 of the Schedule applies.

55 That construction necessarily means that the mere fact that a contractor carries on work under the contractor's own name or under a business or firm name, or even under a company name, does not, without more, exempt the contract or contractor from the reach of Clause 2 of the Schedule. (Although, if there be a company name, the work must necessarily be sublet.) Rather, it is necessary that the contractor carry on a business, and that the business be carried on regularly and that this contract forms an incident of that business.

56 Historically, the term "business", usually used in conjunction with the word "trade", has been the subject of much authority. Often, the discussion on the meaning of the term relates to the business of the principal, because in much of the prior legislation the contract was required to be one between a principal and a sub-contractor executed in the course of and for the purposes of the principal's trade or business: see Humberstone , supra. Those authorities are useful in construing the term as it is used in the present context and, even in the past context, was used in relation to both the principal and the contractor.

57 Because, inter alia, the discussion in judgments dealing with earlier legislation concentrated on the term "business" as it related to whether the contract was made in the course of or for the purposes of the principal's trade or business, much discussion centres on not whether an undertaking (to use a neutral term) is or is not a business, but whether the contract was for the purposes of a business. In that regard, often the delineation was made between a contract involving capital infrastructure or improvement as distinct from recurrent activities: see, for example, Moir v Schrader [1936] HCA 69; (1936) 56 CLR 310, which turned on whether a partnership between a solicitor and a retired bank manager to develop timbered land for firewood involved the proposition that the contract with the engineer for the installation of a saw was in the course of or for the purposes of the business. See also Frauenfelder v Reid [1963] HCA 3; (1963) 109 CLR 42.

58 Central to the concept of the carrying on of a business is, as is stated by Dixon J in Humberstone , supra, at 401 the "independence" of the activity from the activity of the principal and, in that regard, whether the contractor is not holding itself out to the public (or other principals) under its own or a firm or business name. Contracting with the public is not an essential feature of the definition in Clause 2 of the Schedule, but it is a criterion that would inform the determination of whether the activities of the contractor involved an independent business. As earlier recited, Dixon J in Humberstone , supra, drew the distinction between, on the one hand, an independent contractor whose relation with the principal is special or particular because, inter alia, the contractor has no business or is not a general practitioner of his trade and on the other hand an independent contractor who performs work successively or perhaps concurrently for his customers and others in the course of a definite trade or business carried on systematically: Humberstone , supra, at 402, per Dixon J.

59 In a general sense, almost all of the indicia that are often used to determine if a person is an employee or a contractor are criteria that may be used to inform the determination of whether the contractor is carrying on business independently, i.e. in his own name or under a business or firm name and, therefore, exempted under the first exclusion. The provisions seek to cover contractors who are engaged in a manner that is more like that of an employee than independent business people.

60 In that regard, an examination of the criteria may seem like determining whether the contractor is an employee, but, in truth, it is an examination of various criteria to determine whether, on the continuum of relationships, the contractual one is truly independent. Those criteria will include: the level of control of the manner of the performance of work contracted, including the degree to which the contractor is responsible for faulty work; the giving of directions as to where and in what circumstances work is to be performed, including the order in which it is performed; exclusive service or overwhelmingly predominant service for one particular principal; taxation and insurance arrangements; the provision of materials and equipment beyond that ordinarily, in the particular work carried on, supplied by tradespersons or other employees; the manner of termination of the contract; the manner of computation of the remuneration; control over hours of work; whether the contractor operates as part and parcel of the business of the principal; whether there is negotiation as to price; whether there is predetermination of the precise amount of work to be done and a quote to be submitted; whether separate workers' compensation insurance has been taken out by the contractor; and whether the other attributes of an independent business exist, e.g. advertising, telephone entry, etc. and the totality of the relationship between principal and contractor ( Stevens v Brodribb Sawmilling Company Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 at 29). Further, the criteria that may inform this determination may include the ownership of the assets, the chance of making a profit and the risk of loss in the business that is carried on (see Ready Mixed Concrete (South East) Ltd v Minister of Pensions and National Insurance [1968] 2 QB 497 at 526). The foregoing is not, and is not intended to be, exhaustive. Nor is it even indicative; there may be circumstances where some of the foregoing are not relevant.

The second exclusion

61 The other condition of significance, as earlier mentioned, imposed by the Act and Schedule thereto, is the requirement that the contractor neither sublet the contract nor employ any workers (hereinafter "the second exclusion"). The use of the definite article, "the", when referring to "the contract" is a reference to the contract to perform any work exceeding $10 in value, namely, the opening description of the subclause. Thus, in dealing with whether a contractor "employs" or "sublets" one must consider this aspect in two quite distinct ways.

62 First, if a contractor were to employ workers on the work ordinarily undertaken, or were to subcontract its work, that would be a criterion that informs the determination of whether the contractor is carrying on an independent business, namely, the first exclusion. In that regard, the general practice of a contractor in carrying out the work for which it contracts is one of the many factors to be considered in determining the nature of the business and the nature of the relationship between the principal and the contractor.

63 Secondly, in relation to the express exclusion of such persons from the reach of the definition in Clause 2, namely, the second exclusion, it is necessary to show that the contract (namely, "each contract") in which work is undertaken for the principal involves the subletting of the contract or the employment of a worker. In that respect, the general practice of the contractor is relevant to prove the likelihood that, in a particular contract, work was sublet or workers were employed. Of course, there can be one contract to perform work on a number of jobs, and such an arrangement would also inform the first exclusion, as well as extend the effect of the second exclusion to all of the work (including all jobs) performed under that contract.

64 The second exclusion does not exempt persons who have the ability or capacity to sublet or employ, or carry out the work through another, but exempts only those that have sublet the contract, or employed any worker in performing work to which the contract relates. Thus, a contractor may carry out work under 25 separate contracts in one of which another person is employed or the work is subcontracted. That would exempt, under the second exclusion, only that one contract, not all 25 contracts. However, if subletting or employing, or both, were a regular feature of the conduct of the contractor's undertaking, then it is more likely that the contractor is engaged in a business regularly carried on by it, and, thereby exempt under the first exclusion.

65 As earlier stated, it is the actual subletting of the contract or employing of a worker that is relevant to the second exclusion in Clause 2, not the capacity so to do: cf the position with employees, see Stevens v Brodribb , supra; Australian Mutual Provident Society v Allan (1978) 52 A.L.J.R. 407 (AMP v Chaplin); Neale v Atlas Products (Vic) Pty Ltd [1955] HCA 18; (1955) 94 CLR 419.

The Wages Definition Manual

66 The foregoing issues as to the appropriate classification are, in a variety of ways, dealt with by WorkCover in its publication, being the Wages Definition Manual (Exhibit A, commencing p 266). The Wages Definition Manual (hereinafter "the Manual") is published as a guide to employers and licensed insurers, amongst others, on the amounts to be taken into account for the purpose of assessing an employer's workers' compensation premium. It deals with the definition of "remuneration" (Chapter A, commencing at Exhibit A, p 273), in which Chapter it refers the reader to the definition of "deemed workers" and "contractors" in Chapter D and Chapter E respectively. In Chapter B, WorkCover, once more, refers the reader to WorkCover's interpretation of the contractors who are workers for the purposes of the workers' compensation law as being set out in Chapter E (Exhibit A, p 277). Chapter D lists different types of workers who are deemed to be workers for the purpose of workers' compensation in New South Wales and that list includes "contractors (see Chapter E)". The Chapter also states:

"If someone is 'deemed' to be a worker, then they will be entitled to receive workers compensation for a work-related injury. For this reason, their employer (or principal) must cover them for workers compensation and include the remuneration paid to the 'deemed' worker in the employer's wages declaration."

67 In Chapter E, entitled "Contractors", WorkCover sets out an explanation as to why contractors are treated as workers for workers' compensation purposes and some of the indicators that have traditionally been used in determining such a status. Chapter E - Contractors is, relevantly, in the following terms:

"26. Many people working as contractors are treated as workers for workers compensation purposes The Act refers to them as 'deemed workers' (see Chapter D). In those cases, the employer is treated as a 'principal', responsible for declaring remuneration for the purposes of workers compensation.

A contractor with an ABN or a Department of Commerce Office of Fair Trading licence is not necessarily an independent contractor - they may still be a 'deemed worker' for the purposes of NSW workers compensation. The issue is whether the person is a worker in a particular case and must be determined on a case-by-case basis.

The final arbiter of whether a contractor is a deemed worker is the Compensation Court of NSW and, more recently, the Workers Compensation Commission and these are decided on the individual facts of each case. Cases decided in other courts are also relevant. WorkCover applies tests determined by the courts.

Workers compensation legislation does not rely on the tax status of the person carrying out the work to determine whether that person is a worker, deemed worker or contractor.

Some of the indicators examined by the courts in determining if a contractor is a deemed worker are whether the:

• arrangement is in writing;
• contractor/deemed worker can employ other people to perform the work;
• contractor/deemed worker works at stated hours on usual days and the contract specifies the hours and/or days;
• contractor/deemed worker measures and inspects the site and provides a fixed price quotation inclusive of labour and material;
• contractor/deemed worker deals directly with the client requesting the work or the principal contractor for whose benefit the work is to be done;
• contractor/deemed worker can make a profit or loss over the market rate for a tradesman working in the industry;
• contractor/deemed worker supplies the materials, plant and equipment used in completion of the job;
• contractor/deemed worker could be liable for bad quality of work.

For this reason, it is important for employers to include records about contractors in the declarations and other records they make and present to WorkCover and/or insurers. See Chapter I. See rule 45 for information about record keeping.

Note: A proprietary limited company ('Pty Ltd') must have a workers compensation policy to cover all its workers, including directors undertaking employee type duties. "

68 The reference in the foregoing to Chapter I, paragraph 45, is also relevant to the issues that are currently before the Court. It is in the following terms:

"What are the requirements about records for contractors who may be 'deemed workers'?

45. The employer's records about contractors must comply with all the requirements about records for workers, and they must also:

(a) Record a description of the services the contractor provided.

(b) Record full details of component parts of each payment made to the contractor - eg. labour only, labour and materials, labour, materials and plant, or labour and plant.

(c) Contain documents that support the claim for contractor status such as evidence of questions, letterhead, business cards, contractor invoices, Certificates of Currency, ABN, and Department of Commerce Office of Fair Trading licences.

(d) Record payments to contractors, including full details of each payment made including the dates of payment and the amounts.

(e) Record details of Certificates of Currency for period of the contract.

For further information on contractors, see Chapter E

What records should employers keep about contractors who aren't 'deemed workers'?

46. Employers who determine that a 'contractor' is not a 'deemed worker' should keep the same detailed records about those contractors and any details of the contractor's workers compensation policies. The employer may find those records useful if they later need to justify to the insurer, or to WorkCover, that a contractor was not a 'deemed worker'.

The employer's records about contractors must comply with all the requirements about records for workers, and they must also:

• contain documents that support the claim for contractor status such as evidence of questions, letterhead, business cards, contractor invoices, Certificates of Currency, ABN and ACN;
• record payments to contractors, including full details of each payment made including the dates of payment and the amounts;
• record details of Certificates of Currency for period of the contract; and
• maintain written statements by subcontractors that all workers compensation insurance premiums payable in respect of the work done in connection with the contract have been paid."

Principles of Interpretation

69 I have set out at length the history of the most relevant provisions to stress the legislative purpose that may otherwise be inferred from the deemed worker provisions. Primarily and ordinarily, the grammatical meaning of the provision will correspond with the legislative intention: Project Blue Sky Inc & Ors v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355 at 384 [78], per McHugh, Gummow, Kirby and Hayne JJ.

70 In this case, the history of the legislation provides confirmation of the obvious legislative intention and allows an understanding, in context, of precedents on similar, but not identical, legislative provisions.

The task undertaken by WorkCover

71 Before embarking upon an analysis of the grounds upon which L&B challenge the determination of WorkCover, it is appropriate to deal with the task undertaken by WorkCover. I have already described the process of auditing that is required under the Act and the method by which insurance premiums are calculated. Those premiums depend upon the amount paid in "wages", which, for relevant purposes, includes the amount paid as remuneration to deemed workers (I leave aside as irrelevant for the purposes of principle, but not ultimately irrelevant to the calculation of any premium, any amount that would reimburse expenses incurred or the expenses of the business, at least for the present moment).

72 The process undertaken by WorkCover is a process in which WorkCover is required, at least for present purposes, to audit records, to investigate the circumstances under which sub-contractors are engaged by any particular principal, and, on the basis of the information gleaned from that investigation and taking into account the material provided by the principal and any other material, determine the appropriate basis for the calculation of insurance premiums. That process is an inquisitorial process.

73 While an inquisitorial process does not involve all of the limitations relating to the failure to put and seek answers to issues of fact inconsistent with the version of the witness or party before it (see Re Minister for Immigration and Multicultural Affairs; Ex parte S154/2002 [2003] HCA 60; (2003) 77 ALJR 1909 at [55]-[58], per Gummow and Heydon JJ; Minister for Immigration & Ethnic Affairs v Wu Shan Liang [1996] HCA 6; (1996) 185 CLR 259 at 282, per Brennan CJ, Toohey, McHugh and Gummow JJ; Minister for Immigration v Eshetu [1999] HCA 21; (1999) 197 CLR 611), it is nevertheless important, and mandated by the task undertaken by WorkCover, that WorkCover inform a putative employer, in this case L&B, as to the matters that are relevant to its decision and those matters that are relevantly in issue concerning the material that is before them: Haberfield v Department of Veterans' Affairs as Delegate for Comcare [2002] FCA 1579 at [58]-[59], per Sackville J; NRMA Insurance Limited v Ainsworth [2011] NSWSC 344 at [46].

74 It is also essential, in that regard and otherwise, that an affected, or potentially affected, employer understand the basis upon which WorkCover is to come to its conclusion, or has come to its conclusion. The foregoing does not require the issue of lengthy or formal reasons, but it does require, in one or more documents, for WorkCover to inform L&B, in this instance, of the process that WorkCover is undertaking and why it has reached the conclusion that it has.

75 The process undertaken by WorkCover in similar circumstances was discussed by the Court of Appeal in Staging Connections P/L v Workcover Authority of New South Wales [2004] NSWCA 357. At [28]-[30], Bryson JA, with whom Spigelman CJ and Beazley JA agreed, said:

"[28] The process of consideration and determination is not contained only in this letter. The letter itself refers back to WorkCover's letter of 21 June 2002. The process of reasoning on which the rejection of a number of classifications was based, set out in WorkCover's letter of 21 June 2002, was expressly adopted in the letter of 28 March 2003, and continued to affect the determination then made. The whole correspondence needs to be examined in order to understand the material which was before WorkCover for consideration and the process of determination. It is also necessary to have regard to statements in the correspondence and elsewhere in the evidence about what took place at the site inspection. Exhibit GRK1 is a bundle of photographs of equipment and scenes in Staging Connections' head office produced on subpoena by WorkCover and, it should be inferred, taken on the site inspection.

[29] In my understanding the principles on which the Court should act are these. WorkCover was required to make its determination in accordance with law. Its determination may be set aside if it is shown that WorkCover made an error of law in the course of considering and making the determination. However the error of law must have been material to the decision, and not an error on some incidental matter which did not materially affect the outcome. It is an error of law to base a decision on some fact or consideration which is not relevant to the process of determination the power to make which is conferred on WorkCover by s.170 of the Workers Compensation Act 1987. As with other errors of law, an error of this kind must be material to the outcome. If there was an error of law the Court may make an order setting aside the determination which WorkCover made. The Court's power to do this is discretionary, and for sufficient reason the Court may allow a determination to stand even though there was a material error of law. The Court does not have power to make a determination itself, or to decide what is the correct classification in accordance with the Insurance Premium Order, including Schedule 1 cl.2(4) and Table A. If WorkCover's determination is set aside, the Court should order WorkCover to proceed to make its determination on the correct basis. These principles were not in contention at the hearing of the appeal, and the arguments submitted related to their application.

[30] In applying these principles materiality may come under consideration at two different stages. An error of law which does not affect the outcome, the decision under challenge, is not material and is not a basis on which the Court could set the decision aside. At the discretionary stage materiality can be weighed and assessed for its relative importance, which may not justify intervention. A similar process of assessment can take place where there is some procedural shortcoming: compare Minister for Local Government v. South Sydney City Council (2002) 55 NSWLR 381 at [48] (Spigelman CJ)."

76 It is all of the correspondence exchanged between WorkCover and L&B that is relevant to the determination of whether reasons have been given. But, WorkCover must also put L&B on notice as to the material that is relied upon and the criteria that WorkCover considers relevant in determining the issues before it.

77 Lastly, in regard to the task being performed by WorkCover, some attention should be paid to the question of the nature of the determination itself. In that regard, it is necessary to discriminate between error of law and error of fact. The classic differentiation of the two derives from the statement of Jordan CJ in Australian Gaslight Co v Valuer-General (1940) 40 SR (NSW) 126, in which the Court said:

"In cases in which an appellate tribunal has jurisdiction to determine only questions of law, the following rules appear to be established by the authorities:

(1) The question what is the meaning of an ordinary English word or phrase as used in the Statute is one of fact, not of law. This question is to be resolved by the relevant tribunal itself, by considering the word in its context with the assistance of dictionaries and other books, and not by expert evidence; although evidence is receivable as to the meaning of technical terms; and the meaning of a technical legal term is a question of law: Commissioners for Special Purposes of Income Tax v Pemsel .

(2) The question whether a particular set of facts comes within the description of such a word or phrase is one of fact.

(3) A finding of fact by a tribunal of fact cannot be disturbed if the facts inferred by the tribunal, upon which the finding is based, are capable of supporting its finding, and there is evidence capable of supporting its inferences.

(4) Such a finding can be disturbed only (a) if there is no evidence to support its inferences, or (b) if the facts inferred by it and supported by evidence are incapable of justifying the finding of fact based upon those inferences. Thus, if the facts inferred by the tribunal from the evidence before it are necessarily within the description of a word or phrase in a statute or necessarily outside that description, a contrary decision is wrong in law. If, however, the facts so inferred are capable of being regarded as either within or without the description, according to the relative significance attached to them, a decision either way by a tribunal of fact cannot be disturbed by a superior Court which can determine only questions of law." (Citations omitted.)

78 From the foregoing, it is clear that whether there is any evidence of a particular fact is a question of law, as is whether a particular inference may be drawn from facts found or agreed: see also Kostas v HIA Insurance Services Pty Limited [2010] HCA 32; (2010) 241 CLR 390. On the other hand, once there is evidence upon which a fact can be found, that finding of fact cannot be disturbed as an error of law: see Australian Broadcasting Tribunal v Bond [1990] HCA 33; (1990) 170 CLR 321; and see also Sinclair v Maryborough Mining Warden [1975] HCA 17; (1975) 132 CLR 473 at 481 and 483; Azzopardi v Tasman UEB Industries Limited (1985) 4 NSWLR 139 at 151, per Kirby P, and at 155-156, per Glass JA; Haider v JP Morgan Holdings Aust Ltd Trading as JP Morgan Operations Australia Ltd [2007] NSWCA 158 at [33], per Basten JA.

79 The determination of whether the particular set of facts that is before WorkCover, or the material before WorkCover, brings a contractor within the terms of Clause 2 of the Schedule is a question of fact, not a question of law, as is the meaning of the ordinary English words or phrases used in the statute: see Australian Gas Light Co , supra, recited above. It is only when the facts as found, or the material relied upon, are incapable of bringing a contractor within the meaning of Clause 2 of the Schedule that a decision contrary to that proposition would be an error of law. Where either result is open on the material before WorkCover, there has been no error of law and the decision of WorkCover involves only a question of fact.

Submissions of the plaintiff

80 The amended summons filed 17 September 2010 seeks a declaration that the determination under s 170 of the Act was invalid and an order requiring WorkCover to determine the issues according to law. Most of the principles of law and the proper approach to the administrative process undertaken by WorkCover, upon which L&B rely, have been dealt with previously.

81 Leaving aside hyperbole in the submission, in summary, L&B submits that WorkCover:

(a) failed to follow procedural requirements of the Act;

(b) breached procedural fairness by relying on evidence not disclosed to L&B;

(c) did not provide adequate reasons for its determination;

(d) reversed the onus of proof; and

(e) was inconsistent in its formulation and application of criteria.

82 As to the matters set out in the amended summons for relief, I do not repeat each of the alleged grounds upon which it is said the orders should be made.

The first ground: the first review infects the second

83 In the first of the grounds L&B relies on a failure by WorkCover to determine the first application under s 170 of the Act (hereinafter "the first review"). This ground has no merit. The first review was lodged against the charging of additional premium by letter from Allianz dated 15 August 2008 and was calculated as a consequence of the audit by AEA, to which reference has already been made. By letter dated 16 December 2008, as has already been stated, WorkCover overturned the calculation of total wages by AEA and the premiums based, directly or indirectly, on that audit. The appeal was successful and WorkCover fulfilled its obligation under s 170 of the Act.

84 The fact that WorkCover went on, in accordance with the duties imposed upon it, to investigate, itself, the total wages of L&B, is not to refuse to fulfil the duty imposed upon it to deal with the review under s 170 of the Act. Rather, WorkCover accepted the ground of the review and, in accordance with the duties and responsibilities imposed upon it under the Act, undertook the audit and investigation otherwise required. These two steps have separate legal consequences and the action to embark upon an inquiry and commission a new and different audit does not negate the effect of the action of WorkCover in overturning the calculations of premium and the charges made on the basis of the earlier audit and premium demand.

85 There has been, in that regard, no denial of natural justice or procedural fairness and no failure to fulfil the duties imposed upon WorkCover by the Act. The rights of L&B were fully protected by its ability to lodge a subsequent appeal, if it were so advised. This it did. From any practical and effective viewpoint, the only extant determination relates to the review confirmed by WorkCover's letter of 14 May 2010 and the additional premium based thereon notified by the letter from Allianz of 11 June 2010.

86 Part of the submission of L&B seems to suggest that premium adjustment notices issued by Allianz arising from the audit that was subject to the first review, were paid. However, the evidence before the Court (see letter from WorkCover of 30 October 2009, commencing at Exhibit A, p 251 and in particular at p 254) is to the effect that the premium adjustment notices issued by Allianz were withdrawn as a consequence of the request of Clarks Pacific Insurance Brokers on behalf of L&B. As a consequence, it is unclear to the Court what the precise nature of the complaint is. In effect, the first s 170 review has been granted. The premium adjustment notices originally issued as a result of the audit undertaken by AEA & Associates were withdrawn. If, as seems to be alleged, those initial premium adjustment notices gave rise to a payment by L&B, which has not been repaid or credited, the remedy is not certiorari, or orders in the nature thereof, but other causes of action may be available: see Bell Bros Pty Ltd v Shire of Serpentine-Jarrahdale [1969] HCA 63; (1969) 121 CLR 137 and the doctrine of recover of money exacted colore officii , per Kitto J (with whom Barwick CJ and Menzies J agreed; McTiernan and Windeyer JJ issuing separate judgments in or to the same effect).

87 The amended summons seeks relief only in relation to the determination of the second review (hereinafter "the second determination"). As earlier stated, the premium adjustment arising from the first audit is no longer extant. A second determination has issued, which gave rise to a notice of premium adjustment and that premium adjustment notice was the subject of the second review application. It is the result of that second review that is sought to be challenged. Further, the issuing of the second notice of premium overtook the first such notice.

88 Any irregularity or invalidity in the determination of the first review, or any irregularity or invalidity in the process by which the first review was finalised, does not impact upon the process adopted in the second review. As a matter of fact and law the second review and the determination thereof, while it factually arose from the failure to resolve the first review, was a second application and, in law, a separate determination. That second determination stands or falls on the procedures adopted for it and is not vitiated by any irregularity in the process or resolution of the first review. This ground must fail.

The second ground: failure to investigate

89 The second ground upon which L&B relies to invalidate the second determination by WorkCover is that WorkCover failed to carry out a proper investigation in that it did not make sufficient enquiries of the contractors alleged to be deemed workers of L&B.

90 In support of this ground, L&B submits that WorkCover was required to make its own enquiries in order to be satisfied that the contractors fell within the ambit of Clause 2 of the Schedule. L&B then admits that enquiries were made by CIB (the auditors) on behalf of WorkCover, but that WorkCover relied only upon the wage figures. Further, because each contractor must be dealt with on a case-by-case basis, insufficient enquiry was made of each contractor and only internet or database searches were utilised. As a consequence, WorkCover did not, or did not adequately, address issues relevant to the classification of these contractors, including whether they were running a trade or business, whether the work under the contractors were sublet or whether the contractors employed workers. Lastly, and as a result of the foregoing arguments, L&B submits that WorkCover had insufficient information or information that lacked sufficient specificity to make the determinations, or, alternatively, relied on information that was irrelevant and therefore unlawful.

91 As earlier stated, L&B was entitled to apply under s 170 of the Act for a review of the premium demanded of it by Allianz. Once that application was made (s 170(3) of the Act), WorkCover was required to notify the insurer of the application, to consider the application and to have regard to such oral or written evidence or representations as it thinks fit and, subject to currently irrelevant considerations, either dismiss the application or determine it in accordance with the relevant insurance premiums order and thereafter inform the employer and the insurer of its determination. There is no requirement in s 170 of the Act, or any other provision, for WorkCover to make enquiries or to hold or conduct any formal or informal inquiry. The enquiries suggested are not in relation to information that is obvious or easily determined. Mandamus would not run to require WorkCover to make some, any or particular enquiries, in such circumstances. And certiorari, or orders in the nature thereof, will not issue to quash a determination on the basis that enquiries have not been made. The failure by WorkCover to make enquiries is not an error of law or an error of jurisdiction.

92 Notwithstanding the foregoing, the factual basis upon which L&B relies for this ground does not withstand scrutiny. WorkCover engaged CIB (the auditors) to conduct an inquiry and to report to WorkCover on its findings. That report, dated 8 January 2009 can be found in Exhibit A at p 184-192 (plus annexures). The report notes the absence of a separate business address in New South Wales for L&B and included reports on visits to site to inspect work and the relationship with subcontractors. It noted the provision of certain tools. The report also noted the absence of a company logo for subcontractors, save for one person who was wearing a B&L Lining Pty Ltd shirt (B&L Lining Pty Ltd is an associated company with L&B). The trucks used by the subcontractors contained no company logos on their side or elsewhere. The visit disclosed that alleged independent contractors were working together to perform a task for L&B. This derives from the physical inability, in most instances, to perform the work as an individual and the documentary evidence relating to the persons being sole traders and/or partnerships. The subcontractors' statements indicated that they did not employ staff nor engage other subcontractors. The documentary evidence indicated significant control over the process being undertaken by L&B through these subcontractors. Each of the subcontractors was remunerated by the provision of an invoice and payment on invoice. There seemed to be no negotiation of a total contract price beforehand, although in some instances a total price was provided. L&B advertises, but most if not all of the subcontractors do not. That advertising occurred in the yellow pages, trade journals and by word of mouth. The report notes the industry classification and the relevant insurance premium order. The director of L&B is on the payroll of another company, namely, B&L Linings Pty Ltd.

93 The auditors reported on the inspection of business activity statements, PAYG payment summaries, summary payroll reports, employment contracts, supplier and contractor invoices, ledgers and financial statements. Those reports did not reconcile. "Considerable further clerical effort" was required by the auditors to obtain verifiable information for workers' compensation audit purposes. The auditors examined L&B's invoice books and cross-referenced those contractor invoices to a general ledger, copies obtained, and a file created for each subcontractor. They discussed with the director and another each of the subcontractors and requested copies of relevant information. The report states:

"Information was not available on all 'subcontractors', documents were withheld from files that would of [sic; have] proved 'useful' during the audit, as all documents were reviewed by Fred Saraikin [a representative of L&B] before being provided.

Following our review of each contractor, we discussed with Fred their business processes, and methods of allocating specific jobs to each subcontractor."

94 An explanation was given as to how the work was allocated but, during the course of their time at the premises, work was in fact allocated on a fundamentally different basis. During the course of that visit it was made clear that each job was inspected four or five times while it was ongoing and the subcontractors sent in paperwork for pays (or "phoned" it in). During the course of that visit one of the "gyprockers" had asked whether he had a job next week and Fred had replied "yes". Such a process was inconsistent with the quoting process that had been explained. The same gypsum plasterboard fixer was paid notwithstanding that he was apparently from a different company than the one originally suggested.

95 During their discussion with Mr Saraikin, the auditors suggested ways in which evidence could have been provided that the subcontractors had their own employees or other evidence could be provided to show that they ought not be included as deemed workers. The auditors reported that they were advised that a process had been commenced. On being requested to review those forms, filled in by subcontractors for current purposes, in order to determine whether the inference was available that that process had been ongoing, the auditors were informed that the subcontractors did not complete the form properly (or not all of them did).

96 The report notes that the gypsum plasterboard and cornices are supplied onsite to the subcontractors by L&B's suppliers and also notes the tools used by sanders and plasterers, which, in the case of plasterers, also includes some consumable items such as glue, screws, nails, steel angles, arch beads, and cement. The foregoing report was provided to L&B and formed part of the application under s 170. During the course of the correspondence between L&B and WorkCover, WorkCover provided all of the information at its disposal including the primary documents from which the report was compiled.

97 The information that L&B says ought to have been investigated and obtained by WorkCover, before reaching its conclusion as to the status of each contractor, is information that is neither obvious nor easily ascertainable. It is, on its face, information that is extremely difficult to obtain and could not be obtained without the use of compulsive powers and/or the cooperation of contractors engaged by L&B. On the other hand, as the Wages Definition Manual makes clear, employers/principals were required to keep records in relation to each contractor, including documents that support the claim for contractor status such as the information that L&B submit ought to have been the subject of enquiry by WorkCover. As the High Court has made clear in Minister for Immigration and Citizenship v SZIAI [2009] HCA 39; (2009) 83 ALJR 1123, a failure to enquire, except in relation to factual matters that are either obvious or that can be readily determined, could not constitute a departure from common law standards of natural justice or procedural fairness (at [24], per French CJ, Gummow, Hayne, Crennan, Kiefel and Bell JJ and at [53], per Heydon J) and did not involve jurisdictional error or error of law.

98 An audit had occurred on the basis of which a reassessment of premiums was made and notice given to L&B. The basis of that report was provided. L&B sought a review of that report and, to the extent that L&B was suggesting that contractors who were included as deemed workers were not in fact deemed workers, evidence to support that proposition should have been provided by L&B. It was not. There was no duty imposed upon WorkCover to inquire further than it had already. This ground also fails.

Ground 3: Failure to disclose evidence

99 L&B refers to the correspondence between the parties, and in particular the correspondence from WorkCover and submits that there are inconsistencies in the description of the material upon which WorkCover is relying for the purposes of the review.

100 In the letter of 30 October 2009, WorkCover states that it is relying upon the CIB (auditors) wage audit report and information provided by Allianz, L&B's submissions, including copies of receipts, advertising, ABR searches etc., the 1998 Act, regulations with legislation and guidance notes, WorkerCover's Wages Definition Manual, and various Court and Commission precedents. L&B then points to the letter of 11 December 2009 in which WorkCover, amongst other things, states that it is having regard to information provided by L&B, through its representative or on its own account, as well as CIB, legislation, case law and legal precedents (Exhibit A, p 325). In that letter, WorkCover supplied a compact disc of all of the source documentation supplied by the auditor and taken into consideration (p 326 [4]) and deals with the submission of L&B that a contractor licence is not required for commercial work during which it refers to evidence (being invoicing etc.) available to WorkCover and CIB which, according to WorkCover, predominantly relates to residential work.

101 WorkCover then refers to contractors which it had excluded from the deemed worker category and sets out considerations that WorkCover took into account in so doing, some of which had not been previously included by either the auditor (CIB) or WorkCover itself. Lastly, in relation to the letter of 11 December 2009, WorkCover suggests (Exhibit A, p 237 [8] and [9]) that certain concerns raised in relation to the auditor and their report will be dealt with by WorkCover's Compliance Improvement Branch, repeats the statement that the compact disc was supplied and refers to the existence of the Proposed Determination (a draft supplied for comment and to focus any submission that L&B sought to make). Both workers and deemed workers were identified by WorkCover and WorkCover repeated the assertion that it has considered all the factual information contained in the audit report including all supporting documentary evidence gathered by the auditor, WorkCover and any submission from L&B or their representative.

102 Against the foregoing, L&B submits that the determination itself (Exhibit A, p 431 and following) outlines the material relied upon, which material is inconsistent with the material described in the foregoing. I do not consider there is an inconsistency of the kind suggested, nor an inconsistency of any substance. I accept that a more felicitous use of language may have been used, but, of itself, that does not point to an inconsistency. I now explain why I take that view.

103 First, I will next deal with the proposition that WorkCover gave inconsistent accounts of the material from the auditor to which it had regard. As the second determination (Exhibit A, p 431 and following) makes clear, once more, the material from the auditors was considered. This matter is discussed at [128]. The wages amounts were considered at face value. Conclusions (except to the extent that they otherwise accorded with the conclusion of WorkCover) of the auditors were not considered. This included the schedule summarising source documents and the comments thereon and the "questionnaire" which was a document, in relation to each contractor, completed by the auditor, not the contractor, from source documentation otherwise available. Moreover there is no comment or statement that it was only the wage figures upon which WorkCover relied. The wage figures in the auditors report was the only information relied upon "at face value". The wages figures were not controversial, except in the sense that L&B suggested that the monies were paid partly to deemed workers and partly to independent contractors not covered in the definition of Clause 2 of the Schedule.

104 Next, L&B complain as to the fact that WorkCover referred the auditors' report to its Compliance Improvement Branch without indicating what part or parts warranted rectification. The reference to the WorkCover's Compliance Improvement Branch of the auditors' report related to L&B's contention that there were errors contained in the auditors' report. This was a reference to the conclusions reached in the auditors' report, which, as previously stated, were not taken at face value by WorkCover. WorkCover derived its own conclusions from the source documentation and information provided. On that basis, the errors, if there were any, were a matter for internal consideration and related to the relationship between the auditors and WorkCover. There was no duty on WorkCover to disclose the results of that review by the Compliance Improvement Branch.

105 Lastly, under this ground, L&B complain that WorkCover stated that it relied upon information provided by Allianz and various Court and Commission precedents and, it is alleged, did not disclose the information provided by Allianz nor which Court and Commission precedents were relied upon.

106 Ultimately, whatever Court and Commission precedents were relied upon is relevant only if there were no statement by WorkCover as to the criteria it will be considering and the legal tests to be applied. WorkCover provided both the legal tests and the criteria which it considered relevant. There is no challenge based upon the proposition that the criteria said to be relevant were, as a matter of law, not appropriate or relevant.

107 As to the information provided by Allianz, WorkCover made available all of the material upon which it relied. It supplied a compact disc containing all of the source documentation supplied by the auditors and otherwise provided correspondence between Allianz and L&B, which correspondence was provided by Allianz, along with the information as to past payments of premiums and the like. Plainly, on the material before the Court, copies of correspondence between Allianz and L&B were made available by Allianz to WorkCover. The criticism of the statement by WorkCover that it relied upon information provided by Allianz is a complaint that, in essence, assumes that there was information provided by Allianz to WorkCover other than the letters and information that had already been supplied to L&B. There is no evidence that any such material existed and there is no evidence or suggestion that any such material was relied upon by WorkCover.

Ground 4: Reasons for determination and sufficiency thereof

108 The requirement to give reasons is a developing aspect of administrative decision-making. As society has become more complex and sophisticated, there is a growing expectation that persons affected by administrative conduct will know why it is they have been so affected. This growing expectation, in part, has informed many decisions of courts that more readily impose upon administrative decision makers the requirement to give reasons. In all cases, whether there is a requirement to give reasons is derived from the statutory context in which the administrative decision making occurs and the function of the administrative decision maker and the purpose of giving reasons: Campbelltown City Council v Vegan [2006] NSWCA 284; (2006) 67 NSWLR 372; Riverina Wines Pty Ltd v Registrar of The Workers Compensation Commission of NSW & Ors [2007] NSWCA 149; Soulenezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Sydney Ferries v Morton [2010] NSWCA 156.

109 The requirement to issue reasons depends, as earlier stated, on the characteristics of the power exercised and its circumstances. The general statement that there is no general law obligation for administrative decision makers to give reasons ( Public Service Board of NSW v Osmond [1986] HCA 7; (1986) 159 CLR 656) has not been overruled, but has been honoured more in the breach than in the observance. In each case, it depends upon the statutory context. Where, as here, the statutory context includes an inquisitorial process in which the decision maker is both investigator, contradictor and decision maker, all of the correspondence between the parties (subject to its later modification) is available to determine the reasons for the decision. Nevertheless, in my view there is a desirability, where a decision maker is determining matters which potentially adversely affect a person (including a corporation) and which decision can be the subject of review, either by appeal or by judicial review for jurisdictional error or error of law, that there be a statement of the process undertaken in making the determination and why the conclusion has been reached. It is unnecessary to determine whether such a statement of reasons is necessary, or obligatory.

110 In the statutory context now before the Court, I am prepared, without finally deciding, on the basis of the foregoing and the statutory context to which reference has already been made, to accept that reasons for the decision are necessary. But those reasons for decision can be ascertained, and must be ascertained, from the totality of the documents and correspondence between WorkCover and L&B. Further, what is required is a brief indication of the reasons for determination and not a process of judicial reasoning. It is impermissible to comb through the correspondence of an administrative decision maker with an overzealous eye to error or a requirement akin to the requirements imposed upon judicial officers.

111 Accepting, as I do, that it was necessary for WorkCover to disclose its reasoning process, I am satisfied that it has disclosed that process and the reasons for its determination. It is not to the point that L&B disagree with the conclusions reached, or even if the Court disagreed with the conclusions reached, the process by which the conclusions were reached is made clear and the basis for those conclusions is specified. In this case, WorkCover identified the issue that was in dispute between it and L&B and set forth a number of criteria which, it made clear, WorkCover would consider in resolving that dispute. WorkCover also specified the material upon which it relied in weighing those criteria.

112 The definition in Clause 2 of the Schedule refers to a number of conditions which have already been outlined. It is those conditions on which the requirement to pay premiums depends. But the legislature has, in that scheme, made it WorkCover's task to determine whether, for the purpose of payment of premiums, a person is or is not a worker or deemed worker. In those circumstances, it is not the objective existence of the conditions that determines the requirement to pay premiums, but the satisfaction of WorkCover as to those conditions and the requirement of WorkCover to pay premiums in accordance therewith: Parisienne Basket Shoes Pty Ltd v Whyte [1938] HCA 7; (1938) 59 CLR 369 at 391.

113 The criteria published by WorkCover, either generally or specifically to L&B, are factors properly considered in the determination of the issues required to be determined. That material includes the Wages Definition Manual and the correspondence between the parties. They were considered and that consideration was made known to L&B. There are sufficient reasons disclosed for the determination made and this ground of review also fails.

Ground 5: The determination discloses error of law

114 In part, this ground repeats a number of the grounds already relied upon by L&B. L&B refer to the duty on WorkCover to make its own enquiries and the proposition that WorkCover obliged L&B to produce evidence peculiarly within the knowledge and records of the contractors. The ground also deals with an allegation that WorkCover reversed the onus and failed to follow decisions of the ADT relating to B&L Linings Pty Ltd and/or L&B. L&B also rely, once more, on the irrelevance of the criterion that the contractors were or were not licensed under the Home Building Act 1980, that the criteria, or one of them, utilised were "unintelligible" and that WorkCover "abrogated its responsibility".

115 WorkCover had, after the second auditors' report, significant material before it, which material it used to determine whether each contractor was or was not a deemed worker under Clause 2 of the Schedule. It did so by applying criteria, which it made public and which was the subject of correspondence between WorkCover and L&B. Those criteria included that the work of each contractor, on the evidence and material before WorkCover, was confined to work for L&B (or its related entity), that work was allocated by L&B and its staff without prior inspection by the contractors and prior fixed-price contracts, which work was paid on a lineal metre of gypsum plasterboard fixed, the status of the contractor as a private company, whether the contractor had its own workers' compensation policies, whether the contractor advertised, the tools and material that was supplied by the contractor as distinct from that supplied by L&B, whether contractor held licences under the Home Building Act , whether the contractor was registered for and charged GST and/or held an ABN.

116 Further, the auditors had primary source material relating to the way in which contractors were actually allocated work and paid for the job (to which reference has previously been made), and the level of control of the work exercised by L&B. Each of those factors was taken into account insofar as it was relevant in relation to each contractor. A determination was made balancing criteria, which may have pointed in different directions, and a result determined. That result was notified to L&B and L&B were invited to address, by way of submissions and evidence, a contrary conclusion or evidence inconsistent with the criteria adopted. L&B did address those matters and was, in relation to a number of contractors, successful in having them excluded from the preliminary view expressed by WorkCover.

117 The process described above, which was undertaken by WorkCover, is not a reversal of onus. WorkCover arrived at its conclusions on the basis of the material before it and invited L&B to produce material inconsistent with that conclusion or which pointed in a different direction. Nevertheless, I reiterate that it was for L&B to persuade WorkCover that its initial determination, from which L&B were "appealing" was wrong. Even if, which I do not accept, WorkCover were to have imposed an onus on L&B to produce material to persuade WorkCover of the incorrectness of the basis of its original premium calculation, that would not have amounted to an error of law. None of the criteria would be a necessary condition to be satisfied and none of them may be sufficient to require a determination one way or the other, but each of them is entitled to be weighed in the determination of the issues that were before WorkCover. That is the way in which WorkCover dealt with the criteria, and that discloses no error of law.

118 L&B submits that, at least in relation to one contractor, one of the criteria was so obviously inconsistent with the status conferred upon him that it discloses a manifest error in the principles applied or in the manner of their application. The example to which L&B refers is the example of Mr Zhao. Mr Zhao had an Australian Business Number and was registered for GST (if that is not a tautology). Mr Zhao did not have a workers' compensation insurance policy (although he claimed to have such a policy, purportedly issued by NRMA, but, in the knowledge of WorkCover, that could not be a workers' compensation insurance policy, because NRMA is not a licensed insurer for that purpose). Mr Zhao (or the business name under which he operated) did not have or hold a licence under the Home Building Act and, it seems, the invoices for the work performed by Mr Zhao for L&B were predominantly for residential premises (at least that was the conclusion drawn by WorkCover and no evidence to the contrary was produced by L&B). L&B certainly had within its knowledge whether the work performed for it was residential work.

119 L&B refers to Mr Zhao, who, on the material available to the auditors, on the inspection of one or other of the jobs and/or payment of invoices, was sharing jobs with Mr Shishkin and earned (that is, was paid in invoices) $228,965 in the year ending 13 September 2006. L&B asserts that the amount of money involved is such that Mr Zhao must have been an independent contractor employing others or subletting to others.

120 First, if Mr Zhao were employing or subletting he would be required to have a workers' compensation insurance policy, which he did not. L&B submit, correctly, on a strict view, that all that means is that Mr Zhao may have been in contravention of his obligations under the Act. Nevertheless, the existence (or rather the non-existence) of such a policy is a factor to be weighed heavily in determining whether or not Mr Zhao employed or sublet the work.

121 Further, the assertion that an individual could not earn over $200,000 in one year without employing or subletting the work does not necessarily withstand scrutiny. It is not clear whether Mr Zhao, for example, invoices irregularly and that year involved work performed over more than a 12-month period. In addition, Mr Zhao may be working more than 12 hours per day, 7 days per week (or even 6) as a consequence of which he is able to complete linear metres of gypsum plasterboard fixing at a far greater incidence than workers who work only 37 hours per week (ordinary hours). It is correct to submit, if that be what is submitted, that the amount earned by Mr Zhao is a strong factor to be weighed against him being a worker or against him being a contractor other than an independent contractor who carried on his own business, but it is a criterion to be weighed, a consideration, and does not determine the application in the face of other criteria.

122 The submission that WorkCover treated all contractors the same, or dealt with the issues generally rather than by reference to each contractor, is immediately dispelled by the different treatment of each contractor. The discrimination by WorkCover of some contractors over others plainly means that each contractor has been considered separately. When determining whether each contractor is a contractor described as one carrying on a trade or business regularly carried on by the contractor in the contractor's own name or under a business or firm name, one looks at the contractor generally, that is, each contractor generally, and one determines that condition by the general conduct of the contractor in carrying on the business. When WorkCover determines whether the contractor "neither sublets the contract nor employs any worker", WorkCover must look at not only each contractor but each contract and the work performed to fulfil that contract.

123 Similarly, the fact that some contractors who were excluded had some criteria that matched other contractors who were not excluded does not, without more, suggest inconsistency in approach. All of the criteria must be considered and each consideration is to be weighed to come to an ultimate conclusion of the conditions prescribed in Clause 2 of the Schedule.

124 The submission of L&B as to the decisions of the ADT is misplaced. First, the decisions are not binding as a matter of law. Secondly, prior decisions are not binding on a different party as to a finding of fact. The ADT decisions relate to a significantly different statutory scheme, which may or may not have the same effect in including or excluding certain contractors. WorkCover at no time has suggested that the contractors who were deemed workers were in a category that would, for the purposes of the common law, make them anything other than "independent contractors". In that last phrase, the terms "independent" is used differently from the way in which it is used to refer to an "independent business". In the common law, most often, the term "independent contractor" is used to differentiate that relationship from an employee working under a contract of service. No one suggests that the deemed workers under Clause 2 of the Schedule are working under a contract of service.

125 To the extent that the ADT decisions deal with the common law position discriminating between employment and independent contract status, they are wholly irrelevant to the task undertaken by WorkCover. Ultimately, the conclusion of fact that a person is an independent contractor or is an employee is a determination on which reasonable people will differ: see Zuijs v Wirth Brothers Pty Ltd [1955] HCA 73; (1955) 93 CLR 561 and Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 in both of which a majority of judicial officers formed a view, reasonably, that was inconsistent with the ultimate determination of the High Court. The fact that the ADT came to a view as to the status, for tax purposes, of various contractors is a consideration, and one which WorkCover took into account. But it is not determinative of the application and, even if the statutory regime were identical, WorkCover and the ADT were entitled to come to different factual conclusions, even on the same evidence. Moreover, the ADT is an adjudicative tribunal deciding these issues in an adversarial context and not undertaking an inquisitorial task such as that reposed in WorkCover.

Remaining Grounds

126 Ground 6 of the amended summons is, in essence, a particular of Ground 5 as to error of law. It deals with inconsistent criteria, the operation of different criteria on different occasions and a purported outcome that is inconsistent. I have dealt with each of these matters.

127 It is the function of a decision maker, even in an inquisitorial process, to take into account all relevant criteria and not to take account of any irrelevant criterion. But jurisdictional error will occur for failure to take into account a relevant criterion, only when consideration of the criterion is mandatory: Peko-Wallsend , supra. WorkCover has taken into account all mandatory considerations and has not taken into account any irrelevant consideration. Further, the requirement to take into account each relevant consideration is not a requirement to arrive at a particular outcome as a result thereof. All of the matters raised in the other grounds have been dealt with by the Court, in one form or another. However, the last submission accuses WorkCover of acting in bad faith or "against good faith". That allegation is made on the basis of inconsistent statements by WorkCover as to what it took into account. The submission does not withstand scrutiny and is not available.

128 In the letter dated 11 December 2009, WorkCover stated that it was providing a compact disc that "contains all documentation supplied by the auditor and taken into consideration in our deliberations". The compact disc also contained conclusions reached and summaries made by the auditors, which WorkCover stated it was not taking into account. The two comments are not inconsistent. No assertion by WorkCover suggests that all of the documentation on the compact disc was taken into account or that it was the only documentation or material considered. The compact disc contains all of the documentation supplied by the auditor and some of it, specified in other communications, has been considered. Those documents that were considered were the source documents and "evidence" (not conclusions and summaries that were an expression of opinion by the auditor). As a consequence, the contractor questionnaire, even though it was contained in the compact disc, was not a matter taken into account by WorkCover.

129 Contrary to the submission of L&B, the attitude of WorkCover shows the exact opposite of bad faith. It acknowledges the submission of L&B that some of the summaries of the auditor, in particular the narrowness of the conclusions reached in the contractors' questionnaires, were not appropriate to be taken into account and WorkCover did not consider them. This ground is wholly without merit.

Conclusion

130 The task to be undertaken by WorkCover is not an easy one. The position in which it puts a company such as L&B, and did put L&B, is even more difficult. The legislation creates tensions largely associated with the fact that the test for the payment of workers' compensation premiums depends, for its calculation, on the amount paid to contractors of a particular kind. The material which would best go to determining the conditions that give rise to that kind of contractor are within the possession of the contractor, who is not a party to the process.

131 I assume that the foregoing is the reason, amongst others, that WorkCover advises principals to obtain that kind of information at the time that a relationship is formed with the contractor and to have it available for WorkCover if an inspection or audit is undertaken. This was not done by L&B. I am not now being critical of L&B. On the contrary, I sympathise with the position in which it finds itself.

132 It seems to me that there are two ways in which to overcome the problem. The first is by conduct and requirements of a company in the position of L&B. They can insist that every contractor with which they deal must be a corporate entity and possess workers' compensation insurance for all persons who carry on work on their behalf. That workers' compensation insurance can be provided at the time that the relationship is commenced, and such a course would ensure that the contractors were not then deemed workers under the Schedule.

133 Alternatively, if the legislature genuinely desired a system of compensation for workplace injury, which was informal and non-curial, then it could provide, quite simply, that all persons performing work should be covered by workers' compensation insurance and WorkCover's role would be to determine whether the premium for such insurance would be borne by either the principal or the contractor. Such a process would necessarily involve the contractor and make available to both WorkCover and the principal all of the information necessary to enable a full consideration of the criteria based on all of the evidence, rather than only the evidence that is available to L&B and/or WorkCover.

134 Nevertheless, that is not the legislative scheme with which the Court must deal and it is not the legislative scheme with which WorkCover must deal. The criticism made by L&B of the process undertaken by WorkCover is understandable and some of the correspondence from WorkCover to L&B may have been more felicitously expressed, but there is no error of law based on any of the grounds raised by L&B that warrants the quashing of the determination of WorkCover made 14 May 2010. No other determination is extant, nor warrants interference.

135 The Court makes the following orders:

(i) Summons dismissed;

(ii) The plaintiff pay the defendant's costs of and incidental to the proceedings, as agreed or assessed.

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Decision last updated: 27 May 2011