Uninsured working director is not an extended definition worker under section 175

In Greenaway v Prestige Helicopters Pty Ltd [2020] WADC 159 the appellant sought to argue, amongst other things, that an uninsured working director can still nonetheless claim compensation from a “principal” pursuant to section 175(1) of the Workers’ Compensation and Injury Management Act 1981 WA (the Act).

 

The appellant was represented by Graham Droppert SC and the respondent was represented by David Burton and Bryan Ullinger of McCabe Curwood.

Facts

The relevant facts were that Mr Timothy Greenaway (the deceased) was the sole director and only shareholder of Auspray Pty Ltd (Auspray).

Relevant to the determination of the above issue, Flynn DCJ found that Auspray had entered into a contract for services with Prestige Helicopters Pty Ltd (Prestige).

When providing the services to Prestige, the deceased was involved in an industrial accident where he unfortunately passed away.

Law

For working directors, the Act establishes a scheme whereby a company purchases insurance for the director in accordance with section 160 of the Act. If the company purchases insurance for the benefit of the director pursuant to section 160, and if the director then suffers an injury, the director will be regarded as a “worker” for the purposes of the Act.

It follows that if insurance is not purchased pursuant to section 160 then an injured working director is not a “worker”. If there were doubt about this, then section 10A(7) says: if a company (other than a company that is, or is one of a group employers that is, exempt under section 164) does not comply with section 160 on the basis that a working director of the company is a worker, then, for the purposes of this Act, the working director is not a worker.” (our emphasis added).

Argument

The deceased’s estranged wife argued that despite not taking out a working director’s policy of insurance pursuant to section 160 of the Act, the deceased may still be regarded as a worker and entitled to workers’ compensation payments from Prestige.

The appellant argued that section 10A(2) limited the effect of section 10A(7).  Section 10A(2) says: “despite anything in section 5, a director of a corporate body is not a worker of that corporate body for the purposes of this Act, unless and to the extent that this section makes the director a worker” (our emphasis added). The appellant argued that section 10A(2) limited the effect of section 10A(7) to saying that the deceased was not a worker of Auspray, however, could still be regarded as a worker for the purposes of section 175 of the Act and claim compensation from Prestige.

Decision of Flynn DCJ

Flynn DCJ rejected the appellant’s argument and in doing so emphasised the distinction between a liability and an entitlement.

He explained that section 18 of the Act creates both an entitlement of a worker to compensation and a liability to pay the entitlement upon an employer. “The entitlement and liability crystallise upon an injury to the worker”.

In rejecting the argument, Flynn DCJ said that: “section 175 of the Act does not create an entitlement to compensation. It is concerned with identifying the parties who have liability to pay the entitlement that is created by section 18”.

The effect of section 175(1) is that the liability of Prestige was the same as Auspray’s liability. Given that Auspray had no liability to the deceased (because the company did not purchase insurance under section 160) then Prestige had no liability to pay compensation under section 175 of the Act.

Conclusion

This was a very good outcome for an uninsured respondent.

This is the first case that has offered an interpretation of the combination of sections 160, 10A(2) (7) and section 175 of the Act. It highlights the obvious task when confronted with questions about liability of asking what is the entitlement and what is the source of liability.

Contributors

Bryan Ullinger Senior Associate