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Capilano Honey Ltd v Workers' Compensation Regulator[2018] ICQ 2

Capilano Honey Ltd v Workers' Compensation Regulator[2018] ICQ 2

 

INDUSTRIAL COURT OF QUEENSLAND

 

CITATION:

Capilano Honey Ltd v Workers’ Compensation Regulator [2018] ICQ 002

PARTIES:

CAPILANO HONEY LTD

(appellant)

v

WORKERS COMPENSATION REGULATOR

(respondent)

FILE NO/S:

C/2017/11

PROCEEDING:

Appeal

DELIVERED ON:

22 February 2018

HEARING DATE:

10 August 2017

MEMBER:

Martin J, President

ORDER/S:

  1. The Appeal is allowed.
  2. The decision of the Industrial Magistrate of 21 April 2017 is set aside.
  3. In lieu of that decision, it is decided that:
  1. (i)
    The Appeal to the Industrial Magistrates Court be allowed;
  2. (ii)
    The decision of the Respondent of 24 June 2016 be set aside;
  3. (iii)
    The WorkCover decision be varied to set the premium payable by the Appellant under the reassessment notice by applying WIC 360911 – Other Grocery Wholesaling.

CATCHWORDS:

WORKERS’ COMPENSATION – INSURANCE AND LEVIES – PREMIUMS AND CONTRIBUTIONS TO INSURANCE FUNDS – where premium calculated by reference to WorkCover Industry Classification (WIC) – where premium paid by appellant was changed by WorkCover – where decision by WorkCover was affirmed by internal review and Industrial Magistrate – whether the Industrial Magistrate erred in failing to find the appellant’s predominant business activity – whether Industrial Magistrate erred in applying an incorrect test under s 54 of the Workers Compensation and Rehabilitation Act 2003 – whether the Industrial Magistrate erred in not applying the test required under s 19 of the 26 June 2015 WorkCover Queensland Notice (No. 1) of 2015 - whether the Industrial Magistrate erred in finding that the WIC that corresponded to or closely described the appellant’s predominant business activity was Food Product Manufacturing

Workers Compensation and Rehabilitation Act 2003

CASES:

WorkCover Queensland v Shagadelic Pty Ltd (2001) 166 QGIG 422

Otis Elevator Company v WorkCover Queensland (2001) 166 QGIG 424

APPEARANCES:

M C Long instructed by Redchip Lawyers for the appellant

S P Gray directly instructed by the Workers Compensation Regulator for the respondent

  1. [1]
    The appellant (Capilano) pays a premium every year to WorkCover for the policy which covers it under the Workers Compensation and Rehabilitation Act 2003 (the Act). The amount of the premium is set under the Act in accordance with a particular formula. One of the variables used in the formula is the “WorkCover Industry Classification” (WIC).
  2. [2]
    For the purposes of this appeal, the WIC which had been applied to Capilano was, for some time, “WIC 732014 - Packaging Services”. That changed in October 2015 when WorkCover applied a new WIC, namely, “WIC 119913 - other Food Product Manufacturing n.e.c.”. As a result of that change, Capilano’s premium increased from $229,758.07 to $385,238.40.
  3. [3]
    Capilano failed in its attempts to have the WorkCover decision reversed by internal review and its appeal to the Industrial Magistrates Court was dismissed.
  4. [4]
    Capilano now appeals under s 561 of the Workers Compensation and Rehabilitation Act 2003 which applies the appeal provisions of the Industrial Relations Act 2016.

The appeal

  1. [5]
    Capilano relies on the following grounds:
  1. (a)
    that the Industrial Magistrate erred in applying an incorrect test under s 54 of the Act when it set the premium for Capilano;
  2. (b)
    that the Industrial Magistrate erred in finding that the WIC that corresponded to or most closely describes the appellant’s predominant business activity is “WIC 119913 - other Food Product Manufacturing n.e.c.”;
  3. (c)
    that the Industrial Magistrate erred in failing to find that Capilano’s predominant business activity is that of honey packaging;
  4. (d)
    that the Industrial Magistrate erred in failing to find that the WIC that corresponds to or most closely describes Capilano’s predominant business activity is “WIC 732014 - Packaging Services”;
  5. (e)
    in the alternative, that the Industrial Magistrate erred in failing to find that Capilano’s predominant business activity is that of honey wholesaling and that the appropriate WIC to be applied is “WIC 360911 - other Grocery Wholesaling”.

The legislation

  1. [6]
    Section 54 of the Act provides:

“54 Setting of premium

  1. (1)
    WorkCover must set the premium payable under a policy.
  1. (2)
    The premium payable for the policy for a period of insurance must be assessed according to the method (the method) and at the rate (the rate) specified by WorkCover by gazette notice.
  1. (3)
    If no rate is specified in the notice for an employer’s industry or business, WorkCover must decide the rate to be the rate applying to the industry or business classification specified in the notice that most closely describes the employer’s industry or business.

(3A) Without limiting subsection (2), the gazette notice may state a method or rate that provides for a premium payable by an employer in the event that the employer’s premium rate repeatedly exceeds the relevant industry rate.

  1. (4)
    Before WorkCover publishes the gazette notice, it must notify the Minister of the proposed specification of method or rate.
  1. (5)
    The specification is subject to any direction the Minister may make under section 481.
  1. (6)
    An assessment of premium must be made on the following basis—
  1. (a)
    wages paid or estimated to be paid during the period of insurance—
  1. (i)
    are taken to have been paid in equal weekly instalments during the period; or
  1. (ii)
    if the employer establishes to WorkCover’s satisfaction the wages were paid by the employer in another way, are paid in the other way during the period;
  1. (b)
    the premium payable for the period of insurance is according to the method and at the rate in force from time to time during the period.
  1. (7)
    An employer to whom a premium notice is given must pay the premium as assessed by the due date.
  1. (8)
    If the employer is a corporation and an administrator is appointed under the Corporations Act to administer the corporation, the administrator must pay the premium for the period during which the corporation is under administration.
  1. (9)
    If an employer is aggrieved by WorkCover’s decision, the employer may have the decision reviewed under chapter 13.
  1. (10)
    In this section—

employer’s premium rate means the premium rate calculated for the employer by using a formula that takes into account the number and cost of claims made against the employer’s policy during previous financial years.

relevant industry rate, in relation to an employer, means the industry or business classification rate applying to the industry or business classification—

  1. (a)
    stated in the gazette notice under subsection (2) for the employer’s industry or business; or
  1. (b)
    as decided by WorkCover under subsection (3)—for the industry or business that most closely describes the employer’s industry or business.”
  1. [7]
    Section 54(2) refers to the gazette notice which sets out the method and the rate to be used in assessing the premium payable. The relevant gazette notice was published on 26 June 2015 – WorkCover Queensland Notice (No. 1) of 2015. Part 2 of the Notice sets out the method for calculation of premiums for all employers. Part 7 explains how a WIC is allocated to an employer’s policy and section 19 is of particular relevance. It provides:

“19 WIC determined by business activity

19.1 Except as provided by Sections 20 to 23, WorkCover will allocate the WIC that WorkCover considers corresponds to or most closely describes the employer’s predominant business activity.

19.2 Without limiting Section 19.1, in determining the WIC that corresponds to or most closely describes the employer’s predominant business activity, WorkCover will have regard to the following matters:

a) the nature of the goods and services supplied by the employer;

b) the proportion of the employer's total sales and revenue attributable to each business activity undertaken by it and the goods and services supplied by that business activity;

c) the proportion of the employer’s overall operational costs attributable to each business activity undertaken by it;

d) the amount of the payments or estimated payments made by the employer attributable to each business activity undertaken by it to persons, regardless of whether those persons are workers of the employer or not, and shall include persons engaged through an arrangement with another entity whereby the persons’ labour or services are provided to the employer by a Separate Service Entity, a Labour Hire Employer or a Group Training Organisation;

e) the business activity or activities the employer holds itself out as performing or being ready, willing and able to perform; and/or

f) any other matter that WorkCover considers relevant.”

  1. [8]
    Schedule 1 to the Notice defines the “WorkCover industry classification (WIC)” as meaning: “the classification of industry set out in Schedule 2 Column 2 of the WIC table.”
  2. [9]
    Schedule 2 contains this note:

“2. Column 2 of the WIC table contains the WorkCover Industry Classifications. The WorkCover Industry Classifications are based on ANZSIC. …”

  1. [10]
    “ANZSIC” is defined in Schedule 1 as meaning “the Australian and New Zealand Standard Industrial Classification 2006”.
  2. [11]
    The task to be undertaken by WorkCover is described in s 19 of the Notice. WorkCover is to:
    1. (a)
      allocate the WIC
    2. (b)
      that it considers corresponds to or most closely describes
    3. (c)
      the employer’s predominant business activity.
  3. [12]
    Section 19.2 then specifies the matters to which WorkCover will (at least) have regard in in determining the WIC that corresponds to or most closely describes the employer’s predominant business activity.
  4. [13]
    It is obvious that the primary task is the determination of the predominant business activity and that this is to be done in the light of the matters in s 19.2. After that is done, WorkCover must then look to Schedule 2 for the appropriate WIC.

The Industrial Magistrate’s analysis

  1. [14]
    There is no dispute about any of the Industrial Magistrate’s findings of fact. The appeal concerns the way in which they have been applied and interpreted.
  2. [15]
    His Honour incorporated into his reasons part of the analysis of the WorkCover review officer on the internal review of the initial decision. That officer referred to three divisions within the ANZSIC classification. She dismissed “Division N – Administrative and Support Services” and “Division F – Wholesale Trade” as inapplicable. As to “Division C – Manufacturing” she said:

“Division C – Manufacturing describes business units who are mainly engaged in the physical or chemical transformation of materials, substances or components into new products (except agriculture and construction). I note the definition for Division C – Manufacturing provides examples of manufacturing activities to be included in this division given that the determination if [sic of] what constitutes a ‘new product’ may be subjective. The examples include milk bottling and pasteurising and fresh fish packaging. I consider these activities are analogies to the activities undertaken by Capilano in processing honey. Accordingly, I consider the evidence supports that Capilano is engaged in the physical or chemical transformation of material substances or components as part of its process of mixing various individual honeys purchased from various sources into a variety of single or blended honey products which are then filtered, heated and packaged as a new product.”

  1. [16]
    The Industrial Magistrate referred to that analysis and said:

“[31] If one removes ‘chemical transformation’ and notes that Capilano is singular not plural, it is a compelling analysis. Surely if milk bottling (including pasteurisation), meat processing and fish packaging (including oyster shucking and fish filleting) are categorised as ‘Manufacturing’ then so is Capilano’s business.

[32] In working out the predominant activity one cannot ignore what ANZSIC says about packaging, manufacturing and wholesaling. Given that the WIC system is based on ANZSIC this can be said to be what Parliament intended, the whole point of the use of extrinsic evidence in statutory interpretation.

…

[34] Therefore I too am satisfied that Capilano’s business of buying, importing, mixing, blending, heating, filtering, packaging, exporting and selling honey is most closely described as Manufacturing and Division C – Manufacturing is to be applied to this predominant business activity. …”

Was there an error of law?

  1. [17]
    So far as can be gathered from the excerpt from the review officer’s reasons, she did not apply the test required under s 19. That is an error of law. By adopting and applying that reasoning, the Industrial Magistrate similarly erred.
  2. [18]
    The Industrial Magistrate said at [32] that “In working out the predominant activity one cannot ignore what ANZSIC says about packaging, manufacturing and wholesaling”. With respect, that is not the correct approach. In applying s 19, one first determines the predominant business activity. After that is done, one then looks for the WIC which “corresponds to or most closely describes” the predominant business activity. The terms used in ANZSIC are irrelevant up to that point. It is inevitable that there will be predominant business activities which may fall within a number of the headings in WIC. It is at that point, that the ANZSIC schedules may be used to more readily understand the limits of the various WorkCover Industry Classifications. See the consideration of this by Hall P in WorkCover Queensland v Shagadelic Pty Ltd [1] and Otis Elevator Company v WorkCover Queensland [2] where his Honour made it clear that the ANZSIC schedules may be used to assist in the comprehension of the various WorkCover Industry Classifications.
  3. [19]
    The review officer’s analysis (which was adopted by the Industrial Magistrate) and the Industrial Magistrate’s own consideration of the issues both relied upon a comparison of other activities, such as milk bottling, without, it appears, any evidence as to what those activities entailed. The reasoning which was employed can be reduced to this simple syllogism:
    1. (a)
      The work done at Capilano is like milk bottling;
    2. (b)
      Milk bottling is found in ANZSIC Division C – Manufacturing;
    3. (c)
      Therefore, Capilano’s work falls within that same Division.

That is not consistent with the requirements of s 19.2 of the Notice.

  1. [20]
    Further, while the Industrial Magistrate set out many findings which were relevant to the matters in s 19.2 (a)-(e)[3], they do not have appear to have played a part in the reasoning which followed. Indeed, it seems more likely that his Honour did not determine the predominant business activity. As is referred to above, he seems, in [34] of his reasons to have nominated all of Capilano’s business activities in arriving at his conclusion. It follows, then, that an appellable error has been established.

Disposition of the appeal

  1. [21]
    As all necessary facts have been found, it is both appropriate and convenient for a new decision to be made in substitution for the decision under appeal.
  2. [22]
    The predominant business activity of Capilano can be assessed by reference to the following factors set out in s 19:

a) the nature of the goods and services supplied by the employer -

Capilano supplies packaged honey to retailers (94%) and in bulk to the food services industry (6%)

b) the proportion of the employer's total sales and revenue attributable to each business activity undertaken by it and the goods and services supplied by that business activity;

Sale of honey – 97% of gross sales. Of that: Sales to retailers – 80%; Bulk sales – 20%

c) the proportion of the employer’s overall operational costs attributable to each business activity undertaken by it;

  Cost of raw honey – 80% of total costs

  Cost of packaging – 17% of total costs

  Cost of processing (blending, warming, filtering) – 3% of total costs

d) the amount of the payments or estimated payments made by the employer attributable to each business activity undertaken by it to persons, regardless of whether those persons are workers of the employer or not, and shall include persons engaged through an arrangement with another entity whereby the persons’ labour or services are provided to the employer by a Separate Service Entity, a Labour Hire Employer or a Group Training Organisation;

There was no detailed finding on this element. The following facts were found: Capilano employs 120 people at its head office – of those 42 are employed in the packaging unit, 5 or 6 in the honey cleaning unit and the rest in the executive, management, office staff, warehouse and maintenance areas. About 46% of wage costs are attributable to production and packaging.

e) the business activity or activities the employer holds itself out as performing or being ready, willing and able to perform;

There were no findings made with respect to this element. It was uncontroversial that Capilano does not sell to the public.

  1. [23]
    The predominant business activity which emerges from the above is the purchase, packaging and sale of honey to retailers. The elements of processing (no more than 3% of overall costs and less than 5% of the workforce) involve such a small part of the operation that it cannot be regarded as predominant.
  2. [24]
    Capilano submitted that the appropriate WIC is to be found in the Division N – Administrative and Support Services. This, it was submitted, was because within Division N, there was Subdivision 73 – Building Cleaning, Pest Control and Other Support Services. It then goes on to contend that Classification 732014 most closely describes honey packaging. In order to arrive at that conclusion Capilano refers to the ANZSIC definition which defines “packaging services” to consist of units mainly engaged in packing goods in bottles, cans, cartons, collapsible tubes, plastic sachets, plastic film or bags or other containers or materials on a contract or fee basis. It is the latter part of that description – “on a contract or fee basis” – which excludes Capilano from this description.
  3. [25]
    Capilano’s predominant business activity is wholesaling. Capilano buys raw honey in bulk, administers a minor treatment, packages it and sells it to retailers. The traditional meaning of wholesale is the selling of things in large quantities to be retailed by others. Division F of Schedule 2 of the Notice provides, in Subdivision 36, for grocery wholesaling. In order to understand the meaning of that term one then goes to the relevant ANZSIC schedule where it is described in this way:

“This class consists of units mainly engaged in wholesaling specific grocery or food items not elsewhere classified. This class also includes units that repack groceries such as flour, cereal foods or dried fruits and wholesale them.

Primary activities

…

  • Honey wholesaling”

Orders

  1. [26]
    I make the following orders:
    1. (a)
      the appeal is allowed
    2. (b)
      the decision of the Industrial Magistrate of 21 April 2017 is set aside
    3. (c)
      in lieu of that decision, it is decided that:
      1. the appeal to the Industrial Magistrates Court be allowed
      2. the decision of the respondent of 24 June 2016 be set aside
      3. the WorkCover decision be varied to set the premium payable by the appellant under the reassessment notice by applying WIC 360911 – Other Grocery Wholesaling.
  2. [27]
    I will hear the parties on costs.

Footnotes

[1] (2001) 166 QGIG 422

[2] (2001) 166 QGIG 424

[3] [9]-[26] of the Industrial Magistrate’s reasons

Close

Editorial Notes

  • Published Case Name:

    Capilano Honey Ltd v Workers' Compensation Regulator

  • Shortened Case Name:

    Capilano Honey Ltd v Workers' Compensation Regulator

  • MNC:

    [2018] ICQ 2

  • Court:

    ICQ

  • Judge(s):

    Martin P

  • Date:

    22 Feb 2018

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Otis Elevator Company v WorkCover Queensland (2001) 166 QGIG 424
2 citations
Jump To
Cite 1 - (2001) 166 QGIG 424
Cite 2 - (2001) 166 QGIG 424
WorkCover Queensland v Shagadelic Pty Ltd (2001) 166 QGIG 422
2 citations
Jump To
Cite 1 - (2001) 166 QGIG 422
Cite 2 - (2001) 166 QGIG 422

Cases Citing

Case NameFull CitationFrequency
Schlumberger Australia Pty Ltd v Workers' Compensation Regulator [2023] ICQ 73 citations
1

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