A recent decision of the Tasmanian Civil and Administrative Tribunal in Keirasam Trust t/as The Heat Pump Man v W  TASCAT 124 (‘Kierasam Trust’) highlights the importance of business owners who use a Trust as part of the business structure (and their insurance brokers) giving careful consideration to whether they are covered by the workers compensation scheme, or whether they need to obtain separate accident/injury insurance to cover them in the event of a work related injury.
To qualify for compensation under the Workers Rehabilitation and Compensation Act 1988 (Tas) (‘the Act’) one of the basic requirements is that a claimant must be a ‘worker’ within the meaning of the Act. To be a ‘worker’ the Act requires that the claimant has a ‘contract of service or training contract with an employer’.
The decision in Keirasam Trust confirms that, unlike a person or a company, a Trust is not a legal entity and therefore it is incapable of entering into a contract. Instead, where a Trust is involved in a business structure it is actually the Trustee(s) who enter into contracts for the purposes of the Trust.
The difficulty that this creates for someone who is a Trustee and also works in the business is that a person cannot enter into a valid contract with themself. This can be the case even where there are multiple Trustees (as was the case in Keirasam Trust).
If there is not a valid contract it is not possible for there to be a contact of service for the purposes of the Act, which means the Trustee will not be covered under the Act when working for the business, and should obtain separate insurance to cover them in the event of a work related injury.
This does not mean that Trusts should not be used as part of a business structure. The position is different where the Trustee is a corporation for example. However, it does highlight the importance of business owners who use a Trust in their business structure ensuring that they have obtained appropriate advice regarding their coverage for workers compensation.
If you require advice about this issue please get in touch with our insurance litigation team.