CATCHWORDS Industrial law - breaches of terms of award - failure to pay wages, annual leave entitlements etcetera - whether employees had become independent contractors. Penalty - extent to which breaches of one term relating to several employees "arose out of a course of conduct" and therefore shall be treated as constituting a single breach. Amount of underpayments - whether amounts paid in excess of the award in some weeks should be taken into account. Costs - whether Court empowered to order payment of expenses of applicant's witnesses. Conciliation & Arbitration Act 1904 - ss. 116, 119, 120, 197A Federal Court of Australia Act - s. 43 MICHAEL JAMES LYNCH v BUCKLEY SAWMILLS PTY. LTD. Nos. V. 4-18 of 1984 CORAM : KEELY J. DATE : 25 OCTOBER, 1984 .:.- PLACE : MELBOURNE IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY ) Nos V. 4-18 of 1984 ) ) INDUSTRIAL DIVISION BETWEEN MICHAEL JAMES LYNCH Applicant AND: BUCKLEY SAWMILLS PTY. LTD. Respondent 25 OCTOBER, 1984 KEELY J. REASONS FOR JUDGMENT These are fifteen applications seeking the imposition of penalties under s. 119 of the Conciliation and Arbitration Act 1904 (the Act) upon the respondent for alleged breaches of terms of the Timber Industry Consolidated Award 1974 (the award). By consent the applications were heard together. Each application relates to one of four persons alleged to have been employees of the respondent, Messrs. David William Evans, Anthony Thomas Fraser, Robert James Stevenson and Guisseppe Brega. As the respondent has contended that they were not employees at any material time it will be convenient to refer to them as the four workers. The applications fall into four groups. In the first group (Nos. V. 4, 5, 6 and 7 of 1984) each application alleges a failure to pay to one of the four 2. workers "the wages to which he was entitled pursuant to clause 4 of the .. Award ...". The period during which the alleged underpayments occurred was from 27 March, 1983 to 29 July, 1983 except in respect of Guisseppe Brega where the relevant period, as amended without objection, was 22 April, 1983 to 9 September, 1983. It should be added that the parties later agreed, in dealing with an application under s. 119(3), that the relevant period in respect of Mr. Brega was 22 April, 1983 to 29 July, 1983. In the second group (Nos. V. 8, 9, 10 and 11 of 1984) each application alleges a failure to pay to one of the four workers "the monies to which he was entitled pursuant to clause 16 of .. the Award when it did terminate his employment ..." i.e. wages in lieu of notice of termination. The termination date was alleged to be 29 July, 1983 except that in respect of Mr. Brega it was alleged to be 9 September, 1983. In the third group (Nos. V. 12, 13, 14 and 15 of 1984) each application alleges, in relation to one of the four workers, a failure to pay "the monies to which he was entitled pursuant to clause 21 of the said Award when it did terminate his employment .." i.e. as a proportionate payment for completed months of service in respect of which annual leave had not been granted. 3. In the fourth group (Nos. V. 16, 17 and 18 of 1984) the applications allege in relation to Messrs. Evans, Fraser and Stevenson respectively (i.e. the workers other than Mr. Brega) a failure to pay "the wage to which he was entitled pursuant to clause 20 of the ... Award", i.e. as payment for two public holidays, on lst and 4th April, 1983". It was admitted that at all material times the respondent was a duly incorporated company and bound by the award in respect of its employees performing work under the award and the evidence established that each of the four workers was at all material times a member of the Australian Timber Workers' Union (the union). The union is an organization registered under the Act and an organization which is affected, or has members who are affected, by the alleged breaches of the award (s. 119(2)(e)). There was no dispute as to the standing of the applicant, Mr. Michael James Lynch, who is the Victorian State Secretary and. the National President of the union, to bring each of the proceedings. The respondent did not dispute that each of the four workers was until 22 March, 1983, employed by the respondent at its Mansfield saw mill, performing work to which the award applied, and had been so employed for at least some months. 4. On 22 March, 1983 Mr. John Buckley, the managing director of the respondent, and Mr. Tom Brodie, who was then employed by the respondent as a book-keeper, approached four employees including Messrs. Evans, Fraser and Stevenson. Mr. Brega, who was receiving workers' compensation payments, was not present at the saw mill at that time. Mr. Brodie's evidence that Mr. Brega was present is not accepted. The evidence given by the five witnesses present at the meeting had much in common although there were variations in detail. I find that Mr. Buckley at that meeting told the employees that, because of the financial position of the respondent in respect of the Mansfield saw mill, it could not afford to pay wages any longer and that unless they agreed to "work on contract" he would "close the mill down and we would be all out of work". The employees, as Mr. Fraser said, "were not really given much choice" and, faced with the choice of "work on contract" or being out of work within a short time, they acquiesced in the respondent's proposal. As Mr. John Buckley said in evidence "The men were fairly shocked but it was accepted". They were not given a written contract but were told that under the contract they would not be paid for sick leave, annual leave or public holidays - save for the possibility of a payment for the ensuing Good Friday and Easter Monday. They were also told that, with the possible exception of the first premium, they would have to pay for insurance cover because they would not be eligible 5. for workers' compensation. It should perhaps be said that there is considerable difficulty in treating the latter statement as a correct statement of the legal position, having regard to the provisions of the Workers Compensation Act 1958 (Vic.). Mr. Buckley, in his evidence speaking of the respondent's financial difficulties, said that the major problem was not the amount of the wages and other payments fixed by the award; it was workers' compensation. I am satisfied, on the evidence of the workers, supported by Mr. Brodie, that the workers were told on 22 March, 1983 that they would be expected to continue to work normal hours i.e. 7.30 a.m. to 5.00 p.m. on Monday to Thursday inclusive and 7.30 a.m. to 4.00 p.m. on Friday. Mr. John Buckley gave evidence that he "suggested they keep the same hours because if they slacked off in hours it would show in their profitability" but said that he told them "they could work their own hours, being self-employed contractors and that we would not be supervising their hours". All of the witnesses had difficulty in remembering the precise words used in the conversation but I am satisfied that it was made clear to the workers by Mr. Buckley that they were expected to continue to work the same hours as those worked before 22 March, 1983. I do not accept his evidence that the workers were told that their hours would not be supervised. On the evidence I find that in general each worker in fact worked 6. the same hours as before (subject to some exceptions not significant for present purposes) and that at times they worked extra hours in order to finish an order. On 22 March, 1983 the workers were also told that they would be paid in cash each week an amount which would depend on how much timber had been invoiced out of the saw mill - based upon a rate per cubic metre. There was a conflict of evidence as to what the arrangements were for the division between the workers of the total sum for the timber invoiced through the mill and in particular as to who decided how the total sum was to be divided between the workers but I do not find it necessary to resolve those conflicts. There was also some conflict of evidence as to the way in which a bank account was opened at Mansfield in the name of Mansfield Sawmilling Contractors. Mr. Buckley in evidence accepted that he was responsible for suggesting that name for the bank account. It was common ground that Mr. Brodie arranged for the opening of a savings bank account in that name and that in order to operate upon the account it was necessary to have the signatures of two of the three persons nominated, namely, Messrs. Brodie, Fraser and Stevenson. I accept the evidence of Mr. Fraser that at the request of Mr. Brodie he signed withdrawal forms in blank and also the evidence of Mr. Stevenson that he signed them "mostly" in blank. I reject Mr. Brodie's evidence - given during cross-examination - that the forms had always contained the figures of the proposed 7. withdrawal before Messrs. Fraser and Stevenson were asked to sign them. In his evidence - and particularly under cross-examination - Mr. Brodie frequently said "I cannot remember" and at one stage added "Maybe my memory is not good enough". In general his stated recollection of events cannot be preferred to that of the workers. On the evidence it was established that at all material times after 22 March, 1983 :- (a) (b) (c) (d) (e) all of the work of the four workers was performed at the respondent's saw mill; none of the workers supplied any tools or other equipment; the respondent supplied to the workers without charge all necessary materials and equipment including semi-automatic machines, a breaking down saw, saw benches, replacement saws, a chain saw and a fork lift vehicle; none of the four workers performed any work for any other person; instructions were given to each of the four workers from time to time as to the actual method of performing the work concerned - particularly by Mr. John Buckley after he took over the day to day management of the saw mill on 1 July, 1983. He gave instructions, for example, as to which logs to cut and how they could best be cut. evidence (4) (iii) 8. Instructions as to the method of performing work were not given with the same frequency during the period ending 30 June, 1983, when Mr. Buckley's son, Mr. Brian Buckley, was the manager of the mill; he had had much less experience in the industry but his role as manager included that function of giving instructions. In addition it should be noted that there was no suggesting that any of the four workers :- carried on his own business or incurred expenses in performing the work; was entitled to enter into a partnership for the purpose of having assistance in the performance of the work; was entitled to employ other persons to perform his work or to otherwise delegate the performance of his work to any other person. Applying the principles enunciated in Briginshaw v Briginshaw (1938) 60 C.L.R. 336, in considering the evidence, I am satisfied that the respondent both reserved the right of control of the four workers in the performance of their work and in fact exercised that right from time to time (cf. Zuijs v Wirth Bros Pty. Ltd. (1955) 93 C.L.R. 561; cp. Queensland Stations Pty. Ltd. v Federal Commissioner of Taxation (1945) 70 C.L.R. 539 at 552 per Dixon J. as to the reservation of the right of control not being decisive). I am also satisfied that each of the four workers was "part and parcel of the organization" of the respondent within the meaning of the test proposed by Denning L.J. in Stevenson, Jordan and Harrison Ltd. v Macdonald and Evans (19523 1 TT.L.R- 101 at 112 and Bank Voor Handel en Scheepvaart NV v Slatford [1952] 2 All E.R. 956 at 971, cited by J.B. Sweeney and Evatt JJ. in Australian Timber Workers Union v Monaro Sawmills Pty. Ltd. (1980) 29 ALR 322 at 329. I do not regard the facts that after the March meeting the workers were paid on a different basis and the total remuneration payable to them was deposited in an account in the name of Mansfield Sawmilling Contractors, before being distributed to the individual workers, as being sufficient to avoid the conclusion required by the application of the above principles and I reject the respondent's submission to that effect. In my opinion the facts that the respondent relies upon simply establish that the respondent was able to persuade the workers to accept payment on the basis he proposed, with its administrative incidents, because if they did not, it would be obliged to close the mill and retrench them. Those arrangements did not effect any change in the substance of the relationship. Accordingly in my opinion each of the four workers was an employee entitled to the benefits of the award and the 10. respondent has breached the award in the manner alleged in each of the fifteen applications. Section 119(1A) of the Act provides as follows :- "Subject to sub-sections (1B) and (1C), where a Court finds that 2 or more breaches by the same organization or person of a term of an order or award have been committed and those breaches appear to that Court to have arisen out of a course of conduct by that organization or person, those breaches shall, for the purposes of this section, be treated as constituting a single breach of that term." Mr. Strahan, of counsel, on behalf of the respondent submitted that, if the Court found that the respondent had committed fifteen breaches of the award, then all fifteen breaches had "arisen out of a course of conduct by" the respondent and accordingly the fifteen breaches "shall, for the purposes of this section, be treated as constituting a single breach of that term" (s. 119(1A)). Mr. G. Moore, of counsel, on behalf of the applicant submitted that that sub-section had no application and that each of the fifteen breaches should be treated as a separate breach of a term of the award. Neither counsel cited any authority in support of the submission advanced and reference to the speeches made by the Ministers in the House of Representatives and in the Senate in moving the Conciliation and Arbitration Bill 1970 did not help to elucidate the meaning of the words "a course of conduct" in s. 119(1A). ll. In my opinion neither submission is correct. I reject Mr. Strahan's submission because, as Mr. Moore pointed out, s. 119(1A) is dealing with breaches ... of a term of an -+. award and provides that, if they have arisen out of a course of conduct by the respondent, "those breaches shall ++. be treated as constituting a single breach of that term". The sub-section is dealing with breaches of a term of an award and requires that such breaches of a term be treated as constituting a single breach of that term. Mr. Strahan sought to gain support from the provisions of s. 23(b) of the Acts Interpretation Act 1901 (Clth.). However in my opinion sub-section 119(1A) is intended to apply only to a case where the Court has found two or more breaches of the same term of an award; hence its use of the words "that term" in providing that the breaches shall be treated as constituting a single breach of that term. It would be an inappropriate use of language if the sub-section was intended to require that multiple breaches of different terms of an award were to be treated by a court as constituting a single breach of the award. That opinion gains some support from the decision of a Full Court in Quinn v Martin (1977) 31 F.L.R. 25 at p. 30. On the other hand the decision in Quinn v Martin (supra) itself requires me to reject Mr. Moore's submission that there were fifteen separate breaches, consisting of the four breaches of each of claues 4, 16 and 21 of the award and 12. the three breaches of clause 20 of the award, each of which would be a separate breach for the purpose of the imposition of a penalty. In my opinion that decision is authority for the proposition that s. 119(1A) applies where a respondent fails to comply with a particular term of an award in respect of more than one employee. Accordingly, I accept Mr. Strahan's alternative submission that the breaches of clause 4 of the award in respect of each employee arose out of a course of conduct by the respondent and must be treated as constituting a single breach of clause 4. Similarly the breaches of clause 16 are to be treated as constituting one breach of clause 16, the breaches of clause 21 are to be treated as constituting one breach of clause 21 and the breaches of clause 20 are to be treated as constituting one breach of clause 20. In respect of each of those four breaches the maximum penalty that can be imposed is $1,000. As to the amount of the penalties to be imposed I take into account in mitigation of penalty the fact that there is no evidence that the respondent has ever previously breached this award or any other award. I also have borne in mind the evidence as to the financial difficulties of the respondent at the material times. Mr. Strahan submitted that in assessing penalty the Court should take into account that the breach was not contumelious and that the managing director of the respondent 13. had a bona fide belief that, by reason of the arrangements made on 22 March, 1983, the respondent was not obliged to comply with the terms of the award in relation to the workers. It should be noted that Mr. John Buckley did not expressly state in his evidence that he had such a bona fide belief although he did say in evidence that on 22 March, 1933 he had "in mind that we had to keep within the guidelines of the law". Furthermore, there is no evidence before the Court that the respondent sought or obtained legal advice before acting as it did on 22 March, 1983. In this connexion it is important that the respondent - and other employers bound by the award or by other awards under the Act - understand the importance of complying with an award and it follows that any decision taken by them which is regarded as affecting their obligations to comply with particular provisions of an award or the award generally should only be taken after careful consideration. They must not be left under the impression that in times of financial difficulty they can breach an award made under the Act either with impunity or in the belief that no substantial penalty will be imposed in respect of a breach found by a court to have been committed. The breaches of clause 4 occurred over a considerable period of time and related to four employees. The penalty should be sufficient to act as a deterrent and in my opinion a penalty of $600-00 is appropriate. 14. In considering the remaining breaches I appreciate that in one sense it can be said that they flowed from the events which occurred at the meeting of 22 March, 1983. However, s. 119(1A) does not require that those breaches, together with the breaches of clause 4, shall be treated as constituting a single breach. The breaches of clauses 16 and 21 relate to four employees and the breach of clause 20 relates to three employees. They are additional breaches of different terms of the award and it would not be appropriate to impose nominal penalties in respect of them. In my opinion appropriate penalties are $300-00 for the breach of clause 16, $300-00 for the breach of clause 21 and $150-00 for the breach of clause 20. The total amount of the penalties imposed is $1,350-00. In my opinion those penalties are necessary having regard to all of the surrounding circumstances. Under s. 120 of the Act it is ordered that each penalty imposed be paid by the respondent to the Union. The applications also seek orders under s. 119(3) of the Act that the respondent pay to each of the four workers the amount of the underpayment. The respondent contended that, in considering the amount of the underpayment, the Court should take into account the fact that in some weeks the worker was paid more - and on occasions substantially more - than the amount prescribed by 15. the award. No authority was cited in support of that submission and in my opinion it cannot be upheld. Clauses 4(a) and 15(a) of the award imposed an obligation upon the respondent to pay the prescribed amount to each of the four workers, which "payment shall not be delayed for more than four working days ...". It is true, as Mr. Strahan submitted, that, if an employer initially paid to an employee wages less than those prescribed by the award and had later paid to the employee concerned the amount of the underpayments, the Court would not make an order under s. 119(3). However, the reason that the Court would not make such an order is that, on the hypothetical facts stated, it could not be said at the time of the hearing that "it appears to the Court that an employee of that employer has not been paid an amount to which he is entitled under an order or award ..." (s. 119(3)). It would follow from the fact that the amount had already been paid to the employee before the court hearing that the employee was no longer "entitled" to such a payment - notwithstanding that at an earlier stage a breach of the award by the employer had occurred. On the evidence in the present case, however, it is clear that the respondent never paid any amount to any of the four workers on the express or implied basis that it was an amount to which the worker was "entitled under (the) award" i.e. "entitled" by reason of the fact that the respondent 16. had, on an earlier occasion, paid the worker less than the award rate, thereby leaving "an amount to which he is (still) entitled under an .. award". Even if one ignores the evidence that the four workers at times worked additional hours (which may have explained why some payments were in excess of the award rate), none of those payments which were in fact above the award rate were paid as amounts due under the award; they were paid as amounts due under an agreement which patently was not intended to fulfil the respondent's obligations to pay wages under the award. Mr. Strahan conceded - correctly in my opinion - that an employer who has paid, by agreement with an employee, an over-award payment can not later use that over-award payment to offset a subsequent payment of an amount less than that prescribed by the award. In my opinion the present cases, where the payments were made pursuant to an agreement, are in the same position. Accordingly, in my opinion an order should be made in each application that the respondent pay to the worker concerned the amount of the underpayment. Counsel for the parties agreed that if the Court rejected the respondent's submissions that payments by it of amounts above the award rate should be taken into account, the appropriate amounts that the respondent should be ordered to pay are as follows 17. To David William Evans the sums of : $565-15 in matter No. V. 4 of 1984 $220-90 in matter No. V. 8 of 1984 $359-38 in matter No. V. 12 of 1984 $ 88-36 in matter No. V. 16 of 1984 To Anthony Thomas Fraser the sums of : $727-95 in matter No. V. 5 of 1984 $242-20 in matter No. V. 9 of 1984 $386-16 in matter No. V. 13 of 1984 $ 96-88 in matter No. V. 17 of 1984 To Robert James Stevenson the sums of : $727-95 in matter No. V. 6 of 1984 $242-20 in matter No. V. 10 of 1984 $386-16 in matter No. V. 14 of 1984 $ 96-88 in matter No. V. 18 of 1984 To Guisseppe Brega the sums of : $301-75 in matter No. V. 7 of 1984 $209-70 in matter No. V. 11 of 1984 $265-35 in matter No. V. 15 of 1984 Mr. Moore, on behalf of the applicant, conceded that he could not obtain an order against the respondent in respect of his professional costs because of the terms of s. 197A of the Act (see Brophy v Mapstone - unreported judgment of a Full Court delivered 5 September, 1984). However he submitted that the Court had power to make an order for the payment of the expenses of witnesses, contending that s. 197A, in providing that a party "shall not be ordered to pay any costs incurred by any other party to that proceeding" was 18. referring only to professional costs and not to the expenses of witnesses; in so submitting he contrasted the use of the words "any costs" in s. 197A with the use of the words "the costs and expenses (including the expenses of witnesses) of proceedings before the Court" in s. 116 of the Act. It should be noted that s. 116, which is one of the sections expressly referred to in s. 118A(1)(b) of the Act, applies only to the Australian Industrial Court. It does not confer power upon this Court to make any order as to costs. That power is conferred by s. 43 of the Federal Court of Australia Act 1976 and is a power to "award costs in all proceedings before the Court ... other than proceedings in respect of which any other Act provides that costs shall not be awarded". Section 197A of the Act is a provision in another Act which "provides that costs shall not be awarded". An argument founded upon a distinction between the "costs" dealt with in s. 197A and costs by way of expenses of witnesses was put in Harris v Ansett Transport Industries (Operations) Pty. Ltd. (unreported judgment delivered 26 July, 1978) and rejected by me in the following passage :- "Counsel for the claimant ... referred the Court to a passage in Mills & Sorrell's Federal Industrial Law (5th Ed.) at p. 413 and contended that the power given to the Court under s. 116 to award "expenses (including the expenses of witnesses)" is not taken away by 8. 197A. The authors point out that s. 197A does not in express words prohibit an order for "costs and expenses (including expenses of 19. witnesses)". The argument for the claimant in seeking an order against the respondent for expenses is supported by contrasting the words used in s. 197A with the express reference to expenses used in both s. 116 and s. 168. There is some force in that argument. The question to be determined is whether the amending Act in 1973, which inserted s. 197A in the Act, intended to prohibit the Court and other tribunals from ordering a party to pay costs in the limited sense of costs other than expenses including the expenses of witnesses or whether the intention was to prohibit the making of an order for costs in the wider sense in which the word "costs" is normally used in legal proceedings, e.g. as used by a successful party in asking for costs, as used by the other party if it opposes an order for costs and as used by the Court itself in allowing or refusing costs in any matter. An order for costs made by a Court normally is intended to include both professional costs and various other expenses in the conduct of the litigation (assuming they have been properly incurred) including the expenses of witnesses. Although s. 197A does not expressly use the words "costs and expenses (including the expenses of witnesses)" which appear in s. 116 and s. 168 of the Act, it nonetheless expresses in wide terms the prohibition against an order for costs by saying a party shall not be ordered to pay "any costs" incurred by any other party. A prohibition in such terms can not be readily construed as applying only to part of the costs normally ordered and should not be so construed merely because of the failure of the draftsmen to use the words used in s. 116 and s. 168. The additional words in those two sections may well have been included for greater caution. In my view, the intention of s. 197A was to prohibit (subject to the exception which is not presently Material) an order for the payment by any party of any costs which the Court, in accordance with well established principles as to costs, might otherwise order to be paid - including professional costs, witnesses' expenses and other disbursements. Accordingly I hold that I have no power to order the yespondent to pay the claimant's expenses including the expenses of witnesses." 20. In my opinion, for the reasons given in that passage, the Court has no power to order the respondent to pay the expenses of witnesses claimed by the applicant. as" October Mee