RESTRICTED DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) QUEENSLAND DISTRICT REGISTRY ) QLD Q1 of 1986 GENERAL DIVISION ) BETWEEN : AUSTRALIAN LICENSED AIRCRAFT ENGINEERS ASSOCIATION Applicant AND: MALINDA KATHLENE O'BRIEN and NEIL JOHN O'BRIEN First Respondents AND: CODDATIR AIRLINES PTY.LTD. (In Liquidation) Second Respondent SPENDER J. _ iy , 12 JUNE, 1986 yer A ES oA. RECFIVED 4 'D v P| 77 UL 185 REASONS FOR JUDGMENT This is an application by the Australian Licensed Aircraft Engineers Association which claims against the first respondent or, in the alternative, against the second respondent, the imposition of a penalty for breaches of the Aircraft Engineers' (General Aviation) Award 1982, ("the award") concerning one Peter Cawley between 1 April 1984 and 30 October 1984. The alternative formulation of the application arises because of doubts as to whether 1t was the first or second respondent who engaged the services of Mr. Cawley. If the second respondent is found to have engaged Mr. Cawley's services, then an issue arises whether the basis of the engagement was that of employer-employee or as an independent contractor. In addition, the applicant association seeks to recover any penalty that the court imposes and also seeks an order that the respondents pay to Peter Cawley the sum of $4,535.52, being the amount said to have been underpaid to him pursuant to his entitlement under the Aircraft Engineers' (General Aviation) Award 1982. Mr. Cawley filed an affidavit in this application and gave brief oral evidence. He was not cross-examined by either respondent as to the factual matters deposed to in his affidavit and I accept them. Between 1 April 1984 and 31 October 1984, Mr. Cawley was a financial member of the Australian Licensed Aircraft Engineers' Association, an organisation of employees which is a respondent to the Aircraft Engineers (General Aviation) Award 1982. Mr. Cawley remains a financial member of that association. On 2 April 1984, Mr. Truan, the Chief Engineer of Coddair Airlines Pty.Ltd. ("Coddair") asked Mr. Cawley to perform certain engineering work in relation to a Cessna aircraft operated by that company. Mr. Cawley had previously sought employment from the chief engineer with that company. sory Tats Qe ce preven ete waite wor A Mr. Cawley deposes that he commenced employment the following day and remained in employment with Coddair in the capacity of a licensed aircraft engineer until 19 October 1984, after which he performed no further duties with Coddair. From 3 April 1984 until 19 October, he worked each normal working day and frequently worked overtime shifts. He initially worked under the direction of the Chief Engineer of Coddair until that person resigned and, for the balance of his employment, he worked under the direction of a Mr. Woodley, who became Chief Engineer of Coddair. During the period of his employment he performed the duties of a licensed aircraft engineer, including the inspection of work performed by other engineers and the certification of such work. He from time to time requested that he be paid in accordance with the award but was informed by Mrs. Hovorka, a Manager of Coddair, that his rate of remuneration would be that of a casual employee fixed at $7.50 per hour. Over the period of his employment, his remuneration increased to $8.00 per hour and then to $10.00 per hour but his remuneration was not in accordance with the award. Mrs. Hovorka is the daughter of Kevin Codd, the Managing Director of Coddair. Mr. Cawley says that often he was paid by a cheque enclosed in a letter with "Coddair Airlines Pty.Ltd." and a logo printed on it, although on two occasions, when he receiveda printed pay envelope issued by the National Australia Bank, and on other occasions, his pay was in a plain envelope. ver ngecr p> The source of the difficulty is that each pay envelope which he received weekly contained a cheque drawn on the account of NUM Resources. He swears in his affidavit that he attached no significance to that fact and was not aware of the relationship, if any, between NUM Resources and Coddair. During the period he worked, he always performed his work on the premises of Coddair. He used his own tools and equipment but also used tools and equipment supplied to him by Coddair. On 31 October 1984, Mr. Cawley received a letter on the letterhead of Coddair Airlines Pty.Ltd., the body of which read:- "It is with regret we have to advise you that your services with our company are no longer required. We thank you for your support over the last months and request that at your earliest convenience you return your company issue overalls. Yours faithfully, CODDAIR MAINTENANCE DIVISION" Then a signature appears, the surname of which is Horvorka, and underneath is typed "Leanne Horvorka, Manager." That letter also shows various addresses in Queensland and one in Adelaide. One of significance as will later appear is the address at Roma, Post Office Box 226, Roma, 4455. On 31 January 1985, a Mr. Collins, the Industrial Manager of the applicant, wrote a letter addressed to the Manager, Coddair Maintenance Division Pty.Ltd. at Eagle Farm Airport. That letter said in part:- sae "I am forwarding this correspondence on behalf of our member, Mr. Peter Cawley, who has informed me that he was anemployee of Coddair Maintenance Division Pty.Ltd. from 2 April 1984 until 19 October 1984, a total of 29 weeks. Initially I should point out that, as your Company is a member of the Metal Trades Industry Association, you are therefore a respondent to the Aircraft Engineers (General Aviation) Award 1982. As you are now very much aware, there is no provision (and there never has been) for part-time or casual employees to be employed in this industry, and consequently I am making this claim for Mr. Cawley as a 40 hour per week employee with all the provisions, conditions, and payments of the abovementioned Award." With that letter was a detailed claim for underpayment of salary and other allowances for Mr. Cawley in the sum of $4,535.52. By letter of 27 February 1985, under the letterhead of Coddair Airlines Pty.Ltd., a Mr. Gough, who described himself as the Engineering Manager, replied to Mr. Collins. In that letter, Mr. Gough said:- "Reference your letter dated 31 January regarding a claim by a disgruntled ex-subcontractor to Coddair Airlines, namely Mr. Peter Cawley." This statement cannot constitute an admission of the assertion in Mr. Collins' letter that Peter Cawley had been an employee of Coddair Maintenance Division Pty.Ltd. Equally, in my opinion, it does not establish that Coddair Maintenance Division Pty.Ltd. is a misdescription of Coddair Airlines Pty.Ltd. Later in his letter, Mr. Gough says:- "As I see it, Mr. Cawley wanted the job. Obviously he needed the income and it was his decision to operate as sub-contractor (sic). When he was no longer required, he has decided to deny this and claim he was employed part-time casual. He has then perjured himself and gone to your Association making various unsubstantiated claims. He was obviously quite happy to receive his payment for hours worked, without paying the penalty of income tax, or the costs of establishing himself as a self employed person. We donot acknowledge Mr. Cawley's claim. We clain that Mr. Cawley was employed as a subcontractor at an agreed rate on an as required basis." Both the letter of 31 October and that of 27 February 1985 strongly suggest that, whatever be the basis of the relationship, the relationship so far as Mr. Cawley's work was concerned was between Mr. Cawley and Coddair Airlines Pty.Ltd. Towards the end of April 1985, Coddair Airlines Pty.Ltd. went into liquidation and Mr. Harris of Messrs. Cooper & Lybrand was appointed liquidator. On 19 July, solicitors for Mr. Cawley enclosed a form of proof of debt in the sum of the amount of $4,535.52. This was acknowledged by a letter of 13 August 1985, which says in part:- "We acknowledge receipt of the Proof of Debt but are concerned as to why it was forwarded to us. Our information is that Mr. Cawley was employed by NJM Resources, a business name registered to Mr. N.J. O'Brien. Whilst he worked on aircraft owned by Codd Enterprises Pty.Ltd., which were being utilised by Coddair Airlines Pty.Ltd. he worked directly for Mr. O'Brien who was retained as contractor by Coddair Airlines Pty.Ltd.. Accordingly, it would appear that in the first instance the claim for wages as submitted by Mr. Cawley should be directed to Mr. O'Brien." en yee eee After a further letter from Mr. Cawley's solicitors, the liquidator in a letter of 3 September said:- "NOM Resources was retained by verbal arrangement between Mr. O'Brien and the Managing Director of Coddair Airlines Pty. Ltd. This arrangement resulted in the payment to NJM Resources of amounts described in the records of Coddair Airlines as consultancy fees. NUM Resources thereupon issued cheques to all employees for wages and paid both group tax and payroll tax on the employees retained by them. Mr. O'Brien is not and was nota shareholder, director, or manager of Coddair Airlines although he was retained ona Sub-contract basis by the company for promotional reasons." Shortly after Coddair went into liquidation, by a letter by Mr. O'Brien dated 30 April 1985 (which I accept was forwarded to the liquidators or handed to them) the nature of the arrangement between Coddair Airlines Pty.Ltd. and NJM Resources appears. In part that letter says:- "On the 19th December, 1983 I was approached by Mr. John Larcombe on behalf of Coddair Airlines with a proposition of employment with Coddair Airlines but only if Iwas prepared to enter into an agreement where a Business name be registered to N.J. and M.K. O'Brien. The purpose of a registered Name was solely to employ certain persons within the Coddair Airlines structure, thus dividing the company workforce in half and eliminating the past necessary Payrole (sic) Tax Mr. O'Brien said that the business name NUM Resources was registered on 24 January 1984. He then described the procedure that was to operate, which was that each fortnight a number of cheques were presented to Mr. O'Brien for his signature, each cheque bearing the name of the recipients and stamped "not - rte ar aaa % negotiable". On a very few instances, cheques of small value were made out to cash to pay for overtime. A cheque was raised by Coddair Airlines payable to NUM Resources for the total nett value of the wages paid to the persons who had been named in the several cheques. Each month a Coddair Airlines cheque was raised payable to NUM Resources to cover tax deducted from wages. An NJM Resources cheque was then forwarded to the Australian Taxation Office. The same system applied to workers compensation. All bookwork and the raising of cheques was carried out by Mrs. Paula Codd and Mrs. Leanne Hovaka (sic). Cheques presented on Friday 26 April drawn on Coddair Airlines for the credit of NJM Resources were dishonoured. At about that time, Mr. Harris became liquidator of Coddair Airlines Pty.Ltd. (In Liquidation). The payment arrangements involving NJM Resources were then discontinued. The nature of the difference between a contract of service and a contract for services was analysed in Australian Mutual Provident Society v. Chaplin (1978) 18 A.L.R. 385. Lord Fraser of Tullybelton, delivering the judgment of the Board, referred at p.387 with approval to the statement by the learned Chief Justice of the Supreme Court of South Australia, who had said:- "It seems to me, then, that at the present time there is no magic touchstone. The court has to look at a number of indicia and then make up its mind into which category the instant case should ~7e Syme eer —, 3 ae Se ~~ rr ———ie = be put. It is a question of balancing the indicia pro and con ... But the power of control over the manner of doing the work is very important, perhaps the most important of such indicia." A detailed examination of the circumstances of the engagement by Mr. Cawley and in particular the power to control the manner of doing the work, as well as the other indicia as to whether the relationship is that of employer and employee, in my opinion, lead inescapably to the conclusion that during the relevant period Mr. Cawley was an employee of Coddair Airlines Pty.Ltd. Whatever the efficacy of the arrangement between Coddair Airlines Pty.Ltd. and the partnership NJM Resources concerning the incidence of payroll tax, those arrangements did not have the effect of making Mr. Cawley in any way an employee of NJM Resources. Neither the partnership NJM Resources, nor Mr. and Mrs. O'Brien, was at any relevant period a respondent to the award. The arrangement between NJM Resources and Coddair Airlines Pty.Ltd. does not constitute NJM Resources the successor to, or the assignee of, or the transmitee of the business of Coddair Airlines Pty.Ltd... As a consequence, the applicant cannot rely on s.61(d) of the Conciliation and Arbitration Act 1904. It follows then that the application fails against the first respondents. Insofar as the application against the second respondent is concerned, om 16 December 1985, Master Weld, in the Supreme Court of Queensland, granted leave to the applicant to commence oll eee one Raden ener Seee ene eeraeaencd a er em rr re pe serge se ee te, . t . wet "Ae A ee soya 10. these proceedings in the Federal Court of Australia. That application was made, pursuant to s.371(2)(a) of the Queensland (Companies) Code, which provides that, on the making of a winding-up order, no action or other civil proceeding may be commenced without the leave of the Court. The application was filed in the Federal Court on 9 January 1986. It is unnecessary to consider whether an application for the imposition of a penalty for non-observance of an award is an "action or other civil proceeding" because, if it is not properly to be so categorised, no leave was necessary; if it is properly so categorised, leave was obtained. Further, if an application under s.119 which, by s.118A, 1s made to the Federal Court of Australia in its Industrial Division, comes within the description of "an action or other civil proceeding", there may be a question of whether the requirement of leave under the Companies (Queensland) Code has any valid operation in respect of such an application, on a consideration of 5.109 of the Constitution. It was submitted by the solicitor for the liquidator that, notwithstanding such leave, this Court had no jurisdiction to entertain the application as against the second respondent. The submission noted that s.438 of the Companies (Queensland) Code provides:- (1) In every winding up, subject inthe case of insolvent companies to the application in accordance with the provisions of this Code of the Bankruptcy Act 1966, all debts payable on a contingency andall claims against the company (present or future, certain or contingent, +s or =e il. ascertained or sounding only in damages) are admissible to proof against the company, a just estimate being made so far as possible of the value of such debts or claims as are subject to any contingency or sound only in damages or for some other reason do not bear a certain value. (2) Subject to sections 204 and 441, in the winding up of an insolvent company the same rules shall prevail and be observed with regard to the respective rights of secured and unsecured creditors and debts provable and the valuation of annuities and future and contingent liabilities as are in force for the time being under the Bankruptcy Act 1966, in relation to the estates of bankrupt persons, and ail persons who in any such case would be entitled to prove for and receive dividends out of the property of the company may come in under the winding up and make such claims against the company as they respectively are entitled to by virtue of this section." Accepting that the same rules apply with regard to debts provable against a company as are in force under the Bankruptcy Act 1966 in relation to the estates of bankrupt persons, one must refer to s.82(3) of the Bankruptcy Act, which provides:- "Penalties or fines imposed by a court in respect of an offence against a law, whether a law of the Commonwealth or not, are not provable in bankruptcy." It was submitted that what was sought in paragraphs 1 and 2 of the application was "a penalty in respect of an offence against a law", and was therefore not provable. In Gapes v. Commercial Bank of Australia Ltd.(1979) 38 F.L.R. 431, a Full Court of the Federal Court consisting of five members (Smithers, A.C.J., J.B. Sweeney, Evatt, Deane and Fisher ~ — =p ~ fl a4, a wea were ceo 12. Arbitration Act 1904 for the recovery of penalties were criminal proceedings. As Deane J. said at p.458:- 1 "In the absence of express statutory direction, the | question whether proceedings for a statutory penalty are criminal in character can be assimilated to the question whether the act or acts in respect of which the proceedings are brought constitute a criminal offence. The answer to neither question is determined by the mere fact that the consequence of the act or acts is liability to a penalty: 'The recovery of a penalty, if that is the only consequence, does not make the prohibited act a crime. If it did, it seems to me that that distinction which has been well know and established in law for many yeas between a penal statute and a criminal enactment would fall to the ground, for every penal statute would involve a crime, and would be a criminal enactment' (per Brett M.R. Attorney-General v. Bradlaugh (1885) 14 Q.B.D. 667, at p. 687, see also per Cussen J. Jones v. Lorne Saw Mills Pty.Ltd. £19231 V.L.R., at p. 64). The answer to both questions must be determined by reference to the legislative intent appearing from the provisions of the relevant statute." And at p. 459:- "In my view, the form and content of s. 119 in its context in the Act indicate that the legislative intent was neither that breach or non-observance of any order or award should constitute a criminal offence regardless of whether it was wilful or accidental nor that proceedings under s. 119 for a penalty for such a breach should be criminal proceedings." | As to whether such proceedings are proceedings for a penalty \ respect of an offence against a law, whether a law of Commonwealth or not", reference may profitably be made to and aJ.), held that proceedings under s.119 of the Conciliation not "1 in the the ' observations of Dixon 7., as he was then in R. v. Metal Trades Employers' Association; Ex parte Amalgamated Engineering Union, ooo or ee a ae eee - i hoe = ™ ay voyga ye - 13. Australian Section (1951) 82 C.L.R. 208 at pp. 250-251, and the observations of Kitto J. at p. 264. Their honours referred to the distinction in the Act between a breach or non-observance of the Act and a breach or non-observance of an award. In the light of these authorities, I do not accept that a penalty imposed pursuant to s. 119 is a "penalty in respect of an offence against the law". This conclusion also follows, in my opinion, from a comparison of the provisions of the Conciliation and Arbitration Act 1904, found in Part VI headed "The Enforcement of Orders and Awards". Section 119 provides, in part:- "(1) Where any organization or person bound by an order or award has committed a breach or non-observance of a term of the order or award, a penalty may be imposed by the Court ... (2) Any such penalty may be sued for and recovered by - (b) any organization which is affected, or whose members or any of them are affected, by the breach; (3) Where, in any proceedings against an employer before a Court specified in sub-section (1), 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, that Court may order that the employeer shall pay to the employee the amount of the underpayment but no order shall be made in respect of so much of the underpayment as relates to any period more than 6 years prior to the commencement of the proceedings." Section 122 provides:- mcr rr — 14. "No person shall wilfully make default in compliance with any order or award. Penalty. $40" Section 123 provides:- "An employee entitled to the benefit of an award may, at any time within 6 years from any payment becoming due to him under the award, but not later, sue for the amount of the payment in the Court, or in any other court of competent jurisdiction." Even if one assumes that the solicitor for the second respondent is correct in contending that a penalty imposed under s.119 is not provable in a company's liquidation, this does not establish that this Court lacks jurisdiction to hear and determine an application for a penalty. The provisions upon which the second respondent relies concern the recoverability of a penalty, not the jurisdiction of this Court to impose a penalty. In my opinion, the Federal Court has jurisdiction to entertain the application for which leave was granted by the Supreme Court of Queensland on 16 December 1985. The remaining question in relation to the second respondent is whether the applicant has established that Coddair Airlines Pty.Ltd. was at the relevant time a party to the award. By a correction dated 12 January 1983, the award was corrected by, inter alia, inserting Schedule A, which included as 15. one of the respondents Codds Air Service, Post Office Box 226, Roma 4455. Another respondent to the award referred to in its correction was the Metal Trades Industry Association of Australia. The applicant did not seek to rely on the fact that Codd's Air Service was a respondent to the award as a basis of liability in the second respondent. It was said, however, that Codd's Airlines Pty.Ltd. was a member of the Metal Trades Industry Association of Australia and was therefore bound to observe the award. The Deputy Industrial Registrar, by a certificate pursuant to s.155 of the Conciliation and Arbitration Act certified that Coddair Maintenance Division Pty.Ltd. was in 1984 a member of the Metal Trades Industry Association of Australia. Notwithstanding this certificate, with the statutory consequence of prima facie validity of the facts therein stated, it is accepted that no such company, Coddair Maintenance Division Pty.Ltd., ever existed. There is no evidence that Coddair Airlines Pty.Ltd. was at any time a member of the Metal Trades Industry Association of Australia. The applicant submits that I should regard Coddair Maintenance Division Pty.Ltd. as a misnomer for Coddair Airlines Pty.Ltd. There are very real difficulties in that path. There is anumber of different corporate entities, the existence of which hinders any identification of Coddair Maintenance Division Pty.Ltd. with Coddair Airlines Pty.Ltd. caer a ee Coa! ee .8 16. Codd's Air Service, with the same Roma address as on Coddair Airlines Pty.Ltd. letters, is a specified respondent to the award. Codd's Air Service Pty.Ltd., was incorporated on 2 July 1976. A company, Coddair Pty.Ltd., originally called Stereotype No.22 Pty.Ltd., was incorporated on 4 February 1980 and on 3 September 1980 changed its name to Coddair Airlines Pty.Ltd.. The business name, Coddair Maintenance Division was not registered during 1984 but had previously been registered in respect of a business which commenced on 10 March 1980 and which ceased on 7 June 1983. The proprietor of that business name was Coddair Airlines Pty.Ltd.. It also was at all relevant times and is the proprietor of the registered business name "Coddair". There is also reference in the material to Coddair Enterprises Pty.Ltd. In April 1986, (after the events with which I am concerned), Coddair Services Pty.Ltd. was specified as a party to an award known as the Aircraft Engineers (General Aviation) (Roping-in No.1) Award 1986, making the award binding on the parties to the "roping-in" award. In The Australian Commonwealth Shipping Board v. The Federated Seamen's Union of Australia (1925) 35 C.L.R. 462, an award named as respondent "Commonwealth Government Line of Steamers". The name of the organisation intended to be respondent was "Australian Commonwealth Shipping Board", a quite dissimilar name. The description, however, was held sufficient, apparently because everyone knew which body was intended. Starke J. at p. 493, referring to the description "Commonwealth Government Line of Steamers", said:- Ter tr ort UR te rn eee gre ere eee es etsy ne ET torre ree "tae 2 7e va aa ae aeead wh hg " ft 2 of noe Pew 17. "Certainly, want of care has been shown in so naming the party, but the intention to be gathered from the words or from the surrounding circumstances admissible on a question of construction and of identification leaves no doubt that the body owning and carrying on the Line is the party bound by the award, namely the Australian Commonwealth Shipping Board." Relying on that authority, Pincus J. in Nicol v. Parr (unreported, 3 May 1985), permitted extrinsic evidence to he relied upon to establish the identity of an employer. He held, in the circumstances of that case, that a loose and inaccurate designation of an employer did not prevent the actual employer from being bound by the award. In this case, the extent of the evidence is that the letter of 31 October 1984 under the letterhead of Coddair Airlines Pty.Ltd. was signed under a designation "CODDAIR MAINTENANCE DIVISION", and a letter addressed to Coddair Maintenance Division Pty.Ltd. by the Industrial Manager of the applicant association was replied to by Mr. Gough, the Engineering Manager of Coddair Airlines Pty.Ltd. by a letter bearing that company's letterhead. In the light of the diverse corporate entities immediately earlier referred to, I find it impossible to conclude that Coddair Maintenance Division Pty.Ltd. was just a misnomer for Coddair Airlines Pty.Ltd., and that Coddair Airlines Pty.Ltd. was at the relevant time a member of the Metal Trades Industry . - ay : 7 ner FRO . orooe ve Vw mo + ease * ow een oe fa SAE AREER EERIE 18. Association of Australia. It follows then that I am not satisfied that Coddair Airlines Pty.Ltd., though the employer of Mr. Cawley at the relevant time, was bound by the Aircraft Engineers' (General Aviation) Award 1982. No challenge was made to the quantum of the claim and I am satisfied that there was an underpayment by Coddair Airlines Pty.Ltd. in the amount claimed. However, it has not been established by the applicant association that at the material time Coddair Airlines Pty.Ltd. was bound by the award. I therefore dismiss the application against both respondents. . caanli bert yt' ta - 17 recoding "am ° i tnt teeci ang. caeens for $ A SN are A v=, an an ' Se bee Tree Wore oe a ~ aha inh eereainrteres eareaer hie eee ember! atin womens Goon oo —5 = ==