IN THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY NI 3370 of 1995 BETWEEN: JULIE HELEN OLSEN Applicant AND: WEBB BROS PTY LTD Respondent NI 3371 of 1995 BETWEEN: JOHN RONALD ROBSON Applicant AND: WEBB BROS PTY LTD Respondent JUDGE: WILCOX J DATE: 10 AUGUST 1998 PLACE: SYDNEY (VIDEO LINK WITH BRISBANE) EXTEMPORE REASONS FOR JUDGMENT WILCOX J: Before the court are applications to review two decisions of a Judicial Registrar. The decisions concern claims of unlawful termination of employment, in contravention of Division 3 of Part VIA of the Industrial Relations Act, 1988, as the legislation was then styled. The two matters were heard together. The facts overlap. The claims are made by John Ronald Robson and Julie Helen Olsen, who are partners in a de facto relationship. I do not propose to set out the facts in detail. I have been assisted by submissions by counsel for the parties who each focussed on the critical matters for determination. There was an issue before the Judicial Registrar as to whether the applicants were employees of the respondent, a company called Webb Bros Pty Limited, or whether they were involved with the respondent's affairs simply because of their association with a company called Budway Pty Limited, with whom the respondent had entered a consultancy agreement. Counsel for the respondent, Ms Linnane, said if this issue was determined against her client, the respondent would not dispute it contravened the legislation. Ms Linnane did raise some points regarding the determination of compensation and Mr Docking, counsel for the applicants, also said I should revisit this question, making some adjustments in favour of his clients. It seems to me clear the first issue comes down to the question whether Webb Bros contracted with the two applicants, as individuals, to retain them as employees, but with an arrangement that remuneration should be made to them through the medium of Budway or whether it entered into a contract with Budway for services to be provided by it. On that point Webb Bros relies primarily on a letter dated 22 November 1994. The letter is signed by Mr Michael Webb, a director of the respondent company, and addressed to the directors of Budway but is marked for the attention of Mr Robson and Ms Olsen. The letter confirms details of an agreement made at a meeting held on 18 November at Brisbane. It includes a statement about consulting fees being paid to Budway in the sum of $900 per week together with provision of a company car. Other terms are set out. Ms Linnane says this letter establishes the contract was with Budway. I see the force of her submission but I think the situation must be considered in a wider context. It appears to be common ground that Webb Bros advertised for a sales person, to be employed by it in connection with the sale of homes on a development at Yamba, on the north coast of New South Wales, known as "Oyster Cove Waterfront Village". Mr Robson was one of several people who answered the advertisement. He was interviewed by Mr Newton, a person who had been involved in the development on behalf of Webb Bros and was charged with the task of preparing a short list of five people for interview by Mr Michael Webb. Mr Newton included Mr Robson's name on the short list and he was subsequently interviewed by Mr Webb. During that interview Mr Robson mentioned his partner, Ms Olsen, and there was some reference to her employment and qualifications. At that time she was working at the "Big W" retail store in Grafton. Ms Olsen apparently had considerable experience in personnel management. Mr Webb expressed interest in meeting her, with a view to determining whether she would be a suitable employee for the company. Mr Robson said he would speak to Ms Olsen about this. Eventually there was a meeting between Mr Robson, Ms Olsen and Mr Webb; indeed there may have been two meetings. The second meeting, if there was more than one, was in Brisbane when Mr Robson and Ms Olsen inspected Webb Bros' operation and houses being constructed there. It seems to be common ground that, at this meeting, it was determined there would be an arrangement between Webb Bros and Mr Robson and Ms Olsen or their company, Budway, as the case may be. There was a question between the parties as to the terms of the arrangement. It is also common ground that a figure of $1,000, for the services of both people was agreed; and that this was subsequently reduced to $900 because of the fact that Webb Bros was to supply a motor vehicle. According to Mr Robson and Ms Olsen, they had worked out between themselves the distribution of the $1000 they were seeking; $600 for Mr Robson and $400 for Ms Olsen. There was an issue before the Judicial Registrar as to whether this breakdown was communicated to Mr Webb. It is clear that, during the course of the Brisbane meeting, there was a reference to Budway. According to Mr Webb, the first mention of Budway came from Mr Robson. It is clear that, at some stage, Mr Robson had told Mr Webb about his previous work record and had mentioned that he and Ms Olsen had worked as distributors of Orchy fruit juices. I think it is likely, at some stage in that context, he mentioned Budway, or at least the fact their distribution business was done through a family company. According to Mr Robson's evidence, it was Mr Webb who first suggested the payment should be made through a company. It does not matter much who first mentioned Budway. The important matter is what was said. In his evidence before the Judicial Registrar Mr Webb was asked, in relation to the meeting at Brisbane, how Budway came into the matter. He responded: "Well, I was aware that Budway was in existence, or a company was. I didn't know whether it was called Budway, but that a company was in existence and it came to a stage when we agreed at a figure of $900 a week, I asked John how he would like to have that paid and he said, 'Well, we have this existing company, Budway', and I took down the details, and I wrote down Budway Pty Limited. And that's how I was able to even write this letter of confirmation of our discussion." This was a reference to the letter of 22 November 1994. Mr Webb was then asked whether he ever suggested the moneys be paid to Budway. He replied: "Not at all. I asked him how he would like to have them paid, and that seemed legitimate to me. We had previously been engaging a proprietary limited company and that seemed like a legitimate way to operate." It is apparent from this evidence that Budway was introduced simply as a vehicle for the payment for services, after it had been decided Mr Robson and Ms Olsen would be employed. It is important to note that Webb Bros had been concerned to learn as much as possible about the past employment histories and personal qualities of Mr Robson and Ms Olsen. It seems Mr Webb put particular emphasis on Ms Olsen's experience and his assessment of her aptitude for sales work. This is not a case where Webb Bros was prepared to engage a private company, leaving it to the private company to determine who should carry out the duties imposed on the company under the contract. Mr Webb was concerned to ensure that he had the services of two particular people, Mr Robson and Ms Olsen. It would be consistent with that concern for him to make his arrangement with Mr Robson and Ms Olsen but perhaps be ready to channelling the salary payments through their private company. Ms Linnane suggested in argument there was no benefit to Webb Bros in taking that course. However, she volunteered that the arrangement might save the respondent worker's compensation premiums and annual leave payments, and I would add, if the relationship went on long enough, long service leave payments. It seems it would also save Webb Bros making superannuation contributions. It is true that, if Webb Bros had suggested to Mr Robson and Ms Olsen their salary should be reduced to the extent necessary to accommodate superannuation payments out of the $900 per week, they might have agreed. On the other hand, they might not. While there were obvious financial advantages to Webb Bros in channelling the payment through a company, there were also financial advantages for Mr Robson and Ms Olsen. It appears from the tax returns in evidence that Budway then had accumulated tax losses of the order of $11,000 to $12,000; if the money was paid through Budway, there would be an opportunity to absorb these tax losses; and perhaps to save taxation in other ways. The position is clear. Webb Bros took a lot of trouble in selecting the people (Mr Robson and Ms Olsen) who would carry out the work. They then found that Mr Robson and Ms Olsen happened to own a company, Budway, through which the salary payments could be channelled with advantage to both parties. They either offered or agreed to take this course. Ms Linnane placed much emphasis on the fact that, if this was the position, taxation returns submitted by Mr Robson, Ms Olsen and Budway were incorrect. It may be that Ms Linnane is correct in this regard. I note the Judicial Registrar took a dim view of the behaviour, in relation to taxation, of everybody concerned with this case. He directed that the Registrar inform the Attorney-General of the facts of the case. Whether or not there was tax avoidance, is something for the Commissioner of Taxation to determine. For me, the question is whether this is a case of an agreement being made between Webb Bros and two named individuals for them to do work subject to the usual employer-employee relationship or whether it is a case of a company contracting with an independent contractor for the provision of consultancy services. I think the pre-contract history points strongly in favour of the former view. Although the letter of 22 November refers to Budway being a consultant, it contains a statement of duties and responsibilities (para 4) that makes clear Budway is to provide sales management seven days a week and to administer the Village and Sports Centre with a person from Budway signing cheques. The letter requires Budway to co-ordinate with local contractors, represent Webb Bros in the area, co-ordinate activities and functions in the Residents' Club and co-ordinate with maintenance and other employees. In other words, Budway was required to maintain a continuous hands-on, detailed role. It was not to be a consultant who simply comes to a task, discharges that task and goes away. Clause 4 goes on: "You should be aware that your main focus is to market houses. You should be constantly aiming at improving efficiencies in time management during a day so that more daily time is spent on sales and creative 'follow-up' of interested prospects". As Ms Linnane agrees, this passage is more consistent with the attitude of an employer towards an employee than the attitude of a company to an independent consultant. Furthermore, clause 6 provides for initial training to be provided by Webb Bros' staff. It would be unusual for training to be provided to consultants, particularly without specification of the persons who will receive the training. Without specification, the benefit of the training might be lost to Webb Bros; Webb Bros might find people carrying out the work other than those they had trained. The letter also contains a statement, under the heading "General Comments", (para 8) in these terms: "Congratulations! We realise you have both agreed to a very concentrated effort, particularly in the next twelve (12) months at which time we believe (and hope) you have established a successful, long term relationship consulting to Webb Bros Pty Ltd. You will receive every support from Brian and I and you are free to call us anytime for our advice or direction." The letter concludes with work and home contact phone numbers for Mr Michael Webb and his brother, and co-owner of the company, Brian Webb. There is no one element in this letter which establishes the two applicants were employees, rather than persons associated with a consultant company. However, when I read the letter in the context of what had gone before, and bear in mind Mr Webb's own evidence as to how it came about that the money was paid to Budway, I find a compelling inference that this is a case where the agreement was with the individuals rather than the company. I have not overlooked the fact that there was provided to the Judicial Registrar, and there is before me, an affidavit of William Thomas Besford, a qualified accountant employed by Webb Bros in 1994. Mr Besford deposed to the fact that he travelled to Yamba shortly after Mr Robson and Ms Olsen commenced their duties. He said that, whilst going through accounting procedures with Ms Olsen, he asked her who was Budway Pty Limited and she replied words to the effect, "It's a company we are going through because we are trying to write off some tax losses". Mr Besford is in poor health, having suffered a by-pass heart operation. He was not able to travel to Court and was not cross-examined. However, even accepting his evidence as complete and reliable, there is no inconsistency between the speech he attributes to Ms Olsen about "going through" the company in order to write off tax losses and the analysis I have suggested. During the course of submissions, I was taken to many extracts from the evidence. I do not propose to refer to them all. It is sufficient to say it was common ground between the parties that there was frequent contact between officers of Webb Bros, predominantly Mr Michael Webb, and Mr Robson and Ms Olsen, perhaps mainly Ms Olsen, about events that were occurring at Yamba. These included matters germane to sales but also involved matters of administration of the existing development, maintenance work, etc. Ms Olsen referred to this contact as being almost on a daily basis; Mr Webb thought it was less frequent. I do not think it matters who is correct. It clear that Mr Webb felt entitled to give Ms Olsen and Mr Robson detailed instructions about the conduct of the business, and frequently did so. This included them giving directions to Webb Bros employees at Yamba. Ms Olsen and Mr Robson recognised Mr Webb's entitlement to give them instructions. This is a case where there was an entitlement to control, and the entitlement was freely exercised. I should mention one other matter, although I do not put any reliance upon it. Mr Robson made an application for a liquor licence. He made the application in his own name, describing himself as manager of the subject premises and stating he was employed by Webb Bros. Mr Michael Webb was aware of the making of the application, although Mr Robson was the instigator of the application and the person who got together the necessary documentation. Mr Michael Webb signed a management agreement under which Mr Robson was given control of the licensed premises. Such an agreement is required by the New South Wales liquor legislation. Mr Michael Webb said he did not read the whole of the documents and therefore did not appreciate that Mr Robson had described himself as being employed by Webb Bros. That statement may be correct; for that reason I do not put any weight upon the liquor application. However, it is relevant to note that the status claimed by Mr Robson in the application is consistent with his claim in this litigation. I also note it is common ground that Budway provided nothing except the services of Mr Robson and Ms Olsen, if that is what it did. This is not a case of a company providing a mix of goods or services and sending an account for the totality, as might a typical consultant. Webb Bros met the expenses incurred in connection with the services of Mr Robson and Ms Olsen in the same way it would have if the two individuals had concededly been employees. Webb Bros provided uniforms for Mr Robson and Ms Olsen and expected them to wear them. It also provided them with business cards. All of this is consistent with an employer-employee relationship. I agree with the Judicial Registrar in categorising the relevant contracts as being between Webb Bros as employer and each of the applicants as an employee. As I have already mentioned, it is conceded, in this situation, there was a breach of the Act. I need not go into the details of the breach. There is a question about compensation. Dealing first with Ms Olsen's compensation, Ms Linnane criticises the fact that the Judicial Registrar assessed her claim at the rate of $600 per week. As I have said, the original arrangement was negotiated on the basis of $1000 for the two individuals. This was reduced to $900 with use of a motor vehicle and a provision for payment of commission. The figure of $900 was subsequently increased to $1100, apparently without commission being payable. The evidence does not reveal any break-up of the $1100. It seems the Judicial Registrar approached the determination of compensation on the basis that $100 should be added to the figure of $1100, so as to allow for the motor vehicle, making a total of $1,200; he simply split that amount equally between the two people. However, this approach ignores the applicants' agreement between themselves that the amount attributed to Mr Robson's employment should be greater than that attributed to Ms Olsen's. It appears from her evidence that she, herself, thought her share was no more than $500. I agree with this and adopt that figure. The other comment that must be made is that there seems to have been double counting of one week. Ms Olsen was unemployed for a total of 13 weeks, after the termination of the arrangement by Webb Bros and before she started another job. The Judicial Registrar allowed her one week in respect of the lack of notice, pursuant to s 170DB of the Act. He then gave her an additional 13 weeks compensation. This involves double counting one week. In my view the amount previously awarded to Ms Olsen, before coming to the matter of interest, should be reduced by a total of $1900 representing a reduction of $100 for each of 13 weeks ($1300) and the loss of one week ($600) for double counting. In addition, the Judicial Registrar awarded Ms Olsen $2000 by way of compensation for the distress which she had undergone. Ms Linnane criticised this award, on the basis of paucity of evidence. But there was evidence from Ms Olsen that she was very upset, at the time, by the termination and still upset when she gave her evidence. She said it affected her attitude to her current employer. The manner of termination was particularly harsh and arbitrary. The termination came only about two weeks after a function in which Webb Bros had praised Mr Robson and Mr Olsen for their performance. No explanation was given, there was no warning and payment of back wages was not immediately proffered. I think this is a case where it was open to the Judicial Registrar to make an award in respect of distress. I do not propose to interfere with that. Mr Docking suggested that there should be some allowance for pre-judgment interest. I think this is justified. It is now three years since the termination occurred. In relation to Ms Olsen, the computation I make is as follows. I think there should be $500 by way of compensation for lack of one week's notice, pursuant to s 170DB of the Act. I allow an additional 12 weeks, at $500 per week, totalling $6,000. I also allow the sum of $2000 being compensation for the distress suffered by Ms Olsen in relation to the manner of termination. This totals $8500. It is now almost exactly three years since the termination. Allowing three years interest at 10 percent would add 30 percent to that award, namely $2550. This comes to a grand total of $11,050 which I will round to the sum of $11,000. Accordingly, in Ms Olsen's case I propose to deal with the matter by setting aside the Judicial Registrar's orders (1) to (8) and substituting an order that, within 21 days from today, the respondent pay to the applicant, Julie Olsen, the sum of $11,000. This will cover interest up until the present time. I will retain the order (9) made by the Judicial Registrar in respect of deduction of taxation, substituting a reference to para 1 of the order, rather than orders (7) and (8). I retain the Judicial Registrar's order in respect of the reference of the matter to the Commonwealth Attorney-General for transmission to the Commissioner of Taxation and/or the WorkCover Authority of New South Wales. In relation to Mr Robson, the Judicial Registrar allowed $600 for lack of one week's notice pursuant to s 170DB of the Act and a further six weeks. This was notwithstanding that Mr Robson was unemployed for some nine months after the termination of the contract. The Judicial Registrar's reason for this was that he felt Webb Bros might, in any event, have terminated Mr Robson's employment within a short time. Apparently, the company was not very happy with the sales volume. I can see why the Judicial Registrar took that view. The sales record was below the target the company had set itself. It may be, as Mr Docking suggests, that the target was unrealistic. Nonetheless the company might have visited its disappointment upon Mr Robson and Ms Olsen. I am inclined to think that their employment would not have continued indefinitely, but I think six weeks represents an unduly low estimate of the time during which Mr Robson would have been allowed to retain his employment, but for the breaches the subject of this proceeding. Although Mr Robson did not obtain employment at the end of three months like Ms Olsen, I think 13 weeks represents a reasonable assessment of the time he could have expected to continue to serve. Accordingly I will also allow him a total of 13 weeks, that is to say, one week in lieu of notice and 12 weeks as compensation. I will retain the rate of $600 per week because the situation is somewhat confused as to quantum. This yields a figure of $7800. Three years interest on that sum, is $2340, yielding a total of $10,140. I will round this at $10,100 and amend the orders made by the Judicial Registrar by deleting orders 1 to 8 and substituting an order that the respondent pay this sum to the applicant within 21 days. Once again, I will retain the other orders of the Judicial Registrar, subject to variation of the paragraph references. I certify that this and the preceding ten (10) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Wilcox Associate: Dated: 10 August 1998 Counsel for the Applicant: Mr B G Docking Solicitor for the Applicant: Baron and Associates Counsel for the Respondent: Ms Linnane Solicitor for the Respondent: Georgeson & Co