Rasic v Daylesford Real Estate Pty Ltd & Daylesford Cottage Directory [1995] IRCA 124

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1987 of 1994 B E T W E E N : VISNJA RASIC Applicant AND DAYLESFORD REAL ESTATE PTY LTD & DAYLESFORD COTTAGE DIRECTORY Respondent Before: Judicial Registrar Millane Place: Melbourne Date: 31 March 1995 REASONS FOR DECISION By an application made on 25 October 1994 the Applicant alleges that her employment as a bookkeeper and property manager with the Respondents was terminated in breach of Division 3 Part VIA of the Industrial Relations Act 1988 (the Act). The Respondents are separate legal entities. The first, Daylesford Real Estate Pty Ltd is a real estate company involved in sales and the rental of properties. The second, Daylesford Cottage Directory, is a registered business name through which a holiday cottage rental business is conducted by Rosalie Diane Bavin (Bavin). Bavin was also at all relevant times the branch manager of the Firstnamed Respondent and had the responsibility of running the company's day-to-day business affairs including the hiring and firing of staff. Her husband, Bruce Bavin is a director of the company and the licenced agent, however, on the evidence, he played no up-front role in the management of the company's business. It was contended by the Respondents that the Application was misconceived because there was no relationship of employment between the Applicant and either of the Respondents. Mesnils Pty Ltd, a company of which the Applicant is and was a director, on or about 9 April 1994 contracted with the Firstnamed Respondent to provide certain services and pursuant to such contract the Applicant worked as a bookkeeper and in property management with the Firstnamed Respondent. Mesnils Pty Ltd invoiced the Firstnamed Respondent for these services and was paid accordingly. It was denied that the Secondnamed Respondent at any time employed the Applicant or was a party to the contract between Mesnils Pty Ltd and the Firstnamed Respondent. But for the existence of a cheque drawn against the Secondnamed Respondent's account on 14 October 1994 in favour of Mesnils Pty Ltd there was no further evidence to suggest that the Secondnamed Respondent, in the event that an employment relationship existed between the Firstnamed Respondent and the Applicant, was also an employer of the Applicant between 23 May 1994 and 17 October 1994. The explanation given by the Respondent for the use of the Secondnamed Respondent's cheque book to pay one of Mesnils Pty Ltd's invoices was that the Firstnamed Respondent's cheque book had been mislaid and it was decided to use the other cheque book and refund the appropriate amount in due course. On the evidence I am satisfied that at no stage did an employment relationship exist between the Applicant and the Secondnamed Respondent. The alternative argument raised by the Respondents was that, if the Applicant was an employee of the Firstnamed Respondent on 17 October 1994, the Firstnamed Respondent was entitled to summarily terminate her employment because, at interview, the Applicant had misrepresented her skills and her capacity to use a computer programme, Realty Gold, and her competence in real estate property management. It was alleged that by 17 October 1994, as a result of the Applicant's incompetence, the computer programme and the Firstnamed Respondent's accounts were in a state of disarray; not to mention the property management files in the Applicant's care. The Applicant appeared in person and, without the assistance of legal counsel, argued forcefully and intelligently on her own behalf. In about April 1994 John Weir Caines (Caines) the Respondent's Accountant, in the course of his accountancy business advertised for a bookkeeper for a saw milling business. The Applicant's response to that advertisement excited his interest in her as a potential employee for the Firstnamed Respondent, which company then operated manual accounting systems rather than using computer software and packages designed for the real estate industry. The Applicant's application for the position advertised revealed that she had experience in the real estate industry with the real estate agency, Stockdale and Leggo and that she had computer skills using the real estate software package Realty Gold. Norman Reginald Longmuire (Longmuire), the managing director of Tenacity Software Pty Ltd was called by the Respondents to give evidence. Amongst other things, he told the Court that the Realty Gold package had been written by him and was sold by his company to real estate agents to perform accounting functions for the real estate agents' trust accounts to ensure compliance with legislative requirements. Whilst the Applicant and Caines differ on whether there was an initial face-to-face meeting between them rather than only a telephone conversation, it was agreed that a preliminary discussion took place during the course of which Caines told the Applicant that his client, the Firstnamed Respondent, needed a person with real estate and computer skills. This was so even though the Firstnamed Respondent was not then looking for a new employee nor had it acquired or considered the acquisition of a computer and a software package for its business. Caines recommended to Bavin that the Respondents transfer the business accounts to a computer system and further that she interview the Applicant with a view to hiring her to do this job. On the evidence it would be fair to say that when Caines and Bavin met the Applicant at a coffee shop it was to convince Bavin that a position should be created to at least enable the business accounts to be transferred on to a computer with specific software written for the real estate industry. Until she attended a three hour course at Tenacity Software Pty Ltd in the week preceding the alleged termination of employment on 17 October 1994 Bavin described herself as a computer illiterate. The staff in the Firstnamed Respondent's office were limited to three people and, on the evidence, none of the staff, other than the Applicant, had training in the use of computers until Bavin and another employee Megan Bourke attended the Tenacity Software Pty Ltd course in the week preceding 17 October 1994. Caines at the time of the interview appears to have been conversant with the use of computers but not the specific real estate package Realty Gold. The interview on or about 9 April 1994 went well and there was much discussion about computers and the Realty Gold package which the Applicant because of her experience in its use recommended to the Firstnamed Respondent and Caines. Bavin was sufficiently impressed by the Applicant to agree to create the position in the company, acquire a computer and the relevant Realty Gold software package, and to offer payment for her services at the rate of $25,000.00 gross per annum. The services contemplated included real estate services and the transfer of the Respondents' accounts onto the computer as well as bookkeeping. Both Caines and Bavin allege that prior to the interview they discussed a suitable wage to be offered at $25,000.00 gross per annum but had not contemplated engaging an independent contractor or company to perform the services required to be performed in preference to entering into an employment relationship. Their evidence is that the Applicant asked to be paid $27,000.00 gross per annum. The Firstnamed Respondent and its accountant believed $25,000.00 was an appropriate sum. The Applicant then informed them that she had purchased a property in the Daylesford area near her father's property and she was intending to move to that location. She also informed them that she and her brother were directors of their own company and that she wanted to be employed through that company. Caines gave evidence that during the interview the Applicant did not name her company nor did he seek any details of the company from her at that stage. He did however recall the Applicant stating that the company had losses and, whilst the Applicant was not his client and he was not engaged to advise her, he did caution her on the appropriateness and the effectiveness of such an arrangement. In response to this caution the Applicant informed him that other businesses were conducted through her company and it was appropriate for her to be employed through the company. Accordingly, the Respondent's case is that at interview its intention was to employ the Applicant if she was suitable. It was diverted from this course by the Applicant's request to have the Firstnamed Respondent enter into an independent contract with her company, which request arose out of the Applicant's own financial arrangements and needs. Caines and Bavin denied that there was any appreciable benefit to the Firstnamed Respondent in this sub-contracting arrangement even though the Firstnamed Respondent by doing so avoided paying workcare, superannuation and other expenses attributable to a contract of employment. Indeed, the Firstnamed Respondent had not previously engaged workers as independent contractors and agreed to this arrangement primarily to suit the Applicant and to resolve the debate on the amount to be paid for the services performed. The Applicant denied that she raised the question of interposing her company as an independent contractor she conceded that it was agreed that the Firstnamed Respondent would contract with and pay her company Mesnils Pty Ltd for certain services however such agreement came about at the Firstnamed Respondent's request because it wished to avoid the additional costs of employing her. It was not disputed that $25,000.00 gross per annum was offered and $27,000.00 gross per annum was sought in payment for the services. Accordingly, both parties obtained some financial benefit out of the agreement to pay at the rate of $25,000.00 for the first three months and thereafter at the rate of $27,000.00 per annum. The Applicant conceded that during the currency of the alleged employment the company Mesnils Pty Ltd invoiced the Firstnamed Respondent for the services provided and was paid a gross amount being the appropriate portion of the rate of payment agreed upon. She also conceded that such amounts were paid into her company's accounts but alleged that she did not receive any payment to herself of this money from her company. No explanation was given for the failure of her company to pay her. Mesnils Pty Ltd had traded for some eighteen months before the arrangement was entered into with the Firstnamed Respondent and Mesnils Pty Ltd was engaged in other businesses and described itself in its invoices (see Exhibit R4) as "Business Consultants, Primary Producers and Rural Traders (Incorporating Boon Spa Mineral Water Est 1886)". There was nothing in their demeanour or the evidence given by Caines and Bavin which would allow the Court to reject their testimony concerning the discussions leading up to the contract. What is clear is that such arrangement as was agreed upon favoured the Applicant as well as the Firstnamed Respondent because at the very least the rate of payment rose to $27,000.00 per annum as had been sought by her in the course of the interview and the payment of the fee for services to her company may have been advantageous to her company in ways which could not be fully understood at the hearing when none of the records of that company were produced for examination. The Employer/Employee Relationship In his submissions to the Court on behalf of the Respondents Mr Lindeman of counsel, whilst urging the Court to give credence to the intentions of the parties to this contract; that is to say, their express intention to enter into a contract whereby the Firstnamed Respondent contracted with the Applicant's company Mesnils Pty Ltd to provide certain services, conceded that the intention of the parties was not decisive of the issue whether there was a contract of employment. Section 4 of the Act is unhelpful in deciding whether there was a contract of employment as it describes an employee as a person whose usual occupation is that of employee. In the absence of any legislative attempt to define this relationship, the Court is obliged to look at the considerable body of case law which has developed indicia to assist the Court in this task. In Re Porter; Re Transport Workers Union of Australia 34 IR 179 at page 184 Gray J. summarises the approach taken as follows: "A court determining whether a particular relationship is that of employment or of some other kind can therefore only resort to the process of balancing all of the factors, or as they are called in Stevens and other cases, the "indicia". In truth, the result may be a matter of impression. It is unfortunate that this is so. It should not be necessary for people to obtain a decision of a court in order to know the true nature of their relationship. Unfortunate or not, that is the case. Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive. A court will always look at all of the terms of the contract, to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it. As Mr Black put it in the present case, the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck." At pages 184 and 185 of the same case His Honour Gray J draws attention to the level of economic dependence of a party on another and the manner of exploiting that dependence as a relevant factor in deciding whether there was a contract of employment. It was the Applicant's evidence that she did not receive income from her company even though it was the recipient of the Firstnamed Respondent's payments for the services performed. Accordingly, it does not seem that there was true economic dependence on the Firstnamed Respondent in the sense suggested by His Honour in Porter's case. A copy of the written letter of offer dated 9 April 1994 was tendered in evidence (see Exhibit A3). It consisted of a letter written by Caines to the Applicant offering her what was described as a full-time and permanent position with the Firstnamed Respondent from 23 May 1994. Somewhat inconsistently the letter of offer also stated that the position was subject to review after 12 months and it was a condition of the Applicant's employment that she not resign within the 12 month period. Amongst other things, the letter of offer made the Applicant answerable to Bavin who did not resist the proposition that she did and was able to direct the activities and duties of the Applicant throughout the time the Applicant worked at the Firstnamed Respondent's office. Items 4 and 5 of the letter of offer referred to the Applicant's services being provided through her company:- "which will be responsible for all workcover, superannuation and any other personal requirements". On the subject of payment the letter of offer states: "your company will be retained initially at $25,000.00 per annum which will be reviewed after 3 months. In the event that such review is satisfactory the retainer will be increased to $27,000.00 per annum from that date". Item 5 went on to require the Applicant to work a 38 hour week between 9.00 am and 5.00 pm with time off in lieu of any overtime worked. The Applicant signed and returned the letter of offer and submitted her company's invoices to the Firstnamed Respondent for payment of gross sums over the relevant period. She did not ask for holidays or holiday pay or sick leave even though these items were not specifically mentioned in the letter of offer. The last payment to the company by the Firstnamed Respondent was dated 14 October 1994 and, in response to Mesnils Pty Ltd's invoice, allowed for the deduction of one days pay during which time the Applicant was absent attending a Court hearing. The invoice submitted by Mesnils Pty Ltd did not include a claim for payment on the date of her absence. According to Bavin this was because it was not contemplated that an independent contractor would be paid for this absence nor was payment sought. The Applicant agreed that she did not seek payment however she alleges that this was because the Court had awarded her costs on the date of her attendance at Court and she had told Bruce Bavin that the Firstnamed Respondent need not pay her for that day. Bruce Bavin was not called to give evidence. Nevertheless I am satisfied on the evidence that the Applicant fully understood the arrangement between her company and the Firstnamed Respondent to be one where shewas contracting to provide services through the vehicle of her company and would not be paid the usual emoluments of employment such as sick leave and holiday pay. Objectively speaking there are a number of features of the contract and the relationship which may accord with the indicia developed by earlier cases for identifying a relationship of employment. In Stevens v Brodribb Co. Pty Ltd (1985-1986) 160 CLR 16, the High Court pointed to factors such as:- (a) the mode of remuneration; (b) the provision of maintenance of equipment; (c) the obligation to work; (d) the hours of work; (e) the provision of holidays; (f) the deduction of income tax: (g) the delegation of work by the putative employee; and (h) the degree of control over the employee. It was argued by the Respondents that because of her expertise in the use of the computer and its programme the Applicant was not in effect subject to the control of the Firstnamed Respondent. None of the other employees could access the equipment and by her behaviour the Applicant denied Bavin access suggesting Bavin seek training to operate the computer. In Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561 at 571 the High Court observed that the existence of specialist skills which left little room for command by the Firstnamed Respondent would not be decisive of the issue of control, it was more a question of the lawful authority to command and on the evidence in the case at hand arguable such authority resided in the Firstnamed Respondent. The distinguishing features of this application are:- (a) that the intention of both parties was that the contract be entered into between Mesnils Pty Ltd and the Firstnamed Respondent and as such the Firstnamed Respondent had an obligation to pay Mesnils Pty Ltd, which obligation it complied with on the submission of invoices by that company. On the face of the transaction entered into the Firstnamed Respondent had no liability to pay the Applicant (see Building Workers Industrial Union of Australia and Others v Odco Pty Ltd (1991) FCR 104 at page 114 and Massey v Crown Life Insurance Co. (1978) 2 ALLER 596 at 582); (b) that whilst the Applicant was working a 38 hour week between 9.00 am and 5.00 pm at the Firstnamed Respondent's offices it is clear from the evidence there was a right and this was exercised through the company Mesnils Pty Ltd to engage in other business activities. Indeed, she appears to have treated the arrangement between the company and the Firstnamed Respondent as another business activity of her company (see Australian Mutual Provident Society v Chaplin and Another 18 ALR 385); (c) that the imposition of a corporate entity between the Applicant and the Firstnamed Respondent militated against the notion of a contract of service (see Chaplin's case at page 392); and (d) that other than clumsy references to the Applicant's employment in its letter of offer and other correspondence in the period during which the Applicant worked at the Firstnamed Respondent's offices, the Firstnamed Respondent and the Applicant generally complied with the spirit of the agreement entered into. Until the contract was brought to an end by the Firstnamed Respondent on 17 October 1994, allegedly because of the Applicant's poor performance, there was no claim for holiday pay by the Applicant. The Respondents rely on correspondence sent by the Applicant after 17 October 1994 (see Exhibits R2 and R3) in which she seeks to settle her claim for unlawful termination by payment of the balance of the contract sum presumably on the assumption that, if the agreement had run a full 12 months she would be entitled to that sum together with holiday pay. The general effect of the evidence is that the Applicant fully intended and understood that she had negotiated a contract on behalf of her company which was favourable to both her and her company and incidentally favoured the Firstnamed Respondent who paid the payments sought without incurring the liabilities associated with the contract of employment. On the evidence I find that on 9 April 1994 Mesnils Pty Ltd was engaged by the Firstnamed Respondent as an independent contractor. This being so, the application is indeed misconceived; any rights the company Mesnils Pty Ltd has against the Firstnamed Respondent for wrongful repudiation of the contract by the Firstnamed Respondent on 17 October 1994 cannot be prosecuted in this jurisdiction and must therefore lead to a dismissal of the application. MINUTES OF ORDERS THE COURT ORDERS THAT: 1. This Application is dismissed. NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules. I certify that this and the preceding ten (10) pages are a true copy of the reasons for judgment of Judicial Registrar Millane. Associate: Dated: 31 March 1995 Applicant in person Solicitor for the Respondent: Ralph Manno Counsel for the Respondent: Mr Lindeman Date of hearing: 27 & 28 March 1995 Date of judgment: 31 March 1995