CATCHWORDS INDUSTRIAL LAW - Unlawful termination - whether the applicant was employed by the respondent - whether agreement providing for the management of the respondent's business of real estate agent by a company of which the applicant was managing director was a sham Industrial Relations Act 1988 s170EA(1) Auctioneers and Real Estate Agents Act 1991 (Tas) ss20, 21, 28, 29(1), 35(2) and 36 PATRICK JOHN JACKSON V NORTHSHORE REALTY PTY LTD No TI 168 of 1994 NORTHROP J HOBART 18 MAY 1995 IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA No TI 168 of 1994 TASMANIA DISTRICT REGISTRY B E T W E E N : PATRICK JOHN JACKSON Applicant A N D : NORTHSHORE REALTY PTY LTD Respondent COURT: NORTHROP J PLACE: HOBART DATE: 18 MAY 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The applicant's motion for review be refused. 2. The order made on 16 December 1994 that the application be dismissed be confirmed. Note: Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA No TI 168 of 1994 TASMANIA DISTRICT REGISTRY B E T W E E N : PATRICK JOHN JACKSON Applicant A N D : NORTHSHORE REALTY PTY LTD Respondent COURT: NORTHROP J PLACE: HOBART DATE: 18 MAY 1995 REASONS FOR JUDGMENT Pursuant to section 377 of the Industrial Relations Act 1988 ("the Act"), the applicant is seeking a review of a Judicial Registrar's exercise in this proceeding of a power delegated to him under section 376. On 16 December 1994, in the exercise of his powers, the Judicial Registrar dismissed an application brought by the applicant under subsection 170EA(1) for a remedy in respect of his employment by the respondent. The review is sought on motion in the proceeding and is by way of a rehearing. At the directions hearing on the first return of the motion, the parties agreed that the review proceed on the evidence as contained in the transcript of the evidence given before the Judicial Registrar since the issue between the parties arose essentially from the construction and application of several written agreements. The Court accepted the position as agreed and so directed. At the hearing it became apparent that it was unfortunate that this procedure had been adopted since much evidence was referred to which tended to add to, vary or contradict the terms of the written agreements. On the review the Court was at a disadvantage in considering the weight to be given to the oral evidence given before the Judicial Registrar. In addition, evidence was not given with respect to relevant matters. At the beginning of the hearing of the review, counsel for the respondent made it clear that the only issue before the Court was whether, at all relevant times, the applicant was an employee of the respondent. Counsel conceded that if the Court found that the applicant was an employee, the respondent had terminated the applicants employment in circumstances that contravened the provisions of Subdivision C of Division 3 of Part VIA of the Act. Accordingly the Court will consider first the issue of whether the applicant was the employee of the respondent. At all relevant times before 3 June 1994, a corporate body named P.J. Jackson Property Group Pty Ltd ("the Jackson Company") carried on the business of a real estate agent at 117 Sandy Bay Road Sandy Bay under the business name Richardson and Wrench Hobart. The applicant Patrick John Jackson was the managing director and controlling mind of the Jackson Company. There is no evidence to prove that the Jackson Company was the holder of a real estate agents licence granted under subsection 35(2) of the Auctioneers and Real Estate Agents Act 1991 ("the State Act"). The State Act constitutes the Auctioneers and Real Estate Agents Council of Tasmania a body corporate to administer that Act. One of its functions is to grant licences under the State Act. Section 28 empowers the Council to grant real estate agents licences and real estate managers licences. These licences may be granted to natural persons. A real estate agents licence may be granted to a body corporate but a real estate managers licence cannot be granted to a body corporate, see subsection 29(1). Normally a licence is granted for one calendar year only but can be renewed from year to year. It would be strange if the Jackson Company was not the holder of a real estate agents licence since subsection 20(1) of the State Act makes it a criminal offence for a person to carry on the business of a real estate agent if that person is not the holder of a real estate agents licence granted under the State Act. The State Act, by section 36, makes provision for the granting of a real estate managers licence. The State Act also makes it clear that in order to comply with its provisions a person who carries on the business of a real estate agent must have that business managed by a person who has a real estate agents licence or a real estate managers licence. This appears from the definition of "real estate manager" in section 4 of the State Act as meaning "a person engaged by a real estate agent to manage a place where the agent is authorized to carry on the business of a real estate agent" and subsection 20(2) which provides: "(2) A real estate agent shall not carry on the business of a real estate agent except at or from a place that - (a) is specified in the agent's licence as a place where that business may be carried on; and (b) is managed by a person authorized by this Act to manage a place where the business of a real estate agent may be carried on." Attention is directed to section 21 of the State Act. It is a long section but in substance provides that a person shall not manage a place where the business of a real estate agent is carried on unless that person is the holder of a real estate agents licence or a real estate managers licence and the place is that described in the licence. Subsection 21(5) provides: "(5) A real estate agent shall not engage a person to manage a place where the agent carries on his or her real estate business unless that person is the holder of - (a) a real estate agents licence; or (b) a real estate managers licence; or (c) ... " Failure to comply with the requirements of section 21 constitutes a criminal offence. Although there appears to be no evidence before the court to support the finding of fact, relying on the presumption of regularity and on facts referred to later in these reasons, an inference should be drawn that at best at all relevant times the Jackson Company was the holder of a real estate agents licence under the State Act with respect to the place at 117 Sandy Bay Road and that the applicant was the holder of a real estate managers licence to manage the business of the Jackson Company at 117 Sandy Bay Road. Unless this inference is drawn it would have to be accepted that the Jackson Company, in carrying on its business as an estate agent at 117 Sandy Bay Road, was committing an offence against section 20 or section 21 of the State Act. This lengthy introduction is necessary in order to understand the nature of the submissions put by counsel for the applicant. At all material times, the respondent, Northshore Realty Pty Ltd ("Northshore Realty") carried on the business of a real estate agent at Derwent Park. Henry Patrick Priest was the managing director and controlling mind of Northshore Realty. There is no evidence to prove that Northshore Realty was the holder of a real estate agents licence granted under subsection 35(2) of the State Act. For the same reasons as those given with respect to the Jackson Company, the inference is drawn that at all material times Northshore Realty was the holder of such a licence. During the period leading up to 3 June 1994, Mr Jackson and Mr Priest had discussions concerning the sale of the real estate business being conducted by the Jackson Company to Northshore Realty. Agreement was reached and written agreements were prepared by the solicitor who acted for both parties. The instructions as to the terms of the agreements were given to the solicitor by Mr Jackson. Eventually, on 3 June 1994 four agreements in writing were entered into as follows: 1. Sale agreement dated 3 June 1994 between the Jackson Company as vendor and Northshore Realty as purchaser. 2. Management agreement dated 3 June 1994 between Northshore Realty as the owner and the Jackson Company as the manager. 3. Deed of Indemnity dated 3 June 1994 between Mr Priest, Northshore Realty, the Jackson Company and Mr Jackson. 4. Employment Contract dated 3 June 1994 between Northshore Realty as the firm and Mr Jackson as the salesman. In the sale agreement the Jackson Company is described as the vendor and Northshore Realty is described as the purchaser. The recital states the existence of the real estate business and the agreement to sell. The sale was for the goodwill of the business for the sum of $10,000 and was to be completed and possession given on 6 June 1994. The sale was conditional on a new lease of the premises being given to Northshore Realty. It is not necessary to refer to the normal terms in the sale agreement relating to a sale of a business. The sale agreement is under the seal of each of the parties to it. In the management agreement, Northshore Realty is described as the owner and the Jackson Company is described as the manager. The recitals to the agreement are set out: "WHEREAS A. The Owner has recently purchased the business known as "Richardson and Wrench Hobart" of 117 Sandy Bay Road, Sandy Bay in Tasmania ("the business") and has requested the Manager to manage the business which the Manager has agreed to do on the terms and conditions appearing below. B. The Owner desires the Manager to efficiently manage the business upon the following terms. C. The Manager holds a Real Estate Manager's Licence and agrees to make same available for use in the business." By the management agreement, Northshore Realty appoints the Jackson Company as manager of the business at 117 Sandy Bay Road. Under clause 2, the Jackson Company is to make available "its Manager's Licence" to enable the lawful operation of the business. A corporate body cannot have a manager's licence. The clause must refer to the manager's licence held by the applicant. Under the first of the clauses numbered 4, Northshore Realty is to pay the sum of $576.92 weekly to the Jackson Company. Other payments are to be made but are not relevant to the issue before the Court. Under the second of the clauses numbered 4, the Jackson Company must comply with the lawful directions of Northshore Realty and is to be responsible for the selection and supervision of staff required and generally for all of the activities of carrying on the business at 117 Sandy Bay Road. Under clause 5, Northshore Realty is required to contribute the capital required to provide sufficient working capital to enable the business to be conducted. The management agreement is under the seal of each company. Its terms make it clear that, for practical purposes, the Jackson Company is to manage the business including the hiring of staff and the payment of salary and wages to persons employed by it. It is responsible to provide all necessary licences under the State Act. The recitals to the deed of indemnity state that Northshore Realty conducts the real estate agents business at 117 Sandy Bay Road, that the "real estate licence which permits the lawful operation of a real estate business is provided by" Mr Jackson and the Jackson Company and that Mr Priest and Northshore Realty have agreed to indemnify Mr Jackson and the Jackson Company against past and future liability they may incur in relation to the operation of the business. There then appears an entry at the end of this recital that does not make sense. It appears to have been typed in at a time different from the main document. There is no oral evidence relating to it. It states "Opperating (sic) as Northshore Realty Pty Ltd". It appears to place a limitation on the period of the indemnity but the operative clauses are silent on this matter. The deed then states that in consideration of Mr Jackson and the Jackson Company providing "one Real Estate Manager's Licence" to enable Northshore Realty to lawfully operate the business, Mr Priest and Northshore Realty agree to indemnify Mr Jackson and the Jackson Company "against any past or future monetary claim or liability against" Northshore Realty or the Jackson Company. This deed tends to support the fact that the Jackson Company is to be the manager of the business and to engage Mr Jackson, as the holder of a manager's licence, it being the intention of the management agreement that the Jackson Company was to be the manager of the business. Apart from this, the deed has no relevance to the issue between the parties. The employment agreement has no direct application to the issues between the parties. It recites that Northshore Realty is duly licensed under the State Act and that Mr Jackson is "a real estate and business opportunity salesman". Under the agreement, Northshore Realty engages Mr Jackson as a salesman on commission. The employment agreement is not relied upon by Mr Jackson to support his claim that he is an employee of Northshore Realty. On any view, the terms of the agreement make it clear that the agreement does not create the relationship of employer and employee between Northshore Realty and Mr Jackson. On 6 June 1994, it appears that some doubts arose relating to the effect of the agreements just described. On that day an agreement was entered into between Northshore Realty and Mr Jackson. It was signed by Mr Jackson and Mr Priest as a director of Northshore Realty. The terms of the agreement are set out: "The Agreement made the 6th day of June 1994 between Northshore Realty Pty Ltd and Patrick John Jackson. Whereas by an agreement dated 3rd June 1994 Northshore and P.J. Jackson Property Group Pty Ltd and Jackson entered into agreements for the running of the Hobart Office and Whereas the agreement are for certain payments to be made to P.J. Jackson and P.J. Jackson Property Group Pty Ltd. In the event that it becomes necessary for Northshore to pay Jackson a retainer then the $300.00 payable to P.J. Jackson Group Pty Ltd shall be deemed to be the retainer made this shall include holiday pay sickness and superannuation." It is difficult to give any meaning to this document. The grammar is confusing. Counsel could not refer to any term of the agreements referring to a retainer or to $300.00 In any event it does not appear to detract from the proper construction of the sale agreement or the management agreement being the agreements mainly relevant to the issues between the parties. At the hearing before the Judicial Registrar, the secretary of the Auctioneers and Real Estate Agents Council produced a real estate managers licence granted to Mr Jackson. Its date of issue is said to be 1 January 1994. It is not the licence issued on that date. It was amended on 27 June 1994. It certifies that Mr Jackson is licensed as a real estate manager to be engaged by Northshore Realty to be in charge of 117 Sandy Bay. The evidence shows this amended licence was obtained by Mr Jackson who, in support of the application for amendment, stated "Richardson and Wrench, has ceased to trade and the business has been taken over by Northshore Realty" and that "Current sales staff are Patrick Jackson who continues as licensee and manager." These statements, contained in letters under the letterhead of Northshore Realty, are signed by Mr Jackson, and appear to be inconsistent with the terms of the sale agreement and the management agreement. The first payment to be made by Northshore Realty to the Jackson Company under the management agreement was for a period of less than a week. It was paid on 9 June 1994. The amount of $89.74, representing a deduction of tax under the PAYE system, was deducted from the total amount due. The balance was paid to the Jackson Company in cash. Mr Jackson objected to the deduction of tax. On 14 June 1994 he wrote to Northshore Realty as follows: "Re: Licence/Management Fee I would be most grateful if in future, the above fee could be paid weekly, and if possible by cheque, made payable to P.J. Jackson, with no tax deducted." Northshore refunded the tax previously deducted namely $89.74 and thereafter paid the sum of $576.92 directly to Mr Jackson. No further tax was deducted. The management agreement was determined in August 1994. Its determination by Northshore Realty may have been in breach of the terms of that agreement, but that issue is not before the Court. Thereafter Mr Jackson ceased receiving the weekly payment of $576.92. The evidence suggests that at the time of the determination of the agreement, expressions were used by Mr Jackson and Mr Priest which could suggest each considered a relationship of employer and employee existed between them. This suggestion was completely contrary to the clear terms of the management agreement and the fact that no PAYE tax deductions were being made by Northshore Realty from the weekly sum of $576.92. No other payments were being made by Northshore Realty to Mr Jackson. On all of the material before the Court, one conclusion only can be reached. The sale agreement and the management agreement make it clear that the Jackson Company was to manage the real estate business at 117 Sandy Bay Road after the goodwill of that business was sold to Northshore Realty. The Jackson company was to engage all staff necessary to enable it to manage the business. For that purpose the Jackson Company engaged Mr Jackson as its real estate manager to manage the business at 117 Sandy Bay Road. The terms of that engagement are not before the Court. Northshore Realty was required to pay the management fee of $576.92 per week to the Jackson Company. At the request of the managing director of that company, Northshore Realty paid that sum to Mr Jackson. No PAYE tax deductions were taken from that sum. For practical purposes, Mr Jackson treated the Jackson Company and himself as if they were the same legal identity. Mr Jackson misinterpreted his true position when he applied to have his real estate managers licence amended. This, in all probability, occurred because of the failure of Mr Jackson to appreciate the true relationship between himself and the Jackson Company as well as a failure to appreciate, whether intentional or not, the nature of the management agreement. Counsel for Mr Jackson contended that the management agreement was, in realty, a sham, and should be given no legal effect with the result that it should be ignored. This contention is untenable. The management agreement forms part of a series of agreements entered into on 3 June 1994. Each agreement had an important role to play. The Jackson Company received the $10,000.00 payment for the goodwill of the business. The Jackson Company agreed to manage the business for Northshore Realty and for that purpose to engage Mr Jackson. The Court was not referred to any provision of the State Act which would prevent that being done. The indemnity agreement supports the view that the management agreement was to be given effect according to its terms. In the result, Mr Jackson has failed to prove that he was an employee of Northshore Realty. In these circumstances it is not necessary to consider how the management agreement came to be determined. Certainly Mr Jackson has not made out a case for a remedy in respect of termination of his employment. The motion for review is refused. The order made on 16 December 1994 that the application be dismissed is confirmed. I certify that this and the preceding thirteen (13) pages are a true copy of the Reasons for Judgment of The Honourable Justice R.M. Northrop. Associate: Date: ATTACHMENT Counsel for the Applicant: Mr Young Solicitor for the Applicant: Jennings Elliot Counsel for the Respondent: Mr Webster Solicitor for the Respondent: Wallace Williamson & Webster Date of Hearing: 19 April 1995