APESMA and Tony K T Choo v Multistack International Limited [1995] IRCA 224

INDUSTRIAL RELATIONS COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY VI 1881 of 1994 B E T W E E N : APESMA and TONY K T CHOO Applicants AND MULTISTACK INTERNATIONAL LIMITED Respondent Before: Judicial Registrar Murphy Place: Melbourne Date: 29 May 1995 REASONS FOR JUDGMENT In these proceedings under Division 3 of Part VIA of the Industrial Relations Act (the Act) the respondent, by way of a Notice of Motion, sought at the hearing of the proceeding to dismiss the applicant's claim on the basis that the respondent was not the employer of the applicant. After hearing evidence from both parties directed to this issue, on 5 May 1995. I ruled that the second-named applicant (the applicant) was employed by the respondent. I now deliver my reasons for that ruling. Introduction On the issue of the identity of the applicant's employer, the Court heard evidence from the applicant, a 47 year old Chinese speaking Australian citizen. The respondent called evidence from the following employees:- (a) Ronald David Conry - Technical Director; (b) Antonio Vescio - Accountant/Financial Controller; and (c) Peter Hurrell Clyne - Secretary and Finance and Administration Manager. The respondent also filed an Affidavit sworn by a solicitor, Brendan J. Charles, with a number of exhibits. It was the respondent's assertion that the applicant was not employed by it but rather employed by an entity known as Multistack Thermal Limited (MST). China Operations of the Respondent The respondent is a recently listed public company which operates at premises at 351 Dorset Road, Boronia, and manufactures and exports, inter alia, water chillers. One of the respondent's export markets is China. At some time prior to 1993 a decision was taken to establish a joint venture in China. The respondent, through a Hong Kong based wholly owned subsidiary, licensed its technology to another Hong Kong company, Bright Technology Ltd. Bright Technology is 60% owned by the respondent (through a wholly owned subsidiary) and 40% owned by another Hong Kong company, Super Link Company Ltd. The joint venture company is known as Multistack Thermal Limited and it is 60% owned by Bright Technology. The remaining 40% of MST is owned by the PanYu Light Industry Bureau No.2 of PanYu, Guandong Province, Peoples Republic of China. MST was described as a "sino-foreign equity joint venture". In a letter to the applicant after his termination (Exhibit BJS1 to Charles' affidavit) the Managing Director of the respondent said the respondent:- "was earning an equity interest of 36% [in the joint venture]. This ownership proportion will be finally achieved free and clear after the plant is up and running in terms of various agreements, and this is expected in the first half of 1995. Until then, MTL [MST] remains controlled by Bright Technology Limited, in turn controlled by Super Link Company Limited of Hong Kong, to whom Multistack continues to be responsible for the provision of various management, training and technology support services. Although Super Link is Multistack's exclusive PRC licensee, we have absolutely zero management control over its operations." The joint venture is what is known as a technology transfer venture whereby the respondent, which is the project manager, establishes a factory, installs the plant and equipment and trains the local staff. The joint venture is to pay the respondent US $2.5 million to achieve this. Clyne gave evidence that it was known as "turn key project." He said: "The PanYu Government wants to start an operating company so they have no technology and they have limited resources.... The beneficial ownership of the technology and MST remains with either Bright Technology or Super Link Company Ltd until the whole factory is up and running." It is unclear from the evidence whether the factory is up and running. The evidence was that the Chinese were to build the factory. The Applicant's Engagement with the Respondent The applicant is an Electrical Engineer who was previously employed by a public utility. After he left that position, he saw an advertisement in The Age newspaper which read:- "PROJECT IN GUANDONG, CHINA "Leading manufacturer of patented water chillers for air conditioning and industrial process cooling systems requires for its new joint venture Plant in PanYu, Guandong, China, for the manufacture of heat exchanges the following:- [positions of Production Manager, Production Engineer and Accountant listed] A 3 year contract will be offered... [reply] to: The Project Manager, PANYU, PRC - JOINT VENTURE PROJECT, 351 Dorset Road, Boronia." The applicant ascertained from his own researches that the respondent was the "leading manufacturer" referred to. The applicant applied for a position as production engineer and a short time later received a phone call from Mr Soot Goh (Goh). Goh identified himself as the Project Manager for the PanYu, China, project of the respondent and an interview was arranged. At the interview, Goh said that he was employed by the respondent and was recruiting for the project. He referred to the respondent's product, showed the applicant over the plant and said that the respondent had established a joint venture with a company in Hong Kong and that the joint venture had agreed to pay US $2.5 million for the technology of the respondent. The applicant, should he be successful, would work in Australia for approximately six months and then transfer, along with Goh and others, to China. There were discussions between the applicant and Goh in relation to the applicant's application which had to be amended to overcome possible reservations by Conry. The position was also amended to engineering manager. Subsequently, the applicant had another interview with Goh who offered him the position but said that he had to refer the matter for final approval to the Managing Director of the respondent, Mr Richmond-Smith, and the Operations Director, Conry. Subsequently, an interview was arranged with Conry. At that interview, Conry told the applicant that the respondent would have jobs available after this project because it had half a dozen projects in mind over the next few years. That evening, Goh rang and said that Conry had said "employ you." The applicant replied, "Good, that means that I am now employed by [the respondent]." Two days later, the applicant attended at the respondent's premises and signed a letter dated 5 May 1993, on the respondent's letterhead and addressed to him, which read as follows:- "Dear Mr Choo, Re: Engineering Manager - Multistack Thermal Ltd PanYu, Guangdong, P.R. China We are pleased to offer you the above position for our Joint Venture Plant in PanYu on the following terms: 1. Monthly salary of AUD $4,000 disbursed in Hong Kong. 2. Contract period of 3 years. 3. Accommodation in PanYu provided. 4. One return air passage per year to Australia for leave, for employee and family. 5. Four weeks annual leave. 6. Once only baggage allowance of AUD $500. 7. Settling in allowance of AUD $1,000 upon relocation to China. 8. Terminal Gratuity of AUD $36,000 (taxable Hong Kong) payable on completion of the 3 year contract period. 9. Free medical benefits. Please confirm your acceptance by appending your signature on the copy of this letter. You will be required to commence duties on the PanYu Project on the 24th of May 1993 at our Melbourne Plant, 351 Dorset Road, Boronia for approximately 4-6 months prior to relocating to China. On satisfactory completion of an initial one month probationary period, an agreement between Multistack Thermal Limited and your goodself shall be drawn up embodying the above terms to formalise the contract. Yours faithfully, S.H. GOH General Manager MULTISTACK THERMAL LIMITED Encl. Signed: Tony K.T. Choo Dated this 21st day of May 1993." The applicant commenced work a short time later at the respondent's Boronia premises. A week after that, Goh and those involved in the project, moved to another office in the same suburb. In the next seventeen months, the applicant was involved in various duties, under the direction of Goh, associated with the project. These included designing the China factory and learning the respondent's technology. The applicant also went to China on a number of occasions. One of those visits involved negotiations with the provincial power supplier to obtain electricity for the project. He was also involved in arrangements for the import into China and transport of equipment in China for the project. The applicant maintained that he was performing these various duties in China on behalf of the respondent for the respondent's project. On another visit to China, the applicant acted as an interpreter for two of the respondent's engineers who were visiting China and investigating complaints about the respondent's products in China. Subsequently, the product was modified in Melbourne and the applicant was involved in testing the modified product. The applicant also assisted in the preparation of a manual for a machine which was installed in the respondent's factory in Boronia. The applicant maintained that in the course of his working for the respondent, Goh represented himself as the Project Manager of the respondent. At other times, Goh described himself as the General Manager of MST and, on one occasion, as the Training Co-ordinator of the respondent. Goh also told the applicant that he, Goh, was employed by the respondent. He also told the applicant that he, the applicant, was employed by the respondent. The applicant gave evidence that Goh made comments about both he and the applicant wearing two hats, namely, working for the respondent and MST. He said that Goh referred the team as working for the respondent but also being involved for MST so "he expected us ... to change the role from time to time." The applicant needed to obtain leave without pay for his spouse and Goh signed a letter for the applicant on the respondent's letterhead which read as follows:- "31 May 1993 Multistack International Limited 351 Dorset Road Boronia 3155 To Whom It May Concern Re: Mr Tony Choo This is to confirm that we have employed Mr Tony Choo as the Engineering Manager for our Guandong Plant in China. Mr Choo will be relocated to China for a contract period of 3 years. Regards S. Goh General Manager Multistack Thermal Ltd." The applicant produced two letters, one signed by Goh, which described Goh as the Project Manager of the respondent. The applicant gave evidence that Goh had also shown him his business card describing him as the Project Manager of the respondent. The respondent's witnesses denied any knowledge of Goh describing himself as a Project Manager of the respondent or as being employed by the respondent. Employment Arrangements of the Applicant The respondent acted as banker for MST. All accounts in Australia were paid by the respondent and allocated to a loan account. Goh would authorise various payments and cheques would be signed by the respondent's signatories, including Conry. MST had no bank accounts. The authorisation for the applicant's monthly pay of $4,000 was described as "advance to Bright Technology (Hong Kong) against Consultancy Fees to Mr K.T. Choo for the month of ...". This description is consistent with the relationship between the respondent and Bright described in Exhibit BJS1 above. It was never suggested to the applicant that he was providing consulting services to Bright Technology Ltd. Documents produced by the respondent showed that MST had accumulated a substantial debt to the respondent which had not been paid. The evidence was that MST has access to a US $1.5m credit facility which it could access when it commenced production and, when the funds were available, the respondent would be paid. Accounting functions for MST were still being performed by the respondent although a person described as the Accountant accompanied Goh to China in June 1994. Some staff in China are being paid from Australia. The only public manifestation of MST in Australia was a sign erected at the offices occupied by the project to direct suppliers to the project to the offices. The respondent paid the applicant $4,000 per month for the period from May 1993 until October 1994. The project was delayed and the applicant did not go to China in October 1993 as originally envisaged. No PAYE tax was deducted from the amounts paid to the applicant. The applicant was advised by Goh that this was unnecessary. Goh said they would only be in Australia for part of the year and the respondent had overseas accounts which would absorb the expenses. The respondent did not include the applicant or Goh in its list of employees for PAYE purposes and regarded both of them as employed by MST. Conry maintained in his evidence that all actions taken by the applicant were for MST and not for the respondent. He denied that Goh was the Project Manager of the respondent, and said Goh must have made a mistake. He was unable to comment on the business card allegedly held by Goh. Apart from Conroy's evidence the respondent did not challenge the applicant's evidence that Goh represented himself as the Project Manager of the respondent and had advised the applicant that he, Goh, was employed by the respondent. Goh was not called to give evidence. In the early part of 1994, as the time approached for the applicant to relocate to China, he discussed with Goh detailed terms and conditions of his employment in China. The applicant said that Goh produced a draft agreement between them. This was the subject of discussion and a further amended draft was prepared. This was typed by Conry's secretary on the respondent's letterhead. It set out additional terms and conditions for the engagement of the applicant and was to be signed by Conry of the respondent. It was typed around September 1994. On 7 July 1994, Conry and Goh had a meeting with the applicant at which his terms and conditions of employment were discussed. Conry's handwritten notes of that meeting were produced. These notes make reference to a number of terms and conditions and also state that "all other conditions will be as per the policy for expatriate staff seconded to MTL". The notes are converted into a draft letter to the applicant from Conry and refer to Conry "look(ing) forward to working with you and the rest of the team over the next few years". Goh left for China in June or July 1994 and the applicant was to follow in October. The applicant had made all arrangements to leave for China and had airline tickets for himself and his wife. At that stage no final agreement for his terms and conditions in China had been signed. Naturally, he was getting apprehensive and sought to discuss the draft document prepared after his discussions in June with Goh. He was called to Clyne's office on 6 October 1994 and advised that Goh, in China, had sought his resignation. A resignation letter was handed to him and, after some discussion, he, on his evidence, reluctantly signed it. That resignation letter was accompanied by a notice of termination pay which was typed in Melbourne on a letter purporting to come from MST in China. The applicant was paid a "severance payment," of $13,000 by way of a cheque from the respondent. Who was the Employer? The issue in this motion is to determine is "with whom was the contract of service" made. (Australian Insurance Employees v Union W.P. Insurance Services Pty Ltd (1982) 42 ALR 598 at 606). Here it was the respondent's contention that the contract of service was made between the applicant and MST. The respondent argued that the letter dated 5 May 1993 and signed on 21 May by the applicant should be seen as the true agreement between the parties. On its face, it refers to the applicant as being employed by MST. It was signed on behalf of MST by Goh. According to the respondent, the administrative treatment of both Goh and the applicant was consistent with the applicant being an employee of MST. The respondent relied on the parol evidence rule to prevent the consideration of any material extraneous to the letter. Counsel for the respondent argued that the applicant's subjective beliefs as to who was his employer were irrelevant. The representative of the applicant, on the other hand, argued that the reality of the situation was that the respondent was the real employer here. He asserted that this was confirmed by the fact that the letter was on the respondent's letterhead and MST had no legal existence in Australia. Recourse to material other than a written contract The law on recourse to extrinsic material in determining the meaning and effect of a written document has been stated as follows:- "Extrinsic evidence is admissible in support of an implied term, or of a particular meaning, if (a) the contract is ambiguous on the point in issue and (b) the evidence is of objective background rather than subjective intention or expectation". Cheshire and Fifoot's Law of Contract (5th Aust. Ed. para.407)." The evidence is also admissible to ascertain whether or not a party to an agreement was acting as an agent for another (Gilberto v Kenny (1983) 48 ALR 620, see also The Swan [1968] 1 Lloyds LR5). The authorities make it clear that the subjective intentions and assertions of the parties are legally irrelevant in determining their relationship (Connelly v Wells (1994) 54 IR 73). Here, there is a clear ambiguity in the letter of 5 May 1993. First, it is on the respondent's letterhead. Next, it refers to "we" offer a position at "our Joint Venture Plant in PanYu." The letter goes on to refer to the applicant commencing duties "on the PanYu Project ... at our Melbourne plant." A similar ambiguity is contained in the "To whom it may concern" letter detailed above. The evidence makes it clear that at no stage did MST have any legal existence in Australia. Further, MST had no Melbourne plant. The respondent had a Melbourne plant, and was the Project Manager for the PanYu project. The fact that, on the evidence, both the applicant and Goh had dual responsibilities makes it necessary to have recourse to material other than the written agreement to ascertain the "real character" of the relationship between the parties (Connelly (above), 55 IR at 85 per Kirby P). The Test for an Employment Relationship In identifying whether a particular relationship is to be characterised as one of employment, most of the cases have dealt with whether or not the relationship is to be characterised as one of employment or some other relationship such as an independent contractor. In the W.P. Insurance Services case (above) the Court applied the same criteria to ascertain which one of a group of companies was the employer involved. In Connelly (above) the Court looked at each of the traditional indicia to ascertain whether the individual involved could be characterised as a worker. Such an approach is consistent with the High Court decision in Stevens v Brodribb Sawmilling Co. Pty Ltd (1986) 160 CLR 16. Findings on Relationship The first criteria which is often applied is whether or not the employee was the subject of control or the capacity to control. Here, the respondent argued that Goh on behalf of MST was effectively in control of the applicant. It is clear, however, that, contrary to the respondent's assertion, Goh represented himself as an employee of the respondent. He, on the unchallenged evidence, referred to himself as being employed by the respondent. He did also describe himself as being involved with MST. An important matter, however, is that Goh reported to Conry and it was Conry who ultimately signed the cheques for all the MST payments made by the respondent on behalf of MST. It was Conry who employed the applicant and there was no evidence that Conry stated to the applicant that he was employing him in his capacity as the Director of MST. On the contrary, the draft agreement refers to Conry's title with the respondent. Further, all the other employment related documents were on the respondent's letterhead. This is consistent with the respondent being the effective controller of MST. It is consistent with the role of the respondent as the project manager. Given the lack of any corporate existence of MST in Australia, it is difficult to see how it could be said that MST had the capacity to control the applicant. The evidence that Goh referred to himself having two hats was not challenged. Goh was, I find, the project manager of the project for the respondent. It was in this capacity that he employed the applicant and required the applicant to perform duties both for the project and elsewhere, in the respondents' operation. I therefore find that it was the respondent which was in control of the applicant. The method of the payment of the applicant is also important. At no stage was the applicant paid by MST. Although in the WP Insurance Services case (above) the method of payment was described as a neutral indicia, in this case, it is not neutral as it is clear that MST had no capacity or ability to pay. He was also never paid from Hong Kong as referred to in the letter of 5 May 1993. In the WP Insurance Services case, Evatt J applied the organisation test to determine which of the companies in the group was the employer. Applying that test here, I accept the applicant's evidence that he was part and parcel of the respondent's organisation. It is artificial in the extreme to characterise him as being part of the organisation of MST given that it had no corporate existence in Australia and, to the extent that it was trading in Australia, was doing so without any registration under the Corporations Law or Business Names Act. MST was effectively a branch or division of the respondent. It used the respondent's letterhead and facilities. It was economically incapable of any independent existence in Australia. The role of the respondent as project manager cannot be ignored. Although Conry attempted to characterise the matter as the respondent being the vendor and MST being the customer for the technology transfer, this analysis did not reflect the reality. The reality was that the respondent was required to transfer its technology and establish the plant in order to earn its equity interest in the joint venture. It was a "turn-key" project. Until the factory was up and running the respondent had not discharged its obligations. I find that the applicant was part and parcel of the respondent's organisation rather than of MST or any Hong Kong corporation. He was utilised by the respondent in its operations. Those operations included both its role as project manager of the joint venture and also its other business activities both in China and Melbourne. The reality, on the evidence, was that the respondent was in control of the PanYu Project, and all staff were, at the time of the applicant's engagement, and while they were in Australia, its employees. This reality is confirmed by Conry's handwritten notes to the effect that the applicant's terms and conditions were "as per the policy for expatriate staff seconded to MTL". (Emphasis added). It is consistent with the reference by Conry to "the team" in his handwritten notes of the meeting of 7 July 1994. It is consistent with the provision bythe respondent of various services to its Hong Kong licencee referred to in BJS above. Also in evidence was the Bright Technology Ltd - Hong Kong "Policies for Expatriate Staff Seconded to MST". That document refers to a performance appraisal of expatriate staff which "which may be used to evaluate the performance of staff and assess their potential for re-engagement or suitability for other positions within Multistack International Ltd." This evidence is also consistent with the applicant being an employee of the respondent rather than of MST. It is consistent with the applicant's evidence that Conry referred to future projects after the PanYu project. It is consistent with the applicant's evidence that he was never given details of the precise shareholdings of MST or of the role of the Hong Kong based companies Bright Technology Ltd and Super Link Company Ltd. Having regard to all these considerations I conclude that the proper characterisation of the relationship between the applicant and the respondent is that the applicant was employed by the respondent. He was not employed by any other entity. While the subjective intentions of the parties are diametrically opposed I am satisfied that the respondent did make the representations attributed to Goh. Those representations are admissible against the respondent under the Evidence Act 1995. Goh's representation that he was employing the applicant for the respondent and that he, Goh, was employed by the respondent is corroborated by documents tendered in evidence. The treatment of MST as part and parcel of the respondent is manifest in the accounting records in evidence, and is consistent with the titles of the applicant and Goh in the letter of 5 May 1993 being descriptive only. The lack of any evidence of any separate corporate existence of MST in Australia during the period of the applicant's employment makes any question of piercing the corporate veil irrelevant. The only organisation capable of engaging the services of the applicant was the respondent and it did so. The letter of 5 May 1993, when read in the context of the overall relationship between the parties, and looked at objectively, can only be read as confirming an employment agreement between the applicant and the respondent. MINUTES OF ORDERS THE COURT ORDERS: 1. That the Respondent's Notice of Motion dated 4 May 1995 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 eighteen (18) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy. Associate: Dated: 29 May 1995 Solicitors for the Applicant: APESMA Representative for the Applicant: Mr G Considine Solicitors for the Respondent: Corrs Chambers Westgarth Counsel for the Respondent: Mr B Lacy Dates of hearing: 4 & 5 May 1995 Date of judgment: 29 May 1995