ASHLEY -v- GRENAID PTY LTD [1997] IRCA 197

DECISION NO:197/97 C A T C H W O R D S INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - ALLEGED UNLAWFUL TERMINATION - whether EMPLOYMENT RELATIONSHIP. Workplace Relations Act 1996 (formerly Industrial Relations Act 1988) S 170EA, Kirsty Gail ASHLEY -v- GRENAID PTY LTD DI 1081 of 1996 BEFORE: R. D. FARRELL JR PLACE: PERTH (heard in Alice Springs) DATE: 23 May 1997

IN THE INDUSTRIAL RELATIONS ) COURT OF AUSTRALIA ) WESTERN AUSTRALIA ) DISTRICT REGISTRY ) No. DI 1081 of 1996 BETWEEN: Kirsty Gail ASHLEY Applicant AND: GRENAID PTY LTD Respondent MINUTE OF ORDERS BEFORE: R. D. FARRELL JR PLACE: PERTH (heard in Alice Springs) DATE: 23 May 1997 THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules. IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY DI 1081 of 1996 BETWEEN: Kirsty Gail ASHLEY Applicant AND: GRENAID PTY LTD Respondent REASONS FOR DECISION (Delivered ex tempore - revised from transcript) 23 May 1997 R. D. FARRELL JR This is an application under Section 170EA of the then Industrial Relations Act 1988, now known as the Workplace Relations Act 1996. The application is for compensation arising from the alleged unlawful termination of the alleged employment of the applicant, Kirsty Ashley ("Ms Ashley"), by the respondent, Grenaid Pty Ltd ("the Company"). Ms Ashley is also claiming unpaid award wages to which she says she was entitled. The Company denies that there was ever an employment relationship between the Company and Ms Ashley. Ms Ashley is therefore first required to prove to the Court that it is more likely than not that such an employment relationship existed before the Court can go on to consider whether any termination of that employment was lawful. Ms Ashley relies upon her own evidence and that of her de facto husband, David Ashley. There was also some brief evidence from a friend, Ms Maree Croucher. Ms Ashley represented herself in these proceedings. It appears that no order was made prior to hearing for discovery of documents. It is agreed that many of the matters relied on in evidence were not documented. However, oral evidence was given about other matters which should have been capable of documentary support. The only documents in evidence were bank statements tendered by the Company in support of its account of the arrangements between the parties. The bank statements were ambiguous in the absence of interpretation by the Company's witness, and I cannot assume that they formed a complete record of all relevant transactions. In resolving the disputes of fact between Kirsty Ashley and the Company therefore, I have relied almost entirely on the oral evidence. Factual Background According to Kirsty and David Ashley's evidence, David Ashley was originally conducting a tile-laying business under the name of "David Ashley Ceramic Tilers" in Alice Springs where they live. Mr Ashley obtained the tiles for his clients by ordering them from suppliers in Adelaide. An opportunity arose for Mr Ashley to open a tile supply shop in Alice Springs. He took out a lease on premises which he regarded as suitable for that purpose and began to set up the shop, intending to run it under his own name. In early October 1995, after the lease had been taken out but before the shop was ready to open, a company, Grenaid Pty Ltd, was formed for the purpose of running the shop. The Company was to trade as "Red Centre Tiles". The directors and shareholders in the Company were David Ashley and his mother, Mary Ashley. There is a dispute as to why the Company was formed: David Ashley concedes that the cheques he wrote to cover the deposit and the first month's rent for the lease of the shop were not honoured. He denies, however, that that had anything to do with the decision that the shop be run by the Company rather than in his own name. David Ashley says that Mary Ashley advised him that it was necessary to set up the Company and that she be the public officer of the Company because she was a qualified accountant. The shop opened in mid-October 1995 and Kirsty Ashley spent a great deal of her time minding the shop. David Ashley spent most, if not all, of his time continuing to lay tiles for his tiling business, which he maintained separately to the shop. Mary Ashley took some space in the shop for her conveyancing business and David Ashley concedes that she made a contribution to the rent but was not sure how much. Mary Ashley was also employed full time at Nganapa Health so was rarely at the shop during ordinary working hours. She maintained all the accounts for the shop and did the banking. She and David Ashley was co-signatories to the Company's cheque account and she kept the cheque book. Within a couple of months of opening, the regular opening hours of the shop had become settled. They were from 9:30 am to 5:30 pm from Monday to Friday and from 10:00 am to 2:00 pm on Saturdays and Sundays. There is some dispute as to whether Kirsty Ashley was always present at the shop during opening hours as she claims. I accept, however, that she was there for the great majority of that time. She attended to customers and made some sales, answered phone calls, placed some orders for tiles and attended to general cleaning. It is also apparent, on all the evidence, that the shop was not very busy and did not thrive. Kirsty Ashley was away for a period in late 1995, during which time she was in hospital. She was also away for two weeks in February 1995 when she and David Ashley had to travel to Adelaide for Family Court proceedings concerning custody of a child. While they were away in Adelaide, Kirsty and David Ashley made arrangements for one of their neighbours to look after the shop. Kirsty says the neighbour agreed to do it "as a friend" and there was no discussion of payment to the neighbour. Mary Ashley was aware that Kirsty Ashley was often in the shop looking after it. She was also aware that one of the rooms in the premises had been converted into a creche. At the relevant time, David and Kirsty Ashley had an infant child, together with a child who attended preschool and two children old enough to attend primary school. Kirsty Ashley looked after the infant at the shop throughout the day and also looked after the other children when they were not at school or preschool. Kirsty Ashley was never paid for the work she did at the shop. On Sunday, 24 March 1996, the family had a falling out over their financial affairs. As a result of this, Mary Ashley instructed Kirsty Ashley during a heated exchange on the shop premises late that afternoon to leave the premises and never to return. Mary Ashley further arranged for a trespass notice to be issued against Kirsty Ashley. As a result, Kirsty Ashley ceased working at Red Centre Tiles. On 21 June 1996, Kirsty Ashley initiated this application. Whether there was an Employment Relationship in Existence. David Ashley says that Kirsty Ashley assisted him in his tiling business before the shop opened by, for example, placing orders for tiles and answering the telephone at home. He says she was not considered an employee of the tiling business. When David Ashley had the opportunity to lease the shop, before his mother became involved, his plan was that Kirsty could run the shop while she was looking after the children. She was, he says, already doing things to help him while looking after the children at home. He felt it would be just as easy for her to look after the children at the shop as it was to look after them at home. Both Kirsty and David Ashley say that, during a discussion between them and Mary Ashley in the shop premises at some time after the Company was formed but before the shop opened, it was agreed by all of them that Kirsty Ashley be employed to look after the shop. Mary Ashley denies this. David has no specific recollection of the particular discussion. David Ashley says that he agreed at Mary Ashley's insistence that all the proceeds paid to him by the clients of his tiling business, both for the cost of tiles and the cost of laying tiles would, for the time being, be banked to the Company account. This, he says, was in order to demonstrate turnover for the Company so that in due course the Company could obtain an overdraft facility. He says it was part of that agreement that he, Kirsty and their family would, in the meantime, live on Kirsty's wages for looking after the shop. David Ashley says that no specific wage for Kirsty was agreed. He says he assumed it would be the relevant award wage and that Kirsty would be paid weekly. Kirsty agreed that she did not ask what her hourly rate would be. David and Kirsty also agree that there was no documentation completed at any time during Kirsty Ashley's alleged employment to indicate that she was an employee of the Company. They maintain, however, that there was a verbal agreement between Kirsty and the Company's two directors to that effect before the shop opened. David and Kirsty Ashley say that, from time to time after the shop opened, they asked Mary Ashley for payment of Kirsty's wages but that Mary Ashley refused, claiming that the Company had insufficient funds to pay them. Notwithstanding this non-payment, Kirsty Ashley continued to work at the shop for five months, until the final falling out. According to David Ashley, the family lived during that period on Kirsty Ashley's family allowance entitlements supplemented by food parcels from charitable organisations. Their expenses included $155 per week in rent. Mary Ashley's evidence differed markedly. She says she became involved when the landlord of the shop, who was a friend of hers, warned her that he was about to lock David Ashley out of the shop for non-payment of rent. After discussing the options with her son, she says it was agreed that the Company be formed and that she pay the funds overdue on the lease and contribute a further $10,000 as a loan to the Company to cover the first six months of the lease while the shop was being established. The understanding, she says, was that once her loan funds were recovered she would surrender her share in the Company and David could do what he wanted with it. Mary Ashley denies that there was ever any intention that Kirsty Ashley be employed by the Company. Mary Ashley knew that Kirsty was helping out at the shop but Mary Ashley says that both she and her husband, Dennis, were also "helping out". She says she assumed that Kirsty was helping to get her husband's shop on its feet so that Kirsty could get the benefit of an interest in the business when Mary Ashley ceased to play a role in the business. Mary Ashley denies that there were ever any requests to her that Kirsty Ashley be paid wages. She says there was never any suggestion that Kirsty was owed wages until this application was filed. Mary Ashley says that if somebody were to have been employed to manage the shop, she would have advertised the position. She says she would have employed someone with greater knowledge of tiles than Kirsty Ashley and would not have permitted a paid manager to mind their children in the shop. Mary Ashley also says that she would have made taxation and superannuation arrangements for any employee, once employed. Mary Ashley denies that David Ashley was required to paid money earned by him laying tiles into the Company account. She says he was required only to pay for tiles he had purchased through the Company. She says the cash flow of the business was deteriorating. David Ashley, she says, withheld payments he had received from his clients to pay for the purchase of tiles. She says that tiles were sold by David Ashley to his client for less than cost so that he could secure the tiling jobs. She says she made several additional personal payments to David and to his creditors. In due course, her husband, Dennis, injected a further $10,000 into the Company to keep it afloat and became a director. Eventually, these financial tensions led to a falling out, culminating in the events of 24 March 1996. Contrary to Mary Ashley's understanding, there is no reason, in principle, why an employment relationship cannot be established under an oral contract of employment. Certainly, once the relationship is established, obligations arise to make arrangements for taxation, superannuation and other matters. However, a failure to comply with those obligations does not necessarily mean that no employment relationship existed. The representative of the Company sought to rely on the rebuttable presumption of fact, recognised in the common law of contract, that relatives such as husband and wife and parent and child do not intend their agreements to be contracts. I am not sure that such a presumption arises here where the alleged agreement is not between family members but rather between Kirsty Ashley and the Company, albeit a family company. In any event, having considered all the evidence, the applicant has not satisfied me that it is more likely than not that Mary Ashley ever agreed that Kirsty Ashley be employed by the Company and that she therefore be entitled to receive a wage. I find Mary Ashley's account of the arrangements more inherently plausible than that of Kirsty and David Ashley. For example, the fact that Kirsty Ashley was prepared to work for her husband's tiling business without being an employee and the fact that they considered it appropriate for their neighbour to look after the shop for two weeks "as a friend" without payment indicates that it is likely that Kirsty Ashley would have been prepared to look after the shop without necessarily being employed to do so. Accepting that David Ashley's rent cheques had bounced and that the business was just starting, it would seem unlikely that Mary Ashley would agree to the Company incurring an obligation to pay wages to a family member in those circumstances. I found aspects of David Ashley's evidence difficult to accept. I note that Mary Ashley says that she had rarely discussed the Company's affairs directly with Kirsty Ashley and had dealt with David instead. It may be therefore that Kirsty Ashley did not always receive a full and accurate account of the discussions between Mary Ashley and her son. Given the extent to which Mary exercised control of the Company's finances, I do not accept that Kirsty would have been entitled to assume that David was authorised to employ her without Mary's agreement. In any event, there is no suggestion that he purported to do so. I therefore find that there was no employment relationship between Kirsty Ashley and Grenaid Pty Ltd. Conclusion The application must therefore be dismissed; and I so order.