RUSHES PTY LTD v THOMAS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL SAMUELS (1), MEAGHER (2) AND HANDLEY (3) JJA 9 May 1990, 9 May 1990 [1990] NSWCA 195 APPEAL AND NEW TRIAL — ultimate finding of fact dependent upon application of legal standard — failure to give reasons for decision an error of law — Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 considered and applied. WORKERS COMPENSATION — COMPENSATION COURT — failure to give reasons for finding of fact where finding dependent upon application of legal standard an error of law. Samuels JA The respondent, Mr Thomas, between 1968 and 1975 traded in his own name as a photographer in the advertising and fashion field. He then commenced to make television commercials and in 1977 acquired a shelf company called Hayegu Pty Limited, which on 20 December 1977 changed its name to Rushes Pty Limited. It is the present appellant. The respondent and a solicitor, Mr Graham Hicks, were the first directors. The appellant carried on a business, which is described in the evidence as a production company specialising in television commercials, from premises in Whaling Road, North Sydney in which the respondent himself lived. In 1981 Mr TB Accola, an accountant, replaced Mr Hicks. Thereafter, the respondent and Mr Accola were the sole shareholders and directors of the appellant, Mr Accola holding his share in trust for the respondent. Mr Accola acted as the appellant's accountant and public officer, keeping its books and preparing its tax returns. It seems (there are not specific findings upon each of these points) that the appellant's function was to provide a quote for the cost of realising television commercial films, the basic idea and story line for which would be submitted by an advertising agency. That idea might be given with greater or lesser detail. The respondent's evidence was that he designed the commercials and, presumably, worked out the quotes and directed the film if the quote were accepted. He worked with a producer who, to quote from the evidence, did not belong to the company but was "an outsider". The producer and the respondent worked together, hired the production crew, and presumably the actors if any were required. The respondent was cross-examined about his reasons for establishing this corporate framework for activities which he had earlier carried on in his own name. I emphasise, as I have said, that these matters are not all the subject of findings by the learned judge but the state of the evidence is of relevance for reasons to which I will come presently. In essence, the respondent said that his reason for acquiring and utilising the appellant was to use it as a means of carrying on business because large jobs would not be given to individual tenderers. 2 UNREPORTED JUDGMENTS Later on in his evidence he described how the various responsibilities for the making of a television commercial were structured and he said (although, once again, there is no finding upon the point and only limited emphasis can be given to it) that it was the advertising agency and no-one else which had the right of control over him concerning the manner of performance of his work as a director. He said that the appellant had no employees - I interpolate, other than himself upon the view which he asserted - and indicated that the members of the film crew were not paid as employees of the appellant but "were all paid separately for each commercial". On 14 January 1984 the respondent unfortunately suffered a serious cerebral catastrophe. He alleged that this incident arose out of or in the course of his employment by the appellant. His subsequent claim for workers' compensation (liability having been denied) came before Judge Thompson in the Compensation Court, who made an award in Mr Thomas' favour. It is from that order that this appeal comes. The learned judge's findings, which were economical, were as follows: "On the evidence I am satisfied that the appellant was a director of the company, Rushes Pty Limited, which carried on the business of making television commercials which were directed by the applicant. I am satisfied that Rushes Pty Limited was incorporated on 20 December 1977 and that that company employed Mr Thomas and paid him a salary and bonuses when the business was good. The books and records were kept by Mr Accola, the accountant, or his staff. Mr Accola paid workers' compensation premiums each year in respect of Mr Thomas. lam satisfied that Mr Thomas was a worker within the meaning of the Act, and was employed by the respondent company when he suffered a stroke whilst working at Mt Wilson on 14 January 1984. I rely on the decision in Lee v Lee's Air Farming (1961) AC 12." The original notice or appeal took a number of points and the first of them was that there was no evidence upon which the judge was entitled to find that the respondent was a worker employed by the appellant under a contract of service. However, the supplementary notice of appeal upon which this appeal is proceeding omits the 'no evidence' point and, abandoning any challenge to the medical evidence, concentrates upon two alleged errors of law. These are, first, that the learned judge failed to give adequate reasons for his decision; secondly, that the reference to Lee in the context in which it appears indicates an error of law. The principle to which we must have regard concerning the first point has been fairly recently dealt with by this Court in Soulemezis v Dudley (Holdings) Pty Limited (1987) 10 NSWLR 247, in particular at 259, 269 and 281. That decision establishes that the principle does not apply only to cases where the failure to give reasons impedes a right of appeal. As Mahoney JA said at 269: "First, the reasons given must be sufficient, where there is a right of appeal, to allow that right to be exercised. Secondly, the giving-of reasons is not limited to cases where there is a right of appeal: there are reasons in the nature of the judicial process which may require that reasons be given as an incident of the decision in question. And, thirdly, the giving of reasons is a normal but not a universal incident of the judicial process: there are some cases or kinds of cases where they need not be given." URJ RUSHES PTY LTD v THOMAS (Samuels JA) 3 At 280 and 281 McHugh JA observed, having expressed his agreement with what was said by Mahoney JA in Housing Commission of New South Wales v Tatmar Pastoral Company Pty Limited (1983) 3 NSWLR 378 at 386: "Thus, more elaborate reasons are required where legislation gives a right of appeal against a decision than where no appeal lies." Then his Honour added: "An ultimate finding of fact, which is not subject to appeal and which is in no way dependent upon the application of a legal standard, can be treated less elaborately than an issue involving a question of law or mixed fact and law." In the present case, the conclusion that the respondent was employed by the appellant under a contract of service was ultimately one of fact. This was underlined in Ellis v Wallsend District Hospital (unreported, Court of Appeal 19 October, 1989) in my judgment at 40, in which Meagher JA agreed, where there are references to the various well-known cases on the topic. Even so, the conclusion must be arrived at in the light of legal principle. The control test is no longer the sole factor. In Stevens v Brodribb Sawmilling Company Pty Limited (1986) 160 CLR 16 at 24 Mason J (as he then was) explained that control, while significant, is not the sole criterion by which to gauge whether a relationship is one of employment. At 29 his Honour said "the totality of the relationship between the parties" must be considered. That totality involves a whole complex of matters, some of which are referred to in Brodribb, and include the payment of salary or wages, the mode of payment, the existence of insurance or its absence, the provision of holidays, the hours of work, the provision and maintenance of equipment, the obligation to work, the deduction of income tax, and other factors which imagination can fairly readily conjure up. At all events, the finding that A is employed under a contract of service by B is one which must be influenced by and involve a legal standard. In the present case there is no suggestion that I am able to perceive in the judgment that his Honour had regard to any specific principle of law in coming to his first conclusion that the appellant employed the respondent and paid him a salary and bonuses. That finding of employment must presumably have contemplated employment under a contract of service and that is made plain, I would have thought, a few lines later on when the learned judge expressed satisfaction with the concept that the respondent was a worker within the meaning of the Workers' Compensation Act. In my opinion, this is a case where the absence of any indication of the manner in which the learned judge reasoned to his conclusion and his failure to offer any revelation as to the principles of law which he took into account amounted to an error of law. It constituted a failure to discharge what in the circumstances of this case was a judicial obligation to indicate how the judge arrived at his conclusion. Mr Dent, who has argued the case for the respondent with great persistence and ingenuity, put to us that we should be slow to arrive at this conclusion, which would involve an order for a new trial - or a remitter to the Compensation Court to be more precise - because the decisions of that court are appealable only upon questions of law. Hence, he asserts, to permit review for want of reasons is a secondary way of attacking findings of fact which are invulnerable in the ordinary course. I am not persuaded by that argument. It seems to me that the principle to be found in Soulemezis and other cases is intended to operate notwithstanding that there was evidence in the case which was capable of sustaining the findings that were made. Want of evidence constitutes an independent ground of appeal which 4 UNREPORTED JUDGMENTS is certainly available on appeal from the Compensation Court. The purpose of the principle set out in Soulemezis is to ensure that justice is seen to be done. In cases in which the principle applies the judge is under an obligation to explain how he arrived at his conclusion and the failure to do so amounts to a miscarriage. In addition, in my view, the reference to Lee establishes an error of law for these reasons. Lee was a decision in which the Judicial Committee held that it was possible in law for a company to make a contract with its governing director. In that case, however, the articles of association not only appointed the appellant governing director for life and vested in him full government and control of the company, but also provided that he should be employed by the company at a specified salary and that "in respect of such employment the rules of law applicable to the relationship of master and servant shall apply". It was, I think, in the light of those provisions that at 27 Lord Morris, delivering the judgment, said: "Tf the deceased had a contract of service with the company then the company had a right of control. The manner of its exercise would not affect or diminish the right to its exercise". In the present case there was no such express contract of service. It seems to me from the context in which the reference to Lee is found and from the way in which the learned judge's laconic reasons were framed that he regarded Lee as a decision which not only authorised the decision in the respondent's favour but required it. That, for the reasons I have already given, must be wrong. On that ground also I think, with great respect, that the learned judge fell into error. The consequence of these conclusions would be in the ordinary case that the matter would go back to the Compensation Court for reconsideration, or in effect a new trial. Mr Dent argues that that consequence should not ensue here because, looking at the evidence, the only conclusion to which a rational mind could come would be that a contract of service did exist between the parties. lam afraid that I cannot accept that submission. It seems to me that, without expressing a view one way or the other, it was open on the evidence to conclude that whatever the respondent's relationship with the appellant it was not one of master and servant. It is open also to conclude that it was one of employer and independent contractor. In my view, the evidence is capable of establishing that the work of the appellant was primarily concerned with quoting for the making and production of television commercials and that in that work the respondent was undoubtedly involved. However, once the production was commissioned the respondent may have embarked upon his role as director otherwise than as an employee under a contract of service with the appellant. These are, to my mind, possible conclusions on the facts. Accordingly, I do not think that it can be said that it is useless to return the case to the Compensation Court because any decision on the facts contrary to the decision now before us would be perverse. I should add two further comments. First of all, reference was made to the recent decision of the High Court in Nicol v Allyacht Spars Pty Limited 163 CLR 611. I do not think that the reasoning in that case, in particular at 616-617 and at 620 and 625 lend any support to the respondent's contention. Secondly, emphasis was placed upon the fact that the learned Judge found that the respondent was paid a salary and that income tax was deducted from those payments. S221A(1)(b) and (c) of the Income Tax Assessment Act provide for the deduction of income tax by instalments from payments of "salary or wages". That collocation of words however is defined in s221A(1)(b) to include payments URJ RUSHES PTY LTD v THOMAS (Handley JA) 5 made "by a company by way of remuneration to a director of that company" and indeed for other purposes which do not seem to me to indicate the normal concept of salary or wages. Accordingly, the mere fact that instalments are deducted does not carry much weight in arriving at the determination which is at issue in the present case. Finally, it was submitted that if the matter was remitted to the Compensation Court it should be only the issue of employment which should go back and I understand that Mr Kenny QC, for the appellant, has no objection to that course being adopted. One of the witnesses whose evidence is of importance upon the question of employment, and whose oral testimony was taken in the respondent's case below, Ann Kennedy Majcher, would not be available at any further trial. The point was raised at the close of the argument and we have not had an opportunity to consider what orders might be made to preserve her evidence. I would therefore propose to reserve that point, leaving it to Mr Dent to bring in, with Mr Kenny's agreement, the form of an order which we will make in due course in order to prevent the loss of that evidence. Accordingly, I would propose that the orders to be made are these. The appeal is allowed. The award of the Compensation Court is set aside and the matter is remitted to that court upon the question only of whether at relevant times Laurence Charles Thomas was employed by Rushes Pty Limited as a worker within the meaning of the Workers' Compensation Act and to do therein as shall be just and in accordance with this judgement. To make it plain; that is, to the intent that the question of the causal mechanism of the cerebral catastrophe should not be relitigated but should abide the findings that have already been made. The respondent should pay the appellant's costs of the appeal. I would propose that no formal findings should be made yet until counsel have had an opportunity to bring in the suggested orders to which I have referred. Meagher JA His Honour Judge Thompson's reasons for his finding were compressedinto two short sentences and his reasons therefore are laconic to the point of being runic. Whilst it is a consummation devoutly to be wished that a trial judge should express himself without undue prolixity, once conciseness shrinks to near silence a trial judge courts the risk of failing in his duty to provide reasons and thereby committing an error of law. That has happened here. I agree with what has fallen from Samuels JA. Handley JA I also agree. I would only add some further short observations of my own. The respondent, unlike the widow in Lee v Lee's Air Farming (1961) AC 12, is unable to rely upon an express written contract of service with the appellant. The first question in this case therefore on the contract of service issue is whether such a contract arose in this case by implication from the acts of the appellant and the respondent prior to the respondent's injury on 14 January 1984. The second question is whether any such relationship which may have existed at earlier times, when the respondent was engaged full-time in the company's business and was in receipt of a regular salary, still persisted in January 1984 when the respondent was not in receipt or any salary and after a lengthy period when he had not been working full-time for the company. The existence of an express contract of employment as in Lee's case overcomes the difficulty in cases such as this where the formation of any contract between the company and the controlling director involves the formation of a 6 UNREPORTED JUDGMENTS contractual intention and the communication of that intention by one natural person in one capacity to himself in another capacity. The artificiality of the legal distinction which must be maintained between the natural person who controls the company and the company so controlled acting through and by its controller in cases such as this prevents the automatic implication of a contract from the acts of the same person in two different capacities. The conduct which is relied upon as establishing an implied contract of employment may, as matters of fact and inference, be referable to the respondent's status and powers as a controlling director and shareholder or to irregularity or irregularities in the conduct of the company's affairs. In some cases it may but in other cases it may not be possible to infer the necessary contractual intention from conduct of the kinds relied upon here. With these additional observations, I agree with the reasons of Samuels and Meagher JJA. We make no formal orders. It will follow that the respondent must pay the appellant's costs of the appeal. The matter will stand over until tomorrow at 10.15 am. _ That the appeal be allowed. 2. That the proceedings be remitted to the Compensation Court on the question of whether at any relevant time or times the Respondent was employed by the Appellant as a worker under the Workers' Compensation Act and to do therein as shall be just and in accordance with this judgment, in particular so that the causal mechanism of the cerebral catastrophe suffered by the Respondent should not be relitigated and abide the findings that have already been made by his Honour Judge Thompson in that respect. 3. That the transcript of evidence of Ann Kennedy Majcher (now deceased) of the 12 June, 1987 before his Honour Judge Thompson be admissible as evidence in any further proceedings between the parties. 4. That the Appellant be at liberty in such further proceedings as are conducted in the Compensation Court to argue the nature and extent of the Respondent's incapacity at the time of such further hearing. 5. That the Respondent have a certificate under the Suitors Fund Act 1955 as amended. 6. That the operation of these orders be stayed for twenty eight (28) days. Counsel for the Appellant: PJ Kenny QC / M Cranitch Solicitors for the Appellant: Neville and Edwards Counsel for the Respondent: P Dent QC / T Clarke Solicitors for the Respondent: Keddie and Partners