MULHALL v ROBERTS SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL KIRBY ACJ, HANDLEY JA and ROLFE AJA 19 July 1995, 19 July 1995 WORKERS' COMPENSATION — worker — whether employed under contract of service — whether independent contractor — carpenter — working on site with putative employer — detailed instructions given as to performance of work — suggested employer a builder with other work sites — exclusive engagement at daily rate — weekly payment and supply of some tools — workers' compensation form signed as employer — judge in Compensation Court (Egan CCJ) rejects claim — refers to income tax return showing work in private business — applicant concedes that records indicate an independent business — on appeal to the Court of Appeal claiming that the applicant was a "worker" under a contract of service, or was a deemed worker under Schedule 1, CL2(1) Workers Compensation Act 1987 — HELD: (1) (By the Court): The task of the characterisation of the relationship between a private worker and employer requires scrutiny of all of the facts of the case and consideration of the entirety of the relationship between the parties. Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Commercial Union Workers' Compensation (NSW) v Smith, Court of Appeal (NSW), unreported, 19 May 1994; [1994] NSWJB 44; Connelly v Wells (1993) 55 IR 73 (NSWCA); Articulate Restorations and Development Pty Ltd v Crawford (1994) 57 IR 371 (NSWCA); Lee Ting Sang v Chung Chi-Keung and Anor [1990] 2 AC 374 (PC) and Market Investigations Pty Ltd v Minister for Social Security [1969] 2 QB 173 (CA) applied; (2) Upon an application of the relevant tests (per Kirby ACJ, Handley JA concurring; Rolfe AJA dissenting): The proper interpretation of the facts was that, whatever the normal business usually carried on by the applicant, at the relevant title he was working for the respondent as a worker under a contract of service, and so entitled to compensation under the Workers Compensation Act 1987; (3) Accordingly, the alternative case based upon notional employment did not have to be considered; (4) Appeal allowed. APPEAL - workers' compensation - characterisation of relationship of parties - whether employer and worker - observations by Kirby ACJ on the applicable legal principles, and the need for caution in applying a characterisation different from that adopted by the primary judge. Connelly v Wells (1993) 55 IR 73 (NSWCA) referred to. Workers Compensation Act, 1987, Schedule 1, CL2(1). Kirby ACJ The Court is dealing with a list of workers' compensation appeals. In that list this is the third case in which the issue which has been raised concerns the characterisation of the relationship between a putative employee (worker) and employer. A CARPENTER IS INJURED AT WORK AND CLAIMS COMPENSATION In October and November 1990, Mr Anthony Mulhall (the appellant) commenced working (I use a neutral expression) performing carpentry duties for Mr Brian Roberts (the respondent). On 17 December 1990, the appellant was performing the work agreed when he suffered an injury to his head and neck. He ceased work that day. He did not recommence work until 27 December 1990. Thereafter, he worked for other persons and for the respondent. He worked for the respondent for four days until 24 January 1991 2 UNREPORTED JUDGMENTS when he suffered a recurrence of the neck disability which he ascribes to the injury was on 17 December 1990. After the time of his ceasing work on 24 January 1991, and to the date of the hearing before the Compensation Court which gives rise to the proceedings in this Court, the appellant had not been in receipt of remuneration. For his alleged incapacity the appellant brought a claim for compensation under the Workers Compensation Act 1987 (the Act). That claim came for hearing before Egan CCJ. For reasons which he delivered on 13 December 1993, Egan CCJ found that, on the whole of the evidence, the appellant had not established that he was a "worker" employed by the respondent. Furthermore, he found that the appellant was not a deemed worker in the terms of Schedule 1, CL2(1) of the Act. He accordingly made an award in favour of the respondent. In the course of giving his reasons, Egan CCJ expressed the view that, in certain respects, the appellant was an unsatisfactory witness. However, this conclusion was not elaborated. From the award in favour of the respondent the appellant has appealed to this Court. LEGAL PRINCIPLES GOVERNING THE APPEAL The principles of law which are to be applied to the case are not really in doubt: (1) Having regard to the date of the commencement of proceedings in the Compensation Court, the appeal lies to the Court both on fact and law. (See Compensation Court Act, 1984, s32.); (2) The process before this Court is not a first instance proceeding. The Compensation Court of New South Wales is a specialist tribunal, much experienced in the determination of disputes of this character. Egan CCJ has a long experience in such cases extending over very many years. I would differ with him with great hesitation. In an appeal, it is for the appellant to show error; (3) This Court will perform its function, as the Compensation Court Act contemplates, within the framework of respect for any relevant advantages which the primary judge enjoyed. These included advantages in determining disputed issues of credit upon the basis of the impressions of witnesses. As I have said, Egan CCJ concluded that the appellant's attitude in court varied from "being evasive to being forthright". He also made reference to the worker's physical movements which would be relevant to the assessment of his degree of incapacity. Having regard to his primary conclusions his Honour did not have to determine the assessment of any incapacity. Very properly, counsel for the respondent in this Court indicated that there had been no specific challenge at the trial to the credibility of the appellant in his testimony. Nor were any contradictions in his evidence pointed to, relevant to the only issues which are before this Court. Accordingly, this is not a case where the Court must defer to the conclusion of Egan CCJ on the ground of the credit of a witness. His Honour proceeded to give reasons of an objective character for the characterisation of the relationship which he found; (4) The classification of a relationship as one of employment or of independent contract is notoriously difficult. Lord Griffiths in Lee Ting Sang v Chung Chi-Keung and Anor [1990] 2 AC 374 PC, at 385 said: "".. whether or not a person is employed under a contract of service or, to slate the quest in modern language, under a contract of employment... will depend upon the evaluation of many facts and there will be many borderline cases in URJ MULHALL v ROBERTS (Kirby ACJ) 3 which similarly instructed minds may come to different conclusions. It is in such situations that an appeal court must not interfere and it is in this sense that the decision is said to be one of fact". Similar observations have been made by the High Court of Australia, by this Court, and by the English Court of Appeal. See, for example, Market Investigations Pty Ltd v Minister for Social Security [1969] 2 QB 173 (CA), 184; (5) To determine whether employment in the nature of a contract of service exists, it is necessary in every case to look to the entirety of the relationship between the parties. It is then necessary for the court, fixing its characterisation of the relationship, to discern what it regards as the essence of the relationship between the parties. In this country, the most recent and authoritative statement of the test to be applied is that stated by the High Court of Australia in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16. The relevant criteria appear in several passages which have recently been cited and applied in cases in this Court. See, for example, Commercial Union Workers' Compensation (New South Wales) v Smith, Court of Appeal, New South Wales, unreported, 19 May 1994; [1994] NSWJB 44; Connelly v Wells (1993) 55 IR 73 (NSWCA); and Articulate Restorations and Development Pty Ltd v Crawford (1994) 57 IR 371, (NSWCA). Having regard to such recent expositions of the proper approach, I will not delay these reasons with a restatement of them; (6) Enough appears from the cases to require the acceptance that, in many circumstances, the final conclusion will be one of opinion lying at the borderline. So much appears in my reasons in Connelly. So it was expressly said by me in Articulate Restorations (see p 378). I also regard the present case as one standing at the borderline. That is an additional reason for hesitating before disturbing a conclusion of the primary judge; and (7) So far as the alternative claim of notional employment is concerned, the principles to be applied are set out in the authority of the High Court of Australia in Humberstone v Northern Timber Mills Ltd (1949) 79 CLR 389. The principles are still the same, for the statutory provision is substantially that which formerly existed under the Workers' Compensation Act, 1926. I turn to apply these principles to the present case. INDICIA OF CONTROL OR THE RIGHT TO CONTROL As in all of these matters, the Court was taken to the indicia which favoured or negated a conclusion of control or the right of control. Control, although not the exclusive test of employment, is certainly a relevant consideration. It is still regarded as an important test for the determination Of the nature of the relationship said to be that of a contract of service. (See Stevens, at 36.) The indicia of actual control upon which the appellant relied in this case are as follows: (1) That he was told the time and place of the commencement of his duties; (2) That he was directed where he was to work; (3) That the putative employer remained on the work site and performed work there himself, in a situation where he would have effective opportunities of control over the appellant's activities and the right to exert that control if he chose; (4) That the respondent did, in fact, give quite detailed instructions as to the manner in which the work was to be performed. Specifically, he gave instructions that the work in the construction of architraves was to be performed in a manner pleasing to the respondent. This followed a style apparently in vogue in Victoria which is different from that which was familiar to the appellant and is the normal practice in New South Wales (see transcript at 49); and (5) That the respondent was a builder and that the site on which the appellant was working 4 UNREPORTED JUDGMENTS was not the sole site on which he, the respondent, was engaged. He was carrying on an undoubted business and he engaged the appellant in that business as one of a number of persons to assist in its performance. OTHER INDICIA OF EMPLOYMENT INCLUDING TERMS OF ENGAGEMENT There were other indicia which were referred to relevant to, the essence of the relationship: (1) The appellant worked set hours from 7 am until 3.30 pm, a feature typical of regular employment; (2) He worked exclusively for the respondent during his engagement; (3) He worked at a set daily rate which was agreed at $120 per day; (4) He was paid regularly at the end of each week, namely on each Friday by cheque; (5) Although he supplied a number of his own tools, such as hammer, nail bag, and electric saw, for certain larger equipment he had access to, and in fact used, tools supplied by the respondent; and (6) In a claim form for workers' compensation, the respondent signed the form some months after the injury as "employer". It was said that this amounted to an acknowledgment by the respondent of the true nature of the relationship as asserted by the appellant. INDICIA OF AN INDEPENDENT BUSINESS As against these indicia, his Honour was greatly affected by the indications that the appellant was a private businessman carrying on a carpentry business of his own as an independent contractor. In support of that conclusion are the following considerations: (1) The tax returns which were exhibited indicated that the appellant represented himself to the Australian Taxation Office as a private businessman carrying on business as a carpenter. He took part in the scheme for prescribed payments. It was said that this was the common practice on the South Coast of New South Wales. Certainly it was the practice which was observed in his case. The appellant's income tax return contained a number of claims for deductions, eg for his home telephone, which generally speaking could only be justified upon the basis that he was carrying on business as a contract carpenter. Reference also is made to a deduction for accident insurance. However, as this fact was not explored at the trial, it seems inappropriate to give it much weight. It is simply another indication that the formal business records of the appellant were consistent with his carrying on a private business as a contractor; (2) The concessions which were made during cross-examination must also be considered. As a number of points in cross-examination show (see transcript at 21Q, 25G, 26M, 280 and 29N) the appellant accepted that, on the basis of the records and otherwise, he had put himself forward as carrying on business as a contract carpenter; and (3) It was very persuasively put by counsel for the respondent that a number of the facts relied upon for the appellant as indicia of employment were, when analysed, as his Honour pointed out, truly equivocal. Thus, the fact that he worked ordinary hours could be as consistent with a contract for service as for an independent contractor's services. The specification of the location of the work is hardly surprising. Such would be true of both relationships. The control of the work performance in particular aspects of the work would be just as common for an independent contractor, doing work of high quality, as for an employee. It can be seen, therefore, that this is another case where the facts are fairly evenly balanced. But again, I regard the matter as being at the borderline. CONCLUSION - IN THE PARTICULAR CASE A CONTRACT OF SERVICE The considerations which persuade me, against my earlier expressed hesitation, that the proper characterisation of the arrangements between the appellant and the respondent in this case is one of employment are principally the URJ MULHALL v ROBERTS (Kirby ACJ) 5 following: (1) The words of the actual engagement. Those words are described in the evidence of the appellant. They were not relevantly cut down by further questioning. I do not believe that his Honour's observations on the appellant's veracity throw any relevant doubt upon them. They were: "Q. Did you go somewhere and have a conversation with Roberts? A. I did, yes. Q. Where did this conversation take place? A. It took place on a building site in North Street, Ulladulla. Q. Is this the first time you had met him, this conversation? A. Yes, it certainly was, yes. Q. What did you say to him, using direct speech if you can? A. I approached him as 'Hello, Brian Roberts: introduced ourselves to each other, seen a fellow, to which I said 'Hello, how are you, 'm Tony Mulhall, I just ran into a fellow in town, Neil White, he apparently knew you, and he said you had some work and here I am'. I went straight around after seeing him and I approached Brian. Q. What did Brian say to you? A. Brian asked me 'Where did you hear? and I said 'Neil White, seen him in the main street'. He asked me a few more questions concerning, you know, character, I suppose, and who I had worked for before, and then he said 'Yes, I'll see you in the morning'. I said "Okay, Brian, I'1l see you in the morning, same job site'. Q. Was there any discussion about remuneration? A. There certainly was. I asked him before I finished speaking to him, I said 'How much are you going to pay me, Brian?' He replied 'A hundred dollars a day: and I said 'If you can pay me 120 a day, Brian, you've got me', and he said 'Yes, that'll be okay, Pll see you in the morning'." It seems to me that that conversation and the arrangement which followed is one more conformable with a contract of service than an independent contractor being recruited for a particular job for particular work at a given price; (2) The methods of payment are also relevant. Payment by cheque for a specified daily rate at the end of each working week is, I think, a powerful indication of the employment nature of the relationship; (3) The fact that the appellant did not advertise, did not tender, did not quote in respect of this particular engagement also tells in favour of the conclusion that what was here involved was a contract of service. Whatever may have been the other arrangements which the appellant made, and indeed, whatever may have been the general characterisation of his business position, insofar as he was recruited by the respondent I believe that he was recruited on a contract for service; and (4) The tax returns do, it is true, stand against this conclusion. But there were similar tax returns in Articulate which did not prove fatal to the worker's claim (see p 378 of the record). This was also so in Connelly, but, again, they did not prove fatal to the claim in that case. It is important in every case to look to the true relationship between the parties. Courts should not ignore, but not to give excessive weight to, tax returns. They are sometimes left to third parties to prepare who have an objective which is different from that of describing and evaluating accurately the relationship of the parties said to be one of employment. So far as the concessions or admissions which were made by both parties are concered (the respondent in the insurance form, and the appellant in his concessions under cross-examination) they too must be given weight. However, although it is true that the appellant made a number of concessions which tell against his claim, I would conclude about these in the words which Gleeson CJ used in Connelly v Wells, at 74: "Since he probably had not made a close study of the relevant authorities his personal opinions of that issue of law were unlikely to have been of assistance to the trial judge". 6 UNREPORTED JUDGMENTS The duty to characterise the relationship is one which falls upon the Court. It cannot be left to the parties' understanding to decide it. Whilst the facts are equivocal, in the end, and with every respect to the learned and experienced primary judge, I have come to the view that the proper characterisation of the facts in this case is one of employment. Accordingly, the appellant is entitled to an award on that basis. Having come to that conclusion it is not necessary for mc to examine the alternative case which the appellant put, based upon the notional employment. ORDERS The orders which I propose are: (1) Allow the appeal; (2) Set aside the award of the Compensation Court of New South Wales of (Egan CCJ); (3) In lieu thereof, order that the proceedings be returned to the Compensation Court for re-determination of appellant's claim to that court, conformably with the decision of this Court; (4) Order that the respondent pay the appellant's costs in the Compensation Court; and (5) Order that the respondent pay the appellant's costs of the appeal but have in respect hereof, if otherwise so qualified, a certificate under the Suitors' Fund Act, 1951. Handley JA I substantially agree with the reasons given by the Acting Chief Justice. The question in this appeal concerns the nature of the contract between the respondent Mr Roberts, a builder, and the appellant carpenter. The respondent contends - and the trial judge found - that the appellant was a self-employed carpenter who had entered into a sub-contract with the builder. As the Acting Chief Justice has held, there are features of the relationship in this case which are equivocal. Others which point towards the relationship being that of contractor and sub-contractor include the appellant's admissions in cross-examination that he had been carrying on a business as a carpenter in his own name. He has lodged income tax returns on this basis before and after the relevant injury in December 1990. He owned substantial items of equipment of a kind not ordinarily owned by employed carpenters, which suggests that a business was being carried on. However he had no occasion while working for Mr Roberts to use them. In the end, the courts cannot simply act on admissions and indications in income tax returns which may be entirely self-serving in nature. It must determine for itself the true character of the contract between the parties on the whole of the evidence, including of course the matters I have referred to. The contract, which was oral, was for an indefinite hiring of the labour of the appellant as a carpenter at a fixed rate of $120 per day payable weekly. The contract had none of the features usually associated with a building sub-contract. It was not a contract for a fixed job, such as the brickwork or the carpentry in a particular building. It was not a contract for work defined by plans and specifications. It was not a contract for a lump sum price, nor was it a contract for work to be done at piecework rates. In my opinion, the contract was a contract of service and the appellant was an employee of the respondent. I would therefore allow the appeal. I agree with the orders proposed by the Acting Chief Justice. Rolfe AJA The relevant facts and legal principles have been set forth by the Acting Chief Justice and Handley JA. Notwithstanding the matters which lead their Honours to allowing the appeal, I am of the opinion that none of the matters upon which the appellant relies demonstrates in any way at all that the learned trial judge was in error in coming to the conclusion to which he did. There was in my view an abundance of evidence to Support the view that the appellant was carrying on business on his own account, not least of which were a number of URJ MULHALL v ROBERTS (Rolfe AJA) 7 clear concessions by him in his evidence to that effect and to which the Acting Chief Justice has referred. I would accordingly dismiss the appeal. KIRBY ACJ: The orders of the Court, accordingly, by a majority, are as I have provided. 1. Allow the appeal; 2. Set aside the award of the Compensation Court of New South Wales (Egan CCJ); 3. In lieu thereof, order that the proceedings be returned to the Compensation Court for re-determination of the appellant's claim to that court, conformably with the decision of this Court; 4. Order that the respondent pay the appellants's costs in the Compensation Court; and 5. Order that the respondent pay the appellant's costs of the appeal but have, in respect thereof, if otherwise so qualified, a certificate under the Suitors' Fund Act, 1951. COUNSEL: Appellant: MJ Claridge Respondent: JA McIntyre SOLICITORS: Appellant: Parbery and Nesbitt Respondent: Hunt and Hunt