ALVAREZ v FIDREZ SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL MEAGHER and COLE JJA, and SHEPPARD AJA 27 August 1997, 27 August 1997 [1997] NSWCA 15 QUESTION of whether appellant was an employee or sub-contractor HELD appellant's employment had been terminated by a new arrangement between the respondent and subcontractor; appellant not a worker under the Workers Compensation Act 1987 Cole JA Judge Truss dismissed a claim brought by the appellant against the respondent for weekly compensation and s66 and s67 payments arising out of an injury suffered by the appellant on 28 April 1994. She did so on the basis that the appellant was not a worker of the respondent within the meaning of that expression as defined in s3 of the Workers Compensation Act 1987, and did not fall within the deemed worker provisions contained in Schedule 1, cl2 to the Act. Her Honour found that although the appellant had been a worker of the respondent until March 1990, thereafter by agreement between himself and the respondent, which was a company conducted by his brother, he had ceased to be an employee when he had established his own company Patxi Welding Services Pty Ltd which thereafter had contracted with the respondent for the performance of welding work to be performed by the appellant. On appeal three issues were raised by the appellant. First it was contended that the change in arrangements which occurred in March 1990 did not constitute a termination of the admitted pre-existing employment between the appellant and the respondent, but merely constituted an agreed variation to the basis and manner of remuneration under the contract of employment, namely, that in future payment would be made to Paxti Welding Services Pty Ltd at an hourly rate for work performed by the appellant. Second, that the appellant was a "worker" within the definition of that expression in s3, and third that, in the alternative, he was a worker within the meaning of the deeming provisions in Schedule 1, cl2. There was little dispute regarding the facts which may be briefly summarised. Prior to March 1990 the appellant was admittedly an employee of the respondent. He worked in premises occupied by the respondent, did work as directed by his brother on behalf of the respondent, was provided with plans, materials and equipment to enable him to perform that work, and was subject to the direction of the respondent in relation to the work which he did. He engaged solely in work provided by the respondent at those premises. The appellant was paid a wage which was related to the number of hours worked each week. Tax was deducted and he was issued annually with a group certificate by the respondent in respect of his employment. Prior to March 1990 the appellant was advised by his accountant to incorporate a company. Paxti Welding Services Pty Ltd was formed. According to Mr Fidel Alvarez, the principal of Fidrez Engineering Pty Ltd, it was the appellant who approached him and requested the company be taken on as a sub-contractor. Apparently that was agreed because thereafter invoices were rendered by Paxti Welding Services Pty Ltd to the respondent weekly for work performed by the sub-contracting company in the form of hourly charges for work done by the 2 UNREPORTED JUDGMENTS appellant. The respondent paid cheques to Paxti Welding Services Pty Ltd which banked them. The respondent ceased to pay any monies to the appellant for any work which he performed. It ceased to issue him with a group certificate, although one issued for the year ended 30 June 1992, the appellant having been an employee for part of that year. Shortly put after March 1990 all of the financial arrangements in relation to any work in fact performed by the appellant were documented and effected between the two companies. Paxti Welding Services Pty Ltd thus received income from the respondent. It used that income to pay wages to the appellant and to other casual workers, to purchase and maintain a motor vehicle used by the appellant, to purchase tools and equipment for the conduct of welding operations, and to pay director's fees. The appellant gave the following evidence: "Q. Sir. ever since this company was incorporated in March 1990, Paxti Welding Services Pty Ltd before and after your accident, you have been the one who has chosen which days and which hours you work from time to time. That is correct, is it not? A. All the possible hours that I could work. Q. The most that could be said is that sometimes Fidrez Engineering Pty Ltd 'don't not have work on then'. That is a correct statement, is it not? A. Unfortunately that's true. Q. Even if they do have work on, you choose whether or not you'd turn up at 10 Pike Street, Rydlamere to do work, do you not? A. Of course." That evidence makes clear that the appellant after March 1990 was not subject to the direction or control of the respondent. It is consistent only with him having ceased to be an employee of the respondent in March 1990, and is consistent with the evidence of his brother than in March 1990 the appellant had requested that rather than him being employed by the respondent, the respondent enter into a commercial arrangement with Paxti Welding Services Pty Ltd as a subcontractor. That is what in fact occurred. To my mind it is plain that there was no variation of the employment agreement related only to whom the monies were to be paid. There was a termination by mutual consent of the employment arrangement between the appellant and the respondent and the substitution of a new arrangement between the respondent and Paxti Welding Services upon the basis of the latter being a subcontractor. The first ground argued on appeal fails. It also follows that the second ground fails because from March 1990 the appellant was not working "under a contract of service" with the respondent. In fact he had no relationship with the respondent at all except insofar as he was a director of Paxti Welding Services Pty Ltd. Nor is there any basis for holding that he was a deemed worker within the terms of Schedule 1, cl2. Insofar as there was a contract between the respondent and Paxti Welding Services Pty Ltd that was a contract to perform work within the business carried on by that company, namely welding services or provision of welding services. The third point argued on appeal thus fails. I would propose that the appeal be dismissed with costs. Meagher JA I agree. Sheppard AJA I also agree. Appeal dismissed with costs. URJ ALVAREZ v FIDREZ (Sheppard AJA) Counsel for the Appellant: G Grinter Solicitors for the Appellant: M L Marmentini Counsel for the Respondents: J McIntyre Solicitors for the Respondent: Vandervords