Branislav Beljan v Energo Form Act Pty Ltd

[2013] ACTMC 21

BRANISLAV BELJAN V ENERGO FORM ACT PTY LTD
[2013] ACTMC 21 (4 October 2013)

WORKERS COMPENSATION – entitlement and liability – preliminary issues – whether director applicant a “worker” of respondent corporation – jurisdiction – state or territory of connection.

Workers Compensation Act 1951 (ACT) ss 8, 36B

Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30

Anderson v James Sutherland (Peterhead) Ltd [1941] SC 203

Avon Products Pty Ltd v Falls (2009) 236 FLR 212

Elazac Pty Ltd v Shirreff [2001] VSCA 405

Hann v Greyhound Pioneer Australia Ltd [2006] ACTSC 5

Hollis v Vabu (2001) 207 CLR 21

Hutton v West Cork Railway Co [1883] 23 Ch D 654

Lee v Lee’s Air Farming Ltd [1961] AC 12

Lincoln Mills v Gough [1964] VR 193

Normandy v Ind Coope & Co [1908] 1 Ch 84

Riverwood Legion and Community Club v Morse (2007) 10 DDCR 378

Stephan Pacesetter Cleaning Services Pty Ltd (1995) 12 NSWCCR 19

Stevens v Brodribb Sawmilling Co Pty Limited (1986) 160 CLR 16

Tamboritha Consultants Pty Ltd v Knight [2008] WADC 78; (2008) 58 SR (WA) 291

Yaraka Holdings Pty Ltd v Giljevic [2006] ACTCA 6

No. WC 267 of 2011

Magistrate:      Chief Magistrate Walker
Magistrates Court of the ACT

Date:               4 October 2013

IN THE MAGISTRATES COURT OF THE         )
  )          No. WC 267 of 2011
AUSTRALIAN CAPITAL TERRITORY               )

BETWEEN:BRANISLAV BELJAN

Applicant

AND:ENERGO FORM ACT PTY LTD

Respondent

ORDER

Magistrate:  Chief Magistrate Walker
Date:  4 October 2013
Place:  Canberra

1. The applicant, Branislav Beljan, makes an application for compensation pursuant to the Workers Compensation Act 1951 (ACT) (“the Act”) for an injury alleged to have been sustained on 17 November 2009. The incident which is said to have resulted in the injury was a slip whilst climbing scaffolding stairs at a building site for the National Gallery of Australia (“NGA”).
2. An application for arbitration was lodged on 11 August 2011. Liability is denied by the respondent, Energo Form ACT Pty Ltd (“Energo”).
3. Energo was a company established by the applicant to undertake work in the Australian Capital Territory (“ACT”). There were, at various stages, three companies or permutations thereof formed by the applicant which had Energo in their names: Energo Form Pty Ltd, Energo Form ANU Pty Ltd and Energo Form ACT Pty Ltd. The applicant was a director of each of these along with another company, BB Line Formwork Pty Ltd (“BB Line”).
4. By Amended Answer to the Amended Application lodged on 22 March 2013, Energo raised two issues. Firstly, it was denied that the applicant was an employee of the respondent and a worker in the terms of the Act. Secondly, it was claimed that the applicant’s employment was connected to the state of New South Wales rather than the ACT.
5. The matter was listed for hearing on 10 May 2013. The applicant indicated that he was not ready to deal with the issues of employment and state of connection and the matter was adjourned to 28 June 2013 so that these preliminary jurisdictional issues could be determined. The matter resumed on 27 August 2013 for further evidence in relation to these preliminary issues.
6. Somewhat surprisingly against this background, in reply to Energo’s closing submissions counsel for the applicant indicated that he wished to reopen the case on the issue of employment, as it was not his understanding that the matter had proceeded on this basis. That application was refused.

Evidence

7. The applicant gave evidence that he was a director of the respondent and also of BB Line at the time of his injury. He claims to have worked almost exclusively for Energo on the NGA project in the capacity of supervisor between August 2008 and May 2010, with some occasional work for BB Line. He states that he was paid by Energo for his work as a supervisor and that during that time he received some proportion of his income from BB Line, depending on which entity was in funds. His further evidence was to the effect that his duties included managing and supervising, organising materials and assigning tasks, designing formwork propping and back propping as required and conducting inspections of the work. He had a site supervisor at the NGA site named Henry Berger, three foremen and staff under them.
8. The applicant’s son and safety officer for Energo, Mr Mark Beljan, gave evidence that the applicant was head site supervisor for Energo at the NGA project.
9. Mr Rod Mitton, project manager for Manteena Ltd, head contractor on the NGA site, stated that the applicant’s role was managerial, talking to staff and giving direction but that his main dealings were with Mr Berger, whom he understood was Energo’s foreman and supervisor. This was based on his contact with Energo’s employees and his review of documents in which Mr Berger was represented as the site foreman and supervisor for Energo. He did note that the applicant attended the NGA site once a week or fortnight. At that time he was observed to perform management and administrative functions including discussing project specifications, staffing and payments. Consistent with the applicant’s own evidence, Mr Mitton did not see the applicant perform any physical work on site.
10. In his workers compensation claim form to Allianz dated 21 May 2010, the applicant gave his occupation as “director” and his main place of work as Bankstown (New South Wales). In a second workers injury claim form to the Victorian WorkCover authority dated 1 June 2010, the applicant again gave his usual workplace address as Bankstown, New South Wales, did not complete the box requesting the worker’s usual occupation and described the main tasks performed by the worker as “supervisor”.
11. The applicant tendered tax returns for the years 2006 to 2011. In the 2006 year he reported his employer as Energo Form Pty Ltd (as opposed to Energo Form ACT Pty Ltd) and BB Line and listed his employment as “carpenter”. For the 2007 tax return, he nominated his employer as Energo Form Pty Ltd and his occupation as carpenter. In the 2008 tax return he nominated his employers as Energo Form ANU Pty Ltd and Energo Form Pty Ltd and again his occupation as carpenter. In the 2009 return, the applicant nominated his employers as Energo Form ANU Pty Ltd and BB Line and his employment as “building supervisor”. In his 2010 return, he again nominated his employers as Energo Form ANU Pty Ltd and BB Line and his employment as “building supervisor”. According to these returns at the time of injury he was not employed by the respondent Energo. I note, however, that in his statement the applicant indicates that he changed the name of Energo Form ANU Pty Ltd to Energo Form ACT Pty Ltd in August 2008. ASIC records confirm this.
12. In an application for tenancy of premises at Barton in the ACT dated 1 August 2008, the applicant nominated his employer as BB Line.
13. Energo went into liquidation after the alleged date of injury. The liquidators “Report as to Affairs” dated 20 October 2010 noted that the applicant was a priority creditor in respect to his “employee entitlements”.
14. Payment reports disclose that the applicant received income from BB Line and Energo Form ANU Pty Ltd in the months prior to the alleged injury. I have not been provided with any records indicating payments by Energo although again I note the change of name in August 2008. There is substantial dispute as to just what the applicant was paid and by which entity.
15. Another issue in dispute was the applicant’s attendance at the NGA site. His evidence was that he attended fairly consistently five days a week, that he rented premises in Barton because he was based in the ACT and that, while he returned to Sydney on weekends to see his wife and perform some administrative tasks, the majority of his work was conducted from the NGA site.
16. This position was supported by Mr Mark Beljan who gave evidence to the effect that his father was on site a minimum of five days a week for about 40 hours per week.
17. Contrary to this is Mr Mitton’s assessment of the applicant’s attendance to the effect that the applicant attended, as he understood it, far less frequently, perhaps weekly or fortnightly as required, which is supported by the site attendance records. However the applicant stated that he did not always sign in and therefore the records were unreliable. It was Mr Mitton’s evidence that site attendance records were generally accurate and compliance with them was a condition for each contractor but he conceded that the applicant may have been present at times without Mr Mitton being aware of it.
18. Mr Mitton was also aware of the Barton apartment but had been led to understand that the applicant’s son and other Energo employees regularly stayed at the apartment, with the applicant staying overnight on the occasions that he remained in Canberra.
19. I note a schedule of correspondence provided by Energo to the effect that between 15 January 2009 and 10 November 2009, correspondence between the applicant and Manteena was either faxed from a Sydney facsimile number on letterhead from Bankstown or, in the case of statutory declarations, signed and declared at Bankstown. This was relied upon by the respondent to support its contention that whatever work was carried out by the applicant was largely from Sydney. The applicant said that this was because he did not have the office facilities in Canberra and attended to such matters when he was in Sydney and in some instances sent faxes up in blank form from Manteena’s office to be returned on letterhead from Sydney. There was no evidence to support the latter.
20. Energo submitted that the applicant signed a tax return in 2009 which represented to the Taxation Commissioner that the applicant had been made redundant by Energo on 20 November 2008. The applicant denied that in oral evidence. Unfortunately this was not clarified but I do note that the payer’s ABN referred to in that tax return is not the same as the ABN listed for any of the permutations of Energo Form.

Was the applicant a “worker”?

21. Section 8 of the Act defines a worker, relevantly, as follows:

(1)     In this Act (subject to this chapter):

"worker "means an individual who—

(a)     works under a contract of service, whether the contract is express or implied, oral or written...

22. A company directorship is an office, not an employment, therefore it cannot be assumed that a person holding the office of director is employed under a contract of service: Hutton v West Cork Railway Co [1883] 23 Ch D 654; Normandy v Ind Coope & Co [1908] 1 Ch 84; Riverwood Legion and Community Club Pty v Morse (2007) 10 DDCR 378.
23. However, companies are able to enter into contracts of employment with their directors. An example is the managing director who has two separate functions and capacities, namely that of director and that of manager: Anderson v James Sutherland (Peterhead) Ltd [1941] SC 203 cited with approval in Lincoln Mills v Gough [1964] VR 193. In the decision of Lee v Lee’s Air Farming Ltd [1961] AC 12, their Lordships concluded in relation to the question of whether or not a person could be employed as a pilot by a company in which he was director that he could. The court stated:

“nor in their Lordships view were any contractual obligations invalidated by the circumstances that the deceased was sole governing director in whom was vested the full government and control of the company. Always assuming that the company was not a sham and then the capacity of the company to make a contract with the deceased could not be impugned merely because the deceased was an agent of the company in its negotiation.... In their Lordships view it is a logical consequence of the decision in Salomon’s case that one person may function in dual capacities....”.

24. Their Lordships rejected the notion that a contract of service could not be entered into between the respondent company and the deceased, despite his role as a governing director. Their Lordships noted that in that particular case they could find nothing to support the contention that there was a contract for services but not a contract of service. I note that in that case the articles of association specifically provided for an employment arrangement between the company and the deceased on a fixed salary.
25. Ordinarily, the Court will look to the indicia of employment in determining if a person is properly characterised as an employee or a worker. That approach was applied in Lee in which their Lordships considered the issue of control and concluded that:

“the fact that so long as the deceased continued to be governing director, with amplitude of powers, it would be for him to act as the agent of the company to give the orders does not alter the fact that the company and the deceased were two separate and distinct legal persons. If 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 rights to its exercise. But the existence of a right to control cannot be denied if one is the reality of the legal existence of the company is recognised. Just as the company and the deceased were separate legal entity so as to permit of contractual relations being established between them so also were they separate legal entities so as to enable the company to give in order to the deceased”.

26. In the decision of Stephan v Pacesetter Cleaning Services Pty Ltd (1995) 12 NSWCCR 19; BC9505107, a decision of the NSW Court of Appeal, Kirby ACJ and Cole JA agreed with Rolfe AJA who took a somewhat different approach. That matter concerned a claim for compensation by a man who was injured on the way to do some cleaning work. He and a friend had started doing such work in the evenings as a second job. They decided to form a company with a view to engaging in the work full time once it was well established. Both were directors of the company. Very shortly after the company was formed, on his way to an evening job, Mr Stephan had a car accident and was rendered quadriplegic. The company had not taken out workers compensation insurance and the two men had not yet started drawing wages from the company although the company was rendering invoices for work done. Income from the work was paid to the company account. The company had purchased the cleaning contracts from Mr Stephan and his friend. The Court concluded at [BC9505107 at 5] that “the only missing elements of employment were evidence of the contract between them and the company and the making of some regular payments to them”. His Honour made the following observations [BC9505107 at 9-10]:

“Counsel for the respondent relied upon an absence of evidence in relation to control, dismissal, wages and remuneration, regulation of hours and work schedules, supply of equipment and transport, arrangement of insurances, sick leave and holidays, the delegation of work and organisation. In many cases where one is seeking to ascertain whether a person is an employee each or, perhaps, all of these will be relevant matters to take into account. However it seems to me that where one is concerned with two working directors of a company, each of whom has an equal number of shares in its, many of these questions fall by the wayside. Those who control, dismiss, regulate, delegate and organise are the directors and, in the present case the directors were the workers. They made the arrangements, which were all predicated around the work being carried out. The absence of full books of account, an office, office equipment and other such trappings of the business seemed to me totally irrelevant, because it was not in issue that the company was carrying on the business, nor was it an issue that to carry on the business the company did not need an office or office furniture. There was not a total absence of records. The company had its invoices, receipts for payments made on its behalf, and a bank account....

In the circumstances which have been proved and which are not really in dispute, I do not accept the submissions of the respondent. I think his Honour’s error stemmed, to some extent, from an attempt to find indicia of employment, which would apply in the case where there was not the coincidence of directorship and employment, which applied in the present case.”

27. On the face of it, this case appears to be authority for the proposition that where there is a dual function of director and employee, it is not appropriate to consider the ordinary indicia of employment to determine whether or not a director is also an employee. This approach has some attraction in the sense that an application of the sorts of factors ordinarily considered in determining whether there is an employment relationship can be quite difficult in the absence of a written contract to that effect in director/employee situations. However, whilst the rationale for the Pacesetter approach is reasonably clear in the context of the factual scenario their Honours were presented with, it does seems to me to involve circular logic. That is, how can one determine the coincidence of directorship and employment, without first determining whether there is in fact an employment relationship at all?
28. Where a person who is a director is performing functions on behalf of the company which are clearly outside of the functions of a director, there is necessarily some other form of relationship, whether it be volunteering, such as in Riverwood Legion and Community Club Ltd, a contract for services or a contract of service. In order to characterise that relationship, noting the particular circumstances that will potentially apply where there is a coincidence of directorship, regard nonetheless must be had to indicators as to the nature of the relationship.
29. It is common ground that there is no written contract of service between the applicant and Energo. The Court is therefore required to assess the factual situation in order to determine whether an employment contract can be implied.
30. In Stevens v Brodribb Sawmilling Co Pty Limited (1986) 160 CLR 16, their Honours Wilson and Dawson JJ, rejecting the exclusivity of control as the indicia of employment, said at [524]:

“The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances”.

31. In the ACT Court of Appeal decision of Yaraka Holdings Pty Ltd v Giljevic [2006] ACTCA 6, their Honours Crispin, Gray and Madgwick JJ approved the multi-factorial approach to determining the nature of an employment relationship. The Court referred to the decision of Abdalla v Viewdaze Pty Ltd (2003) 53 ATR 30, which had been relied upon by his Honour Justice Connelly in relation to an appeal from this Court. The principles which had been summarised in that decision as to the indicia of the contract were extracted from leading High Court decisions including Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 and Hollis v Vabu (2001) 207 CLR 21. More recently a similar approach was taken in Elazac Pty Ltd v Shirreff [2011] VSCA 405. Whilst the criteria identified in these cases do not readily translate into the context of a director/employee situation, nonetheless, they are a guide to determining the issue which arises here.
32. The applicant was largely self-directed as to the work he chose to do, having staff to whom he could delegate. As for himself, he appears to have determined what he would do, where and when. However, on behalf of his company, he managed, supervised and administered to ensure the completion of the contractual obligation to Manteena as head contractor. His efforts were directed to that end at the location at which the work was required to be performed, i.e. the NGA, or the location at which administrative support could be provided, mainly Bankstown. Whilst the usual indicia of control and direction are absent, these indicia are particularly unhelpful when considering a person exercising contiguous functions as a director and providing services to the company.

31. For this work, the applicant and his wife, who apparently helped with administration, received a regular income, although the legal entity which met those payments appears to have varied. He was not paid as an individual but as part of an arrangement including an amount directed to him and his wife with no clear distinction between them.  The records do record the payment of holiday pay and the 2009 tax return discloses that the “employer” withheld tax. At the time of the accident, he was not paid directly by Energo but had been for the previous nine months. The evidence was that the applicant had been advised that one corporate entity could loan to another if funds were required and that wages were sometimes met in this way.
32. The applicant performed work for BB Line during the period that he also performed work for Energo. The division of effort is not clear. One can, of course, have more than one employer.
33. The applicant did not provide his own office, equipment or materials to perform that work. He used that of the principal place of business of Energo, 398 Chapel Road Bankstown, and the site shed established for Energo at the NGA. Certainly whilst at the NGA site, noting the dispute as to frequency, there is no evidence to contradict that his efforts there were for the benefit of Energo.
34. Thus, whilst the relationship between the applicant and Energo was not a typical employer/employee relationship, and is difficult to characterise, I am nonetheless satisfied on the balance of probabilities that it is properly characterised as an implied contract of service.

1. It follows that I find that the applicant was a worker in accordance with s 8(1)(a) of the Act.

State or Territory of Connection

1. The State or Territory of Connection must be determined in accordance with section 36B(3) of the Act which, relevantly, provides as follows:

   3. A worker’s employment is connected with-

   a)The territory state where the worker usually works in the employment; or

   b)if no territory or state, or no single territory or state, is identified by paragraph a-the territory of state with a worker is usually based the purposes of the employment; or

   c)if no territory or state, or no single territory or state is identified by paragraph a or B-the territory or state where the employer’s principal place of business in Australia is located

   39. The explanatory statement to the Workers Compensation Amendment Act 2003 (No 2) (ACT), which inserted the relevant section into the Act, states at [17]:

   “The employment connection test is a three-part test that examines the history of an intention of the parties to the employment relationship. The test is progressive, in that, if a State or Territory of connection is not ascertained from the first limb of the test, the second limb of the test is examined. If the second limb of the test does not identify a single State or Territory of connection, then the third limb of the test is examined.”

   40. This three phase approach to the test has been adopted by ACT Supreme Court in the decision of Hann v Greyhound Pioneer Australia Ltd [2006] ACTSC 5. In Hann, Grey J examined the meaning of section 7A(2), the provision of the Act then in force which dealt with the territory of connection issue prior to the current provision. That provision stated, relevantly, that for the purpose of the Act a worker is a worker of whichever state or territory is the state or territory in which the worker usually carries out the work of the employment concerned.
   41. Whilst this provision was in slightly different terms to section 36B(3)(a), the comments made by Gray J in Hann were adopted and approved by the Chief Justice in the decision of Avon Products Pty Ltd v Falls (2009) FLR 212. “Usual” is not determined simply as that which occurs more often than not; rather, it is determined by what is habitual, customary or regular. It is not a mathematically determined formula.
   42. In this case, despite the dispute as to how much time the applicant spent working in the ACT, it is clear that he usually, in the sense of regularly, worked in both the ACT on the NGA site and in New South Wales at the Bankstown address where administration was attended to.
   43. The second limb of the test is that detailed in section 36B(3)(b), that is where the worker is usually based.
   44. There is some evidence that the applicant was based in New South Wales. This was the location of the company office and he attended to administration whilst there. Conversely, the substantive work of the contract, that is formwork, was carried out in the ACT, where the applicant contributed design, supervision and inspection.

45.It appears to me that the applicant’s functions were equally divided between the ACT and New South Wales and I am unable to determine a usual base.

46.I am therefore required to turn to the third limb of the test (section 36B(3)(c)) which requires that if no single State or Territory can be determined as the State or Territory of connection having regard to the usual place of employment or the usual base of employment, then the determination will be made having regard to the employer’s principal place of business. The respondent’s registered principal place of business was Bankstown in New South Wales. However, in Tamboritha Consultants Pty Ltd v Knight (2008) 58 SR (WA) 291, it was held that the registered principal place of business is not the sole determinant of the employer’s principal place of business and that regard should be had to work performed. In that case, the registered principal place of business was Victoria but the majority of the work was performed in Western Australia and that was found to be the state of connection.

47.In this instance, despite registration in New South Wales, Energo was, on the applicant’s uncontradicted evidence, established solely for the performance of work in the ACT. The contract that was being completed at the date the applicant claims to have been injured was solely within the ACT. Whilst some administration for the company was attended to New South Wales, the majority of the work of the respondent was conducted in the ACT, as was the substantive work by the applicant on its behalf.

48. I therefore conclude that the territory of connection for the purpose of this claim is the ACT.

I certify that the preceding 48 numbered paragraphs are a true copy of the Reasons for Judgment herein of her Honour, Chief Magistrate Walker.

Associate: Sharon Kemaken
Date: 4 October 2013

Counsel for the Applicant:  Mr Wilson
Solicitor for the Applicant:  Ms Macdonald, Capital Lawyers
Counsel for the Respondent:  Mr Purnell SC
Solicitor for the Respondent:  Mr Markham, Minter Ellison Lawyers
Date of hearing:  28 June 2013; 27 August 2013
Date of judgment:  4 October 2013