Collins v Trimatic Contract Services Pty Ltd and Ors (No.5)
[2019] FCCA 1018
•15 April 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COLLINS v TRIMATIC CONTRACT SERVICES PTY LTD & ORS (No.5) | [2019] FCCA 1018 |
| Catchwords: INDUSTRIAL LAW – Alleged contraventions of the Fair Work Act 2009 (Cth) – whether applicant an employee or a subcontractor. |
| Legislation: Fair Work Act 2009 (Cth) ss. 44(1), 90, 117, 357, 535, 536, 550(1) Fair Work Regulations 2009 (Cth) reg.3.42 |
| Cases cited: ACE Insurance Ltd v Trifunovski (2013) 209 FCR 146 ACE Insurance Ltd v Trifunovski& Ors (2011) 84 ATR 561 Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 Commissioner of Pay-roll Tax v Mary Kay Cosmetics Pty Ltd [1982] VR 871 Eastern Express Pty Ltd v General Newspapers Pty Ltd (1992) 106 ALR 297 Ex parte Commonwealth Life (Amalgamated) Assurances Ltd (1952) 85 CLR 138 |
| Applicant: | TIMOTHY JOHN COLLINS |
| First Respondent: | TRIMATIC CONTRACT SERVICES PTY LTD |
| Second Respondent: | PETER WILLIAM JONES |
| Third Respondent: | TIMOTHY MARK UNGAR |
| File Number: | PEG 276 of 2013 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 10, 11 and 12 June, 2014, 20, 21 and 22 October, 2014 |
| Date of Last Submission: | 26 February, 2016 |
| Delivered at: | Brisbane |
| Delivered on: | 15 April 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Howlett |
| Solicitors for the Applicant: | Lark Lawyers |
| Counsel for the Respondents: | Mr Blackburn |
| Solicitors for the Respondents: | Norton Rose Fullbright |
ORDERS
The amended application filed on 7 April, 2014 is dismissed.
Subject to any submissions from either party to be made in writing within seven (7) days of the delivery of this judgment, direct that:
(a)any application for costs be notified by one party to the other by the filing and service of written submissions specifying:
(i)the precise orders for costs sought and any alternatives;
(ii)the argument in support of each order; and
(iii)whether that party is desirous of any oral hearing of the costs issue
by the date no more than fourteen (14) days after the delivery of these orders; and
(b)the respondent to any such application shall file and serve written submissions specifying:
(i)the precise orders sought by the respondent;
(ii)the argument in support of the response; and
(iii)whether that party is desirous of any oral hearing of the costs issue
by the date no more than twenty-eight (28) days after the delivery of these orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
PEG 276 of 2013
| TIMOTHY COLLINS |
Applicant
And
| TRIMATIC CONTRACT SERVICES PTY LTD |
First Respondent
| PETER JONES |
Second Respondent
| TIMOTHY UNGAR |
Third Respondent
REASONS FOR JUDGMENT
This is an application under the Fair Work Act 2009 (Cth). The applicant alleges that the first respondent contravened the following sections of the Act:
a)s.44(1) because it:
i)failed to pay his annual leave entitlements under s.90 of the Act;
ii)terminated his employment in a way inconsistent with s.117 of the Act;
b)s.357 by misrepresenting his employment as an independent contracting arrangement;
c)s.535 and reg.3.42 of the Fair Work Regulations 2009 (Cth) by failing to keep employee records; and
d)s.536 by failing to provide payslips to him.
The applicant alleges the second and third respondents were each involved in the first respondent’s contraventions of the Act and by reason of s.550(1) of the Act are liable for the first respondent’s contraventions.
The applicant’s claims are predicated on the basis that he was at all material times an employee of the first respondent. The respondents contend that the applicant was never an employee of the first respondent. This is the critical issue in the case. If I conclude that the applicant was not an employee of the first respondent then the application must be dismissed. If I conclude that the applicant was employed by the first respondent then some consequential issues arise for determination in relation to compensation and penalty. For the reasons that follow, I have concluded that the applicant was never an employee of the first respondent. Consequently the application must be dismissed.
The evidence
The evidence in chief of each witness was given by affidavit. The applicant relied upon four of his own affidavits – filed on 6 January, 17 February, 5 May and 27 May, 2014 and the affidavits of Mr Matthew Scott Kennedy and Mr Brian Stephen Cathcart both filed on 3 January, 2014. Mr Kennedy and Mr Cathcart were not cross-examined. The applicant was cross-examined.
The respondent relied upon the affidavits of the second and third respondents both filed on 13 June, 2014, two affidavits of Mr Jason Anthony Webster filed on 3 February, 2014 and 20 May, 2014, the affidavit of Mr Luke Patrick Kenny filed on 3 February, 2014, the affidavit of Mr Mark Andrew Kalajzich filed on 20 May, 2014 and the affidavits of Mr David Anthony Holmes filed on 20 May, 2014 and 17 June, 2014. Mr Holmes was not cross-examined. The respondents’ other witnesses were cross-examined.
The affidavits of Mr Holmes strictly relate to searches of email accounts and documents obtained from the Australian Securities and Investments Commission website. His second affidavit merely corrects two errors in his first affidavit. Some of the annexures to his first affidavit are found in the affidavit evidence of other witnesses who were cross-examined.
Cross-examination of the applicant, the second respondent and the third respondent reveal each of them to be elusive and difficult witnesses with selectively poor recollection. The applicant and the second respondent found it difficult to recall many things and those they could recall were generally self-serving. The third respondent gave evidence of many things that he understood to be the case, but it was apparent that he did not have personal knowledge of a great many matters.
The affidavits, particularly those of the parties contained much argument and opinion rather than evidence or fact. The witnesses’ oral evidence sometimes contradicted their affidavit evidence. I have noted that later in these reasons where it has become relevant.
The applicant submits that both the second and third respondents’ evidence is characterised by generalisations, lack of detail, lack of time frames, lack of knowledge or recall, speculation and opinion. He submits that in cross-examination the second respondent frequently reconstructed questions to suit his answers. These are all accurate observations. Indeed, the transcript of proceedings reveals that I said some things to the second respondent in relation to this issue – his constant use of the phrase “would have happened” was troubling.
The respondents submit that the applicant was not a credible witness. The respondents allude to, and I have mentioned in these reasons, the applicant’s elusive responses to questions about any potential or actual tax benefits derived from the way in which he conducted his affairs. The applicant had been a director of a company for several years prior to 2002, he had regular advice from accountants, and I have found that he requested and insisted later that he not be engaged as an employee. I cannot accept his apparent suggestion that he had little idea about the tax advantages of the arrangements that I have detailed below. These matters tell against the reliability of his evidence more generally.
Background and some findings of fact
This case involves a relatively complicated corporate structure involving several companies some of which were deregistered, renamed or incorporated during the period to which these proceedings relate. The first respondent to these proceedings is the alleged employer of the applicant. The second and third respondents are two senior executives of the first respondent. The parties have conducted their respective cases, most of the time, by reference to a generic company or group name – TSA Telco Group. The first respondent was not incorporated until sometime after the applicant began his work (irrespective of how he was engaged) with the TSA Telco Group. The lack of particularity, clarity and accuracy in the evidence and even the submissions of the parties has created hurdles in determining this case. For this reason I have considered it useful to provide an extensive recitation of the background to the case.
In about 1997 the second respondent was engaged by “some Telstra executives” “to start a door knocking team” for the purposes of selling Telstra products to prospective customers. To further that objective, the second respondent and Mr David Whitford, an accountant, incorporated Telecommunications Services Australia Pty Ltd in 1997 as a medium by which they could carry on the business the second respondent had with Telstra. The second respondent and Mr Whitford were both shareholders and directors of Telecommunications Services Australia Pty Ltd at its constitution.
The third respondent “had a financial interest” in Telecommunications Services Australia Pty Ltd from around 31 May, 1998. At that point he was neither a director nor involved in the management of the business which the company conducted. By this time, the second and third respondents each held 40% of the shares in the company and Mr Whitford the other 20%. In late September, 2001 Mr Whitford sold his shares to the second and third respondents equally.
The second respondent gave evidence that in 1997 Mr Whitford advised him that Telecommunications Services Australia Pty Ltd could engage sales representatives as independent contractors rather than as employees. Sales representatives were engaged by Telecommunications Services Australia Pty Ltd and were described as “contractors”. At least one of the reasons for this, according to the third respondent, was that it was a cheaper method by which the service provided by Telecommunications Services Australia Pty Ltd could be provided to Telstra. Other reasons included the flexibility that came with having contractors rather than employees because of the variability in work volumes, the contracts from Telstra and the type of work required. The sales representatives were required to contact relevant customers or prospective customers by door-knocking to acquire their telephony services. Telstra would pay Telecommunications Services Australia Pty Ltd for its sales services. Half of that income would be distributed amongst the sales representatives.
The respondents’ case is that there were no employees of Telecommunications Services Australia Pty Ltd prior to 2001. Sales representatives did not have a choice but to be engaged by Telecommunications Services Australia Pty Ltd as a contractor rather than an employee. The second respondent suggested that managers had the option of being either independent contractors or employees.
By 1999, Telecommunications Services Australia Pty Ltd had expanded interstate, had begun selling fixed line telephony products directly to customers on behalf of Telstra and had extended its original marketing operations to telemarketing. To cope with this expansion Telecommunications Services Australia Pty Ltd began engaging additional sales representatives to perform telemarketing services for Telstra. This contract between Telecommunications Services Australia Pty Ltd and Telstra was known as “Pacific Access” and later “Sensis”. As part of this expansion, the second respondent sought “to engage someone on behalf of TSA to provide services relating to the recruitment of sales contractors, start-up of sales teams, expansion and establishment of a core sales force in regional areas and the reporting and monitoring of sales performance”.
The applicant was a director of Sports Management Group Pty Ltd from 1988. Sports Management Group was registered on 28 March, 1988 initially as “Access Holding Proprietary Limited”. It changed its name to Sports Management Group in November, 1988. From at least 2002 the applicant was the sole director and secretary of Sports Management Group. Sports Management Group provided management and consultancy services, particularly in relation to Australian Football League players. In cross-examination the applicant said he could not recall if in 1988 he was aware of any taxation or asset protection benefits of conducting business through a corporate entity. When asked if he knew of any benefits at the time he sat in the witness box, his answer was hesitant and elusive.
The evidence shows that the applicant received distributions from the T & N Collins Family Trust. When asked about the trust he could not recall why he set it up or if it made any distributions to any beneficiaries. However, his individual tax returns for the financial years ending 2008 through to 2013 each record the receipt of franked distributions from the T & N Collins Family Trust totalling some $727,977 over those six years.
In June, 2002 the applicant was engaged by the second respondent, on behalf of Telecommunications Services Australia Pty Ltd, for the purposes of commencing work with or for that company to “manage [a] Division of the TSA business”. The applicant accepted a “nine month role with TSA”. There was a meeting between the applicant and the second respondent. The second respondent gave evidence that during this meeting in June, 2002 (some twelve years earlier) the applicant said words to the effect of “I want to be engaged as a contractor through my company SMG”. The applicant denied that he said that. However, in cross-examination the applicant acknowledged that Sports Management Group had accrued tax losses by 2002 and that an engagement through Sports Management Group as a contractor would be to his benefit because it would enable him to limit, or offset, some taxation obligations. He denied that he mentioned this to the second respondent when they talked about his engagement.
The second respondent’s evidence was that had the applicant wished to be an employee then he would have been engaged as such. In his affidavit of evidence in chief, the second respondent said that before the applicant requested this arrangement, he did not have a view about whether the applicant would be engaged as an independent contractor or an employee. However, in cross-examination he conceded that that statement was untrue. The “model of the business at the time” was that all staff were engaged as independent contractors. That must have been the second respondent’s “view”.
However, I am satisfied that it is more likely than not that the applicant sought to provide his services to Telecommunications Services Australia Pty Ltd using Sports Management Group. I have come to that conclusion because the evidence demonstrates that Sports Management Group had tax losses and the applicant was able to take advantage of that. If it was the case that the applicant sought to be engaged as an employee, it is curious that he would mention the company at all or that it would become party to the contract with Telecommunications Services Australia Pty Ltd. No particular reason was identified as to why, if a contractor relationship was insisted upon by the second respondent, the applicant did not simply enter into the agreement in his own right. His evidence about how Sports Management Group came to be nominated in the June, 2002 agreement is curious. On his account, the document simply arrived – he had not mentioned the company to the second respondent. But the second respondent must have been given information by the applicant about that company, otherwise, presumably, the agreement would have been prepared in the applicant’s name alone absent any other information from him.
Those conclusions are consistent with the evidence given by the second respondent in his affidavit filed on 13 June, 2014 at paragraph 29 to 34. Although the second respondent was challenged about that conversation, I am satisfied that it is likely to have occurred because it provides an explanation of how the second respondent was able to nominate Sports Management Group in the agreement.
I am also satisfied that the second respondent supported this arrangement because to engage contractors was the “model of the business at the time”. Put shortly, the engagement of the applicant using Sports Management Group as a contractor suited both parties to the agreement.
After the meeting, and during June, 2002 a letter was sent by the second respondent to the applicant offering a 36-week contract. The letter is in evidence. It is not dated. It is signed by “Director of SMG”, the second respondent as “Director/CEO, TSA” and the applicant. The applicant signed on behalf of both “Director of SMG” and himself. The applicant claims he “had no involvement in drafting this letter”. But that is not to the point. He signed the letter both on his own behalf and as director of Sports Management Group. The second respondent in cross-examination could not recall who drafted the 2002 agreement but asserted that “Somebody at my office would have prepared it”. The third respondent said he “was not involved in the negotiation or signing of those agreements”, meaning the agreement constituted by this letter and a subsequent agreement reached in 2003. However, he says from his discussions with the second respondent that he “had a broad understanding of the services to be provided” by the applicant under the agreements.
The letter provided:
Dear Tim,
“RE: Management of Pacific Access Regional Canvases”
Further to our recent negotiations we are pleased to offer Sports Management Group Pty Ltd (“SMG”) a 36-week contract for the management of Telecommunication Services Australia Pty Ltd’s (“TSA”) regional canvases undertaken for Pacific Access.
The terms and conditions for the engagement are as follows:
1. Commencement date – Monday 17th June 2002
2. Completion date – Friday 21st February 2003
3. Duties – The duties required will include, but are not limited to the following:
§Recruitment and training of professional sales contractors
§Initial start up of sales teams to run canvasses in Darwin, Wagga, Albury and Ballarat
§On-going expansion and establishment of core sales force in regional and metropolitan areas
§Reporting to and communicating with key personnel at the corporate level
§Set-up of offices and infrastructure as required in the various regional centres
§Establish reporting systems for the monitoring of sales performance
§Motivate and manage sales staff to achieve targeted sales
4. The responsible officer in TSA for the management of your contract is Carol Forlong the National Sales Director
5. Tim Collins personally guarantees the performance of SMG under this contract.
6. Remuneration
§A Base fee of $6,000 per month will be paid monthly in advance.
The initial payment for June will be a pro-rata payment for the month of June of $3,000.§The following additional payments will be made based on achieving the following sales targets averaged over all canvases:
Ø 95% of target sales $8,000
Ø For each 1% of sales above the 95% of target $8,000
i.e.If 97$ of target sales are achieved the bonus will be $24,000
If 100% of target sales are achieved the bonus will be $48,000
…
7. TSA will create a ‘Recipient Created Tax Invoice’ (“RCTI”) for the payments to SMG. SMG agrees to provide TSA with its Australian Business Number and hereby consents to the creation of a RCTI to support payments made to SMG.
…
The bonus will be paid in arrears within 14 days of the end of the month that the bonus relates to. The bonus will be calculated on a pro-rata basis allocated over each canvas, with the following canvas ratios applied:
Wagga16%
Albury27%
Darwin32%
Ballarat25%
§TSA will reimburse SMG for all reasonable travel and accommodation costs required to perform the duties. Reasonable travel costs in relation to airfares is limited to economy and discount airfares.
§TSA will meet SMG’s fuel costs incurred in performing the duties.
§TSA will reimburse out of pocket expenses such as mobile phone costs and approved entertainment costs.
7. TSA will create a ‘Recipient Created Tax Invoice’ (“RCTI”) for the payments to SMG. SMG agrees to provide TSA with its Australian Business Number and hereby consents to the creation of a RCTI to support payments made to SMG.
8. Termination – The contact can be terminated during the 36-week period by either party giving the other party one months written notice of termination.
Please indicate SMG’s acceptance of this offer by signing where provided below.
The second respondent gave evidence that some people engaged by Telecommunications Services Australia Pty Ltd for management positions around that time were engaged as employees and signed written employment contracts or Australian Workplace Agreements. That clearly conflicts with the second respondent’s evidence given in cross-examination that all workers were engaged as independent contractors. But nothing turns upon this.
Sports Management Group was engaged to manage a division of Telecommunications Services Australia Pty Ltd, to be based in Melbourne. It was responsible for recruiting, appointing and managing sales representatives for four locations around Australia pursuant to the Pacific Access agreement between Telstra and Telecommunications Services Australia Pty Ltd. In addition to the provisions in the letter, the applicant says he was required to:
a)work closely with other managers appointed “under Pacific Access” to manage those locations; and
b)prepare monthly board meeting reports and attend those board meetings either in person or via telephone.
In late 2003 the applicant says he was “successful in acquiring four new locations within Australia”. He does not elaborate on his success or how he came to acquire responsibilities for the additional locations. After this expansion he says he became responsible for:
a)recruiting and appointing sales staff as managers for those locations and for organising their training and approving recruitment advertisements for employment opportunities with the company;
b)approving the financial aspects of employees and contractors including employment contracts, new employees and the terms of their engagement, the engagement of contractors, payment to and pay advances for employees and contractors, bonuses, reimbursement of expenses of staff, staff travel, and staff leave;
c)approving and signing letters on behalf of the second respondent;
d)approving structural changes within his divisions;
e)initially sourcing office space and negotiate short term leases to be used by sales staff and then lease renewals and negotiations generally;
f)speaking with Telstra senior management staff about results, data, strategic planning for future performance, set targets and create payment plans;
g)monitoring managers of sales representative to ensure targets were met;
h)conducting detailed performance reviews on each sales representative; and
i)suspending or dismissing sales representative where “appropriate and necessary to do so”.
He was also responsible, he said, for company events, including:
a)approving expenditure for Christmas party lunches;
b)AFL Grand Final and Melbourne Cup and Telstra functions and awards nights; and
c)determining the winner of the monthly staff member award, along with Mr Kenny and Mr Webster.
The respondents’ evidence does not cavil with the applicant’s evidence in relation to his duties as set out above. Their collective evidence provides very little about the applicant’s actual duties, responsibilities or work.
The parties agree that after the June, 2002 agreement expired on 21 February, 2003 the applicant returned to his home in Perth but continued to work under the terms of that agreement.
A second agreement was reached between Telecommunications Services Australia Pty Ltd and Sports Management Group on 14 April, 2003. It was executed by both the second respondent and the applicant as directors of Telecommunications Services Australia Pty Ltd and Sports Management Group, respectively.
The April, 2003 agreement relevantly provided (errors in the original):
Telecommunications Services Australia Pty Ltd …
and
Tim Collins, Sports Management Group Pty Ltd …
RECITALS:
TSA have contracted with various clients in the Telecommunications industry to provide sales services to those clients for certain services and products.
SMG is able to provide specialist skills and experience that will assist TSA in providing these sales services to its clients.
The parties wish to provide a framework agreement under which SMG will provide those services to TSA.
THE PARTIES AGREE AS FOLLOWS:
1 Term
1.1 The term of the this Agreement will commence on 14 April 2003 and will end on 31 March 2004.
1.2 TSA may extend the terms of this Agreement by providing written notice of the extension to SMG. If no notice of extension is given, the terms and conditions of this Agreement continue to apply.
2 Contractor’s Obligations
2.1 SMG agrees to provide the services as set out in the attached Position Description Document (the Services).
2.2 The nature and scope of the Services may change, from time to time and TSA will notify the Contractor notice in writing of any changes and the Contractor agrees to provide the Services as may be changed from time to time.
2.3 SMG warrants that they will provide the Services with due care and skill and in a professional and timely manner.
2.4 SMG must sign the confidentiality undertaking (the Confidentiality Undertaking) and comply with all the terms of the Confidentiality Undertaking.
2.5 SMG must sign the code of conduct (the Code of Conduct) and comply with all the terms of the Code of Conduct.
2.6 SMG must fulfil all of its obligations in the proper performance of the Services including, where necessary, following the directions of TSA.
2.7 SMG must co-operate fully with TSA and act in good faith towards TSA.
2.8 SMG must comply with all legislation (Federal and State) and common law relevant to this Agreement and all relevant and applicable regulations, by-laws, ordinances or orders, and the lawful requirements of any public, municipal or other relevant authority.
2.9 SMG must provide its own means of transport to perform the Services.
2.10 SMG must pay the running and maintenance costs for its transport, including fuel and insurance.
2.11 SMG must provide its own mobile telephone, office and administrative facilities.
2.12 SMG will provide the services of Tim Collins.
3.1 A Base fee of $8,500 per month will be paid monthly in advance.
3.2 TSA will reimburse SMG for all reasonable travel and accommodation costs required to perform the duties. Reasonable travel costs in relation to airfare is limited to economy and discount airfares.
3.3 A Car allowance of $1,000 per month will be paid monthly in advance
3.4 A bonus of 8% of Net Profit of the Sensis Division will be paid based on achieving the required KPI’s. The bonus will be paid in arrears within 14 days of the end of the month that the bonus relates to.
3.5 TSA will create a 'Recipient Created Tax Invoice' (“RCTI”) for the payments to SMG. SMG agrees to provide TSA with its Australian Business Number and hereby consents to the creation of a RCTI to support payments made to SMG.
3.6 TSA will provide a senior officer Mr Peter Jones, to act as the contact point for SMG in all dealings with TSA.
4 Termination of this Agreement
4.1 This Agreement may be terminated at any time by any party giving to the other parties one week’s notice in writing addressed to the other parties.
4.2 This Agreement is subject to the continued operation of the Sensis contract with TSA
4.3 Notwithstanding clause 4.1, TSA may terminate this agreement at any time and without notice in the event that SMG (or his/her employees or contractors) commits any breach of the terms of this Agreement.
5 Independent Contractor Relationship
5.1 The intention of the parties to this Agreement is that nothing contained in this Agreement or otherwise will constitute a relationship of partnership, or employment between the parties and it is the express intention of the parties that any such relationships are denied.
5.2 The relationship of the parties to this Agreement is a strictly commercial relationship in which the Contractor is an independent contractor of TSA.
5.3 The Contractor agrees and undertakes not to make any claims, proceedings, causes of action, suits, demands or rights at common law and/or statute against TSA on the ground that it is or was an employee of TSA.
5.4 This Agreement may be pleaded as a bar in any action, suit, claim, demand or other proceeding whatsoever, now or at any time hereafter Instituted or made by the Contractor or any person claiming under or through the Contractor with respect to any costs, losses, damages or other action whatsoever in any way connected with the assertion that the Contractor was an employee of TSA.
…
Annexed to the second respondent’s affidavit is a document titled “POSITION DESCRIPTION”. The second respondent refers to it as the applicant’s position description at the time of the April, 2003 agreement. It is a separate annexure in his affidavit and does not form part of the April, 2003 agreement. The annexure containing the April, 2003 agreement does not include a position description.
The second respondent’s affidavit relevantly provides:
48. The 2003 Agreement stated that SMG agreed to provide the services set out in the attached Position Description. The Position Description was for the position of Sensis Operations Manager. Annexed hereto and marked “PWJ-2” is a true copy of the 2003 Agreement. This was Mr Collins’ position description at the time. This role was very similar to the role Collins had previously been doing.
The position description appears very general in nature. It has no reference to the applicant or Sports Management Group. It is not signed. The second respondent accepted in cross-examination that the position description was never given to the applicant.
By the commencement of the April, 2003 agreement the applicant’s role was “very similar” or substantially identical to his previous role. The second respondent accepted that the April, 2003 agreement was designed to continue the “previous arrangements”. The third respondent accepted that the April, 2003 agreement continued the applicant’s role as it was under the June, 2002 agreement.
The respondents contend that the agreement was a “commercial agreement between two companies” namely Sports Management Group Pty Ltd and Telecommunications Services Australia Pty Ltd; the applicant was “not a party to the April, 2003 Agreement”. In my view, that argument is plainly correct.
Between about November, 2002 and November, 2003 the directors of Telecommunications Services Australia Pty Ltd undertook a review of its corporate structure. According to the evidence (and despite the second respondent’s evidence to the contrary), Telecommunications Services Australia Pty Ltd had adopted a “contractor model” to that point in time. The second respondent asserted in cross-examination that “we knew we had to make changes because the business had evolved”. The design, it seems, was “to go down the employee path” – to change the independent contractors’ contracts to employment contracts. The intention was “to establish two separate corporate entities which would operate as service companies to TSA Pty Ltd. One of the service companies would engage employees and the other would be used to engage contractors.”.
In cross-examination the second respondent explained some of the reasons for the restructure. Those reasons included his desire to protect his personal assets, his desire to protect the company’s negotiating position with Telstra and certain reporting considerations to ASIC on the company’s revenue.
According to the third respondent, by reason of the conclusion reached following the review of the TSA Group corporate structure, in 2003 the first respondent, Trimatic Management Services Pty Ltd, Telco Services Australia Pty Ltd, and TSA Australia Pty Ltd were incorporated. These companies, along with another company Telco Sales Australia Pty Ltd (incorporated in 2011), were referred to collectively as the “TSA Telco Group” by the respondents.
The first respondent was incorporated sometime in 2003. The entities comprising TSA Telco Group carried on the business which had previously been conducted by Telecommunications Services Australia Pty Ltd. Telecommunications Services Australia Pty Ltd was deregistered in 2007 but it appears that it ceased carrying on its business sometime in late 2003.
In 2003, subsequent to the incorporation of the new companies, the third respondent “continued as director and Chairman of those new companies which then carried on the TSA business”. The second respondent said that he became a director of the first respondent on 11 November, 2003 and that he was CEO and director of the entities of the TSA Telco Group from sometime in 2003.
According to the second respondent’s evidence:
a)Telco Services Australia Pty Ltd is the entity through which all Telstra business contracts are made;
b)TSA Australia Pty Ltd holds the TSA Telco Group’s assets;
c)Telco Sales Australia Pty Ltd (incorporated in 2011) holds all “external Telstra consumer contracts”;
d)Trimatic Management Services Pty Ltd engages all TSA Telco Group’s “employees”; and
e)the first respondent engages all TSA Telco Group’s “contractors”.
The evidence demonstrates that Telco Services Australia Pty Ltd and Telco Sales Australia Pty Ltd became the successors to the business operations of Telecommunications Services Australia Pty Ltd. The evidence tends to suggest that these companies adopted the functions of Telecommunications Services Australia Pty Ltd progressively. The evidence does not permit of a finding about when and how this occurred.
The third respondent explained the distinction between those engaged as employees and those engaged as contractors subsequent to the corporate restructure. He said that employees performed “Admin work” and contractors were “sales people who were remunerated by commission”.
Prior to 2001 Telecommunications Services Australia Pty Ltd had no employees. The second respondent’s evidence is that by July, 2002 there were “some employees”. It is not clear on the evidence when these employees were engaged by Telecommunications Services Australia Pty Ltd. Nor is it clear whether they were initially engaged as employees or whether they were “converted” from independent contractors to employees sometime after 2001 but before the corporate restructure in 2003.
Mr Jason Webster began his employment with Trimatic Management Services Pty Ltd on or about 10 October, 2004 as Commercial and Finance Manager of “TSA”. He reported to the then General Manager of Finance and Operations, Mr Greg Seal. Mr Seal reported to the third respondent. In about July, 2006 Mr Webster was appointed to Mr Seal’s former position. In July, 2010 he was appointed as Chief Financial Officer of the TSA Telco Group.
According to Mr Webster, the first respondent was established to pay all of the TSA Telco Group’s “contractors” and then invoice Telco Services Australia Pty Ltd and Telco Sales Australia Pty Ltd “in accordance with labour supply agreements between the entities that had been put in place in May 2006”.
On 1 December, 2003 a deed of novation was executed by the second and third respondents on behalf of both Telecommunications Services Australia Pty Ltd and the first respondent and by the applicant on behalf of Sports Management Group. The effect of the deed was to transfer all rights and obligations of Telecommunications Services Australia Pty Ltd under the April, 2003 agreement from Telecommunications Services Australia Pty Ltd to the first respondent. The April, 2003 agreement continued to operate after 1 December, 2003 between Sports Management Group and the first respondent. After 1 December, 2003 Sports Management Group was paid by the first respondent for the services performed by the applicant. Pursuant to the agreement, the first respondent prepared and sent recipient created tax invoices to the applicant. The date upon which the novation agreement was signed – 1 December, 2003 – marks the commencement of the period for which the applicant makes his claims in these proceedings.
In July, 2004 there were issues in retaining the services of a particular team leader, Mr Allan Twiner. The evidence suggests that Mr Twiner was having “visa issues”. The second respondent claimed that Mr Twiner’s “work visa had run out”. A solution was identified by the second respondent. The applicant, the second respondent, and it seems Mr Seal organised to have Mr Twiner employed by and paid through Sports Management Group while continuing to provide his services to one of the entities of the TSA Telco Group. The effect of the arrangement was that whichever company of the TSA Telco Group that employed Mr Twiner dismissed him, Sport Management Group employed him and he continued providing his services as he had done up to that point. Under this arrangement the relevant company in the Group was to reimburse Sports Management Group for the costs of Mr Twiner’s engagement. Annexed to the second respondent’s affidavit, as well as to Mr Holmes’s first affidavit, is a bundle of emails relating to this matter. Relevantly, those emails provide:
a)from the applicant on 22 July, 2004 to: “Mark; Jo; TSA Tim Collins”
Jo
Pay into my account what he’s owed plus gst. I’ll then get narelle [the applicant’s wife] to transfer to his account. Please forward his bank details as well.
Tim
b)from Mr Seal on 23 July, 2004 to: “Mark Kalazich” and copied to “Tim Collins; Jane King; Pam Wiggins; Josephine Miller; Annette Miller”:
Mark
As discussed, can you please organize to have Alan Twiner sign a deed of release from TSA. Jane will organize a contract agreement to be sent to Tim so that Alan can sign up for his company.
As discussed this is for a 4 month period and as advised by Tim previously to be paid $1k per week no commissions.
We will need to organize a RCTI from Tim for the payment.
Jo can you please organize payment for the period Alan has worked in this role, I am not sure of the dates so pls confirm with Mark.
Thanks
Ms Josephine Miller (referred to in the correspondence above as “Jo”) was the payroll officer of TSA Telco Group.
The applicant said that in mid-2004 Sports Management Group was experiencing issues with the Australian Taxation Office about its taxation obligations. A new company was incorporated by the applicant on 12 August, 2004 – Passline Enterprises Pty Ltd. The applicant’s wife Narelle Collins was appointed as the sole director of that company on the advice of the applicant’s accountant. She was also the sole shareholder. The reason for the incorporation of Passline and why it was necessary is not clear. The applicant suggests that it was done at the request of his accountant and that might be so. But he also suggests that it was necessary so as to continue the arrangements with the first respondent. However, it is difficult to see why that is so. If Sports Management Group was coming to an end, the applicant could have simply taken a novation of the agreement from Sports Management Group in his own name. That is to say, there is no explanation as why it was necessary for there to be a corporate entity interposed between the first respondent and the applicant. The only conclusion that is reasonably open on the evidence (for example the applicant’s taxation returns) is that it was the way in which he chose to structure his side of the bargain. That is consistent with him utilising Sports management Group as the contracting party in the first place.
The second respondent sent a letter to the applicant on 13 September, 2004. It purported to alter the “consultancy agreement” between the first respondent and Sports Management Group. Relevantly, it provided:
Dear Tim
On behalf of Trimatic Contact Services Pty Ltd we have pleasure in confirming the following variation to your Consultancy Agreement.
Scope of Work: The service to be provided encompasses the duties of the General Manager Sales, for both Sensis and PCP divisions.
New Payment Structure:
Your new payment structure will comprise four components:
1. Base Payment
§Retainer of $144,000 per annum paid bi-monthly as per Recipient Created Tax Invoice or Invoice.
2. Profit Share
§5% of Net profit after tax of the Sensis Division, based on achievement of required KPI's
§5% of Net profit after tax of the PCP Division, based on achievement of required KPI's
§These bonuses will be paid quarterly with the first payment for the quarter ended September 2004, due at the end of October 2004. These payments will be based on management accounting profit, with a final reconciliation at the end of June 2005 once final figures are available.
3. Travel expenses
§Additional travel expenses of up to $20,000 per annum can be utilised throughout the year for your family, or for Business class upgrades for yourself.
The above structure is subject to Telstra's Head PCP contract and any ancillary agreements to that contract being maintained. Where these change these structures will be reviewed accordingly.
TSA reserves the right to amend this Bonus structure at any time, notwithstanding any payments accrued up to that time will be honoured. All other terms and conditions as set out in your Contract of Services continue to apply.
The second respondent said the letter should have been addressed to Sports Management Group and that it was an oversight on his part that it was not. The applicant was the sole director of Sports management Group. The second respondent only ever had contact with the applicant when dealing with Sports Management Group. I do not think it is material that the letter was addressed to the applicant rather than Sports Management Group of its director (by that title).
A further deed of novation was prepared, dated 1 December, 2004 between the first respondent, Sports Management Group and Passline. This document is curious because the applicant argues that it was prepared to suit the respondents’ purposes. Problems had apparently arisen with Sports management Group and the Australian Taxation Office. The applicant, the second respondent and the third respondent each annex to their relevant affidavits an unsigned copy of that deed. Both the second and third respondents say they do not recall signing the document. The applicant did not give evidence about whether it was signed. It purported to transfer all rights and obligations of Sports Management Group under the April, 2003 agreement from Sports Management Group to Passline.
The second respondent’s evidence is that from December, 2004 “Trimatic began to make payments and issue RCTIs to Passline (instead of Sports Management Group) and paid GST on those payments”. An Australian Business Number was acquired by Passline. On 22 December, 2004 the applicant’s wife sent an email to Ms Miller in the following terms:
Hi Jo
I have finally got the new ABN number it is 57 110 479 582.
Can this number be used from now on.
Also can you change the two pay we have already received to this number.
Any problems please call me.
Thanks
Narelle
On 17 October, 2005 the second respondent on behalf of Telco Services Australia Pty Ltd signed a “Bonus Scheme deed under which Passline would be eligible to receive bonus payments”. That scheme was designed as an incentive for workers. According to the second respondent the “Quasi Equity Bonus Agreement was a template document prepared by Freehills” and that it was “Tim Unger’s idea”. The applicant’s wife signed that deed on behalf of Passline. The applicant’s wife authorised the contribution to that scheme of $50,000 for the financial year ending 2006. Passline was rewarded pursuant to that scheme. Participation in the scheme was offered to both employees and contractors.
The applicant says that on or about 23 December, 2005 he received a document addressed to Passline. He does not say who sent it to him or how he otherwise acquired it. The letter provided:
In relation to the agreement between Passline Enterprises Pty Ltd and Trimatic Contract Services Pty Ltd, I , Tim Collins will indemnify and keep indemnified Trimatic Contract Services Pty Ltd (Trimatic) from and against any losses, damages or costs (including any Government Liability) suffered or incurred by Trimatic as a consequence of this agreement.
Government Liability means …
Government Agency means …
Signed for and behalf of Passline Enterprises Pty Ltd
_________________________ Date:_________
Another letter dated 23 February, 2006 addressed to Passline is in evidence. It relevantly provides:
In relation to the agreement between Trimatic Contract Services Pty Ltd, Passline Enterprises Pty Ltd will indemnify and keep indemnified Trimatic Contract Services Pty Ltd (Trimatic) from and against any losses, damages or costs (including any Government Liability) suffered or incurred by Trimatic as a consequence of this agreement.
Government Liability means …
Government Agency means …
Signed for and behalf of Passline Enterprises
N Collins – Director [signature] Date: 28.2.06
It will be noticed that the first letter sent in 2005 provides that the applicant will be the indemnifier. It is not signed by anyone. The applicant says that he did not sign it, although he does not say why he did not sign it. The second letter sent in 2006 provides that Passline will be the indemnifier. It is signed by the applicant’s wife as director of Passline.
On 14 March, 2006 a further agreement was executed by the second and third respondents on behalf of the first respondent and by the applicant’s wife as director of Passline. There is no commencement or cessation date provided in the document. The majority of the terms of the April, 2003 agreement were substantially incorporated into the March, 2006 agreement. However, the following clauses from the April, 2003 agreement do not appear in the March, 2006 agreement:
3.6 TSA will provide a senior officer Mr Peter Jones, to act as the contact point for SMG in all dealings with TSA.
…
4.2 This Agreement is subject to the continued operation of the Sensis contract with TSA
The March, 2006 agreement contained many additional clauses including provisions relating to Passline about GST; the requirement for insurance and compliance with taxation obligations; changes to the remuneration and bonuses scheme; and general clauses such as alternative dispute resolution. The “Contractor” is defined in the agreement to mean Passline. The “Contractors Representative” is defined in the agreement to mean the applicant. The following additional clauses in the 2006 Agreement are relevant:
2.13 The Contractors Representative may perform the Services during the hours and on the days entirely suitable to the Contractor and at his/her convenience.
2.17 The Contractor must provide to TRIMATIC proper details of all completed transactions.
2.19 The Contractors Representative is not entitled to any leave including sick leave, annual leave and long service leave or any leave loading or allowances, all of which are included in the payment of the Invoices.
2.20 The Contractor is responsible for carrying out all management and administration required for proper accreditation, insurances and invoicing.
3.6 The Contractor will be solely responsible for the payment of any persons employed or engaged by the Contractor including any taxes and/or superannuation, which may be due.
9.1 The Contractor acknowledges that, in providing the Services, he will learn about The Client’s promotional procedures and strategy and/or forge relationships with the Client’s customers.
9.2 For this reason, the Contractor must not, unless TRIMATIC first gives written consent, involve himself in any capacity, in any of the following activities in Australia, during the period set out in clause 9.4 below:
(a) Advise any other carriage service provider or carrier;
(b) Provide services similar to the Services to any other carriage service provider as defined by section 87 if the Telecommunications Act 1997;
(c) Solicit, interfere with, entice away or endeavour to solicit, interfere with or entice away any customer of the Client, with whom the Contractor has dealt in performing the Services under this Agreement; or
(d) Promote any competing service product, whether in the telecommunications industry or not.
The second respondent discussed the terms of the March, 2006 agreement with the applicant. He did not discuss the March, 2006 agreement with the applicant’s wife. It is not suggested that the applicant, or the applicant’s wife, did not request any changes to the March, 2006 agreement.
The March, 2006 agreement stipulates that the relevant services to be performed are contained within the “Position Description” (the first cl.2.4 (of which there are two) refers to Schedule A which in turn refers to the Position Description). However, the copies of the agreements in evidence do not include the Position Description, despite the document’s other voluminous annexures. The second respondent conceded that a Position Description was not provided to the applicant in relation to the March, 2006 agreement. The transcript records the second respondent’s evidence about the services the applicant was to provide under the March, 2006 agreement:
How did you tell Passline or Mr Collins what services he would provide? --- It was generally verbal between Tim Collins and myself. We would sit down and we would have a chat about what type of work or what we were going to do with the business. Passline would have been informed by letter, which would have been handled by my accounts team, with the advice of lawyers and Tim Ungar.
No witness could confirm that a Position Description for the March, 2006 agreement ever existed. It seems that it is probable that it did not. Instead, the services the applicant was to provide were discussed between the second respondent and the applicant. That is to say, the second respondent “instructed [the applicant] what work [he] wanted done”. In a practical sense, changes to the services Passline was to provide were dealt with by discussions or directions with the applicant, not by written instruments. The applicant says his role consistently required him to meet with the second respondent daily and the third respondent “on a semi-regular basis” to discuss business performance and related issues. The changes of the services from time to time generally came about by the changes in the contracts that the TSA Telco Group had with Telstra.
The third respondent, although only having a broad understanding of the services to be provided by the applicant, said that the applicant did not “do anything other than provide the services”.
Over time the applicant’s breadth of responsibilities extended to:
a)Telstra mobile sales in 2006;
b)“the Telstra retention team in 2007”;
c)outbound sales and door knocking teams for an electricity and gas supplier, Simply Energy, in 2011; and
d)Telstra inbound sales in 2012.
During his time with the TSA Telco Group, the applicant says he was involved in:
a)the introduction of a computer generated dialler software system, which resulted in a significant increase of sales activity;
b)the introduction of the “mobile attack” program, which resulted in a new sales team within the company for the purpose of selling mobile telephones for Telstra;
c)the implementation of a new sales quality and customer experience section of the business in order to improve sales results and quality; and
d)the implementation of “a wireless tablet based provisioning and enquiry system” for the face to face division.
An issue arose in cross-examination, about whether the March, 2006 agreement was necessary at all, or whether the “end date” of the April, 2003 agreement could have simply been extended and the scope of the services to be provided by the applicant been altered. The second respondent accepted that the end date of the April, 2003 agreement could have been extended. He explained that the reason the March, 2006 agreement was much longer than the April, 2003 agreement was because, simply, it was the company’s template (or part thereof) at the relevant time. That the March, 2006 agreement was derived from a template would explain references to “he” when referring to the “Contractor”: see for example cl.91 (above).
The third respondent accepted that the March, 2006 agreement continued the effect of the April, 2003 agreement and the April, 2003 agreement continued the effect of the June, 2002 agreement. He attested that the March, 2006 agreement was necessary, however, because when Ms Carol Forlong left in 2004, the applicant “took on a broader range of responsibilities”. The applicant initially reported to and received instructions from Ms Forlong, who was the National Sales Manager for the TSA Telco Group. In June, 2004, after Ms Forlong left the company, the applicant was moved from his role of “Sensis Sales Manager” or “National Sales Manager” to “General Manager Consumer Division”. He began to report directly to the second and third respondents. That role included “consumer acquisition” and overseeing telephone sales and face to face door knocking sales for Telstra. He says that he appointed a sales manager to replace him to manage the Sensis division. That person reported to him. There is no suggestion that Passline paid the wages or salary of the person so appointed.
The third respondent accepted that under the April, 2003 agreement, Telecommunications Services Australia Pty Ltd, and later the first respondent, had the capacity to alter the scope of the services to be provided by the applicant. This would have been sufficient to accommodate the applicant’s changing responsibilities. The apparent desired effect of the March, 2006 agreement could have been obtained by instead extending the date of the April, 2003 agreement and altering the scope of the services to be provided by the applicant. But that is not what occurred. It was the March, 2006 agreement under which the applicant’s services, through Passline, were provided until termination on 22 February, 2013.
Since 2004, and continuing under the March, 2006 agreement, the applicant provided services of “General Manager Sales, Sensis & PCP Divisions” to the first respondent. The PCP division was responsible for selling Telstra products to households. It was one of the three divisions in the TSA Telco Group structure. Mr Luke Kenny was responsible for the business division and the applicant was responsible for the PCP and Sensis divisions. The business division focussed on selling Telstra products to small business clients. The sales representatives of the PCP division were to sell Telstra products such as landlines, mobile phones, Foxtel and broadband to households. The PCP division was also responsible for contacting customers who advised they were leaving Telstra as customers to try and retain the relationship; they essentially attempted to recontract customers.
In June, 2009 Telstra sent a letter to the second respondent claiming that workers in the PCP division had been creating fraudulent client contracts. As I have said, that division was overseen or managed by the applicant. In August, 2009 the TSA Telco Group was issued with a “Notice of Material Breach” by Telstra pursuant to the contractual relationship with Telstra.
In response, the applicant “implemented a range of strict controls and reporting across the business to increase a compliance and accountability in order to minimise the Company’s risk exposure”. He “terminated the entire mobile sales team in Sydney with assistance from Ms Zahra Peggs … the compliance manager for the Company”. This, he said, was within his “discretion and authority”.
In a letter dated 14 August, 2009 from the second respondent to the applicant, the second respondent expressed his disappointment in how the allegations of fraud and the Telstra investigations have been “handled by TSA management”. He advised that “any level of manager that is aware or has had knowledge that fraudulent activity is or was taking place and did nothing to prevent it will be suspended from work with no pay immediately”.
The third respondent asserted, in his affidavit, that he had a conversation with the applicant about the breach notice from Telstra. He says he “took a dim view” of the applicant because it was the direct reports of the applicant “that had led to us being put in material breach”. The conversation was allegedly about the applicant’s lack of accountability and how that might be rectified. According to the third respondent:
65. … It wasn’t an agitated discussion. Mr Collins said words to the effect that it wasn’t his responsibility, that he could delegate to others and that the buck stopped with one of his manager’s John Miller, who was also a contractor.
66. I said to Mr Collins words to the effect of:
“You can’t say you don’t have responsibility. Your status as a contractor has to change. If we can’t hold you to account who can we hold to account.”
67. Mr Collins didn’t respond which was often his way. Mr Collins would often just “take things on board” and wear you down through inaction.
The applicant denies that there was any such conversation.
I accept that the applicant benefited from his taxation arrangements through Passline. So much is clear from the applicant’s individual tax returns, the company tax returns and the other evidence about how much Passline was receiving from the first respondent for the services provided under the agreement. Annexed to the first affidavit of Mr Holmes is an email from the applicant to his accountant regarding Passline’s profit for the 2010 financial year. The email from the applicant provides:
Kathal
Please mate look at this. This cannot be right. No way in the world can or could we make this much profit.
I have no money, we may have to sell the house. We’re broke.
800k profit? Please.
It can’t be right.
Please have a look and get back to me.
Passline should always break even. In and out!
Thanks
I am satisfied that the applicant well understood the taxation implications of the structure that he utilised to receive revenue from his engagement with the first respondent. The evidence about his taxation arrangements clearly suggests that he did not wish to be an employee of the first respondent.
Contemporaneously with the Telstra incident in 2009, the Fair Work Ombudsman commenced an investigation of the TSA Telco Group. The investigation related to allegations of sham contracting, where the Group’s sales representatives, who were engaged as independent contractors, were alleged to be employees.
Around this time, in 2009, the second respondent and the third respondent instructed the management team to “migrate the entire workforce from contractors to employees”. The management team was composed of Mr Webster as Chief Financial Officer, Mr Kenny as General Manager of the Business Division, and the applicant as General Manager of the Sensis and PCP/Consumer Divisions. The second respondent and third respondent contend that the applicant’s position was not subject to this migration of the workforce.
The move to convert sales representatives to employees was instigated, at least in part, because of the Fair Work Ombudsman’s investigation. The Fair Work Ombudsman had instituted proceedings against companies in the TSA Telco Group. The third respondent also obtained legal advice suggesting that if the proceedings went to trial there was only a “60-40” chance of success against the Fair Work Ombudsman. He was advised to accept and enter into an enforceable undertaking to not engage contractors past 1 March, 2014. This, it was said, was a “good outcome”. The conversion of the workforce was later extended to all contractors (not just the sales force) because, as the third respondent puts it, they “couldn’t put up with another five years of FWO investigations”. Mr Webster explained that the contractors were offered employment contracts.
The applicant says that he had discussions with the third respondent about the Fair Work Ombudsman investigation. His involvement, he says, extended to discussions about “the employee versus contractor relationship”. The applicant says that he travelled to Melbourne with the second and third respondents to brief senior counsel “in relation to Fair Work claims”.
By early 2011 the workforce “migration” from contractors to employees had been “delayed again”. The applicant said that the third respondent expressed that he was frustrated with “how you three have handled this”. The applicant contends this was a reference to the management team which included him.
In early 2012 the second respondent considered the concept of outsourcing the company’s contractors to third parties as an alternative to the “migration” plan. The applicant contends that he was involved in the exploration of that approach. Mr Kenny gave the following evidence:
23. From about 2012 TSA took a decision to change its business model and cease the practice of engaging contractors and move to an employment model. This was driven in part by an investigation and proceedings undertaken by the Fair Work Ombudsman. It meant that over time the contractors would be migrated to a new method of engagement as employees. I recall attending a number of meetings with the Applicant, Jason Webster, the Second Respondent and the Third Respondent in which the process of migration was discussed.
The plan to “migrate” the workforce from independent contractors to employees was implemented from 2012. The second respondent gave evidence that “Everybody was required to convert from contractors to employees” except for the applicant because he “was the only one that was resisting it”.
The Fair Work Ombudsman’s investigation and the Telstra material breach were not the sole reason for the conversion of contractors to employees. There was also a process by which management was converted to employment contracts. The reason for this, it seems, was to hold to account certain managers.
Mr Mark Kalajzich was engaged by Telecommunications Services Australia Pty Ltd in February, 2001 in a door to door sales role. Mr Kalajzich was later given managerial responsibilities. Mr Kalajzich said (in paragraph 5 of his affidavit) that in April, 2003 the applicant said the following to him:
Mate you are an employee now, me and Wayne are not going to be employees, we want to stay as contractors, you have to take this one for the team. We need a number of managers to become employees.
Mr Kalajzich gave evidence (in paragraph 6 of his affidavit) that on numerous occasions over a number of years the applicant said words to him to the effect:
It suits me to be engaged as a contractor, financially it is the best option for me. Narelle is an employee of our company and she gets paid throughout the company, it all works well.
I accept his evidence about that. He also recalled having an ABN prior to becoming an employee in 2003. He said that he was required to have an ABN because he was a sales representative and an independent contractor. He does not recall the process by which he obtained that ABN. He said that he was not given a choice about becoming an employee at the time of his engagement. The third respondent said, and the second respondent agreed, that Mr Kalajzich was eventually converted to an employee because it strengthened the company’s ability to hold him to account.
In 2004 Mr Kalajzich became a State Manager in the PCP division. He said the applicant was instrumental in him obtaining that position. Mr Kalajzich left the TSA Telco Group, finally, in November, 2009.
Mr Brian Cathcart was engaged by Telecommunications Services Australia Pty Ltd as a sales representative in 2002 on the basis that he was an independent contractor. His evidence is that he was provided with a recipient created tax invoice every fortnight and was not required to provide any documents or data for that purpose. His fortnightly pay depended on how many and in which pay period his sales were processed. He was appointed as the State Manager Sales for Western Australia in 2005. Sometime after 2005 he became an employee of Trimatic Management Services Pty Ltd. He said that around this time he was given an Australian Workplace Agreement, which is annexed to his affidavit. In July, 2013 he was made redundant. Mr Cathcart’s affidavit relevantly provides:
14. I was then informed by Peter Jones (“Peter”) that upon taking on the role of WA State Manager Sales, I would have to change from contractor to employee. It was explained to me by Peter that TSA had a rule that all management staff within the business were engaged as employees. Peter also said that this rule applied to him as well.
The second respondent had a conversation with the applicant about the need for the applicant to become an employee. The second respondent’s affidavit relevantly provides:
110. I had a discussion with mr Collins and said words to the effect of:
“You really need to be an employee”
111. I recall that Mr Collins said words to the effect of:
“I’m going to get advice from kathal about my status as a contractor.
112. Kathal Spence was and I believe still is Mr Collins’ accountant.
113. Mr Collins didn’t tell me anything about the detail of the advice he received from Mr Spence but a few days later he said words to the effect of:
“I’ve got advice from Kathal and I’m staying as a contractor”
…
This evidence was given in the context of the “Telstra material breach” and the impression conveyed by the second respondent’s affidavit was that the conversation took place around that time. Cross-examination revealed that the conversation was not connected temporally to the Telstra material breach difficulty but occurred at a later time. To the extent that the applicant denies that this conversation (as extracted above) occurred, I accept that it did occur. It is consistent with the applicant’s evidence that, in respect of the arrangements with Sports Management Group, Passline and the first respondent, he acted on the advice of his accountant. It is consistent with the evidence that the applicant, first, benefited from the arrangement and, second, sought to retain the arrangement.
Mr Jason Webster gave evidence that a list was compiled of people engaged as an independent contractor that ought to be an employee. The people on that list were to have their contracts terminated and contracts of employment offered to them. Mr Webster said that the applicant, along with two other contractors in managerial positions were originally on the list. His evidence is that “the applicant asked the HR manager to take those three people off the list”. I accept that a list of that nature was compiled. According to Mr Webster’s evidence everyone on the list except for the applicant and the two other managers were “converted” to employees.
In 2012 the applicant set up a “back-of-house” team in Manila. It was required to enter all sales by the TSA Telco Group for Telstra into a data system to ensure the company was remunerated for those sales. He says he travelled to Manila five times in 2012 for that purpose and that the expenses for that trip were met by an entity within the TSA Telco Group.
In late January, 2013 the second respondent made the decision to close the business’s “face-to-face” operation. Mr Kenny gave evidence that the face-to-face business “fell within the Consumer Division managed by the Applicant”. Mr Kenny also said that the future of that aspect of the business had been under consideration because it was not profitable. He further said that the applicant had opposed its closure but had not been able to restructure the business so as to make the face-to-face operation profitable.
On 1 February, 2013 the applicant was informed by the second respondent of changes to his role. On 4 February, 2013 an “organizational chart” was distributed which reflected those changes. According to that email and chart, the applicant retained his position as a general manager of sales of the consumer aspect of the business, but with an emphasis on consumer acquisition.
These changes had the effect of diminishing the applicant’s role in the overall business of the TSA Telco Group. Prior to the closure of the face-to-face business, the applicant was responsible for “seven direct reports with approximately 1,000 employees and contractors under [his] management”. Subsequent to that restructure, the applicant had one direct report with approximately 150 employees and contractors under his management.
On 20 February, 2013 the applicant met with the second respondent to discuss the changes. The applicant claims the reason for this restructure was “duplication”. However, at the meeting on 20 February, the second respondent complained, on the applicant’s evidence, of the applicant’s aversion to “accept blame for anything”. Whatever is the case, the parties’ relationship seemed to sour. An “offer” was subsequently sent by the second respondent to the applicant. It seems that he did not accept it.
On 21 February, 2013 Passline was given a notice that the March, 2006 agreement was to be terminated with effect from 22 February, 2013. At that time the second respondent was the Chief Executive Officer and director of the entities which comprised TSA Telco Group. By that time also, the third respondent was the chairman and director of each of the entities comprising the TSA Telco Group.
The test for establishing employment
The cases dealing with the identification of an employee under the common law are relevant. That is because the Fair Work Act imports into its application the common law understanding of employment: ss.11, 335 of the Act; ACE Insurance Ltd v Trifunovski& Ors (2011) 84 ATR 561, at [24] and [26].
The authorities tend to discuss the distinction between an employee and an independent contractor. The question here is not whether the applicant was an independent contractor of the first respondent but simply whether or not he was an employee. The former is not contended by any party. What must be discerned from the cases that follow is the focus on the characteristics which tend towards an employment relationship.
If there can be said to be a single test for determining whether a person is an employee or an independent contractor, it is that each case must be considered on its own facts. In the present case, it is necessary to look at the totality of the relationship to determine whether the applicant was effectively employed by the first respondent under a contract of service: Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 33, 39, 41 and 45.
Notwithstanding the very broad nature of the approach to the question in issue, a few matters are, however, clear. First, any attempt by the parties to label their relationship in one way or another is far from determinative: Sweeney v Boylan Nominees Pty Ltd (2006) 227 ALR 46 at 50; and indeed “a clause designed to prevent the relation receiving the legal complexion which it truly wears would be ineffectual”: R v Foster; Ex parte Commonwealth Life (Amalgamated) Assurances Ltd (1952) 85 CLR 138 at 151.
Second, there can be no categorical factors used to determine the nature of the relationship: ACE Insurance Ltd v Trifunovski (2013) 209 FCR 146 per Buchanan J at 162-3. It would be fruitless and apt to mislead to attempt to exhaustively list all the possible indicia for consideration: Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 per Wilson and Dawson JJ at 37; Mason J at 24. Relevant matters are often variously stated and added to from time to time: Stevens at 36; Hollis at 46. In ACE Insurance Ltd v Trifunovski Perram J summarised the position thus (at [29]):
...first, the distinction between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’ (Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker’s Building Supply Co [1963] HCA 26; (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the ‘totality’ of the relationship (Hollis at 33 [24]); thirdly, a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays are permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party ‘represents’ the other; for the benefit of whom does the goodwill in the business inure; how ‘business-like’ is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ, for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ...
Third, post-contract conduct is relevant in ascertaining the true nature of the relationship: ACE Insurance at 168-9; cf. Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385; Narich Pty Ltd v Commissioner of Pay-roll Tax [1983] 2 NSWLR 597; Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 at 539. The manner in which parties represent or portray their relationship to third parties, for example, is a factor that tends towards that particular relationship: ACE Insurance at [148].
In Tattsbet Ltd v Morrow (2015) 233 FCR 46, Jessup J said (at 63-4):
It is no longer just the absence of PAYG deductions that may make it more difficult to characterise the relationship as one of employment, it is the presence of GST collections by the putative contractor, and his or her compliance with the regulatory requirements which apply to the provision of services by persons who are not employees, that point quite strongly against the relationship being characterised in this way.
Fourth, in the words of Buchanan J in ACE Insurance Ltd v Trifunovski (at 151): “The two areas where the distinction [between a contract of service and a contract for services] is important concern the duties and obligations owed by the contracting parties to each other and the duties and obligations that one of them may owe to third parties.” Which of the relevant indicia ought to be applied in any given case will be heavily influenced by the nature of the claim and the focus of the specific dispute: Commissioner of Pay-roll Tax v Mary Kay Cosmetics Pty Ltd [1982] VR 871 at 878-9). As Buchanan J put it in ACE Insurance (at 151):
[28] … The basic question remains the same in all types of case but when the question at stake concerns third persons outside the contractual relationship the focus of the examination may sometimes produce subtle influences on the outcome.
Fifth, an objective consideration of whether the putative employee made an investment in, or commitment to, a business of his or her own might be an important factor. In ACE Insurance Ltd v Trifunovski Buchanan J said (at [93]):
It appears to me to have been in Hollis that a real emphasis was authoritatively placed on the notion of working in the business of another, rather than in the business of the individual. The joint judgment said (at [39]-[40]):
In Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia, Dixon J explained the dichotomy between the relationships of employer and employee, and principal and independent contractor, in a passage which has frequently been referred to in this Court. His Honour explained that, in the case of an independent contractor:
“[t]he work, although done at [the principal’s] request and for his benefit, is considered as the independent function of the person who undertakes it, and not as something which the person obtaining the benefit does by his representative standing in his place and, therefore, identified with him for the purpose of liability arising in the course of its performance. The independent contractor carries out his work, not as a representative but as a principal.”
This statement merits close attention. It indicates that employees and independent contractors perform work for the benefit of their employers and principals respectively. Thus, by itself, the circumstance that the business enterprise of a party said to be an employer is benefited by the activities of the person in question cannot be a sufficient indication that this person is an employee. However, Dixon J fixed upon the absence of representation and of identification with the alleged employer as indicative of a relationship of principal and independent contractor. These notions later were expressed positively by Windeyer J in Marshall v Whittaker’s Building Supply Co. His Honour said that the distinction between an employee and an independent contractor is “rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own”.
(Footnotes omitted.)
His Honour relevantly concluded (at [102]):
It is trite to say that the foregoing survey yields no single or unifying test to determine whether an employment relationship exists. Some features of a particular relationship may tend strongly against such a conclusion. Principal amongst such features, in my view, are contractual terms which deny any requirement for personal service or represent clear indications of the pursuit of an independent business. Even where such features are absent the proper conclusion may be that a particular relationship is not one of employment, but the analysis is less straightforward.
Sixth, in answering the question, “If [the] relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they made with one another. The agreement itself then becomes the best material form from which to gather the true legal relationship between them”: Australian Mutual Provident Society at 389.
One of the factors often considered important is control by the putative employer over the putative employee. However, it is not the exercise of that control which is important to the determination, but rather the existence of the right of control. “The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter’s order and directions.”: Humberstone v Northern Timber Mills (1949) 79 CLR 389 at 404.
It is important to note that the way in which control will manifest itself will differ from case to case: “[i]t may be found in a right of organisation and allocation of work, as much as in some theoretical right to say how actual work should be done”: ACE Insurance per Buchanan J at 432.
The level of control exerted over the purported employee tends to have diminished importance in the modern context. This is particularly so in relation to high level managers who are often subject to little direct control and have more autonomy in the manner in which they perform their work. The capacity to exert control, however, remains in an employment relationship: Stevens. Inversely, as Buchanan J pointed out in ACE Insurance, “Frequently there is little real independence in some contracts for services”.
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd & Ors
On 22 January, 2016 I made some directions for the parties to file and serve further written submissions for the purpose of addressing the decision of the Full Court of the Federal Court of Australia in Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd & Ors (2015) 228 FCR 346. That decision was the subject of an appeal to the High Court of Australia. The principles relevant to this case of the Full Court’s decision were not the subject of the High Court’s decision.
Quest involved what was termed by North and Bromberg JJ as “triangular contracting”. Quest South Perth Holdings Pty Ltd previously employed housekeepers to clean its apartments. In 2009 relevant officers of Quest proposed to its employees that they should accept an offer of engagement by another company, Contracting Solutions Pty Ltd, for the purpose of performing work at Quest’s apartments as independent contractors of Contracting Solutions. Two of those employees, Ms Best and Ms Roden, were the subject of the case. The employees believed their only option was to accept the offer. They continued to perform the exact same work that they had performed as employees once they became engaged by Contracting Solutions Pty Ltd. They were paid $20 per hour. However, the Full Court held that Ms Best and Ms Roden had in fact remained employees of Quest under implied contracts of employment.
Further emphasis was placed on the terminology used by witnesses or used in documents in evidence referring to the applicant as an employee. It was suggested that an inference could be drawn from the terminology in those documents that the applicant was an employee. For example, the applicant refers to:
a)a letter annexed to the applicant’s first affidavit, dated 14 August, 2009 and addressed to the applicant in which the second respondent expresses his frustration about the way in which “TSA management” dealt with the Telstra material breach. He threatens that any manager which had knowledge of or participated in any of the fraudulent activity “will be suspended from work with no pay immediately”. He advised that he was suspending bonuses for “General Manager level down to Team Leader level”. Mr Webster referred to this applying to employees. The applicant refers to this in his submissions and, I think, I am invited to draw the inference that this depicts some perception or treatment of the applicant as an employee; and
b)Annexure C to the March, 2006 agreement the first respondent was required to “issue tax invoices to the Consultant in respect of the payments by the Principal under this Contract”. The “Consultant” in that annexure is clearly named as the applicant.
The applicant submitted that although he did not hold a managerial position at Passline, he was the primary point of contact with the first respondent. For example he submitted that:
a)the first respondent made payments to Sports Management Group or Passline for the work that the applicant performed and notified only the applicant of those payments;
b)changes to the applicant’s work was conveyed through instructions from second respondent and not formal contractual alterations or even through Passline;
c)changes to the executive bonus structure in January, 2013 were only communicated with the applicant and not with Passline or Mrs Collins; and
d)Passline and Narelle Collins had no dealings with the first respondent except for executing the March, 2006 Agreement.
The last contention is factually incorrect. Passline and Narelle Collins also had dealings at least in relation to the bonus scheme and the signing of the indemnity letter that I have referred to earlier in these reasons.
It is correct to say that the respondents communicated very little with anyone other than the applicant. But that is not surprising because he was the person performing the services that Sports Management Group and Passline contracted to provide. The reality of the situation was that it was the applicant with whom the respondent dealt, almost on a daily basis.
But be that as it may, and notwithstanding that the applicant was not a director or office holder of Passline, I do not think they are particularly persuasive arguments. The second respondent was the CEO of the entities comprising the TSA Telco Group. He was likely more concerned with the services provided by the applicant and not the intricacies of the contract itself. That is clearly why the provision of the applicant’s services is a pivotal term in each of the three agreements. It explains why letters relating to the applicant’s services, from the second respondent, are addressed to the applicant. The administrative aspects of Passline’s dealings with the first respondent were occasionally dealt with by Mrs Collins: the email relating to the obtainment of Passline’s ABN, for example. That the second respondent dealt with, and addressed correspondence to, the applicant instead of Mrs Collins, on behalf of Passline, is not, in my view, material.
The respondents submitted that the applicant’s failure to call his wife, Mrs Collins, as a witness invites the Court to draw an inference unfavourable to the applicant: see Jones v Dunkel (1959) 101 CLR 298. She could have, the respondents submitted, “shed light on the genuineness of the contractual arrangements between Passline and the First Respondent and on whether the Applicant was an employee or contractor of Passline” because she was the sole director of Passline. Therefore, the respondents argue, the Court should draw the inference that Mrs Collins would not have assisted the applicant’s case and that her evidence would have tended to support the propositions contended for by the respondents.
But I am not sure that evidence from Mrs Collins would have added anything to the case. The question is one to be determined according to the terms of the documents and the objective assessment of the other evidence in the case. Mrs Collin’s opinions about various matters (because that appears to be all she might have given evidence about) would not have been particularly helpful. The April, 2003 and March, 2006 agreements and the novation agreements were all plainly genuine documents that reflected what the parties intended by them when they were executed. There is no suggestion that the agreements were a sham or were anything other than a genuine attempt by the parties to document what they considered the parties’ responsibilities and obligations to be. It would be highly unlikely, I expect, that Mrs Collins would have suggested to the contrary.
The applicant’s evidence in relation to the formal contractual arrangements between the first respondent and Sports Management Group and then Passline was that he did not have any input into the relevant agreements or even the deed of novation of 2004. He submitted that he only ever acted on advice from the second respondent or from accountants or lawyers. All of the agreements, he argues, were initiated by, prepared by, and controlled by the first and second respondents. This, it seems, is his explanation for why, when he was first engaged by the second respondent in 2002, he did not contract with Telecommunications Services Australia Pty Ltd personally, but through a corporate entity. His submission appears to be that, analogous to The Director of the Fair Work Building Industry Inspectorate v Linkhill Pty Ltd (No.7) [2013] FCCA 1097 (at [282]), “the process and terms of the relationship were insisted upon by the [first respondent] and was one where [the applicant] had little effective choice”. However, I reject those submissions. There is no evidence that the applicant was unhappy with the way in which the agreements were structured generally or any of the particular terms of the agreements. Indeed, the novation of the April, 2003 agreement from Sports Management Group to Passline occurred at the instigation of the applicant. There is nothing to suggest that the various agreements between the parties were not freely entered into by the parties to them at arm’s length.
Structuring the agreements in the way in which they were brought advantaged both sides of the agreements for the reasons I have set out above. I have no hesitation concluding that the agreements reflected precisely the relationship that the parties wished to establish between them and I so find.
The arrangement between Passline and the first respondent is detailed in the March, 2006 Agreement. The respondents outline the implementation of that arrangement in their submissions. Relevantly, the first respondent:
a)made payments to Passline pursuant to the 2003 Consultancy Agreement and, after 14 March 2006, the 2006 Consultancy Agreement;
b)made payments to Passline pursuant to the Quasi-Equity Bonus Scheme (until the scheme was wound up);
c)paid GST on those payments;
d)issued RCTIs to Passline;
e)did not withhold or remit any part of those payments to the ATO;
f)did not make superannuation contributions in respect of those payments; and
g)did not provide the Applicant with annual group certificates.
The applicant submitted that he “was remunerated by periodic wage or salary (and bonuses) and not by reference to completion of tasks”. But the applicant did not receive any remuneration from the first respondent at all. His individual tax returns for the financial years ending 2004 to 2013 tell a different story. He received his income largely from Sports Management Group and then Passline, no doubt according to the arrangements that he had with them. He also received significant sums from 2008 onwards as distributions from the T & N Collins Family Trust. The basis upon which he received those sums is not in evidence.
The applicant emphasises the authorities that provide that the financial and taxation arrangements of a putative employee are generally unhelpful when determining issues such as that in this case. I bear them in mind, but here the evidence shows that the taxation arrangements put in place by the applicant were, I am satisfied, instrumental in determining the way in which the agreements were structured from the applicant’s point of view. That could be the only explanation for the use of Sports Management Group and Passline. It was not suggested that for the first respondent’s purposes it was necessary for the applicant to have a corporate vehicle through which to contract. It was not suggested that the arrangements would not have been just as efficacious for the first respondent if the applicant had contracted in his own capacity.
The applicant argues that his bonuses or performance payments were not based on his personal performance but were based on the performance of the division which he managed. But that is more consistent, in my view, with the respondents’ case that he was not an employee. The bonuses to be received by Sports Management Group and later Passline were not tied to the applicant’s performance at all. Rather they were dependent upon a result that was not necessarily dependent upon the performance of the applicant. At best for the applicant this is a matter which has a neutral impact upon the relevant assessment in the circumstances of this case.
Although the joint judgment in Quest stated, as the applicant points out, “payment made by a third party to a worker is not necessarily inconsistent with the existence of an employment relationship between worker and the end-user”, the present circumstances involve an intermediary company which is not under the control of or associated with the end-user. Indeed, Sports Management Group was under the control of the applicant. Passline was controlled by the applicant’s wife. In that sense there was an independent relationship between Sports Management Group and Passline on the one hand, and the first respondent on the other. Sports Management Group and Passline were operated independently of the first respondent in all relevant senses. They were not an instrument of the first respondent: cf. Fair Work Ombudsman v Grouped Property Services Pty Ltd (2016) 152 ALD 209 at 235.
The applicant urges me to make a finding that the agreements in question here are not indicative of any genuine desire on the part of the applicant to become an independent contractor to the first respondent. He urges me to find that the agreements were made in the way that they were because he believed they had no or little option but to do so if he wanted to take up the opportunity offered by the first respondent.
But I decline to make those findings. The agreements in the present case were structured in the way that they were because it suited both parties to the transactions. He caused the novation of the 2003 agreement from Sports Management Group to Passline. I have already recorded his reasons for doing so.
The applicant argues that he was integrated into the business of the first respondent. He referred to the organisational structures and emails from the third respondent; his various management titles including “General Manager Sales”; the provision of a personal assistant, corporate credit card and TSA business cards. I accept that there are indicators that he was indeed integrated into the first respondent’s business. Some of the indicators that the applicant was integrated into the business include:
a)he had a TSA corporate email address together with email signature;
b)the provision of a personal assistant, Ms Kate Twigley. The applicant said she would occasionally undertake work for the second respondent. Her desk was located outside the applicant’s office;
c)the provision of an iPad, a laptop and a “company credit card” issued in his name and paid for by one of the companies of TSA Telco Group, to be used for travel costs;
d)his mobile telephone account was paid for by the first respondent, or perhaps one of the other companies in the TSA Telco Group;
e)the provision of a credit card to pay for fuel, which, according to Mr Webster, was never applied to “any employee of TSA”;
f)he was a part of the first respondent’s “Management Team” “with other persons who were employees of the First Respondent”. However, a few things should be noted. First, the management team was not that of the first respondent – the first respondent was a corporation used only to engage independent contractors for the purpose of the business conducted by some of the other entities comprising the TSA Telco Group. Second, the persons referred to as being part of the management team were not employees of the first respondent. There likely was no one properly characterised as an employee of the first respondent. Notwithstanding those remarks, several of the TSA instructional or promotional documents annexed to the various affidavits in evidence indicate that the applicant was a part of the “TSA Executive Management Team”;
g)he was required to manage certain and numerous employees of and independent contractors to the companies of the TSA Telco Group. In particular, the applicant refers to:
i)an email sent from Ms Twigley “On Behalf Of Tim Collins” wherein “important structural changes … within the Consumer division” were communicated to, presumably, those under the applicant’s management;
ii)an email chain between the third respondent and the applicant wherein the third respondent says “Thanks, it’s great to hear that the team are going so well. I’m all for recognizing them but also take credit where the credits due. The buck stops with you and it cuts both ways”;
iii)a promotional TSA document in which the applicant, as “General Manager Sales (Consumer)”, features with the second and third respondents, Mr Kenny and Mr Webster. Later in that document is the “TSA Organisational Structure” – a flow chart depicting the second and third respondents above the applicant who in turn is above five others, four of whom are managers; and
iv)a page in a document annexed to the applicant’s first affidavit titled “Quarterly Business Review Oct – Dec 2009” which is another organisational structure depicting the applicant under the second respondent and above five others – notably mostly different persons to the previous organisational structure;
h)the affidavit of Mr Cathcart who deposes to have had “to take instructions from and directly answer to [the applicant] on a daily basis as it was [the applicant’s] role to direct and oversee all National Managers under his portfolio”. Mr Cathcart also said that the applicant “had over 200 sales representatives working under his control”;
i)the affidavit of Mr Kenny, which relevantly provides:
“As part of TSA’s executive management team between 2006 and July 2010 I would attend meetings with the Applicant, the General Manager of Finance, Jason Webster, and the General Manager of Operations, James Hill”; and
j)the applicant attended monthly or quarterly TSA board meetings; and
k)the power to dismiss workers of the first respondent or perhaps employees of other companies in the TSA Telco Group. In his affidavit he deposes that he terminated “the entire mobile sales team in Sydney with assistance from … the compliance manager for the Company”.
The applicant suggests that the requirement for him to sign a confidentiality agreement and code of conduct corroborates his claim to have been an employee of the first respondent. I do not think that the requirement to sign those two documents tends towards that conclusion. Nor do I think it suggests the contrary. It is equally consistent with either parties’ positions.
The applicant submitted that his work was similar in nature to the work done by other of the first respondent’s managers who were employees: Mr Kenny and Mr Webster. The third respondent’s evidence and the organisational structure portray that those two men were at the same managerial level as the applicant. Mr Webster said that the applicant was one of three “senior managers” who were not employees and who provided their services through companies. He said the applicant was an “anomaly” in that all other contractors had been or were going to be converted to employees. The second respondent did not agree with that description.
The applicant referred to an excerpt of the transcript of proceedings of 20 October, 2014, namely the cross-examination of the second respondent in relation to the hours worked by the applicant, Mr Kenny and Mr Webster (at p71 lines 22-24 of transcript of 20.10.14):
---I treated them the same. They would have been able to work whatever hours they wished, and whatever hours it took to get the job done, that’s what was requested of them.
In re-examination the third respondent said (at p178 lines 25-39 of transcript of 21.10.14):
You were asked in terms of how Mr Kenny and Mr Collins managed their work and how they operated, whether there were any real differences. Were there any real differences in relation to hours of work?---There was significant differences.
And what were they?---Mr Collins came and went as he pleased and Mr Kenny worked fairly structured and long hours.
Can you – when you say, “Mr Collins came and went as he pleased”, what do you mean by that?---He started work sometimes mid-morning and left sometimes mid-afternoon.
And how often was that? You say “sometimes”. How often was that?---At least one of two days a week, to my knowledge.
And were you aware of any differences in relation to leave? If you’re not - - -?---No.
The applicant said he was required to attend to his work each business day because there was never a time when “there were no issues that required attention or action”. He said he was often contacted by the second respondent outside of business hours and that he was expected to answer. The second respondent disagreed. He said the applicant was “free to come and go” and was not required to work set hours. I accept the evidence of the second respondent. The evidence of Mr Webster and Mr Kenny accords with that of the second respondent. But it does not seem remarkable that a high level manager did not work set hours.
It was put to the third respondent in cross-examination that there were no real differences between the managerial roles of Mr Kenny and that of the applicant insofar as how they went about doing their work. The transcript relevantly provides (at p141 lines 22-30 of transcript of 21.10.14):
But in terms of how they went about doing their work in managing those things, there wasn’t any real difference, was there?---There was similarities. Yes. Correct.
There were similarities, and there wasn’t any real difference, was there, in terms of how they went about managing their two teams even though the two teams did different things?---They were different styled managers.
But putting aside style, there were no other differences, were there?---There were definitely similarities. Yes. I’ll agree with that.
Mr Kenny accepted in cross-examination that the work that he did and the way in which he did it was identical to that of the applicant. The transcript relevantly provides (at p247 lines 43-6 and p248 lines 1-3 of transcript of 22.10.14):
But putting that aside, apart from the form of the work – the workplace agreement, the work that you did and the way in which you did it was identical, wasn’t it?---Yes. I would say reasonably so. Both responsible for driving those respective units to their revenue and sales and margin targets.
The only difference was that Mr Collins had a contractor agreement and you had an AWA and you had – did the different work because you did small business and he did consumer?---Yes.
The applicant submitted that the relevant clauses of the agreements between the first respondent and Sports Management Group or Passline which guaranteed the provision of the applicant’s services constituted a prohibition on delegation of his work. I accept that to be so.
On the applicant’s evidence, he was “paid for holidays” totalling around 12 weeks and spanning from 2004 to 2012. For those holidays, he said, the second respondent would approve his leave. The second respondent disagreed. He said the applicant was free to holiday whenever he liked provided his absences were covered, usually by delegation to “people under him”. The second respondent clarified in cross-examination that those delegations were limited to “existing employees or contractors of TSA”. The applicant could not “bring in anybody he wanted”. The second respondent explained that the contractors had little or no flexibility to outsource their work due to the requirements of extensive product knowledge and Telstra regulation.
To the extent that he did delegate during the performance of his work, it was limited to that which necessarily fell within the scope of a manager. It was not the type of power of delegation discussed by the authorities.
The applicant submitted that he was subjected to the direction and control of the first, second and third respondents. He referred to the cross-examination of the second respondent. The transcript relevantly provides (at p69 lines 39-47 and p70 lines 17-21 of transcript of 20.10.14):
And you agree that you could change the services that Mr Collins provided?---Yes.
And Mr Collins had to follow directions when they were given, didn’t he?---Mr Collins had autonomy in a lot of his decisions. We would make – we would have discussion on the direction of his parts of the business, but generally, I let him run a lot of those the way he wanted to run them.
You had the power to force him to follow your directions, didn’t you?---I believe I did.
…
… So you did have the right to direct Mr Collins as to the work that he did, didn’t you?---I did.
And you did have the right to direct Mr Collins as to when and where he did the work, didn’t you?---I did.
The second respondent contended that he did not interfere with the applicant’s “significant autonomy to deliver the services as he saw fit”. This, it seems, was conditioned on the applicant’s performance – his autonomy was relatively unfettered provided that he was meeting his “KPIs”. Mr Kenny agreed with the evidence of the applicant that he regularly exercised his discretion and authority to make decisions. The second respondent said that the applicant had autonomy in a lot of his decisions, but that they would have “discussions on the direction of his parts of the business”.
The applicant submitted that the respondents represented the applicant to clients and potential clients of the first respondent as General Manager of Sales and as part of the first respondent’s business. This is evident, he argues, in the organisational structure documents and the provision of a personal assistant and business cards.
Mr Kennedy’s affidavit provides some insight from an outsider’s perspective. He was an employee of Telstra when he met and worked with the applicant. He was present at a conference to which some employees of Telstra were invited. Mr Kennedy’s affidavit relevantly provides:
16. Peter announced at this conference, amongst 20 senior managers of the Company, that Tim was the new General Manager Sales for the Consumer division of the Company.
17. I recall that along with this announcement, Peter had said that he had great faith in Tim to lead the business on to bigger and better things.
…
24. My involvement with peter, from a business perspective was minimal however, the few occasions I did have dealings with him, it was evident from the number of times he would refer me to Tim that he wanted the Telstra Consumer business routed through Tim.
…
30. Tim was the key person negotiating the contracts between Telstra and the Company. He attended numerous audio link ups and face to face meetings with Telstra personnel based in Melbourne to discuss, negotiate and renegotiate the contracts.
The applicant was responsible for arranging annual events, held over weekends, for the purposes of recognising and rewarding “the best performing sales agents and managers”. Moreover, sometime around July, 2012 the applicant claims to have been given a commemoration of some form connoting “recognition of 10 years’ service 2012 Timothy Collins”. These matters are, in my view just as consistent with an employment relationship as they are with a relationship of contractor and principal. They are neutral in the circumstances of this case.
The respondents argue that ultimately, unless I can be satisfied that the March, 2006 agreement is a sham, I should conclude that the parties intended that it govern their relationship. They point out that “In many cases the manner of provision of services under a contract for services may, on analysis, differ inconsequentially from the manner of performance of a contract of service. The distinction will be found in the terms of the contract that has been formed between the provider of the work and the recipient of those services.”: per Lee J in Gurran v Tarbook Pty Ltd [1996] IRCA 424.
Conclusion
In my view, taking into account the totality of the circumstances described above, the relationship between the applicant and the first respondent was not one of employee and employer. The April, 2003 agreement and the March, 2006 agreement were contracts for services between the parties to those agreements. The parties intended that they operate according to their terms. Whilst there are matters which tend towards the cases argued for by each of the parties, in my view, the totality of the evidence is more consistent with contacts for services between the parties to those agreements than a contract of service between the applicant and the first respondent.
Moreover, at the very best for the applicant, the evidence as to an employment relationship is equivocal and ambiguous. In those circumstances the free entry by Sports Management Group and later Passline into the April, 2003 and March, 2006 agreements is significant.
“If [the] relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity, by the very agreement itself which they made with one another. The agreement itself then becomes the best material form from which to gather the true legal relationship between them.”: Australian Mutual Provident Society at 389.
Here the parties chose to designate their relationship in a particular way and for many years they acted in accordance with that designation. They conducted themselves without demur according to those agreements and the applicant conducted his financial and taxation affairs consistently with those agreements. The agreements here are, in my view, “the best material form from which to gather the true legal relationship between them.”
The application must be dismissed.
I certify that the preceding one hundred and seventy-five (175) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Associate:
Date: 15 April, 2019
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