Cookson v M.R.R.A Pty Ltd
[1996] IRCA 447
•30 Aug 1996
DECISION NO: 447/96
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NI 1351 of 1996
ANN MARGARET COOKSON
Applicant
M.R.R.A. PTY LTD (A.C.N. 004 605 207)
Respondent
AND
NI 1352 of 1996
STEPHEN WALLACE RODGER
Applicant
M.R.R.A. PTY LTD (A.C.N. 004 605 207)
Respondent
Coram: Judicial Registrar Linkenbagh
Place: Bega
Date: 30 August 1996
REASONS FOR JUDGMENT
I make a finding that the relationship between the parties to these proceedings in both matters was that of employer/employee and as a consequence of that the applicants applications under Section 170EA of the act may be maintained. I propose to give reasons for that finding at this stage.
These are applications pursuant to the provisions of Section 170EA of the Industrial Relations Act in which each applicant seeks a remedy in respect of the termination of his or her employment with the respondent. The applicants came to work for the respondent on 1 October 1994 and their employment continued until 7 February 1996. The respondent raised at the outset of the proceedings the proposition that the applications were not maintainable because there was no relationship of employer and employee between the parties.
I have elected to conduct the matters on the basis that I should determine as a separate issue what the true nature of the relationship was. My reason for doing that was that there is a substantial Cross-Claim filed by the respondent and the claims made in that Cross-Claim are disputed by the applicants in each case. Had the decision on the separate question of the nature of the relationship between the parties been made in favour of the respondent, then I would have been precluded, in my view from entertaining the Cross-Claim and matters related to it pursuant to the provisions of Section 430 of the Act and even if I were not precluded, I would have exercised my discretion not to hear those matters in the circumstances that the substantive application before the Court in each case had failed. However, that is not the case.
The substantive applications will proceed to finality and I will hear the Cross-Claim along with the claims for substantive relief. My reasons for the finding today are these. The applicants answered an advertisement placed in the Weekly Times Newspaper on 15 June 1994. A copy of that advertisement is Exhibit A and it is in these terms:
“FARM HOSPITALITY
We are seeking a mature couple or family with the experience and skills to manage a high class farm hospitality enterprise on a retainer plus generous incentive basis.”
The advertisement seeks a reply to a Post Office Box. The applicants did reply to the advertisement. There was a form of written application composed by Ms Cookson which is Exhibit “Q” and which is in a form which might generally be described as a job application. I note that the advertisement was placed in the “Situations Vacant” column of the Weekly Times Classified Advertisements. Following the application of Ms Cookson, Dr and Mrs Bate, who are effectively the controllers of the respondent, personally visited the applicants at Bacchus Marsh in Victoria where they were residing.
Following that visit, the applicants went to Rocky Hall near Bega in New South Wales and inspected the property known as “Wongabirrie”. Following that visit, Dr Bate wrote to them a letter dated 23 August 1994 which is Exhibit “B”. I note that in that letter Dr Bate uses the phrase: "We could comfortably work with you" and "You could successfully work with us". Dr Bate suggests that the parties should put their intentions into: "A fair and workable business blueprint" and also refers to an arrangement which:
“Provides you with a reasonable reward for your inputs and us with a return on our investment and the pretty much "ready to go" facilities which are in place.”
The letter goes on to set out some detailed proposals in numbered paragraphs. The first of those is that the applicants be paid a:
“Subsistence wage of $20,000 per annum and be provided with a cottage rent free.”
Dr Bate also refers to:
“a cottage rent free and also pasture and paddock and fencing for up to 15 horses.”
Dr Bate describes this proposal as a "package" which he saw as covering:
“Farm maintenance, maintenance of equipment and upkeep of the homestead area.”
The letter, in paragraph 2, makes suggestions as to the division of income from the hospitality and recreational activities which were to be carried out at the property and those arrangements involved a split of income from a self-catering lodge and guests on full board. Paragraph 2C indicates that income from horses etc. would be entirely the applicants as would be all expenses relating to those activities including Public Liability Insurance. Paragraph 2D provides that income from activities such as archery, clay bird shooting etc would be split 50/50 and finally paragraph 2E provides that golf, tennis, billiards would be free.
The letter goes on to say that the figures "were negotiable at this stage” and “could be reviewed after 12 months". The letter then indicates that there would have to be further discussions to finalise the details of the transaction and the production of a formal document or exchange of letters. It also indicates that the financial basis of the operation would be that moneys would pass through the respondents bank account on which the applicants would have authority to draw. That the applicants were to maintain records and report on financial matters to Dr Bate's accountant.
The letter then speaks of possibilities relating to advertising and promotion of the enterprises and mentions that possibly the applicants should contribute towards the promotional costs. The letter confirms that Dr Bate had knowledge that the applicants wished to construct pens and shelters for their own animals and he confirms that he is:
“sure that you would obtain our approval before going ahead.”
That document, in my view, is the essential document in these proceedings. It was on the basis of that document that the applicants took up their appointment at the property. The applicants’ evidence was that they were in no doubt that they were to be employees. I note that Exhibit “C” is a letter to the Commonwealth Employment Service written by Dr Bate at the request of the applicants. The purpose of that letter was to establish to the satisfaction of the Commonwealth Employment Service that the applicants, who had up to that time been receiving benefits from the Department of Social Security, were to be employed, and that they required assistance in relation to relocation expenses.
On the basis of the letter, the applicants were paid substantial amounts, something like $3800 each, by the Department of Social Security. In Exhibit “C”, which is dated 1 September 1994, Dr Bate confirms that he is: "offering employment" and says:
“The terms and conditions of this employment are agreed and are to be embodied in formal contract for an initial period of two years commencing 1 October 1994.”
On 26 September 1994 the firm of solicitors, Commins Hendricks from Wagga Wagga, prepared a draft document which is described, in their covering letter, as a Management Contract. That document was never signed by the parties. It is essentially in the same terms as Dr Bate's letter of 23 August 1994 which is Exhibit B to which I have already referred. It differs in at least one particular, however, and that is that clause 6 provides:
“The manager and the owner agree that the manager is an independent contractor and not an employee of the owner. The manager is not entitled to any of the usual entitlements of an employee including annual holidays, long service leave, superannuation, sick leave, overtime, leave in lieu, etcetera.”
The applicants' evidence was that the agreement was not signed because of the inclusion of that clause and Ms Cookson's evidence was that she was “astounded” when she read the document including that clause. The document refers to payment of the $20,000 per annum to the applicants as a "management fee" and that payment is covered in Paragraph 1 of Schedule B to the draft agreement. Paragraph 3 of Schedule B covers the splitting of income generated by the hospitality / accommodation / recreational activities carried out on the property and Schedule A to the draft agreement lists the Managers’ responsibilities and duties. That document was never signed by the parties and it cannot be seen as anything other than a draft prepared at the initiative of Dr Bate.
When the applicants took possession on 1 October 1994, Dr Bate gave them a list of duties, which is Exhibit “E” and that list is extensive and quite detailed. It speaks for itself. After the applicants commenced duties they learned that the property was not presently functioning as a hospitality business and was in need of considerable work before that business could be undertaken. They also learned that the employee of Dr Bate, who at that time was looking after some 200 to 300 head of cattle on the property, was to leave, and that employee left the property a couple of weeks after the applicants arrived. The applicants' duties thereafter included looking after the cattle and those duties, on the evidence of Ms Cookson, engaged them both most days for five hours or so.
Dr Bate left to go overseas at the end of January 1995 and returned at the end of September 1995. Before he left, he gave the applicants instructions from time to time as to their duties at the property and during his absence overseas the applicants were left in the hands of Mr Johnson who was Dr Bate's accountant. I am satisfied that the applicants, at all times, were subject to detailed direction in the discharge of their duties either by Dr Bate or, in his absence, by Mr Johnson. Exhibits “U”, “V”, “W”, “X” and “Y” are some of the documents which evidence the understanding that the applicants were subject to such direction. Exhibit “BB” spells out, in Dr Bate's own handwriting, that Mr Johnson would be in control while he was absent overseas and the whole content of Exhibit “BB” illustrates the degree of control and direction which Dr Bate exercised over the applicants in the discharge of their duties. Exhibit “CC” is a direction from Dr Bate as to the collection of rent for one of the buildings on the property.
As has been put to me by Mr Perram for the respondent, the law as to the factors which should be taken into account in assessing the true nature of a relationship such as existed between these parties was spelled out in no uncertain terms by the High Court in Stevens v Brodribb Sawmilling which is reported in (1986) 160 CLR 16. The measure of control exercised over the employee/contractor is a starting point but is not the only test to be applied. I am satisfied that there was a high degree of control of the applicants in the discharge of their functions at this property by Dr Bate on behalf of the respondent but I look at other factors as well, including the history of the setting up of the parties' relationship.
It has been put to me by Mr Perram that because of the profit sharing aspects of the arrangement between these parties I could not find that there was an employment relationship. I must look at the true arrangements between these parties. Certainly, there was a proposal in the early stages that the hospitality and recreational activities would be conducted on a profit sharing arrangement. Those activities did not get off the ground, so to speak, and the applicants suffered the disappointment of the realisation that what they thought was a going concern in those activities was not, in fact, a going concern at all.
I regard the numbered paragraphs of Dr Bate's letter of 23 August 1994 as creating disparate arrangements between these parties. The first arrangement was that they were to be paid $20,000 per annum to manage the property and they were clearly, in my view, employees in that regard. The guest house/recreational activities arrangement involved profit sharing. It is not for me, at this stage, having seen the development of the relationship between the parties, to go into that arrangement. It may well be that in respect of that activity these parties were in some relationship other than employer/employee but there were four or five guests in a period of 14 months and that, in my view, is insufficient as a basis for any assessment of what that arrangement really meant and whether it was ever put into effect at all.
Similarly, the Equestrian activities, which were to be the sole responsibility of the applicants, operated only to a very limited extent and have to be seen, in my view, as a separate arrangement between the parties to the effect that the applicants could operate equestrian activities if they wished to do so as long as they took all responsibility for them.
The essential agreement between these parties which came into effect was that they managed the property in return for payment of $20,000 per annum wages which they shared equally between them. That payment is referred to as a wage in the letter of 23 August 1994 and was paid by regular fortnightly payments into Mr Rodger's bank account as one might expect wages to be paid. There was no provision for Income Tax by either of the parties and that is a factor in relation to which, no doubt, The Australian Taxation Office will show some interest. Mr Perram argued that because there were no PAYE deductions, then that tended to support the view that the relationship was not an employment relationship. I cannot agree with that. I certainly agree that if PAYE deductions are made, then that tends to support the view that the relationship was that of employer and employee, but I cannot accept that the converse argument is as strong. I also note that the respondent apparently failed to address the issue of Income Tax by way of payments under the Prescribed Payment Scheme as one might have expected the respondent to do if it were seriously of the view, at the time this relationship was formed, that it was contract for the provision of services by an independent contractor. Other factors which are of assistance sometimes in looking and determining the nature of the relationship include the provision of equipment and certainly Mr Rodger provided some tools and equipment that were used on the property. I can gain no assistance from the evidence in that regard in this case, one way or the other.
The hours of work were certainly not defined and were certainly not directed by Dr Bate or the respondent. However, the duties of the applicants were very clearly directed by Dr Bate. As the applicants resided on the property and given the nature of their duties as involving the care of animals and farm work generally, one would not expect that there would be any specific direction that they are to sign on at 6.00 am and sign off at 2.00 pm or anything like that.
Mr Perram noted that there was no provision for Workers Compensation Insurance cover for the applicants. There is evidence that, in fact, Ms Cookson was injured in the course of her employment and that she is having difficulty in obtaining compensation in respect of that injury. The fact of lack of Workers Compensation Insurance, in my view, does not assist in determining the relationship and probably only indicates that the respondent is in breach of its obligations under the relevant legislation.
I note further in relation to the ‘control’ aspect of the relationship that there was considerable evidence about the role of a man referred to as Wally Williams. Mr Williams was employed by Dr Bate, from time to time to assist with the work with the cattle and property. The suggestion was put to the applicants in cross-examination that because they used Mr Williams' expertise in relation to the cattle, that that fact was an indicator that they, the applicants, were in fact contractors to the respondent. I note Dr Bate’s evidence that he employed Mr Williams to work with the cattle and that his instructions were that the applicants were to obtain advice and help from Mr Williams from time to time. I note also that the decisions in relation to treatment of the cattle for worm infestations and the breeding and sale of the cattle were controlled by Dr Bate and were not decisions which the applicants were free to make. I have said during the course of the hearing that the labels which the various players use to describe features of the evidence are not necessarily accurate or conclusive and I have to look at what actually happened between the parties rather than the labels which they applied from time to time. I have already referred to letters in which Dr. Bate uses words such as "subsistence wage" and so on.
I note that on 28 June 1996 Dr. Bate made a statement to the police in relation to some matter and that he referred to the payment of salary to the applicants in that statement. He also uses the word "salary" in his letter of 12 December 1995 which is Exhibit “U” and in his oral evidence he described their relationship as "employment as managers-contract workers".
Now, the concept of a contract of employment is well known to all the parties and it seems to me that that is what the contract was between these parties. It was not a contract for the provision of services by an independent contractor. There are other parts of the evidence to which I could refer which reinforce the view that I have taken as to the nature of this relationship.
The applicants' employment was terminated by Dr Bate in a letter dated 1 February 1996 which is Exhibit “M”. That letter refers to any future work being done by the applicants as being done on a casual rate of $11.50 per hour and it is significant, in my view, that Dr Bate does not appear to have seen fit to redefine the duties of the applicants in that letter. Indeed, the letter concludes with three items of jobs which Dr Bate requires the applicants to complete, again reinforcing my view that Dr Bate was very much in control of the activities of the applicants at the property.
Those are my reasons for the finding that I have made.
I certify that this and the preceding 8 pages are a true copy of the Reasons for Judgment of Judicial Registrar Linkenbagh
Associate: Renee Cauchi
Date: 26 September 1996
The applicants appeared in person
Counsel for the Respondent: Mr N Perram
Solicitors for the Respondent: Corrs Chambers Westgarth
Dates of Hearing: 29 & 30 August 1996.
CATCHWORDS
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT -UNLAWFUL TERMINATION - EMPLOYEE - INDEPENDENT CONTRACTOR - NATURE OF RELATIONSHIP BETWEEN PARTIES.
Industrial Relations Act 1988, ss 430, 170EA.
Stevens v Brodribb Sawmilling which is reported in (1986) 160 CLR 16
STEPHEN WALLACE RODGER -v- M.R.R.A. PTY LTD (A.C.N. 004 605 207)
ANN MARGARET COOKSON -V- M.R.R.A. PTY LTD (A.C.N. 004 605 207)
No. NI 1351 of 1996
No. NI 1352 of 1996
CORAM: LINKENBAGH JR
PLACE: BEGA
DATE: 30 AUGUST 1996
IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY NI 96/1351
ANN MARGARET COOKSON
Applicant
M.R.R.A. PTY LTD (A.C.N. 004 605 207)
Respondent
AND
NI 1352 of 1996
STEPHEN WALLACE RODGER
Applicant
M.R.R.A. PTY LTD (A.C.N. 004 605 207)
Respondent
Coram: Judicial Registrar Linkenbagh
Place: Bega
Date: 30 August 1996
MINUTES OF ORDERS
THE COURT FINDS THAT:
The relationship between the parties was that of employer and employee and that the applicant has the right to apply under Section 170EA of the Industrial Relations Act, 1988.
THE COURT ORDERS THAT:
The proceedings be adjourned, part heard, for telephone directions on 21 November 1996 at 9.15am.
Settlement and entry of Orders is dealt with by Order 36 of the Industrial Relations Court Rules
0
2
0