Fair Work Ombudsman v Centennial Financial Services Pty Ltd & Ors
[2010] FMCA 863
•15 November 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v CENTENNIAL FINANCIAL SERVICES PTY LTD & ORS | [2010] FMCA 863 |
| INDUSTRIAL LAW – Civil penalty proceedings – civil procedure – notice to admit facts and authenticity of documents – privilege against self-exposure to penalty. EVIDENCE – Notice to admit facts and authenticity of documents – deemed admissions – privilege against self-exposure to penalty – waiver of privilege. PRACTICE & PROCEDURE – Notice to admit facts – proper scope of notice – proper content of notice – deemed admissions. JUDGMENTS & ORDERS – Discretionary power to base judgment on admissions. PRACTICE & PROCEDURE – Adequacy of pleading – specificity of allegations – particulars – procedural fairness – jurisdictional error – case as litigated differed from case as pleaded. PRACTICE & PROCEDURE – Civil penalty proceedings – standard of proof. INDUSTRIAL LAW – Accessorial liability – proceedings against principal contravener stayed. INDUSTRIAL LAW – Sham contracting – contract of employment – contract for services – dismissal – constructive dismissal – motivation of employer for dismissal of employee – rebuttable presumption concerning employer’s motivation for dismissal of employee. PRACTICE & PROCEDURE – Assertions in pleadings – whether admissions. WORDS & PHRASES – Dismiss – aid and abet – counsel – procure – knowingly concerned. |
| Workplace Relations Act 1996, ss.4, 167, 169, 182, 183, 232, 234, 235, 666, 717, 718, 719, 720, 728, 729, 824, 900, 901, 902, 904, 905 Corporations Act 2001, s.471B Fair Work (Transitional Provisions & Consequential Amendments) Act 2009, item 2 sch.1, item 11 sch.2, items 12 and 13 sch.18 Fair Work Act 2009, ss.682, 701 Evidence Act 1995, s.140 Occupational Health & Safety Act 1983 (NSW), ss.15,16 Trade Practices Act 1974, s.75B Workplace Relations Regulations 2006, regs.14.3, 14.4, 19.12, 19.14, 19.18 Federal Magistrates Court Rules 2001, rr.15.30, 15.31 |
| Rich v Australian Securities & Investments Commission (2004) 220 CLR 129 Reid v Howard (1995) 184 CLR 1 Aslor Pty Ltd (in liq) v Springmount Pty Ltd [1998] VSC 108 Millane v Nationwide News Pty Ltd [2004] NSWSC 1023 Briginshaw v Briginshaw (1938) 60 CLR 336 Rejfek v McElroy (1965) 112 CLR 517 Jones v Dunkel (1959) 101 CLR 298 Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition & Consumer Commission (2007) 162 FCR 466 Australian Securities & Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32 Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96 Navair Pty Ltd v Transport Workers’ Union of Australia (1981) 52 FLR 177 Accident Insurance Mutual Holdings Ltd v McFadden (1993) 31 NSWLR 412 Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission (2002) 213 CLR 543 Vajda v Nine Network Australia Ltd [2001] NSWSC 620 Craine v Colonial Mutual Fire Insurance Company Limited (1920) 28 CLR 305 Spedley Securities Ltd (in liq) v Bank of New Zealand (1991) 26 NSWLR 711 Great Atlantic v Home [1981] 2 All ER 485 Birrell v Australian National Airlines Commission (1984) 55 ALR 211 Piatek v Piatek [2010] QSC 122 Cormie v Orchard [2001] QSC 21 Symes v The Proprietors Strata Plan No 31731 [2003] NSWCA 7 Ellis v Allen [1914] 1 Ch 904 Termijtelen v Van Arkel [1974] 1 NSWLR 525 Gramophone Co Ltd v Magazine Holder Co (1911) 28 RPC 221 Damberg v Damberg (2001) 52 NSWLR 492 Australian Competition & Consumer Commission v Leahy Petroleum Pty Ltd (2007) 160 FCR 321 Adler v Australian Securities & Investments Commission (2003) 179 FLR 1 Schellenberg v Tunnel Holdings Pty Ltd (2000) 200 CLR 121 Kirk v Industrial Court of New South Wales (2010) 239 CLR 531 R v Tannous (1988) 81 ALR 403 R v Lam (1990) 46 A Crim R 402 Yorke v Lucas (1985) 158 CLR 661 Automotive, Food, Metals, Engineering, Printing & Kindred Industries Union (AMWU) v John Holland Pty Ltd (2009) 180 IR 350 Downey v Acting District Court Judge Boulton (No 5) [2010] NSWCA 240 Sabag v Health Care Complaints Commission [2001] NSWCA 411 Mummery v Irvings Pty Ltd (1956) 96 CLR 99 Maloney v Commissioner for Railways (NSW) (1978) 52 ALJR 292 Water Board v Moustakas (1988) 180 CLR 491 Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR 279 Neat Holdings Pty Ltd v Karajan Holdings Pty Ltd (1992) 67 ALJR 170 Transport Industries Insurance Co Ltd v Longmuir [1997] 1 VR 125 Australian Competition & Consumer Commission v IMP Operation & Maintenance Loy Yang Pty Ltd (2006) 157 FCR 162 Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 Hollis v Vabu Pty Ltd (2001) 207 CLR 21 Australian Competition & Consumer Commission v Black on White Pty Ltd (2001) 110 FCR 1 Matheson Engineers Pty Ltd v El Raghy (1992) 37 FCR 6 Australian Competition & Consumer Commission v Giraffe World AustraliaPty Ltd (1999) 95 FCR 302 Rural Press Ltd v Australian Competition & Consumer Commission (2002) 118 FCR 236 Heydon v NRMA Ltd (2000) 51 NSWLR 1 Australian Competition & Consumer Commission v IMB Group Pty Ltd [2003] FCAFC 17 Giorgianni v The Queen (1985) 156 CLR 473 Australian Securities & Investments Commission v Australian Investors Forum Pty Ltd (No 2) [2005] NSWSC 267 Australian Securities & Investments Commission v Somerville (2009) 259 ALR 574 Western Australia v Burke (No 3) [2010] WASC 110 Troung v R (2004) 223 CLR 122 Poletti v Ecob (1989) 31 IR 321 Laws v Australian Broadcasting Tribunal (1990) 93 ALR 435 Smith v Director-General of School Education (1993) 31 NSWLR 349 Ex parte Wurth; Re Tully (1954) 55 SR (NSW) 47 Advertiser Newspapers Pty Ltd v Industrial Relations Commission of South Australia (1999) 90 IR 211 Hiser v Hardex Co-operative Ltd (unreported, Supreme Court of New South Wales, Santow J, 14 December 1994) Visscher v Giudice (2009) 239 CLR 361 Woolworths (SA) Pty Ltd v Russian (1996) 66 IR 13 Whittaker v Unisys Australia Pty Ltd (2010) 192 IR 311 Thomson v Orica Australia Pty Ltd (2002) 116 IR 186 Russell v The Trustees of the Roman Catholic Church for the Archdiocese of Sydney (2008) 72 NSWLR 559 Martech International Pty Ltd v Energy World Corporation Ltd (2007) 248 ALR 353 Hem v Cant (2007) 159 IR 113 |
| Applicant: | FAIR WORK OMBUDSMAN |
| First Respondent: | CENTENNIAL FINANCIAL SERVICES PTY LTD |
| Second Respondent: | ROLF MERTES |
| Third Respondent: | CHRISTOPHER CHORAZY |
| File Number: | SYG 3337 of 2008 |
| Judgment of: | Cameron FM |
| Hearing dates: | 4-5 November 2009, 30 April 2010 |
| Date of Last Submission: | 30 April 2010 |
| Delivered at: | Sydney |
| Delivered on: | 15 November 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms E.A Collins |
| Solicitors for the Applicant: | Norton Rose |
| Counsel for the Second Respondent: | Mr J.R Young |
| Solicitors for the Second Respondents: | Collins Legal |
| Counsel for the Third Respondent: | Mr J. Wormington |
ORDERS
The proceedings stand over for further directions.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 3337 of 2008
| FAIR WORK OMBUDSMAN |
Applicant
And
| CENTENNIAL FINANCIAL SERVICES PTY LTD |
First Respondent
| ROLF MERTES |
Second Respondent
| CHRISTOPHER CHORAZY |
Third Respondent
REASONS FOR JUDGMENT
INTRODUCTION............................................................................................... [1]
STATUTORY PROVISIONS............................................................................. [9]
EVIDENCE
Brooke Craig.................................................................................................. [27]
Documents obtained during investigation.................................................. [33]
Nicola Martin................................................................................................. [40]
Rolf Mertes.................................................................................................... [45]
Christopher ChorazyBackground.............................................................................................. [46]
Employment with Centennial................................................................. [50]
Change of structure of sales team.......................................................... [55]
Mr Chorazy’s understanding of the new agreement............................ [58]
NOTICE TO ADMIT FACTS AND AUTHENTICITY OF
DOCUMENTS................................................................................................... [69]
Mr Mertes....................................................................................................... [75]
Privilege against self-exposure to penalties......................................... [76]
Waiver....................................................................................................... [78]
Notice to admit facts and authenticity of documents objectionable.. [79]
Admissions as the foundation for judgment......................................... [83]The Ombudsman
Privilege against self-exposure to penalties......................................... [86]
Waiver....................................................................................................... [87]
Notice to admit facts and authenticity of documents objectionable.. [91]Consideration
Privilege against self-exposure to civil penalties................................. [93]
Waiver..................................................................................................... [102]
Notice to admit facts and authenticity of documents objectionable [111]
Admissions as the foundation for judgment...................................... [123]
Jones v Dunkel....................................................................................... [133]
ACCESSORIAL LIABILITY – ADEQUACY OF PLEADING.............. [137]
Mr Mertes.................................................................................................... [140]
The Ombudsman......................................................................................... [145]
Consideration............................................................................................... [150]
STANDARD OF PROOF.............................................................................. [163]
THE FACTS.................................................................................................... [171]
The respondents.......................................................................................... [172]
First Period................................................................................................... [173]
Meeting on 23 April 2007.......................................................................... [177]
Second Period.............................................................................................. [182]
EMPLOYMENT IN SECOND PERIOD.................................................... [188]
Submissions................................................................................................. [189]
Consideration............................................................................................... [197]
CONTRAVENTIONS BY CENTENNIAL AND ACCESSORIAL LIABILITY OF MESSRS MERTES AND CHORAZY
Section 182.................................................................................................. [210]
Submissions........................................................................................... [212]
ConsiderationCentennial.......................................................................................... [217]
Messrs Mertes and Chorazy............................................................ [223]
Sections 232 and 235.................................................................................. [244]
Centennial............................................................................................... [248]
Mr Chorazy............................................................................................ [249]Sections 900 and 901.................................................................................. [253]
Submissions........................................................................................... [256]
ConsiderationCentennial.......................................................................................... [267]
Messrs Mertes and Chorazy............................................................ [273]
Section 902.................................................................................................. [279]
Submissions........................................................................................... [281]
ConsiderationCentennial
Was there a dismissal or threatened dismissal?........................ [290]
Was the dismissal undertaken for the sole or dominant purpose of engaging the employees as independent contractors to perform the same work or substantially the same work as before?.................................................................. [300]
Messrs Mertes and Chorazy................................................................. [308]
Regulations.................................................................................................. [313]
CONCLUSION............................................................................................... [314]
ANNEXURE A
Introduction
The applicant in these proceedings is the Fair Work Ombudsman (“Ombudsman”). The first respondent (“Centennial”) was in the business of providing financial services. The second respondent, Mr Mertes, was Centennial’s sole director and shareholder and was responsible for the day to day management and operation of its business. The third respondent, Mr Chorazy, was employed by a company in the Centennial group of companies as Centennial’s human resources manager.
In 2007 Mr Chorazy recruited certain sales staff known as “Corporate Associates” on behalf of Centennial. The Corporate Associates were employed on terms conforming to the Commercial Travellers Award. The Ombudsman alleges that certain of the Corporate Associates did not accrue and were not paid all their statutory entitlements during their initial period of employment.
In April 2007 Centennial changed the Corporate Associates’ relationship with it to commission-only payments and asked them to sign agreements entitled “Sales Consultant Agreement”. The Ombudsman contends that this action represented an attempt to re-badge the Corporate Associates as independent contractors, and to pay them on that basis, although their duties changed in no substantial way. The Ombudsman alleges that the purported independent contracting arrangement was a sham and that the relationships between Centennial and the Corporate Associates remained one of employer and employee. It was alleged that, in such circumstances, certain of the Corporate Associates did not accrue and were not paid their statutory entitlements during the alleged sham contracting period.
In these proceedings the Ombudsman seeks the imposition of pecuniary penalties under ss.719 and 904 of the Workplace Relations Act 1996 (“WRA”) and pursuant to reg.14.4 of chp.2 of the Workplace Relations Regulations 2006 (“Regulations”). The Ombudsman alleges that Centennial breached the WRA and the Regulations by conduct which may be classified into four general categories:
a)first, the underpayment of employees’ statutory entitlements, coupled with the failure to accrue annual leave. The provisions allegedly contravened were ss.182, 232 and 235 of the WRA;
b)secondly, engaging in conduct in contravention of the WRA’s sham contracting provisions. The Ombudsman alleged that Mr Mertes, in his capacity as a director of Centennial, represented what was really a contract of employment to be a contract for services and that this constituted a contravention of either s.901 or s.900 of the WRA;
c)thirdly, a threat to dismiss employees for the dominant purpose of rehiring them as independent contractors to perform the same, or substantially the same, work as they had been doing. The Ombudsman alleged that Centennial, through Mr Mertes as its director and controlling officer, contravened s.902 of the WRA in that respect; and
d)an alleged failure to keep records concerning terminations, leave accruals and payments which the Regulations required be kept.
As Centennial is in liquidation and thus the proceedings against it are stayed by reason of s.471B of the Corporations Act 2001, the case proceeded against Messrs Mertes and Chorazy only. In the amended application and in the further amended statement of claim, the Ombudsman alleges that pursuant to s.728 they have accessorial liability for Centennial’s alleged contraventions of the WRA. In the amended application the Ombudsman alleges that Messrs Mertes and Chorazy are liable as principals for the alleged breach of regs.19.12 and 19.14. This allegation against Mr Chorazy was not pressed.
The proceedings have been conducted on the basis that, initially, findings of fact will be made dealing with the Ombudsman’s allegations that the respondents have contravened the WRA and the Regulations. That is this stage of the proceedings. Whether, and to what extent, the question of penalties needs to be considered depends on the findings of fact made at this stage.
It should also be recorded that although Mr Chorazy was represented on the first two days of the hearing, he was not represented or indeed present on the third day when submissions were made. Also, the written submissions which were filed for and by him were narrower in scope than those filed for Mr Mertes with the result that many issues relevant to both respondents were raised only by Mr Mertes.
For the reasons which follow, I find that:
a)Centennial contravened ss.182, 235, 901 and 902 of the WRA. It has not been necessary to determine whether Centennial contravened s.900 or regs.19.12 or 19.14;
b)Mr Mertes was involved in Centennial’s contraventions of ss.901 and 902 of the WRA and in Centennial’s contraventions of s.182 of the WRA in what will be known in these reasons as the “Second Period”; and
c)Mr Chorazy was involved in Centennial’s contraventions of ss.182, 901 and 902 of the WRA and in Centennial’s contraventions of s.235 in what will be known in these reasons as the “Second Period”.
Statutory provisions
The alleged conduct of the respondents is said to have occurred between 1 January 2007 and 22 January 2008. The WRA was the relevant legislation at the time.
Since these proceedings were commenced on 17 December 2008, the relevant provisions of the WRA have been repealed by sch.1 to the Fair Work (Transitional Provisions & Consequential Amendments) Act 2009 (“Fair Work (TPCA) Act”). Nevertheless, item 11 of sch.2 to the Fair Work (TPCA) Act provides that the WRA continues to apply on and after its repeal in relation to conduct that occurred before the repeal. Consequently, the WRA continues to apply to these proceedings and to the issues which the proceedings raise.
Part 7 of the WRA was entitled “The Australian Fair Pay and Conditions Standard”. The stated purpose of pt.7 was to set out key minimum entitlements of employment. Division 1 of pt.7 dealt with preliminary matters, div.2 dealt with wages, div.3 with maximum ordinary hours of work and div.4 with annual leave. Taken together, the provisions of divs.2-6 of pt.7 were the “Australian Fair Pay and Conditions Standard”.
Section 182 was within div.2 of pt.7. It provided:
182 The guarantee
Guarantee of APCS basic periodic rates of pay
(1) If:
(a) the employment of an employee is covered by an APCS; and
(b) the employee is not an APCS piece rate employee;
the employee must be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (pro-rated for part hours) that is at least equal to the basic periodic rate of pay (the guaranteed basic periodic rate of pay) that is payable to the employee under the APCS.
Guarantee of APCS piece rates of pay
…
Guarantee of standard FMW
(3) If:
(a) the employment of an employee is not covered by an APCS; and
(b) the employee is not a junior employee, an employee with a disability, or an employee to whom a training arrangement applies;
the employee must be paid a basic periodic rate of pay for each of the employee’s guaranteed hours (pro-rated for part hours) that is at least equal to the standard FMW (the guaranteed basic periodic rate of pay). …
An APCS was a set of provisions relating to pay and loadings for particular employees which complied with sub-div.H of div.2 of pt.7 of the WRA, which was entitled “Australian Pay and Classification Scales (APCSs): general provisions”.
Sub-division B of div.4 of pt.7 of the WRA was entitled “Guarantee of annual leave”. Section 232(2) provided:
All employees to whom this Division applies
(2) An employee is entitled to accrue an amount of paid annual leave, for each completed 4 week period of continuous service with an employer, of 1/13 of the number of nominal hours worked by the employee for the employer during that 4 week period.
Section 235(2) provided:
(2) If the employment of an employee who has not taken an amount of accrued annual leave ends at a particular time, the employee must be paid a rate for each hour (pro-rated for part hours) of the employee’s untaken accrued annual leave that is no less than the rate that, immediately before that time, is the employee’s basic periodic rate of pay (expressed as an hourly rate).
Section 728 provided:
728 Involvement in contravention treated in same way as actual contravention
(1) A person who is involved in a contravention of a civil remedy provision is treated as having contravened that provision.
(2)For this purpose, a person is involved in a contravention of a civil remedy provision, if, and only if, the person:
(a)has aided, abetted, counselled or procured the contravention; or
(b)has induced the contravention, whether by threats or promises or otherwise; or
(c)has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or
(d)has conspired with others to effect the contravention.
Part 22 of the WRA was headed “Sham arrangements”. Section 900 provided:
900 Misrepresenting an employment relationship as an independent contracting arrangement
(1) A person contravenes this subsection if:
(a)the person is a party to a contract with an individual; and
(b)the person makes a representation to the individual that the contract is a contract for services under which the individual performs work, or is to perform work, for the person as an independent contractor; and
(c)the contract, as in force at the time of the representation, is a contract of employment under which the person is the employer of the individual, rather than a contract for services under which the individual performs work as an independent contractor.
(2)A person does not contravene subsection (1) if the person proves that, at the time the person made the representation concerned, the person did not know that, and was not reckless as to whether, the contract was a contract of employment rather than a contract for services.
(3)Subsection (1) is a civil remedy provision.
Section 901 provided:
901 Misrepresenting a proposed employment relationship as a proposed independent contract arrangement
(1) A person contravenes this subsection if:
(a)the person offers to enter into a contract with an individual; and
(b)the person makes a representation to the individual that the contract, if entered into, would be a contract for services under which the individual would perform work for the person as an independent contractor; and
(c)the contract, if entered into, would be a contract of employment under which the person would be the employer of the individual, rather than a contract for services under which the individual would perform work as an independent contractor.
(2)A person does not contravene subsection (1) if the person proves that, at the time the person made the representation concerned, the person did not know that, and was not reckless as to whether, if the contract were entered into, the contract would be a contract of employment rather than a contract for services.
(3) Subsection (1) is a civil remedy provision.
Section 902 provided:
902 Dismissal etc. for purpose of engaging certain persons as independent contractors
(1) An employer contravenes this subsection if:
(a)the employer dismisses, or threatens to dismiss, an individual who:
(i) is an employee of the employer; and
(ii) performs particular work for the employer; and
(b)the employer’s sole or dominant purpose in dismissing or threatening to dismiss the individual is to engage the individual as an independent contractor to perform the same work, or substantially the same work, under a contract for services.
(2)Subsection (1) is a civil remedy provision.
(3)In proceedings alleging a contravention of subsection (1) it is presumed, other than in relation to the granting of an interim injunction, that the employer’s sole or dominant purpose was the purpose referred to in paragraph 1(b), unless the employer proves otherwise.
Section 719(1) of the WRA enabled a court of competent jurisdiction to impose a penalty in respect of a breach of an “applicable provision” by a person bound by the provision. “Applicable provision” was defined in s.717 to include a term of the Australian Fair Pay and Conditions Standard, which relevantly included ss.182, 232 and 235.
Section 904(1) of the WRA provided that the Court might, on application by an eligible person, make an order imposing a pecuniary penalty on a person who contravened ss.900(1), 901(1) or 902(1) of the WRA.
Regulation 19.12 of chp.2 of the Regulations relates to the content of leave records required to be kept by employers. It provides:
19.12 Contents of records — leave
(1) If the employee is entitled to leave, the record relating to the employee must contain the following details:
(a) the accrual of that leave;
(b) any leave taken by the employee;
(c) the balance of the employee’s entitlement to that leave from time to time.
(2) If the employee has elected to forgo an entitlement to take an amount of leave, an employer must keep the following:
(a) a copy of the employee’s written election to forgo the amount of leave;
(b) a record of the rate of payment for the amount of leave forgone and when the payment was made.
(3) Strict liability applies to the physical elements in subregulations (1) and (2).
Regulation 19.14 relates to the content of records in relation to the termination of employment required to be kept by employers. Regulation 19.14(1) provides:
19.14 Contents of records — termination of employment
(1) If the employee’s employment is terminated, the record relating to the employee must contain the following:
(a)whether the employment was terminated:
(i) by consent; or
(ii) by notice; or
(iii) summarily; or
(iv) in some other manner, specifying the manner;
(b)the name of the person who acted to terminate the employment.
Subregulation 19.14(3) provides that sub-reg.(1) is a civil remedy provision.
These proceedings were commenced by the Workplace Ombudsman. That office was later abolished by the Fair Work (TPCA) Act: item 2 of sch.1 and item 12 of sch.18. However, the presently relevant functions of the Workplace Ombudsman were assumed by the current applicant: s.682(1)(d) of the Fair Work Act 2009 (“FWA”). Sections 167(1A), 718(1) and 904(3)(a) of the WRA and reg.14.3 of the Regulations empowered the Workplace Ombudsman to bring these proceedings. Item 13 of sch.18 to the Fair Work (TPCA) Act and s.701 of the FWA empower the applicant to continue these proceedings.
On 4 November 2009 the Fair Work Ombudsman was substituted for the Workplace Ombudsman as the applicant in these proceedings.
Evidence
Brooke Craig
Ms Craig was the workplace inspector working with the Office of the Workplace Ombudsman who conducted investigations into certain complaints against Centennial. Ms Craig deposed that the Office of the Workplace Ombudsman received a claim from Andrew Young concerning non-payment of wages, annual leave, allowances, superannuation and moneys in lieu of notice during his employment as a Corporate Associate with Centennial. Ms Craig deposed that two months after the Workplace Ombudsman received Mr Young’s claim, it received a claim in respect of Centennial from Dennis McFarlane.
In her affidavit sworn on 9 June 2009 Ms Craig deposed to the substance of a conversation she had with Mr Chorazy on 23 October 2007. The relevant paragraph of Ms Craig’s affidavit sworn on 9 June 2009 was admitted subject to a finding concerning the relevance of what was said to be the substance of that conversation. As the conversation discloses the attitude of Mr Chorazy to the claims made by Messrs Young and McFarlane and to their asserted status as contractors, I have concluded that the conversation is relevant and that the paragraph should be allowed.
Following a request Ms Craig made of her supervisor on 23 October 2007, notices to produce documents under s.169(2)(b)(iv) of the WRA addressed to Messrs Mertes and Chorazy were issued. These notices required production of documents describing the nature of Mr Young’s employment together with employment records and a copy of the contracting contract. Following a request made on 24 October 2007, similar notices were issued addressed to Messrs Mertes and Chorazy requiring production of similar documents in relation to Mr McFarlane.
Ms Craig deposed that the notices concerning Mr Young were answered by a document on “Centennial Group” letterhead describing the nature of Mr Young’s duties together with copies of documents connected with Mr Young’s remuneration and a copy of an unsigned document entitled “Sales Consultant Agreement”. A similar response was made to the notices concerning Mr McFarlane.
Between November 2007 and May 2008, Ms Craig conducted a number of interviews with people she described in her affidavit as “purported independent contractors engaged by” Centennial. She conducted interviews with Andrew Young, Dennis McFarlane, David Peisley and Paul Cussens. On 21 January 2008 she issued a request for records pursuant to reg.19.18 of chp.2 of the Regulations, addressed to Centennial, in respect of records concerning David Peisley, Guilmar Perez, Reagan Murphy, Richard Moon, Richard Nguyen, Taranath Shetty, Mirantha Perera and Paul Cussens.
Mr Craig said that her investigations had revealed that Corporate Associates at Centennial had formed the impression that if they did not accept independent contracting, it would be the end of their employment.
Documents obtained during investigation
Documents referred to in Ms Craig’s affidavit were tendered by the Ombudsman and evidenced the following matters.
On 4 June 2007 Andrew Young, one of the Corporate Associates, contacted the Office of Workplace Services complaining that his employment had been terminated because he refused to sign a new agreement and had not been paid anything since the week starting 7 May 2007.
On 26 July 2007 Mr Chorazy on behalf of Centennial wrote to the Workplace Ombudsman saying, amongst other things, in response to the claim which had been lodged by Mr Young:
Just for your information effective from 2 March [sic] 2007, the company met with all Corporate Associates to inform them that our employment structure was changing from a permanent employment basis to a contractor basis. The company provided all staff with 7 days to object or refuse the employment status changes and contract to which no objections were raised from any parties involved including Mr Young. Additionally, staff members were also under different conditions in relation to hours/days worked, payments received, and key performance indicators of the role, all of which Mr Young accepted by following these new conditions under the contract. …
Centennial produced certain documents to the Workplace Ombudsman in response to various notices served upon it. Amongst the documents produced by Centennial in respect of Mr Young’s employment and the alleged sham contracting arrangements was an undated letter from Centennial offering Mr Young a job as a Corporate Associate. In that letter the following appears:
Each Corporate Associate must adhere to these below Key Performance Indicators, of [sic] which are monitored on a weekly/monthly basis:
KPI
· Must attend the office daily between [sic] as agreed by management
· Seen close rate (33%)
· 2 FIA’s a week (8 month)
· Reporting outcomes on all client visits and activity
· Diary management
· Own referrals (1/3)
· Data Entry of all client records
· Participate in marketing programs, i.e. canvassing, door knocking, shopping centres, and other marketing
Overview of position
Promote the business operations in the area of property and investment, in particular create and sell FIA plans.
Duties:
· Calling of potential clients and promote the Company
· Meet ALL Key Performance Indicators
· Attend the office daily between hours as specified
· Attend all training sessions and be actively involved in
· Data Entry of client into company database
· Sell the FIA plan to clients
· Actively be involved in other marketing campaigns including but not limited to door knocking, seminar attendance
· Other duties as directed by management
Mr Young’s employment agreement signed on 6 March 2007 was also produced. It stated that the duties and responsibilities of the position of Corporate Associate were those set out in the “Letter of Offer”.
Centennial also produced letters of offer in respect of Ms Kioukas and Ms Taylor and Messrs Perera, da Silveira, Murphy, Shetty and McFarlane. Those letters were, relevantly, in terms almost identical to Mr Young’s letter of offer. Centennial also produced the employment agreements of Ms Kioukas and Ms Taylor and Messrs Perera, da Silveira, Peisley, Murphy, Shetty and McFarlane which, relevantly, were identical to Mr Young’s employment agreement. Neither a letter of offer nor an employment agreement in relation to Mr Nguyen was produced. However, a document headed “Acceptance” and signed by Mr Nguyen on 12 February 2007 was produced. That document stated:
I, Richard J Nguyen accept the terms and conditions of employment with Centennial Financial Services Pty Limited.
Documents concerning a Mr Denis Compton were also produced but the Ombudsman advised at the commencement of the trial that the claim in relation to him was no longer pressed.
Centennial also produced the purported contracting agreement which was later given to its staff. That agreement defined the services which were to be provided as:
… sales and distribution of property investment and finance products including:
(i)Regularly discussing, reporting to and updating management of the Company in respect of the progress of the Services;
(ii)Assisting with the sale of property developments;
(iii)Undertaking investment property search analysis;
(iv)Training of future consultants;
(v)Undertake presentation reviews including attendance at training courses, in field training and training meeting;
(vi)Attend allocated/appointed Leads and report on the outcome of leads;
(vii)Obtain, present, complete and submit for approved asset and liability statements of Leads;
(viii)Monitor clients progress until finance approval is received and liaise with the Company’s Sale Manager until settlement;
(ix)Maintain individual client files and a progress report on a computer tracking system;
(x)Provide advice concerning possible loan options and mortgage advice, debt consolidation, mortgage reduction options, business finance and investment strategies;
(xi)Liaise with a network of professional associated [sic] and providers in accessing specialist taxation advice and dealers in licensed securities and managed investment funds for clients.
In schedule “B” to that document the following appears:
Each Corporate Associate must adhere to these below Key Performance Indicators, of [sic] which are monitored on a weekly/monthly basis:
Duties
· Calling of potential clients and promote the Company
· Meet ALL Key Performance Indicators
· Attend the office daily between hours as specified
· Attend all training sessions and be actively involved in
· Data entry of client into company database
· Sell the FIA plan to clients
· Actively be involved in other marketing campaigns including but not limited to door knocking, seminar attendance
· Other duties as directed by management
Key Performance Indicators
Promote the business operations in the area of property and investment, in particular create and sell FIA plans.
· Must attend the office Monday and Thursday as agreed by management
· Seen close rate (33%)
· 2 FIA’s a week (8 month)
· Reporting outcomes on all client visits and activity
· Diary management
· 1/3 own referrals
· Data entry of client records
· Participate in marketing programs, i.e. canvassing, door knocking, shopping centres and other marketing.
Nicola Martin
Ms Martin is a solicitor with Deacons, the then-name of the solicitors acting for the Ombudsman in these proceedings and for the Workplace Ombudsman before he was substituted as the applicant. In her affidavit affirmed on 9 June 2009 she deposed to events relevant to a notice to admit facts and authenticity of documents which was served on each of the respondents. Annexed to her affidavit was a number of documents. Mr Mertes objected to Ms Martin’s affidavit being read, partly on the basis that he was entitled to what was described in submissions as the freedom from compulsory self-incrimination. The objection was unsuccessful and Ms Martin’s affidavit was admitted into evidence together with its annexures.
Ms Martin referred to the orders made by the Court on 1 April 2009 which included consent orders that:
(4)The applicant file and serve a notice to admit facts by 20 April 2009.
(5)The respondents file and serve any response to the notice to admit facts by 4 May 2009.
Ms Martin deposed that the notice to admit facts and authenticity of documents, a copy of which was annexed to her affidavit, was served on each of the respondents under cover of letters from Deacons dated 20 April 2009. Ms Martin deposed that no notice disputing facts was served by Centennial or Mr Mertes by 4 May 2009 or within the fourteen day time period specified in r.15.31(2) of the Court’s Rules.
Ms Martin deposed that on 5 May 2009 Deacons wrote to the solicitors acting for Centennial and Mr Mertes noting that neither of them had served a notice disputing any of the facts or documents specified in the Workplace Ombudsman’s notice, nor had Deacons received a request for an extension of time to respond. That letter also said:
We therefore assume that the First and Second Respondent admit all the facts and the authenticity of the documents set out in the Applicant’s NTAF. The Applicant will therefore commence the preparation of its evidence on this basis.
On 11 May 2009 Ms Martin telephoned the solicitors acting for Centennial and Mr Mertes querying their failure to respond to the Workplace Ombudsman’s notice or to Deacons’s letter of 5 May 2009. She deposed that the solicitor then acting for Centennial and Mr Mertes said to her, amongst other things:
I am void of instructions.
Ms Martin also deposed that on 2 May 2009 Deacons received a letter from Mr Wormington of counsel, acting for Mr Chorazy on a direct access basis, enclosing a notice disputing facts. A copy of that letter and the terms of the notice disputing facts were annexed to her affidavit. On 6 May 2009 Deacons responded to that letter by post to Mr Chorazy and by email to Mr Wormington pointing out that Mr Chorazy was deemed to have admitted those facts which had not been disputed in the notice disputing facts. The letter went on to say:
It is on this basis that our client will commence the preparation of its evidence.
Rolf Mertes
Mr Mertes did not file an affidavit or give oral evidence.
Christopher Chorazy
Background
As recorded earlier in these reasons, Mr Chorazy was Centennial’s human resources manager.
Mr Chorazy gave detailed evidence of his work history prior to joining Centennial. For much of that period he worked for labour hire companies where his job was to develop client relationships and to promote the services of the company for which he was working at the particular time. From about mid-2008 to early 2009, Mr Chorazy worked for Radio Rentals, i.e. Thorn Australia.
Before he worked for Centennial, Mr Chorazy had had no exposure to or knowledge of independent contractors. Indeed, his evidence was that he had probably not heard of the term “contractor” before working for Centennial. His evidence was that he had no exposure to contractors in any of his prior employments and had no understanding of the concept because he had no experience of it. No one had asked for it and it had never come up.
Mr Chorazy said that he came to understand the difference between an employee and an independent contractor around July 2007 when the Workplace Ombudsman started to write. He did some research on the Workplace Ombudsman’s website concerning “what an independent contractor needs to do”.
Employment with Centennial
In his affidavit sworn on 3 August 2009 Mr Chorazy deposed that he started working for Centennial in October 2006. Mr Chorazy said that his role with Centennial was to find as many people as he possibly could. He deposed that when he commenced, the Centennial group had about 110 employees in total, of whom about 30 were sales staff.
He said that in about January 2007 Mr Mertes said to him that he wanted to put on a permanent sales team as he wanted “greater control over them”. After outlining the sort of work the sales team would be expected to do, Mr Mertes asked Mr Chorazy what he would have to pay them. The latter checked the Commercial Travellers Award and informed Mr Mertes that he would have to pay an annual salary of $40,000 together with superannuation and a $7,500 car allowance. Mr Mertes agreed and Mr Chorazy then wrote up employment contracts using the template that was already in the company’s system. Mr Chorazy then advertised the positions and started to recruit the sales team, conducting both telephone and face-to-face interviews with prospective staff over a period of five months.
Mr Chorazy said that when interviewing potential staff he would describe to them what the job entailed on a daily basis, including training, trying to get leads, calling clients, calling on clients in the evening and reporting on client meetings. Once he had conducted an interview, candidates he recommended would then normally be interviewed by the person to whom they would report if employed. He referred candidates to the sales director, the senior sales managers and to Mr Mertes for further interviews and decisions on whether offers of employment would be made.
He also said that his signature appearing on letters of offer sent to successful candidates was printed from a scanned copy of his signature. He said that he was not the only person who could issue letters of offer and, impliedly, that a reproduction of his signature could have appeared on a letter generated by someone else at Centennial. However, at least one employment agreement to which he was taken in his evidence had been signed by him.
Mr Chorazy said that his understanding at the time the Corporate Associates were appointed was that they were permanent employees of the business. He said that he understood that the newly recruited staff who attended training sessions were not paid for attending them.
Change of structure of sales team
Mr Chorazy deposed that on 21 April 2007 Mr Mertes advised him that as it was in financial difficulties Centennial was changing the structure of the sales team. Mr Mertes had decided to return the sales team to a commission-only remuneration structure and he was to hold a meeting with the sales staff later in the week to advise them of this. Mr Chorazy deposed that Mr Mertes said:
I have spoken to Craig Lynch about putting all the sales staff back on commission only.
Mr Mertes handed Mr Chorazy a document saying:
I want you to type this consultancy agreement up and go through this with the sales team, also print out an example of a tax invoice to show the team what it should look like … when you are finished typing the consultancy agreement come and see me because I want to add in a few clauses.
The following day Mr Mertes gave Mr Chorazy the wording for the restraint of trade, the “penalty for taking clients” and the commission structure clauses. Mr Chorazy typed these up and gave the completed document to Mr Mertes for final approval. Mr Mertes dictated, for Mr Chorazy to type into the draft, schedule B to the document, which dealt with “Duties” and “Key Performance Indicators”, and the “commission structure clause” which is schedule A to the agreement. Mr Chorazy just copied what he was told and had no reason to question anything. He did not notice that schedule B was identical to the equivalent provision in the earlier employment contracts nor did he notice that the key performance indicators were almost identical to those in the employment contracts.
The next day, 23 April 2007, Mr Mertes asked him to attend a staff meeting to read through the proposed agreement and to explain “what a tax invoice looks like”. Mr Chorazy deposed that at that meeting with about six sales staff Mr Mertes said to them that from the start of the following month all staff would be on commission only. Mr Chorazy deposed that Mr Mertes explained that the staff would be required to advise their availability at the start of each week, would be required to attend the office for training twice a week and that all their other duties would be the same as before. At a later point in the meeting, Mr Chorazy went through the sales consultant agreement clause-by-clause, allowing the staff to ask any questions, and showed the sales staff what a tax invoice looked like.
Mr Chorazy’s understanding of the new agreement
Mr Chorazy denied the allegation that he could have accessorial liability for Centennial’s conduct. He deposed that he was not asked to provide, nor did he provide, advice to Mr Mertes on making employees into contractors. Mr Mertes never asked whether the change to commissions would conform to the Commercial Travellers Award and the question of whether it would or would not did not cross Mr Chorazy’s mind. Mr Chorazy did not say to Mr Mertes that such a change would not be in conformity with the award because he was never asked. He deposed that he followed Mr Mertes’s directions and had no reason to consider the legality or otherwise of what the latter was doing with the sales force.
Mr Chorazy deposed that the only advice he provided to Mr Mertes was general advice on employment contracts, about matters such as having a minimum of ten days’ personal leave, twenty days’ annual leave and which awards covered the various staff members. Moreover, Mr Chorazy deposed that at no stage did Mr Mertes ask him to keep leave records and, to the best of his knowledge, Centennial’s financial controller managed leave, superannuation, wages, termination payments and taxation issues.
At the time he did not know that what Mr Mertes was doing may have contravened the WRA; he had no reason to doubt the propriety of the change. However, once the Workplace Ombudsman’s letters started to arrive he had reason to question this assumption.
When shown the draft sales consultant agreement, he thought it looked like it referred to a contracting arrangement and not to an employment arrangement because of the change in the basis of remuneration. He understood that Mr Mertes’s proposal to pay the Corporate Associates only on a commission basis necessarily meant that he was proposing to change them to contractors. This was so even though the restraint of trade clause in the draft referred to the restraint lasting for six months after the “termination of employment”. Also, although he knew that payment by way of commissions would not involve wages, he did not know that the commission provisions would contravene the Commercial Travellers Award.
Mr Chorazy knew that if the Corporate Associates accepted the contractors agreement and were still working for Centennial they were not being paid wages, were not accruing annual leave and were not accruing or being paid superannuation contributions.
Mr Chorazy conceded that the only substantive differences between the two arrangements were the remuneration and the fact that the Corporate Associates could, under the sales consultant agreement, dictate their availability whereas previously they could not. He also said that one of the biggest differences between the two arrangements was that under the second one they no longer had to come into the office on a daily basis, but only on Mondays and Thursdays, and that for the rest of the time they would advise Centennial whether and when they were available. Under the new arrangements they would not have to be available each day for appointments.
In this connection, Mr Chorazy was taken to a document which he prepared in conjunction with Mr Mertes and sent to the Workplace Ombudsman in response to a notice to produce documents. In that document, Mr Chorazy’s notes of an interview with Mr Young on 31 May 2007 are reproduced. There, the following statement by Mr Chorazy is recorded:
… you have not been here the contractors agreements states you are available for appointments daily and you have not returned calls from our office nor informed of your availability which is a requirement under you [sic] contractors agreement.
That document also stated that although the Corporate Associates would only have to attend the office on Mondays and Thursdays, they were to be available each day for appointments.
Mr Chorazy conceded that under the contracting arrangement the key performance indicators and duties were basically the same as the previous employment conditions. Even so, the Corporate Associates were provided with availability sheets to tell Centennial when they would be available for client contact. On this basis, Mr Chorazy queried the proposition that the contractors were required to be available on a daily basis.
Mr Chorazy rejected the proposition that what the Corporate Associates were being offered in April 2007 was a choice between accepting the new arrangements or ceasing to work for Centennial. Mr Chorazy said that he thought that they had the option to stay as they were, notwithstanding that he had deposed in his affidavit sworn on 3 August 2009 in relation to the 23 April 2007 meeting:
Mr Mertes closed the glass door and said to the staff “the company is changing its sales structure and effective from the start of the next month all staff would [sic] be commission only”.
He conceded that he did not think that at that meeting Mr Mertes had said that the staff had the option of staying under their employment agreements, although he did not know whether, if they refused to accept the proposed arrangement, they would have no job with Centennial.
Although Mr Chorazy did not think that Mr Mertes had told the staff that they had an option to remain under the employment agreements, he also did not think that they would not have a job if they did not sign up. However, by the end of May this did look like what was happening and he got an inkling of this at the time of his conversation at the interview with Mr Young.
He did not know how many of the Corporate Associates had agreed to the contract terms.
Notice to admit facts and authenticity of documents
As disclosed by Ms Martin’s affidavit, in May 2009 the Workplace Ombudsman served a notice to admit facts and authenticity of documents (“notice to admit”) on the respondents. Neither Centennial nor Mr Mertes filed or served a notice disputing the notice to admit. Mr Chorazy filed and served a notice which disputed some facts and some documents.
Rule 15.31 of the Court’s Rules relevantly provides:
15.31 Notice to admit facts or documents
(1) A party to a proceeding (the first party) may, by notice in accordance with the approved form, ask another party to admit, for the proceeding, the facts or documents specified in the notice.
(2) If the other party does not, within 14 days, serve a notice on the first party disputing the fact or the authenticity of the document, the other party is taken to admit, for the proceeding only, the fact or the authenticity of the document.
(3) The other party may, with the Court’s leave, withdraw an admission taken to have been made under subrule (2). …
Because Mr Mertes did not dispute any aspect of the notice to admit, r.15.31(2) of the Rules provides that he is taken to admit, for these proceedings only, the facts and the authenticity of the documents specified in the notice. Under the Rules, Mr Mertes is taken to have admitted the facts set out in annexure A to these reasons.
In broad terms, Mr Mertes is taken to have admitted that the Corporate Associates identified in the notice to admit were in paid employment with Centennial for a period (“First Period”) and subsequently provided their services under contracts which were represented to be contracts for services (“Second Period”). Some of the Corporate Associates also attended unpaid training. It is also taken to have been admitted that Centennial did not pay Corporate Associates for the periods they spent in training, did not pay for every hour worked pursuant to the contracts for services or at the federal minimum wage rate, failed to accrue annual leave or pay accrued annual leave when Corporate Associates ceased to perform work and failed to keep annual leave records or to keep records of Corporate Associates no longer performing work.
Mr Mertes is also taken to have admitted that in the period following the restructure of the sales team from paid employees to commission based contractors, there was no substantive change in the workers’ duties or the way in which those duties were performed, nor was there a change in the reporting structure or the hours which the workers were expected to work. He is also taken to have admitted that mediation of the claims made by two workers failed and that the Workplace Ombudsman’s investigation ensued. This led to the issuing of various breach notices leading to some payments, notices to produce and requests for records. Requests for interviews were refused. Following the issuing of final breach notices these proceedings were commenced.
Mr Chorazy admitted the same facts but disputed that he was responsible for the day to day management of Centennial’s human resources function including, but not limited to, recruitment, drafting contracts of employment, offers of employment and advising on wages, annual leave and termination issues. Mr Chorazy also may be taken to have disputed the authenticity of a number of documents referred to in the notice to admit.
Mr Mertes
Mr Mertes submitted that the Court should not rely on the notice to admit to find a contravention of the WRA. The arguments advanced in support of this submission were very similar to those which he had advanced when objecting to the reading of Ms Martin’s affidavit.
Privilege against self-exposure to penalties
In his final submissions, Mr Mertes referred to Rich v Australian Securities & Investments Commission (2004) 220 CLR 129 where it was held that a respondent will not be ordered to give discovery in proceedings to exact a penalty. That case considered the privilege against self-exposure to penalties and how that privilege might be subverted were a respondent to be required to list discoverable documents which were or had been in his possession. The High Court said:
The primary judge ordered that the appellants make discovery of documents by verified list. That order would permit the appellants to object to production of any document on a ground of privilege. At first sight, that might suggest that the appellants’ challenge to the order for provision of a verified list of documents is premature. That is, it might suggest that any question of privilege is one about privilege from production rather than privilege from making discovery. That is not so. As Isaacs J pointed out in R v Associated Northern Collieries, once it is determined that the proceedings expose a person to penalty, the proper course is to refuse any order for discovery. As Isaacs J said, to leave the party at risk of penalty to object to production of documents, having first listed them, may lead to the very mischief which the privilege is designed to prevent. In the words of Lord Coleridge CJ in Jones v Jones, to which Isaacs J referred:
“The whole case for the plaintiff may depend upon his power to trace a particular document into the possession of the defendant, and, upon its non-production, to prove its contents by secondary evidence.”
That being so, the proper course in this matter was to refuse the application for discovery. (at 147-148 [39] per Gleeson CJ, Gummow, Hayne, Callinan and Heydon JJ) (references omitted)
Mr Mertes submitted that this reasoning must also apply to the notice to admit served in these proceedings.
Referring to Reid v Howard (1995) 184 CLR 1, Mr Mertes submitted that an individual’s privilege against self-incrimination is a fundamental bulwark of liberty and applied in civil proceedings just as it did in criminal ones. In that case, it was said that it would be anomalous to allow a person to refuse to answer questions in criminal proceedings or before investigative bodies where the privilege had not been abrogated if that person could be compelled to answer interrogatories or otherwise make disclosure with respect to the same matter in civil proceedings.
Waiver
Mr Mertes submitted that a notice to admit facts offended the penalty privilege because to admit facts by this process might constitute a waiver of the privilege. He submitted that this was so even if an admission arose simply out of the fact that a particular fact or facts were not disputed and were deemed by the Court’s Rules to have been admitted. He submitted that although a party’s admission of facts might constitute a waiver of privilege, that was not the case here as no admissions had been made by him. He submitted that to deem an admission to have been made because a notice to admit facts had not been disputed was inconsistent with authority and repugnant to principle.
Notice to admit facts and authenticity of documents objectionable
In his final submissions, Mr Mertes also argued that the notice to admit was objectionable.
He submitted that the notice to admit was not confined to matters of fact and that it would be unjust to permit the Ombudsman to rely on it. In support of this contention Mr Mertes referred to Aslor Pty Ltd (in liq) v Springmount Pty Ltd [1998] VSC 108 where Chernov J held that it would have been unjust to allow a party to rely on a notice to admit facts which was not confined to facts but was mainly made up of propositions which were, at best, a mixture of conclusions, facts and law. In that case the recipients of the notices were unrepresented lay people who could not have been expected to recognize that the notices did not comply with the court’s rules. Notwithstanding that the notices were not answered by notices disputing, Chernov J disregarded them, saying:
In my view, it would be unjust to allow Crema to take advantage of the relevant deeming provisions of the Rules, where it has itself essentially failed to confine its Notice to propositions of fact as contemplated by the Rules. In my view, the Rules do not contemplate that the recipient of a notice under r35.03(1), who does not respond to it, is to be taken to have thereby admitted the contentions in it which are conclusions or legal propositions. Because the Notice here has the flaws to which I have referred, it would be oppressive to require the defendant directors to sift through it and ascertain which paragraphs are confined to questions of fact. Had they applied to have the Notice struck out on that basis, I would probably have granted their application. I should say, that I raised this matter with Senior Counsel for Crema. He did not dispute that many of the paragraphs in the Notice were not confined to facts. Moreover, he chose not to make any submissions as to whether the Court had jurisdiction effectively to disallow the Notice. It is my view, that in all the circumstances, it would be unjust to allow Crema to rely on its Notice. If a formal order striking out the two Notices which were sent to the two non-appearing defendants were required to formulate my conclusion, I would make such an order. In my view, however, that would be a mere formality and I propose to do no more than disregard the two Notices. (at [30])
Mr Mertes submitted that para.21 of the notice to admit, which dealt with the alleged duties of the Corporate Associates during the nominal contracting period, did not
… even go close to making allegations of fact. Each of the matters is a conclusion.
Expanding on this point, Mr Mertes submitted that not only was the notice to admit in this case not confined to facts but was in the nature of “a most complex pleading”. He submitted that the purpose of rules such as r.15.31 is to facilitate admission of matters which are not seriously in issue so that proceedings are not unnecessarily prolonged and that it was not appropriate for a party to seek to prove the substratum of its case by way of a notice to admit facts. In support of this submission Mr Mertes referred to Millane v Nationwide News Pty Ltd [2004] NSWSC 1023 where Hoeben J said:
[A notice to admit facts is] not intended to provide a mechanism whereby the factual substratum of a party’s case can be challenged and if the challenge is successful, for indemnity costs to be payable. (at [20])
Mr Mertes further submitted, by way of example, that paras.6 and 9 of the notice to admit, which deal respectively with Mr Young and Mr Peisley, were unfair because they alleged facts for which there was no evidence. He also submitted that it was scandalous of the Ombudsman to take advantage of the fact that Centennial was heading to liquidation and that, no doubt, he would be fully occupied with that. No evidence was led on that issue.
Admissions as the foundation for judgment
Mr Mertes submitted that it was inappropriate to employ a notice to admit facts as a means of proof given the nature of the action, the nature of the subject matter of the proceeding and the gravity of the matters alleged. In this connection, Mr Mertes referred to what Dixon J said in Briginshaw v Briginshaw (1938) 60 CLR 336 concerning how the degree of satisfaction for which the civil standard of proof calls may vary according to the gravity of the fact to be proved: Rejfek v McElroy (1965) 112 CLR 517 at 521. He submitted that contraventions of civil remedy provisions which imposed penalties should not be sought to be proved by inexact proofs “or by devices or contrivances designed to enable the admission of non-contentious facts in litigation so as to facilitate the speedy resolution of matters not seriously in contention”. He submitted that the Court must feel an actual persuasion of the occurrence or existence of the facts before a finding could be made in connection with them and could not feel actual persuasion of events merely because a respondent had not, within the time period allowed, disputed contentions in a notice to admit facts.
He submitted that in a case where the Briginshaw standard applies, evidence which is adduced by way of a notice to admit facts may not be persuasive enough for the Court to be satisfied that the Ombudsman had made out his onus. He submitted that it was difficult for a party who relied on deemed admissions to satisfy a court to the Briginshaw standard and queried how a court could attain the necessary degree of satisfaction in the absence of substantial corroboration of the pleaded case. In this regard, he submitted that Mr Chorazy’s evidence did not provide that corroboration and, particularly in relation to the meeting on 23 April 2007, gave evidence which was completely different to what is contended in the notice to admit.
Mr Mertes also submitted that as none of the relevant Corporate Associates gave evidence, a very strong Jones v Dunkel (1959) 101 CLR 298 inference adverse to the Ombudsman’s case arose.
The Ombudsman
Privilege against self-exposure to penalties
In response to the argument that the notice to admit offended the privilege against self-exposure to penalties, the Ombudsman submitted that there was no reason for the Court to revisit its original ruling which rejected the submissions Mr Mertes made when objecting to the reading of Ms Martin’s affidavit. At that time the Ombudsman said that any arguments based on the criminal law were misconceived because these are civil proceedings. In this regard, s.729 of the WRA was pointed to; it provided:
729 Civil evidence and procedure rules for civil remedy orders
A court hearing a proceeding under a civil remedy provision must apply the rules of evidence and procedure for civil matters.
The Ombudsman also pointed to Rich v ASIC in support of this proposition.
Waiver
In response to the objection to the tender of Ms Martin’s affidavit which was made on the first day of the hearing, the Ombudsman submitted that despite his concession that an individual respondent has a common law right to rely upon what was described in argument as the privilege against self-incrimination, in this particular case Mr Mertes had subjected himself to an order of the Court to do certain things and, although given a second chance to try to undo the operation of the Rules, he did not take it up.
With regard to the former issue, the Ombudsman referred to the consent orders made on 1 April 2009 which included the order that:
(5) The respondents file and serve any response to the notice to admit facts by 4 May 2009.
In relation to the latter issue, in the argument over Ms Martin’s affidavit, reference was also made to an order made on 21 August 2009 by which Mr Mertes was given leave to file an application in a case returnable on 16 September 2009 “to seek leave to withdraw certain admissions” and to the fact that no such application in a case was filed.
In his written submissions in reply, the Ombudsman observed that at the trial Mr Mertes had been given an opportunity to move the Court for leave to withdraw the admissions but had not made such an application.
Notice to admit facts and authenticity of documents objectionable
In relation to the second ground raised by Mr Mertes, the Ombudsman submitted that there had been no identification of the specific paragraphs said to go beyond matters of fact. As to the two examples of what was said to be the unfairness of the notice to admit, it was submitted that neither demonstrated any unfairness. The Ombudsman submitted that the matters in respect of which Mr Mertes said there was no evidence were, in fact, supported by evidence which had been adduced. In response to Mr Mertes’s submissions concerning para.21 of the notice to admit, the Ombudsman submitted that the letters of offer and the employment contracts specified with some precision the duties which the Corporate Associates were to perform during the First Period and the sales consultant agreement contained the same key performance indicators as appeared in the letters of offer, with the exception of a reference to attending the office “daily”. The Ombudsman also pointed to pay records produced by Centennial which, in the Second Period, continued to describe the Corporate Associates as permanent employees. The Ombudsman submitted that para.21 of the notice to admit was corroborated by the balance of the evidence in the proceedings.
As to the propriety of the Ombudsman seeking to prove a complex case and seeking to “take advantage” of the fact that Centennial was heading to liquidation and that Mr Mertes would be fully occupied by that issue, the Ombudsman submitted that there was no basis for such a submission and the Court was invited to reject it.
Consideration
Privilege against self-exposure to civil penalties
These proceedings have a quasi-criminal quality because they potentially involve the imposition of civil penalties but they are nevertheless civil in nature: Communications, Electrical, Electronic, Energy, Information, Postal, Plumbing & Allied Services Union of Australia v Australian Competition & Consumer Commission (2007) 162 FCR 466 at 477-479 [19]-[29].
Although the argument over the admission of Ms Martin’s affidavit was framed in terms of the privilege against self-incrimination, where the relevant peril confronting a respondent is the imposition of a civil penalty the privilege which may apply is the privilege against self-exposure to penalty. The privilege against self-exposure to penalty permits a natural person who is party to civil proceedings to resist providing proof against him or herself and bears some similarity to the privilege against self-incrimination: Rich v ASIC at 141 [23]; Australian Securities & Investments Commission v Mining Projects Group Ltd (2007) 164 FCR 32 at 36 [7]; cf Reid v Howard at 12. Halsbury’s Laws of Australia describes those privileges in the following terms:
A natural person is not bound to answer any question or produce any document if the answer or the document would have the tendency to expose that person to the imposition of a civil penalty or to conviction for a crime. (para [195-7405])
When deciding whether a party should be ordered to do something, provisions such as s.729 of the WRA, which require the Court to apply the rules of evidence and procedure for civil matters in proceedings such as these, also require the application of the body of law which has developed in relation to privilege against penalties and forfeitures: Rich v ASIC at 140 [19]. The penalties and forfeitures which attract the privilege include monetary exactions such as the monetary penalties which are presently sought by the Ombudsman: Rich v ASIC at 143 [26]; CEPU v ACCC at 479 [26].
The question in Rich v ASIC, concerning whether Mr Rich should have been ordered to give discovery, reflects the fact that the privilege is concerned to provide a party with protection from being compelled to expose him or herself to a penalty. In that case it was held that the proper course was to refuse discovery because the very fact that a document might be specified in a list of documents, even if privilege could be claimed over it, might lead to the very mischief which the privilege is designed to prevent: at 148 [39]. In Trade Practices Commission v Abbco Iceworks Pty Ltd (1994) 52 FCR 96, after reviewing the texts and authorities, Burchett J said:
My conclusion from the survey made in these reasons of texts and authorities since the 18th century is that the privilege against self-incrimination, and that against self-exposure to a penalty, are both reflections of the one fundamental principle. It has been stated in various ways, and with differing emphases. But, with respect, it cannot be better expressed than by the words which Deane, Dawson and Gaudron JJ used in Caltex (at 532) with reference to self-incrimination:
“In the end, [the privilege] is based upon the deep-seated belief that those who allege the commission of a crime should prove it themselves and should not be able to compel the accused to provide proof against himself.”
Substituting “the incurring of a penalty” for “the commission of a crime” and “the defendant” for “the accused”, I think this statement applies to the privilege against self-exposure to a penalty. (at 129, Black CJ and Davies J agreeing)
As the quotation from Halsbury suggests, an easily imagined situation where the privilege could be claimed successfully would be in response to questions in cross-examination, the answers to which would have the tendency to expose the witness to a penalty. As has been seen, in Rich v ASIC the circumstance which attracted the privilege was an application that a party be ordered to give discovery of documents. The privilege can also be invoked in response to interrogatories: Navair Pty Ltd v Transport Workers’ Union of Australia (1981) 52 FLR 177. These examples reflect the fact that the privilege protects individuals from being compelled to expose themselves to a penalty.
It is the absence of any element of compulsion in the notice to admit facts procedure which sets notices to admit facts and authenticity of documents apart from the situation of a witness giving evidence and a party giving discovery of documents or answering interrogatories. There is nothing about a notice to admit facts which has any quality of compulsion. A party is free to dispute all the facts and documents which are notified in such a notice and such a step is no more inculpatory than the unverified traverse of an allegation in a pleading. Further, the possibility of an order for the costs of proving disputed facts cannot be considered to amount to compulsion in the relevant sense. A costs order is of a quality entirely different from the possible consequences of defiance of a court’s order. The distinction is even starker in proceedings under the WRA where costs orders are the exception rather than the rule: s.666 and, relevantly for these proceedings, s.824.
As already noted, the privilege against self-exposure to penalty serves the purpose of ensuring that those who allege criminality or other illegal conduct should prove it (Rich v ASIC at 142 [24]). A notice to admit facts is not inconsistent with that obligation. As Finkelstein J put it in ASIC v Mining Projects Group:
… the plaintiff must prove his case without any assistance from the defendant. (at 37 [12])
A notice to admit facts is a shortcut to the proof of specified facts but performs that function only with the agreement or acquiescence of its recipient. No party is required to admit the facts or the authenticity of documents specified in a notice to admit and, by disputing such matters, its recipient can always put the party serving it to proof of them. That reflects the situation here. The Ombudsman did not seek an abrogation of Mr Mertes’s penalty privilege; he simply invited him to admit or dispute documents and factual allegations which, if not admitted, would have had to be proved in the ordinary way.
Mr Mertes has not shown that he was prevented for some reason from responding to the notice had he wished to. It has been submitted that the Ombudsman took advantage of the fact that Centennial was heading to liquidation and that Mr Mertes was occupied with that. As no evidence was led on that issue, the assertion has not been proved. What the evidence and the Court file do show is that the notice was properly served on Mr Mertes, that his subsequent silence was queried by the Ombudsman’s solicitors, that he was given leave to file an interlocutory application to withdraw the admissions which were deemed to have been made, that he filed no such application and that he pressed no application at the trial to withdraw the deemed admissions. As far as Mr Mertes is concerned, the circumstances surrounding the notice to admit are characterised by unexplained inaction, not by compulsion.
I find that Mr Mertes’s penalty privilege was not offended by the service of the notice to admit or the fact that admissions are deemed to have been made because no notice disputing facts or authenticity of documents was served by him. Neither the notice nor r.15.31 compelled Mr Mertes to do anything which had the tendency to expose him to the imposition of a penalty. As a consequence the privilege, whose availability in proceedings such as these was uncontested, does not prevent the Ombudsman from relying on the notice to admit or on the lack of disputes as to its contents made in notices disputing facts.
Waiver
However, if I am wrong and penalty privilege does apply to the notice to admit and the resultant deemed admissions, it should be found that Mr Mertes waived reliance on that privilege.
As observed in Reid v Howard at 12 the privilege against self-incrimination may be abridged by statute or waived but, that aside, it has generally been accepted that it is without “real exception”. Declining to make the claim and answering the question is an example of waiver of the privilege: Accident Insurance Mutual Holdings Ltd v McFadden (1993) 31 NSWLR 412 per Clarke JA at 431.
In ASIC v Mining Projects Group at 39 [18], Finkelstein J stated that penalty privilege may be waived expressly by contract and impliedly by conduct, a position which his Honour concluded was entirely consistent with principle and accorded with the nature of the privilege as explained in Daniels Corporation International Pty Ltd v Australian Competition & Consumer Commission (2002) 213 CLR 543 and Rich v ASIC. In Vajda v Nine Network Australia [2001] NSWSC 620 Brownie AJ expressed no objection to the waiver of the privilege against self-incrimination by way of express admissions or to the possibility of admissions being deemed to have been made in criminal contempt proceedings and to penalty privilege being waived thereby, saying:
If in proceedings for contempt the party making the charge serves a notice to admit facts and the alleged contemnor expressly admits the facts mentioned or some of them, I see no reason in principle why that should not be regarded as a waiver of the privilege against self-incrimination. Similarly, to speak of an example used in debate this morning, if there was a notice to answer interrogatories and answers were given, then I am inclined to think that the answers to the interrogatories might be regarded as a waiver of the privilege. Perhaps, in an appropriate case, an admission or a deemed admission could be withdrawn pursuant to the provisions of Pt18 r2 subr(3). (at [10])
Waiver of a right requires an intentional act with knowledge: Craine v Colonial Mutual Fire Insurance Company Limited (1920) 28 CLR 305 at 326 and thus waiver of privilege involves the intentional act of a party with the knowledge of the right to claim the privilege. However, waiver can be inferred where the failure to assert a privilege is inconsistent with its continuance: Spedley Securities Ltd (in liq) v Bank of New Zealand (1991) 26 NSWLR 711 at 729-730, Great Atlantic v Home [1981] 2 All ER 485 at 492-494. In Spedley v BNZ at 730 Cole J referred with approval to the following passage in Cairns’s The Law of Discovery in Australia:
A client may waive the benefit of legal professional privilege. This can be done implicitly by the client simply desisting from claiming the privilege where it exists. It can also be waived when legal advisers conduct proceedings in such a way as to abandon privilege.
Where a party consents to an order of the Court which is inconsistent with a privilege which is subsequently claimed, he or she may be taken to have waived the privilege by his or her conduct. In Birrell v Australian National Airlines Commission (1984) 55 ALR 211 the applicant sought, amongst other orders, the imposition of a penalty upon the respondent for a breach or non-observance of the Airline Pilots’ (TAA) Agreement 1981. At the first directions hearing, consent orders were made which provided for mutual discovery and the administration of interrogatories. Following failure of the respondent to serve a list of documents, the applicant filed a motion seeking judgment or, in the alternative, an order that the respondent file and serve a list of documents.
In that case, the basis of the respondent’s refusal to give discovery was that because the proceedings involved a claim for a penalty it was inappropriate for the court to order it to discover documents which might tend to expose it to such a penalty. Gray J found that a party could waive penalty privilege and concluded that if the respondent in the matter before him had:
… bound itself not to claim the privilege against the production of documents on the ground of self-exposure to a penalty, it should be compelled to make such discovery. (at 217)
His Honour continued:
That the consent of each party to these orders and directions constituted a contract cannot be doubted. There was involved the agreement that each party would submit to the orders and directions proposed and would consent to them being made and given by the court. Consideration lay in the promise of each party to be bound. The respondent did not place before me any evidence which suggested mistake or inadvertence on its part or the part of its legal advisers, or any other element which might lead to the conclusion that no contract existed. It is my view that the respondent must be bound by the contract which it has made. (at 217)
His Honour went on to say that although the penalty privilege had been waived by reason of a consent order, that did not affect any other privilege normally available. For instance, the respondent in that matter was still able to claim legal professional privilege over communications between itself and its legal advisers made for the purposes of the litigation.
10.6Mr Murphy provided his services under a contract which was represented as being a contract for services from 4 May 2007 until 22 June 2007 (Second Period);
10.7Mr Murphy ceased performing work for the First Respondent on or around 22 June 2007;
10.8The First Respondent did not:
(1)pay Mr Murphy for every hour worked during the Second Period;
(2)pay Mr Murphy at the hourly FMW rate during the Second Period;
(3)accrue annual leave on behalf of Mr Murphy during any of:
(a)the First Period; or
(b)the Second Period;
(4) pay accrued annual leave to Mr Murphy when he ceased performing work;
(5) keep annual leave records in respect of Mr Murphy;
(6)keep records in relation to Mr Murphy no longer performing work.
10.9The amounts owed by the First Respondent to Mr Murphy when he ceased performing work were as follows:
(a)pursuant to paragraph 10.8(1) and (2): $3,583.02;
(b)pursuant to paragraph 10.8(4): $787.46;
(c)total amount owed by the First Respondent to Mr Murphy when he ceased performing work and which remains due is $4,370.48.
10.10If the Court decides Mr Murphy was an “employee” as defined under section 5 of the WR Act during the Second Period the First Respondent agrees that Mr Murphy is owed the amount outlined in paragraph 10.9(c).
Mr Richard Nyugen [sic]
11.1Mr Nyugen provided his services to the First Respondent pursuant to contractual arrangements by which he performed work from 30 January 2007 to 22 August 2007;
11.2Mr Nyugen confirmed his acceptance of the terms and conditions of employment in writing on 12 February 2007;
11.3The payroll records for Mr Nyugen, dated 24 January 2008, and headed ‘Centennial Financial Services Pty Ltd’, state his employment classification to be that of Corporate Associate;
11.4Mr Nyugen was in paid employment with the First Respondent from 30 January 2007 until 4 May 2007 (First Period);
11.5Mr Nyugen provided his services under a contract which was represented as being a contract for services from 4 May 2007 until on or around 22 August 2007 (Second Period);
11.6Mr Nyugen ceased performing work for the First Respondent on or around 22 August 2007;
11.7The First Respondent did not:
(1)pay Mr Nyugen for every hour worked during the Second Period;
(2)pay Mr Nyugen at the hourly FMW rate during the Second Period;
(3)accrue annual leave on behalf of Mr Nyugen during any of:
(a)the First Period;
(b)the Second Period; and
(4) pay accrued annual leave to Mr Nyugen when he ceased performing work;
(5) keep annual leave records in respect of Mr Nyugen;
(6)keep records in relation to Mr Nyugen no longer performing work.
11.8The amounts owed by the First Respondent to Mr Nyugen when he ceased performing work were as follows:
(a)pursuant to paragraph 11.7(1) and (2) $7,985.02
(b)pursuant to paragraph 11.7(4) $1,102.52
(c)total amount owed by the First Respondent to Mr Nyugen when he ceased performing work and which remains due is $9,087.54.
11.9If the Court decides Mr Nyugen was an “employee” as defined under section 5 of the WR Act during the Second Period the First Respondent agrees that Mr Nyugen is owed the amount outlined in paragraph 11.8(c).
Mr Taraneth [sic] Shetty
12.1Mr Shetty provided his services to the First Respondent pursuant to contractual arrangements by which he performed work from 22 January 2007 to 8 June 2007;
12.2Mr Shetty was offered employment with the First Respondent by way of Letter of Offer signed by the Third Respondent on behalf of the First Respondent, and dated 2 January 2007;
12.3An employment agreement for Mr Shetty was signed by Mr Shetty on 6 February 2007 and the Third Respondent on behalf of the First Respondent on 14 February 2007;
12.4The employment agreement offered Mr Shetty employment with the First Respondent as a Corporate Associate;
12.5Mr Shetty was in paid employment with the First Respondent from 22 January 2007 until on or around 11 May 2007 (First Period);
12.6Mr Shetty provided his services under a contract which was represented as being a contract for services on or around 11 May 2007 until 8 June 2007 (Second Period);
12.7Mr Shetty ceased performing work for the First Respondent on or around 8 June 2007;
12.8The First Respondent did not:
(1)pay Mr Shetty for every hour worked during the Second Period;
(2)pay Mr Shetty at the hourly FMW rate during the Second Period;
(3)accrue annual leave on behalf of Mr Shetty during any of:
(a)the First Period; or
(b)the Second Period;
(4) pay accrued annual leave to Mr Shetty when he ceased performing work;
(5) keep annual leave records in respect of Mr Shetty;
(6)keep records in relation to Mr Shetty no longer performing work.
12.9The amounts owed by the First Respondent to Mr Shetty when he ceased performing work were as follows:
(a)pursuant to paragraph 12.8(1) and 12.8(2): $2,047.44
(b)pursuant to paragraph 12.8(4) $787.46
(c)total amount owed by the First Respondent to Mr Shetty when he ceased performing work and which remains due is $2,834.90.
12.10If the Court decides Mr Shetty was an “employee” as defined under section 5 of the WR Act during the Second Period the First Respondent agrees that Mr Shetty is owed the amount outlined in paragraph 12.9(c).
Ms Helen Kioukas
13.1Ms Kioukas provided her services to the First Respondent pursuant to contractual arrangements by which she performed work from 20 March 2007 until 8 June 2007 [sic];
13.2Ms Kioukas was offered employment with the First Respondent by way of Letter of Offer signed by the Third Respondent on behalf of the First Respondent, and dated 2 January 2007;
13.3An employment agreement for Ms Kioukas was signed by Ms Kioukas and the Third Respondent on behalf of the First Respondent on 20 March 2007;
13.4The employment agreement offered Ms Kioukas employment with the First Respondent as a Corporate Associate;
13.5Ms Kioukas attended unpaid training from 20 March 2007 until 23 March 2007 inclusive (the March Training);
13.6The First Respondent did not pay Ms Kioukas for the March Training;
13.7An employment declaration form from Centrelink signed by the Third Respondent on 9 August 2007 states that Ms Kioukas was in employment with the First Respondent from 20 March 2007;
13.8Ms Kioukas was in paid employment with the First Respondent from 26 March until 16 April 2007;
13.9Ms Kioukas ceased performing work for the First Respondent on or around 16 April 2007;
13.10The First Respondent failed to keep records in relation to Ms Kioukas no longer performing work.
13.11The amount owed by the First Respondent to Ms Kioukas when she ceased performing work and which remains due in respect of the March Training is $323.28.
Ms Trish Taylor
14.1Ms Taylor provided her services to the First Respondent pursuant to contractual arrangements by which she performed work from 6 March 2007 until 8 June 2007 [sic];
14.2Ms Taylor was offered employment with the First Respondent by way of Letter of Offer signed by the Third Respondent on behalf of the First Respondent, and dated 2 January 2007;
14.3An employment agreement for Ms Taylor was signed by Ms Taylor and the Third Respondent on behalf of the First Respondent on 6 March 2007;
14.4The employment agreement offered Ms Taylor employment with the First Respondent as a Corporate Associate;
14.5The Letter of Offer provided that Ms Taylor would commence training, which would be unpaid, on 6 to 9 March 2007;
14.6Ms Taylor attended unpaid training from 6 March 2007 until 9 March 2007 inclusive (March Training);
14.7The First Respondent did not pay Ms Taylor for the March Training;
14.8Ms Taylor was in paid employment with the First Respondent from 12 March 2007 until on or around 13 April 2007 (First Period);
14.9A document entitled ‘Centennial Group Holdings Pty Ltd Employment Exit Checklist’ states Ms Taylor’s termination date as 13 April 2007;
14.10Ms Taylor ceased performing work for the First Respondent on or around 13 April 2007;
14.11The First Respondent failed to keep records in relation to Ms Taylor no longer performing work;
14.12The amount owed by the First Respondent to Ms Taylor when she ceased performing work and which remains due in respect of the March Training is $323.28.
Dennis McFarlane
15.1Mr McFarlane provided his services to the First Respondent pursuant to contractual arrangements by which he performed work from 6 March 2007 to 3 May 2007;
15.2Mr McFarlane was offered employment with the First Respondent by way of Letter of Offer signed by the Third Respondent on behalf of the First Respondent, and dated 2 January 2007;
15.3An employment agreement for Mr McFarlane was signed by Mr McFarlane and the Third Respondent on behalf of the First Respondent on 6 March 2007;
15.4The Letter of Offer and employment agreement offered Mr McFarlane employment with the First Respondent as a Corporate Associate;
15.5The Letter of Offer provided that Mr McFarlane would commence training, which would be unpaid, on 6 to 9 March 2007;
15.6Mr McFarlane attended the unpaid training from 6 March 2007 until 9 March 2007 inclusive (the March Training);
15.7Mr McFarlane was in paid employment with the First Respondent from 12 March 2007 until 3 May 2007 (First Period);
15.8Mr McFarlane ceased performing work for the First Respondent on or around 3 May 2007.
15.9The First Respondent did not:
(1)pay Mr McFarlane for the March Training;
(2) accrue annual leave on behalf of Mr McFarlane during any of:
(a)the March Training; and
(b)the First Period;
(3) pay accrued annual leave to Mr McFarlane when he ceased performing work;
(4) keep annual leave records in respect of Mr McFarlane;
(5)keep records in relation to Mr McFarlane no longer performing work.
15.10The amount owed by the First Respondent to Mr McFarlane when he ceased performing work was $2,901.58.
15.11As a result of a Breach Notice served on the First Respondent by the Applicant, the First Respondent paid Mr McFarlane $2,901.58.
15.12No amount is therefore currently owing by the First Respondent to Mr McFarlane.
Dennis Compton
16.1Mr Compton provided his services to the First Respondent pursuant to contractual arrangements by which he performed work from 9 October 2007 to 22 January 2008;
16.2Mr Compton provided his services under a contract which was represented as being a contract for services from 9 October 2007 until 22 January 2008 (the Period);
16.3Mr Compton ceased performing work for the First Respondent on or around 22 January 2008;
16.4The First Respondent did not:
(1)pay Mr Compton for every hour worked during the Period;
(2)pay Mr Compton at the hourly FMW rate during the Period;
(3)accrue annual leave on behalf of Mr Compton during the Period;
(4) pay accrued annual leave to Mr Compton when he ceased performing work;
(5) keep annual leave records in respect of Mr Compton;
(6)keep records in relation to Mr Compton no longer performing work;
16.5The amounts owed by the First Respondent to Mr Compton when he ceased performing work were as follows:
(a)pursuant to paragraph 16.4(1) and (2) $7,831.80;
(b)pursuant to paragraph 16.4(4) $481.99;
(c)total amount owed by the First Respondent to Mr Compton when he ceased performing work and which remains due is $8,313.79.
16.6If the Court decides Mr Compton was an “employee” as defined under section 5 of the WR Act during the Second Period the First Respondent agrees that Mr Compton is owed the amount outlined in paragraph 16.5(c).
The Second Period
17.1On or around 21 April 2007 the Second Respondent (Mr Mertes) spoke with the Third Respondent (Mr Chorazy) and told him that:
(1)the company was changing the structure of the employment of Corporate Associates;
(2)the company was struggling financially and changing the structure was the only way to keep it running;
(3)he had spoken with Craig Lynch about putting all the sales staff on a commission only arrangement rather than retain them as employees; and
(4)he was going to meet with the sales staff later in that same week to tell them that the arrangement referred to in (3) above was going to be implemented.
17.2On or around 21 April 2007, Mr Mertes handed a document to Mr Chorazy and instructed Mr Chorazy to do the following:
(1)to type up the document, which was a sales consultancy agreement (Agreement);
(2)to go through the Agreement with the Corporate Associates;
(3)to print an example of a tax invoice so as to show the Corporate Associates what a tax invoice looked like;
(4)to return the Agreement to Mr Mertes once it had been retyped so that Mr Mertes could add additional clauses.
17.3The following day, on or around 22 April 2007, Mr Mertes provided Mr Chorazy with wording for the following clauses to be inserted into the Agreement:
(1)restraint of trade;
(2)penalties for soliciting clients; and
(3)commission pay structures.
17.4Mr Chorazy inserted the clauses outlined in paragraph 17.3 above into the Agreement.
17.5Mr Chorazy returned the amended Agreement to Mr Mertes for final approval.
17.6Mr Mertes told Mr Chorazy that he was going to have a meeting with the Corporate Associates the following day and that he required Mr Chorazy to attend the meeting in order to read through the Agreement with the Corporate Associates and to explain the tax invoices to them.
The April 2007 Meeting
18.1On or around 23 April 2007 a meeting was held in the Boardroom of the First Respondent’s premises (the April 2007 Meeting).
18.2The April 2007 Meeting was called by the Second Respondent, Mr Mertes.
18.3The following Corporate Associates were present at the April 2007 Meeting:
(1)Mr Peisley;
(2)Mr McFarlane;
(3)Mr Young;
(4)Mr da Silveira; and
(5) Mr Guilmar Perez.
18.4The following management staff were present at the April 2007 Meeting:
(1)the Second Respondent, Mr Mertes;
(2)the Third Respondent, Mr Chorazy; and
(3)Mr Paul Cussens.
18.5No other persons were present at the April 2007 Meeting.
18.6The April 2007 Meeting was jointly conducted by Mr Chorazy and Mr Mertes.
Content of the April 2007 Meeting
19.1Mr Mertes told the people present at the April 2007 Meeting that:
(1)the Corporate Associates were not performing well;
(2)the company (First Respondent) was changing its sales structure;
(3)effective from the beginning of May 2007, rather than being paid wages and commission, all Corporate Associates would be on commission only;
(4)the Corporate Associates would make more money if they were put on 100% commission structure;
(5)the Corporate Associates employment status was going to change from “employees” to “contractors”;
(6)the Corporate Associates would be required to sign a consultancy agreement; and
(7)Mr Chorazy would explain the new Agreement and the process for tax invoices.
19.2Mr Chorazy explained to the people present at the April 2007 Meeting:
(1)the content of the Agreement;
(2)that the Corporate Associates would be required to obtain Australian Business Numbers (ABNs);
(3)that the Corporate Associates would be required to call in their availability at the start of each week;
(4)that the Corporate Associates would be required to be in the office twice per week for training and to report to either Damian Edwin or Paul Cussens (the two team leaders);
(5)that the Corporate Associates would be provided with sales leads;
(6)that the Corporate Associates were required to take the sales leads provided;
(7)that there would be a transition period where the Corporate Associates would receive $500 per week for the following 2 weeks after which the Corporate Associates’ incomes would be derived solely from commission on sales;
(8)the format of the tax invoices;
(9)that the Corporate Associates were to submit a tax invoice to the First Respondent fortnightly on the Friday of each week so as to be paid on the Thursday of the following week; and
(10)that the payroll frequency was to remain the same.
19.3The following events took place at the April 2007 Meeting:
(1) all the Corporate Associates, were given a copy of the Agreement;
(2)the Corporate Associates were told they had six or seven days to read the Agreements and return them to the First Respondent;
(3) none of the Corporate Associates asked any questions regarding the Agreements or the arrangements for the Second Period;
(4)none of the Corporate Associates were asked their opinion regarding the Agreements or the arrangements for the Second Period;
(5)there was no discussion regarding employee entitlements that had accrued to date and that were due to be paid prior to the Second Period commencing;
(6)the Agreements pertaining to the Second Period were presented to the Corporate Associates as being something they had to sign to get leads and therefore to get work;
(7)The Second Period was to take effect from the beginning of May 2007.
After the April 2007 Meeting:
20.1Following the April 2007 Meeting, Mr Chorazy and Mr Peisley discussed the matter further and the following was discussed:
(1)Mr Peisley asked Mr Chorazy whether, under the arrangements for the Second Period, there was a requirement to obtain professional indemnity insurance;
(2)Mr Chorazy advised Mr Peisley that there was no requirement for separate indemnity insurance as there was adequate coverage provided by the First Respondent;
(3)Mr Peisley asked Mr Chorazy to provide him with a copy of [scil: the] indemnity insurance provided by the First Respondent;
(4)A copy of the indemnity insurance was not provided to Mr Peisley at any time.
Working during the Second Period
21.1At all times once the Second Period commenced, the Corporate Associates:
(1)continued to perform the same sales duties as they had previously;
(2)were expected not to work for any other organisation other than the First Respondent;
(3)continued to attend the premises of the First Respondent on a regular basis;
(4)met with clients at the First Respondent’s premises;
(5)continued to represent themselves to prospective clients as working for the First Respondent;
(6)continued to use the First Respondent’s mobile phones;
(7)had business cards indicating they represented CGH, the holding company of the First Respondent;
(8)used the First Respondent’s letterhead for all correspondence from Corporate Associates to clients or prospective clients;
(9)used the First Respondent’s equipment, including computer and phones, when in the office;
(10)had brochures, sales material and forms in the name of the First Respondent;
(11)filled in sales reports, outlining which appointments the Corporate Associates had made and attended and faxed these to First Respondent;
(12)had either their own desks or their own offices or shared cubicles with other Corporate Associates within the premises of the First Respondent;
(13)submitted invoices to the First Respondent for completed sales so as to be paid a commission on those sales.
21.2Once the Second Period commenced:
(1)there was no substantive change in the duties the Corporate Associates performed from those duties performed during the First Period;
(2)there was no substantive change in the way the work was performed from the way work was performed during the First Period;
(3)there was no change in the reporting structure from the structure that had been in place during the First Period; and
(4)there was no substantive change in the hours the Corporate Associates were expected to work from the hours they were expected to work during the First Period.
The Investigation
22.1The Applicant received two claims against the First Respondent, the first from Mr Young on 4 June 2007 and the second from Mr McFarlane on 14 August 2007 (the Claimants).
22.2The Claimants both sent letters of demand in regard to their underpaid entitlements to the First Respondent.
22.3On receipt of the Claim Notifications from the two Claimants the First Respondent wrote to the Applicant claiming Mr Young was an independent contractor but agreed to pay Mr Young as en employee to settle the claim quickly.
22.4The First Respondent stated that it would make payment to Mr Young on receipt of a letter from him confirming that upon payment the matter would be closed.
22.5Mr Young supplied the letter referred to at 22.4.
22.6The First Respondent did not make payment to Mr Young referred to at 22.4.
22.7The First Respondent also claimed Mr MacFarlane was an independent contractor.
22.8Following a period where both Claimants attempted to negotiate a settlement with the First Respondent, the First Respondent and both Claimants were offered formal mediation by the Applicant.
22.9The parties accepted the offer of mediation and the mediation was conducted on 19 September 2007.
22.10The mediation was conducted between Mr Mertes, Mr Chorazy, Mr Young and Mr MacFarlane.
22.11The mediation was unsuccessful.
22.12The matter then moved to full investigation.
22.13Inspector Craig contacted Mr Mertes and Mr Chorazy in regard to the claim.
22.14The Inspector gathered statements regarding the non-payments and the contracting issues.
22.15The First Respondent threatened legal action against the Claimants for pursuing their claims.
22.16The First Respondent threatened legal action against the Inspector.
22.17Two Notices to Produce, dated 23 and 24 October 2007, were sent to Mr Mertes.
22.18Two Notices to Produce, dated 23 and 24 October 2007, were sent to Mr Chorazy.
22.19The First Respondent provided the documents and written statements in regard to the way the contracting arrangements had been put into place with the employees and the circumstances of the Claimants’ terminations of service.
22.20Breach Notices were issued by the Applicant to Mr Mertes and Mr Chorazy in respect of each Claimant.
22.21The Breach Notices in respect of Mr Young were dated 12 November 2007 and were due to be complied with by 26 November 2007.
22.22The Breach Notices in respect of Mr Young sought payment to Mr Young of $4,303.88.
22.23The First Respondent partially complied with the breach amount of Mr Young dated 13 November 2007. The First Respondent paid $2,393.60 net.
22.24In a letter dated 29 November 2007 the First Respondent’s solicitors indicated that the First Respondent disputed the payment of hours worked by Mr Young between 30 April 2007 and 31 May 2007.
22.25The Breach Notices in respect of Mr McFarlane were dated 13 November 2007 and were due to be complied with by 27 November 2007.
22.26On 29 November 2007 the First Respondent paid the amount in the Breach Notice for Mr MacFarlane in the amount of $1,588.
22.27The First Respondent did not complete the records of payment information or review their records as required by both Breach Notices.
22.28The Inspector made the First Respondent’s solicitor aware that the First Respondent must:
(1)rectify the entire breach referred to in the Breach Notice in relation to Mr Young;
(2)review and rectify and other breaches; and
(3)provide records of payments and details regarding the steps they have taken to rectify the breaches.
22.29On 3 December 2007 the Inspector advised the First Respondent’s solicitors that she had determined that the payment for time worked by Mr Young still stood and needed to be paid.
22.30A final Breach Notice was issued to Mr Mertes on 7 December 2007 in relation to the breach for Mr Young.
22.31A final Breach Notice was issued to Mr Chorazy on 7 December 2007 in relation to the breach for Mr Young.
22.32The Breach Notices of 7 December 2007 stipulated the remainder of the payment needed to be made and that the written notification of correction of payment of the breaches was required.
22.33The Respondents did not supply the documentation as required in relation to the rectification of the other breaches outlined in the Breach Notice of 7 December 2007.
22.34By way of letter dated 14 December 2007, the First Respondent’s solicitors informed the Applicant that the First Respondent would not make a payment in respect of the balance of Mr Young’s Breach Notice.
22.35A further Notice to Produce, dated 17 December 2007, was issued by the Applicant to Mr Mertes.
22.36A further Notice to Produce, dated 17 December 2007, was issued by the Applicant to Mr Chorazy.
22.37A further Notice to Produce, dated 30 January 2008, was issued by the Applicant to Mr Mertes.
22.38A further Notice to Produce, dated 30 January 2008, was issued by the Applicant to Mr Chorazy.
22.39The Inspector sent the First Respondent two further Requests for Records. These are dated 21 January 2008 and 18 February 2008.
22.40Responses to the Notice to Produce and the Requests for Records, dated 12 February 2008, were received by the Applicant.
22.41On 25 February 2008 Inspector Craig spoke with representatives of the First Respondent offering Mr Mertes and Mr Chorazy the opportunity to attend the Applicant’s office for an interview in relation to the claim.
22.42On 3 March 2008 Inspector Craig spoke with Mr Chorazy and invited him to attend the Applicant’s office for an interview.
22.43Mr Chorazy did not accept the offer made on 3 March 2008 to attend the offices of the Applicant for an interview.
22.44On 3 March 2008 Inspector Craig wrote to Mr Mertes and his legal representative inviting Mr Mertes to attend the Applicant’s office for an interview.
22.45Mr Mertes did not accept the offer made on 3 March 2008 to attend the Applicant’s offices for an interview.
22.46On 13 March 2008 Inspector Craig again wrote to Mr Chorazy and Mr Mertes inviting them to attend the Applicant’s office to participate in an interview.
22.47On 13 March 2008 an additional Breach Notice was issued to Mr Mertes in respect of Mr Young and Mr McFarlane.
22.48This 13 March 2008 Breach Notice included references to the section 900 of the WR Act breaches.
22.49On 11 June 2008 Inspector Craig wrote to Mr Mertes offering him the opportunity to participate in an interview regarding Mr Compton.
22.50On 5 August 2008 a Breach Notice was issued to Mr Mertes in respect of Mr Compton.
22.51On 21 August 2008 a Final Breach notice was issued to Mr Mertes in respect of Mr Compton.
22.52The Applicant commenced proceedings against the First, Second and Third Respondent on 17 December 2008.
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