Fair Work Ombudsman v Ecosway Pty Ltd
[2015] FCCA 202
•2 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| FAIR WORK OMBUDSMAN v ECOSWAY PTY LTD | [2015] FCCA 202 |
| Catchwords: INDUSTRIAL LAW – Alleged breach of breach of terms of modern award – failure to pay minimum wage, leave loading and penalties for work on weekends and public holidays – respondent denies liability on basis individual concerned was not an employee but was engaged as an independent contractor – matter fixed for hearing on liability in this court in May of 2015 – both parties originally sought hearing of the matter in this court – respondent now seeks transfer of proceedings to Federal Court – matters to be considered – resources of the court – complexity – question of general importance – balance of convenience and cost – fees in Federal Court for hearing are significantly greater – public purse considerations – wishes of the parties – interests of justice. |
| Legislation: Fair Work Act 2009, ss.42, 45, 357, 539(2) Federal Circuit Court Act of Australia Act 1999, s.39 |
| Re Porter; Re Transport Workers Union of Australia [1989] 34 IR 179 Aon Risk Services Australia v Australian National University [2009] HCA 27 |
| Applicant: | FAIR WORK OMBUDSMAN |
| Respondent: | ECOSWAY PTY LTD |
| File Number: | ADG 189 of 2013 |
| Judgment of: | Judge Brown |
| Hearing date: | 28 January 2015 |
| Date of Last Submission: | 28 January 2015 |
| Delivered at: | Adelaide |
| Delivered on: | 2 February 2015 |
REPRESENTATION
| Counsel for the Applicant: | Ms Walker |
| Solicitors for the Applicant: | Office of the Fair Work Ombudsman |
| Counsel for the Respondent: | Mr Austin |
| Solicitors for the Respondent: | Scales & Partners |
ORDERS
The trial listed in this Court scheduled to commence on 18 May 2015 be vacated.
The proceedings herein be transferred to the Federal Court of Australia at Adelaide for hearing and determination.
The costs of this application be reserved.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 189 of 2013
| FAIR WORK OMBUDSMAN |
Applicant
And
| ECOSWAY PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant in these proceedings, the Fair Work Ombudsman “the FWO”, has standing under the provisions of the Fair Work Act 2009 (Cth) “the FWA” to commence proceedings against any person whom it believes has breached the terms of any applicable modern award or provision of the FWA in respect of the employment of any other person.
The respondent to these proceedings, Ecosway Pty Ltd “Ecosway”, is a subsidiary of a company incorporated in Malaysia, Cosway (M) Sdn Bhd “Cosway”. Besides Australia, this company has operations in North and South America; Europe; and Asia.
Cosway sells and distributes hair and beauty products, organic food products, skin care products and homewares worldwide through outlets in Singapore, Indonesia, Thailand, Japan, South Korea, USA, Mexico, Columbia, Russia, Hong Kong, UK, New Zealand, as well as Australia and other countries.
Cosway owns all the shares in Ecosway, which is incorporated in Australia. It describes itself as an international networking business not a retailer. It asserts that it pays a commission to any other business or store operator who sells any of its products to a customer, through any one of a variety of channels.
Ecosway sells its products through business owners, affiliated with it, who sell through networks of contacts, which they the business owners have established themselves; or through actual outlets, which are operated by persons, who are designated as store operators.
Ecosway has developed a specific client base, the members of which are designated as VIP members. They are entitled to discounts and reward points. VIP members pay a small annual fee or achieve their status as a consequence of the amount of their purchases.
Business members sell Ecosway products to the VIP members, whom they have attracted. Business members pay a registration fee to Ecosway and receive documentary advice about how to sell products effectively. They receive a commission on the products which they sell. Business members are not linked to a specific location, but sell products in private homes or at meetings.
Store operators sell Ecosway products from a specific location. They can also sign up VIP members. Such operators many sign up other business members to sell products for themselves. They gain a commission from their down line network of business members.
Chee Fee Phan is the general manager of Ecosway in Australia. It is his evidence that the main way Ecosway distributes its products is through its business members, whom he describes as being independent persons, usually operating their businesses from home. They receive a commission of 5% on each item they sell.
Store operators are also regarded as business members by Ecosway. Mr Phan deposes that they sell Ecosway products on consignment from the company. They receive a 12% handling fee, as well as a 5% commission on each item sold. It is Mr Phan’s position that store operators are not employees of Ecosway but are to be regarded as independent contractors or self-employed business operators.
Heather Ruth Wardell joined Ecosway, as a business owner, in early 2010. She was signed up by two other business owners. Later, between March 2011 and September 2012, she was a store operator at two separate locations in suburban Adelaide, firstly at Unley and then at Kensington Park.
Ms Wardell entered a Store Operator Agreement with Ecosway on 23 February 2011. It is her evidence that she derived a meagre income as a business owner, at best $245.00 per month. In addition, she asserts that she earned around $1,100.00 per month as a store operator at Unley and less when the location was moved to Kensington Park.
Between June and September of 2012, Ms Wardell made complaints to the FWO regarding these arrangements with Ecosway. She asked the FWO to determine whether she was to be regarded as an independent contractor (as she had been told she was by Ecosway) or was due some form of wage as an employee of Ecosway. She was concerned that she had been working in excess of 45 hours per week for what amounted to around $5.00 per hour, which she considered grossly unfair.
As a consequence of this complaint, the FWO appointed a Fair Work Inspector, Joanne Latz to investigate Ms Wardell’s claims. Ms Latz interviewed Ms Wardell and Mr Phan and examined many documents regarding Ecosway’s operations in Adelaide.
Ultimately, Ms Latz reached the conclusion that Ms Wardell was to be regarded as an employee of Ecosway and her employment to be covered by the terms of the General Retail Industry Award 2010, which is a modern award as defined by provisions within the FWA. In addition Ms Latz concluded that some of the National Employment Standards, particularly relating to holiday pay had also been breached.
Ms Latz calculated that, after the deduction of handling fees of $38,524.62 and network income of $3,269.76, paid to Ms Wardell by Ecosway, during the period of the relationship between the two, she (Ms Wardell) was due a further sum of $32,116.80 by way of wages as a consequence of her employment at both the Unley and Kensington Park outlets.
Ecosway’s solicitors advised the FWO that its client had sought extensive advice from a firm of solicitors based in Sydney prior to starting its operations in Australia. It was given to understand that its various store operators were not to be regarded as employees for the purposes of applicable domestic Australian Law and it would not be regarded as having breached any Australian Industrial or Consumer legislation.
The FWO takes a different view and commenced proceedings in this court on 2 July 2013. It contends that Ms Wardell was an employee of Ecosway because she performed a variety of duties for it, including:
·opening and closing its store, at specific times;
·displaying its stock, as directed;
·selling its goods;
·banking the proceeds; and
·regularly reporting to Ecosway management in respect of sales.
The FWO further contends that Ecosway controlled the activities of Ms Wardell, in particular directed her as to opening times, how stock was to be displayed and like matters. As such, it submits that Ms Wardell cannot be regarded as an independent contractor of Ecosway.
In this context, in the statement of claim filed with its application, the FWO seeks declarations and the imposition of pecuniary penalties for what it alleges have been five contraventions of the applicable modern award and two contraventions of National Employment Standards [see FWA at sections 44 & 45] .
These contraventions relate to a failure to pay the minimum wage; failure to pay overtime; failure to pay penalties for evening work; failure to pay penalties for work on Saturdays; failure to pay leave on termination; and failure to pay leave loading.
The maximum penalty for these contraventions is set out in section 539(2) of the FWA. As Ecosway is a corporation the maximum penalty for each contravention of the applicable modern award or breach of National Employment Standards is $33,000.00.
In addition, the FWO alleges that Ecosway has breached the provisions of section 357 of the FWA, which renders it a civil offence for an employer to misrepresent to one of its employees that he or she is performing work as an independent contractor, pursuant to a contract for services, rather than through a contract of employment. Again the maximum penalty is one of $33,000.00.
In addition to civil penalties and the making of declarations, the FWO seeks an order for the payment of the wages, which it says are due to Ms Wardell.
In its defence filed on 19 November 2013, Ecosway denies these various allegations of breaches of the FWA. It asserts that Ms Wardell was an independent contractor, pursuant to an agreement with it made on 24 February 2011. As such, neither the modern award nor the National Employment Standards applied to her.
Essentially, it is contended that there were no controls or any form of supervision exerted by Ecosway upon Ms Wardell, who was running her own enterprise. It denies the allegation of sham contracting regarding her employment.
The history of the matter to date
Regrettably, the course of the proceedings to date has not been a smooth one. Originally the matter was allocated to the docket of Judge Lindsay, who has since resigned his commission with the court. Following an unsuccessful mediation, the matter was fixed for a three day liability hearing on 23 July 2014. This hearing was allocated by Judge Lindsay on 13 December 2013 and orders were made for each party to file evidence.
The hearing allocated for 23 July 2014 did not proceed. On 21 March 2014 the solicitor for the FWO filed a bundle of relevant documents. Bundle is something of a misnomer. The documents were voluminous and consisted of eight thick volumes. Later, on 16 May 2014, the respondent filed its own volume of documents. All in all, as a common tender, there are in excess of 3,300 pages of documents, said to be relevant to the proceedings.
From the perspective of the respondent, there is much at stake in these proceedings. It has arrangements with other individuals throughout Australia, at other outlets, which it asserts are analogous to the arrangement it had with Ms Wardell. Ecosway vehemently asserts that the arrangements surrounding these individuals are extraneous to the application of the Fair Work Act 2009. In these circumstances, it retained Mr Duggan of senior counsel to represent it in the proceedings scheduled for mid-July.
Due to the resignation of Judge Lindsay, the matter was allocated to me. On 25 March 2014, with the consent of each of the parties, I confirmed the liability hearing in July and made further orders for the filing of material, including directions as to when objections were to be taken to any aspect of the evidence.
On 23 July 2014, it was Mr Duggan’s position that the trial could not proceed due to the manner in which the various documents, which each party asserted were relevant to the proceedings, had been thus far collated. Mr Duggan’s view was that the manner in which the documents had been collated was, in effect, unworkable and was likely to lead to confusion and the almost certain over-running of the trial.
At this stage, Mr Duggan viewed the estimated duration of the trial, at three days, as being woefully inaccurate. He believed the trial was likely to take between seven and ten days. He further submitted that it would be necessary for there to be a more rigorous compilation and indexation of the various documents on which each party relied and which he asserted were illustrative of the true nature of the relationship between Ecosway and Ms Wardell and, by necessary implication, other persons in similar contractual relationships, with the respondent, throughout Australia.
Ms Walker, counsel for the FWO was not unsympathetic to the position advocated by Mr Duggan. She agreed that much work needed to be done in order to regulate how the tender to the court of the voluminous documents relevant to the case was to be managed.
Looming large in these considerations was the tender of documents from the file of the solicitor who had earlier advised the respondent about its business operations in Australia, which was said to be particularly relevant to the issue of sham contracting.
It is a defence to a charge of sham contracting for the employer concerned to demonstrate that it did not know and did not act recklessly, when the representation relating to the independent status of the employee concerned was made.
Issues arose as to how the solicitor, who had advised Ecosway, as to its Australian structure, was to give evidence. From Ecosway’s perspective, it was concerned that, if the case was determined in a manner adverse to it, there would be serious ramifications for it, as it would have to review the status of its many other store operators throughout Australia. It might also be liable for further prosecution for breaching industrial regulation in respect of numerous other individuals.
In addition, in such circumstances, it was likely to wish to pursue the solicitor concerned for some civil remedy arising from negligent misstatement or breach of contract. Clearly, in such a scenario, there was the potential for a serious conflict of interest to arise between Ecosway and its former solicitor.
In all these circumstances, there was general consensus between Ms Walker and Mr Duggan that it was inappropriate for the July 2014 trial to proceed. Essentially, it was conceded that three days was inadequate to complete it and work needed to be done on the tender bundle. Mr Duggan also wished to give thought as to how Ecosway’s former solicitor should give evidence and ascertain indeed whether that person wished to be independently represented in the case.
At this stage, I raised with counsel for each of the parties, as I am entitled to do pursuant to the provisions of section 39 of the Federal Circuit Court of Australia Act 1999, the possibility of the proceedings being transferred to the Federal Court. The section empowers the court to transfer proceedings either on its initiative or on the application of a party.
The matters to be considered on such a transfer are enumerated in section 39(3) and are as follows:
·the applicable rules of court;
·whether proceedings are pending in respect of an associated matter in the Federal Court;
·whether the resources of the Federal Circuit Court are sufficient to hear and determine the proceedings;
·the interests of the administration of justice.
If proceedings are transferred, the Federal Circuit Court may make any order it considers necessary pending the disposal of the matter in the Federal Court [section 39(5)]. No appeal lies from the decision to transfer [section 39(6)]. However, as with all discretions, I take it, the discretion to transfer a matter to the Federal Court is to be exercised judicially.
The applicable rule of court, dealing with transfer, is Rule 8.02 of the Federal Circuit Court Rules 2001. If a party wishes the transfer of a proceeding, it must be made on or before the first return date, unless the court orders otherwise. An application for transfer must be supported by an affidavit. In addition, pursuant to Rule 8.02(4), the following factors are identified as relevant to the exercise of the discretion to transfer:
·whether the proceedings entail a question of general importance such that it would be desirable for there to be a decision of the Federal Court on the issue;
·whether, if the proceedings are transferred, it would lead to a reduction of costs and be more convenient to the parties concerned;
·whether the proceedings could be heard sooner;
·the availability of particular procedures appropriate to the class of proceedings concerned;
·the wishes of the parties.
Neither Ms Walker nor Mr Duggan advocated for the transfer of the proceedings to the Federal Court. Mr Duggan conceded that the case was one of significant moment for his client, but did not contend that the issues raised by the case were of such moment that it should be transferred to the superior court.
From Mr Duggan’s perspective, the case raised management or logistical issues, stemming from the number of documents which were likely to be in issue and which would have to be consulted by the judge, counsel and witnesses regularly throughout the proceedings. He was confident these logistical issues could be largely resolved through a re-organisation of the tender bundle and preparation of an agreed index.
In addition, neither party asserted that the case raised issues of particular legal novelty, although from Mr Dugan’s perspective there were elements of complexity. It being generally conceded that the distinction between contracts of employment and contracts for services was a path relatively well trammelled in the jurisprudence of this country, over the last century or so, although not any less controversial for all of that.
In short, neither party, in mid-2014, appeared anxious to leave the Federal Circuit Court. For my part, I was concerned that the proceedings had been on foot for about a year, by that stage, and there had been the disruption to the orderly management of the case arising from the resignation of Judge Lindsay.
In these circumstances, I felt duty bound to do my best to accommodate the case and at least give the parties a firm date on which the matter could be heard. I acted on the assumption, provided by Mr Duggan, that it would be better to allocate too much time, rather than too little. His topside estimate, for the case, if the respondent’s former solicitor did not provide an affidavit and was independently represented, was ten days.
It is a significant thing for me to find ten consecutive days for hearing. The Federal Circuit Court is a busy first instance court with a wide jurisdiction in family law and matters of general federal law. One of the characteristics of family law courts, particularly at first instance, is a high volume of matters, often requiring the urgent resolution of issues relating to the care of children.
This leads to the need to slot in matters at short notice, often in the morning or afternoon before and after the time courts have traditionally convened in this country, so that the matters can be determined expeditiously, on an interim basis. At the same time, the court must deal with the final hearing of cases, which have moved beyond the interlocutory stage.
In addition the Federal Circuit Court operates a docket system where cases are allocated to the one judicial officer permanently. This is to avoid the evil of litigants having to reiterate their cases to a fresh judge, upon the making of an interlocutory application. This mechanism is said to be an aid to efficient case management and to hasten the finalisation of cases.
Accordingly, at any one time, each judge of the Federal Circuit Court has an individual docket comprising many individual files, which he or she is required to manage from instigation to completion. Necessarily the docket system creates many calls on the time of the judge concerned, both in pre-trail management and at final hearing. The rationale of the docket system being that the court is to be a helping one, which is readily accessible to persons from all walks of life.
Aspects of the general federal law jurisdiction of the court also encompass areas of law, which are to be characterised as areas of high volume. These areas are particularly the judicial review of decisions of the Refugee and Migration Review Tribunals and small claims arising under the Fair Work Act 2009. Many applicants in these types of application are unrepresented, as they often are in family law matters.
The Federal Magistrates Court (or Service), as it was then known was inaugurated in 2000. The epithet Service was particularly evocative of the intention of the then Attorney-General. The court was intended to augment the work of the superior Federal Courts by easing the work-load of the Federal and Family Courts, by relieving those courts of less complicated cases, so each could concentrate on matters of greater complexity, which by necessary implication were likely to take longer to hear.
The then Attorney-General, Mr Williams said as follows in the Second Reading Speech introducing the Federal Magistrates Bill 1999 into the Commonwealth Parliament:
“The government proposes that the federal magistrates develop a new culture, with an emphasis on user-friendly, streamlined procedures. This will be especially important for litigants who do not have legal representation. The Federal Magistrates Service will be as informal as possible, while remaining consistent with the discharge of judicial functions…
Undoubtedly, considerations of this kind led to the insertion of section 42 into the Federal Magistrates Act. This section, which remains in force with the commencement of the Federal Circuit Court, reads as follows:
“In proceedings before it, the Federal Magistrate must proceed without undue formality and must endeavour to ensure that the proceedings are not protracted.”
After consultation with my own diary and the diaries of Ms Walker and Mr Duggan, ten consecutive days were found for the hearing of the current case, which were convenient to all. Those days were between 18 and 29 May 2015. Thereafter, the case was adjourned to 24 September 2014 for the court to oversee management of the trial, particularly in respect of the tender of documents in the case, which had been a particular concern of Mr Duggan.
On 24 September, further directions were made regarding the exchange of indexes of documents between the parties and for the filing of trial affidavits. Both Ms Walker and Mr Duggan were sanguine that the tender bundle was now manageable.
One major issue remained. It concerned how the former solicitor for Ecosway was to give his evidence. In addition, it was asserted by Ecosway that it would be more convenient if Mr Phan gave his evidence in chief viva voce, rather than by affidavit. These issues were listed for a short interlocutory hearing on 28 January 2015.
Otherwise, it was my understanding there were not likely to be many other procedural issues, requiring adjudication, arising before the dates scheduled for the final hearing.
It is now the case that there has been a fresh tender of the bundle of documents each party believes are relevant to the case. These documents have now been indexed and paginated. From Ecosway’s perspective, the documents which it believes are relevant to its contention that there a contract for the supply of services between it and Ms Wardell have been integrated in a rationale way with other documents on which the FWO relies to denote a contract of employment. In particularly the file of legal advice provided to it, which is relevant to the sham contracting allegation has been rationalised and re-organised.
The current application
The issues regarding how Mr Kean, Ecosway’s former solicitor and Mr Phan are to give there evidence has been over-taken by other events. On 27 January 2015, an application was filed, by Ecosway, seeking the vacation of the May hearing dates and the transfer of the case to the Federal Court in Adelaide.
The basis for the transfer is set out in an affidavit of Mr Parr, the solicitor for Ecosway. Mr Parr deposes that Mr Duggan has very recently returned the brief in the matter and, in his place, Mr Neil SC of the Sydney Bar has been retained. In general terms, I have been informed that Mr Neil has formed a different view as to the more expedient way, from his client’s perspective, for the case to be disposed of.
Mr Neil favours a transfer of the matter to the Federal Court. He, like Mr Duggan before him, characterises the case as concerning an issue of some complexity surrounding what is categorised as a multi-level marketing operation. The business operation of Ecosway is characterised as being both novel and unique.
Mr Parr deposes as follows:
“Given the novel and unique nature of the respondent’s business and the importance of this matter to its business owners and store operators this is a matter that should properly be adjudicated upon by the Federal Court of Australia.
The issue of the standing of independent contractors is central to the operation of multi-level marketing industries carrying on business in the various states and territories of Australia and so is of such general importance that it would be desirable that there be a decision of the Federal Court of Australia on this issue.
Given the general importance of the issue it is anticipated that if the respondent were to be successful at trial the applicant would appeal the decision to the Federal Court of Australia. Likewise it is anticipated that if the applicant were to be successful the respondent would appeal to the Federal Court of Australia. The hearing of the matter would save the costs of conduct of two hearings.”[1]
[1] See affidavit of Gregory Robert Parr filed 27 January 2015 at 9-10
The FWO has not formally responded to this application by the filing of a response or any affidavit material. The FWO has however considered its position. As a model litigant, it takes a neutral position. It would be content for the matter to remain in this court, which was the jurisdiction it originally selected. It would not oppose the transfer of the matter to the Federal Court.
However, there is one proviso attached to the position of the FWO regarding the issue of transfer. It concerns the application of the Federal Court and Federal Circuit Court Regulations 2012, which inaugurated a system of fees for users of both court. The fees are fixed by Federal Government regulation. As will become apparent in due course, the fees levied for proceedings in the Federal Court are significantly higher than those levied in the Federal Circuit Court.
The FWO will not oppose the transfer of the proceedings to the Federal Court if it is a condition of the transfer that Ecosway pay the setting down fee and all resulting daily hearing fees arising thereafter.
The setting down fee and daily hearing fee, in the Federal Circuit Court, is $590.00 per day. In the Federal Court, the setting down fee, for a corporation, is $5,535.00; the hearing fee for the 2nd to 4th day is $2,215.00; the hearing fee for the 5th to 9th day is $3,985.00; and for the 10th to 14th day $7,860.00.
If length denotes complexity, the Federal Government has denoted that longer and more complicated cases should attract a greater cost to the court user concerned. Greater fees again apply to publically listed companies. Pursuant to Section 1.04 the FWO, as a public authority, is deemed to be a corporation.
Accordingly, the potential court costs, if the matter is transferred to the Federal Court, are significantly more than if the matter remains in this court. On my rough calculation, if the case takes around seven days, it would cost at least four times more. From the perspective of the FWO, this is a significant issue.
It contends that, in good faith and in the public interest, it selected what it considered to be the appropriate forum for the adjudication of the issue arising in the matter. The case, from its point of view, concerns one putative employee, who is possibly owned a relatively small amount of wages, if found to have been engaged by Ecosway on a contract of employment. The FWO does not regard the case as being one of inherent complexity.
One of the factors influencing the FWO, in its choice of forum, was the costs to be levied by the court concerned. Clearly the Federal Circuit Court is considerably cheaper. As an entity funded by the public purse, this was a significant factor in the FWO determining to institute its prosecution of Ecosway in this court. Accordingly, as a pre-condition of its neutral stance to the transfer of the case, the FWO would seek an order that Ecosway be responsible for the payment of the necessary court fees in the Federal Court.
Pursuant to Section 2.03(3) of the Federal Court and Federal Circuit Court Regulations setting down fees and daily hearing fees are to be paid by the applicant concerned. However, Section 2.03(1) also provides as follows:
“A fee in relation to a proceeding is payable as set out in this section, unless the relevant court for a proceeding, or a Judge or Registrar of that court, directs otherwise.”
The expression relevant court is defined to mean that if the proceedings are in the Federal Court – that court; and similarly, if the proceedings are in the Federal Circuit Court – the Federal Circuit Court.
Mr Austin was not in a position to argue this issue extensively on the day his client’s application for transfer was listed, other than his client opposed it and would want Mr Neil to argue the point. In my view, there was something counter-intuitive, in the court adjourning the proceedings to enable senior counsel to come from Sydney to Adelaide to argue a point which relates essentially to court administration.
Either the matter is of such complexity that it warrants transfer to the Federal Court or it is not. The legislature has seen fit to allow exemption to the fees applicable in both courts, particularly in the case of a person who is in receipt of legal aid.
If the case remains in this court, clearly it must be the relevant court, so far as the setting of fees are concerned. If the case is transferred to the Federal Court, its judges or registrars become the appropriate arbiters of the fees to be levied and from whom. On transfer, the proceedings are in the Federal Court. I do not think I have the authority to transfer the proceedings subject to any condition relating to the payment of fees.
Certainly neither section 39 of the Federal Circuit Court Act nor Rule 8(2) of the Rules authorise a transfer of proceedings subject to the satisfaction of a condition. Proceedings are either transferred or not. It seems to me that the act of transfer severs my authority to make consequential orders in the proceedings in question. Essentially, on transfer the proceedings are no longer in the Federal Circuit Court.
It is not necessary, in the sense of having to be done to bring about the satisfactory transfer of the proceedings or in the sense of preserving the respective positions of the parties, for me to determine this issue prior to any transfer.
The federal legislature has determined that higher fees should attach to proceedings in the Federal Court. In my view, it is a matter for the Registrar of that court or the Judge hearing the matter, if it is transferred, to determine the issue of fees or, in the alternative, if the matter remains in this court, any issues, pertaining to fees, fall to me to determine.
However, the potential costs of proceedings, for one or other of the parties concerned, must for obvious reasons, be relevant to consideration of convenience and so be a relevant criterion to be considered on an application for transfer.
I now turn to consider each of the criteria, relevant to transfer, set out in Rule 8.02(4)
(a) Questions of general importance
Complexity, like beauty, is a matter very much in the eye of the beholder. In one sense, this case turns only on the relationship between Ms Wardell and Ecosway and what happened at the outlets in Unley and Kensington Park respectively. The wages said to be due to Ms Wardell amount to a sum of around $32,000.00, which is a figure which falls comfortably within the jurisdiction of the vast majority, if not all, lower level courts in this country.
I concede that the monetary amount of the claim is not only the determinative of the matter of complexity. These are also civil penalty proceedings, which potentially may render Ecosway liable to a significant monetary penalty and the sullying of its corporate reputation.
Again, this court is regularly called upon to adjudicate upon such issues, both at the liability and quantum stage. Indeed the FWA itself envisages both this court and the Federal Court imposing pecuniary penalties for breaches of the Act and does not differentiate in the quantum of the maximum penalty, which each court may impose. The range of penalty for each court is the same.
No doubt it was considerations of this kind, which dictated the FWO’s choice of this court in the first place. It engaged one of its officers, rather than a team of industrial inspectors, to investigate the matter and determine whether the applicable legislation had been breached. This entailed examining what Ms Wardell did at the two stores in question and what she was paid.
The FWO contends that what Ms Wardell did is neither likely to be controversial nor complicated to ascertain. She attended at a fixed location, displayed goods for sale emanating from Ecosway, which she sold to persons, who came onto premises bearing the name of the respondent. Ms Wardell did not get paid a wage, she was paid a commission. None of these issues is likely to be controversial.
Rather, what is controversial is the label or legal designation to be attached to the relationship between Ms Wardell and Ecosway. I am not determining that issue at this stage, as I have not been called upon to consider the evidence to any significant degree. I accept however that the case law regarding the differentiation between individual contracts of employment and contracts for the provision of services is extensive.
In general terms, the distinction turns on the relevant fact finder identifying and weighing a number of indicia, none of which are likely to be determinative alone of the issue. Some of these indicia are likely to include the following:
·Is the essence of the contract for the supply of work or skill of the person concerned;
·Is the person a part and parcel of the employer’s organisation or is he or she carrying on business on his or her own account;
·Is the person engaged to produce a result;
·Is the person under the control or direction of the employer?
No doubt, each of the parties, in the present case, can muster other indicia, which support its particular position and can throw a different light on salient issues as asserted by the other party. That after all is the nature of the fact finding task. It does not necessarily render such a task inherently intellectually complex.
In addition, this central legal controversy is one which arises in a variety of contexts, most notably in the area of workers’ compensation and negligence. As such, it is an issue, which courts and tribunal falling at the lower levels of the administration of justice, have frequently been called upon to determine, in the past.
It is also correct that the decisions of these lower level courts have frequently been the subject of appeal to superior courts, including the High Court. In my view, it is not an area of jurisprudence which, of itself, is inherently novel, although the circumstances surrounding this particular case may not have been the subject of consideration at a superior court level.
Where the relevant indicia of either a contract of employment or a contract for services are to be found in the three thousand odd pages of documents already tendered is unclear to me. No doubt there will be some documents which support one view and others which support the contrary view. No one document is likely to be determinative. Again, although voluminous, the number of documents is not likely to indicate the degree of complexity.
Gray J considered these issues in Re Porter; Re Transport Workers Union of Australia [2] particularly the balancing of indicia of the kind I outlined above. His Honour said as follows:
“A court determining whether a particular relationship is that that of employment or of some other kind can therefore only resort to the process of balancing all of the factors, or…as they are called in other cases, the “indicia”. In truth, the result may be a matter of impression. It is unfortunate that this is so. It should not be necessary for people to obtain a decision of a court, in order to know the true nature of their relationship. Unfortunate or not, that is the case. Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive. A court will look at all of the terms of the contact, to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it….the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck.”
[2] Re Porter; Re Transport Workers Union of Australia [1989] 34 IR 179 at 184
This is the task for whichever court ultimately is called upon to determine this case. The task may be controversial and multi-faceted but, in my view, it is not necessarily complex because of that. The court must be careful not to confuse complexity with the import of consequences of its determination for one or other of the parties concerned.
From the perspective of Ecosway, the complexity of the case comes from two considerations. Firstly, a consideration of its business itself, which is said to be both novel and unique. Secondly, the potential ramifications, for its business, throughout Australia and possibly for other operators, who engage in what is termed multi-level marketing in Australia. Again, whether this is mere verbiage or a question of whether it quacks or not, is unclear to me.
Underpinning Ecosway’s position is its contention that it went to a great deal of trouble and expense to ensure it was compliant with Australian domestic law. As I understand it, a significant proportion of the three thousand odd pages of documents tendered in these proceedings go to this aspect of the case and support Ecosway’s position that firstly Ms Wardell was an independent contractor at relevant times and secondly the relevant officers of Ecosway genuinely and without being reckless considered this to be the position.
There is a tension between Ecosway asserting its business is unique but that the outcome of the case will have implications for other business operating throughout Australia, which engage individuals to sell products to others through networks of customers, on the basis of commission.
In general terms, I accept Ecosway’s assertion that the outcome of the case may potentially affect others apart from itself and Ms Wardell. Those others are obviously other store operators of Ecosway, in other areas of Australia and perhaps, although this has not been delineated with any degree of clarity, other individuals who engage in analogous marketing practices to Ecosway.
As Gray J indicated in Porter, whether a contract is one of employment or something else is a matter of impression. As a consequence different judicial minds may form different impressions of factual matters and place weight on different indicia. Given the outcome of this case may have consequences for other persons I accept that it is likely to be desirable that there be a more authoritative determination, at a higher level, within the Federal Judicature.
(b) Cost and convenience
It will be more costly for the proceedings to be heard in the Federal Court by dint of the fees levied in that court. The different in cost is significant. If transferred, the cost will mostly likely fall on the public purse, unless a judge or registrar of the Federal Court determines otherwise.
In my view, this is a factor which favours this court retaining the matter. It will remain in the jurisdiction, which the industrial regulator deemed most appropriate and expedient.
Mr Parr asserts that, regardless of the outcome of the case in this court, there will be an appeal. This may be so. I do not know, as I do not know what the result of the case will be. I accept however, that its outcome has much significance for Ecosway and possibly for Mr Kean. As such, it seems likely that, if the decision of this court is adverse to Ecosway, the overwhelming probability is that there would be an appeal.
The Federal Court is empowered to hear appeals from this court. Such appeals are to be heard by a full bench of that court, unless the Chief Justice determines that a single judge is to hear the appeal. An appeal from a judgement of the Federal Circuit Court is not conducted de novo nor is it an appeal in strictu sensu. Such an appeal is conducted as a re-hearing of the original application.
In these circumstances, I accept Mr Parr’s submission that there is the possibility of Ecosway being put to greater expense, if the proceedings are not transferred, because there may be more than one hearing. This ties in closely with my acceptance of the submission that it is preferable that there be the most authoritative determination of the issue sooner rather than later.
(c) Where the proceedings will be heard sooner
As matters currently stand, this court is in position to hear the matter in approximately three and a half months’ time, after the matter has been on foot for over eighteen months and after the court itself has canvassed the issue of transfer and been rebuffed. This rebuff, it would seem, has stymied any prospect of the case coming on sooner in the Federal Court than in this one.
The import of Rule of 8.02(2) is that applications for transfer should be made as soon as possible. For obvious reasons this will provide the transferee court with the maximum amount of flexibility to accommodate the case transferred to it and so ensures that the interests of justice are not frustrated by delay. The lateness of the application and the fact that it is likely to delay the fixing of the matter are factors which militate against the transfer.
(d) Availability of appropriate procedures
To date, in my view, the proceedings have been conducted with a high degree of cooperation between the parties. The FWO agreed to the earlier vacation of the liability hearing dates because it accepted that more work needed to be done in respect of the tender bundle.
This is not a case in which there have been a plethora of interlocutory application or disputes about discovery. There remains some level of uncertainty about how Mr Keen will provide evidence. I also accept that Mr Neil has only been recently retained and has not as yet had an opportunity to consider the matter in depth. However, this does not seem to be a case which requires specific case management procedures.
(e) The wishes of the parties
It is a significant thing that Ecosway wishes the case to be heard in a superior court of record. It is a court of equity and law. I have no reason to consider that Ecosway wishes the transfer for any capricious or tactical reason.
The thrust of Mr Parr’s affidavit is that his client has much at stake in these proceedings and wishes to have the most authoritative determination of the questions surrounding its chosen mode of operation as soon as is possible. Its view that this will be provided by the Federal Court is, of course, supported by the status of that court, which is superior to this one.
The FWO, to its credit as a model litigant, recognises the validity of the wishes of Ecosway and acknowledges the moment of the proceedings for it. As such, it has taken a neutral position in regards to the issue, in recognition of the entitlement of a litigant to proceed in the forum of its preference, if this can be done without injustice or inconvenience to its opponent.
In all these circumstances, I do not believe that I am in a position to blithely over-rule the wishes of Ecosway. I also acknowledge that, as a result of the recent involvement of Mr Neil, its views have changed. Again, I do not consider that there is anything sinister in this change of views. For obvious reasons, Ecosway wants to put its best foot forward and engage in the litigation in the forum it believes is most appropriate. It is understandable that it would wish to follow the advice given to it by its new senior counsel in this regard.
Conclusions
All these considerations outlined above are to be considered within the framework provided by section 39(3) of the Federal Circuit Court Act, which requires the court itself to consider whether it has the resources to hear and determine the case concerned and whether it is in the overall interests of justice for it to be transferred to a superior court.
As I have already indicated, the Federal Circuit Court is a busy first instance court, providing a forum for the quick and speedy resolution of matters of less complexity to matters of more complexity, which are more appropriately determined in the Family and Federal Courts because of the superior status of those courts.
The Productivity Commission has recently described the Federal Circuit Court, in a report for Government on Justice as follows:
“The first sittings of the Federal Magistrates Court were on 3 July 2000. The court was established to provide a simpler and more accessible service for litigants, and to ease the workloads of both the Federal Court and the Family Court of Australia. As a result of legislative amendments which recognise the work and status of the Court, the Federal Magistrates Court of Australia was renamed the Federal Circuit Court of Australia on 12 April 2013. The inclusion of the word ‘circuit’ to the name of the court highlights the importance of the Court’s circuit work in regional areas and its broad Commonwealth jurisdiction in both family law and general federal law. The jurisdiction, status and arrangements under which the Court operates have not changed. Its jurisdiction includes family law and child support, administrative law, admiralty, anti-terrorism, bankruptcy, copyright, human rights, migration, privacy and trade practices. State and Territory courts also continue to do some work in these areas.
The Federal Circuit Court shares its jurisdiction with the Federal Court and the Family Court of Australia. The intention is for the latter two courts to focus on more complex legal matters. The Federal Circuit Court hears most first instance judicial reviews of migration matters. In trade practices matters it can award damages up to $750 000. In family law matters its jurisdiction is similar to that of the Family Court of Australia, except that only the Family Court of Australia can consider adoption disputes, applications concerning the nullity and validity of marriages, and dealing with parenting issues under The Hague Convention. Otherwise, the Federal Circuit Court has jurisdiction to hear any matter transferred to it by either the Federal Court or the Family Court of Australia.”[3]
[3] Report on Government Service 2015 Volume C: Justice: Productivity Commission for the Steering Committee for the Review of Government Services at 7.9
A hearing of ten days represents a significant allocation of the court’s resources, which will inevitably affect other users of the court, particularly those already docketed to me. Just by dint of the potential length of the hearing, this case assumes some aspects of complexity, in how this court manages the many other matters docketed to it.
It is necessarily complex for a busy court, such as the Federal Circuit Court, which has many calls on its time and resources, to manage a case of ten days in duration, whilst at the same time managing other matters, which although not having the same temporal constraints as the current one, are matters of the highest moment for the individuals concerned in them.
These factors have to be balanced against one another. It is now recognised that courts have an obligation to ensure that their business is transacted effectively and efficiently, not only in the interests of individual parties concerned but also in the interests of other litigants and users of the court, whose cases are inevitably affected by how other cases in the system are managed.[4]
[4] See Aon Risk Services Australia v Australian National University [2009] HCA 27
Judicial resources are scare. The costs of justice are potentially great. In these circumstances, case managers have a responsibility to ensure that individual cases are heard by the appropriate courts at the appropriate level of judicial structures. It is in the interests of all users of the justice system that this occurs.
When both parties wished this court to determine the matter, I thought it incumbent that this court do what it could to accommodate the parties, particularly as, for the reasons outlined, the case encompassed issues falling within the parameters of complexity routinely dealt with by this court.
This consensus no longer prevails. The respondent wishes the matter to be transferred. After closely considering all the issues in the matter, I have come to the conclusion that it is appropriate that the proceedings be transferred.
It is, I think, in the interests of justice that a case involving senior counsel, which is anticipated to take between seven and ten days to complete and which is of great moment to one of the parties concerned be transferred to the superior court, particularly as this is the wish of that party.
It is also, I think, in the interests of other users of the court, that a matter of this type be transferred. Accordingly, with some reluctance, particularly because of the late stage at which the application is made, I have determined to vacate the May hearing dates and transfer the case to the Federal Court of Australia at Adelaide.
Having made that decision, I do not believe I have any authority to determine how the hearing fees are to be levied, as the matter is no-longer in this court.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding one hundred and twenty-six (126) paragraphs are a true copy of the reasons for judgment of Judge Brown
Associate:
Date: 2 February 2015
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