Gerob Investments Ballina Pty Ltd t/as Beach Life Homes v Compton
[2007] NSWWCCPD 180
•20 August 2007
WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:Gerob Investments Ballina Pty Ltd t/as Beach Life Homes v Compton [2007] NSWWCCPD 180
APPELLANT: Gerob Investments Ballina Pty Ltd t/as Beach Life Homes
RESPONDENT: Ian Lloyd Compton
INSURER:QBE Workers Compensation (NSW) Ltd
FILE NUMBER: WCC1100-07
DATE OF ARBITRATOR’S DECISION: 1 May 2007
DATE OF APPEAL DECISION: 20 August 2007
SUBJECT MATTER OF DECISION: Worker; deemed worker; clause 2 of Schedule 1 of the Workplace Injury Management and Workers Compensation Act 1998; calculation of earnings
PRESIDENTIAL MEMBER: Deputy President Bill Roche
HEARING:On the papers
REPRESENTATION: Appellant: Mulcahy Lawyers
Respondent: Bourke Love McCartney Young
ORDERS MADE ON APPEAL: Paragraph two of the Arbitrator’s decision dated 1 May 2007 is revoked and the matter is remitted to the same Arbitrator for the Respondent Worker’s current weekly wage rate and average weekly earnings to be re-determined in accordance with the reasons in this decision.
Paragraphs one and three of the Arbitrator’s decision are confirmed.
The Appellant Employer is to pay the Respondent Worker’s costs of the appeal.
BACKGROUND TO THE APPEAL
Ian Lloyd Compton (‘Mr Compton/the Respondent Worker’) is a qualified carpenter who is currently 62 years of age. From the 1970’s until October 2006 he was engaged (to use a neutral term) as a carpenter for a business that has used several different names. Mr Compton gave evidence that he had only ever been engaged by the same company or business, namely, Gerob Investments Pty Ltd t/as Beach Life Homes (‘Beach Life Homes/the Appellant Employer’) (see Mr Compton’s statements dated 4 December 2006, paragraph eight and 16 February 2007, page one). The nature of Mr Compton’s contractual arrangements with the Appellant Employer (whether he was an employee or an independent contractor) is the subject of the dispute before the Commission and will be considered in detail below.
On 11 October 2006 Mr Compton was engaged by the Appellant Employer as a carpenter on the construction of a new home (‘the Irish home’) when he fell from scaffolding on which he had been standing and suffered extensive and severe injuries. As a result of his injuries he has not been able to return to work. It is not disputed that Mr Compton has been and remains totally unfit for work. By letter dated 24 November 2006 Mr Compton’s solicitor made a claim for compensation on Beach Life Homes. The claim was not determined within the time limits under the legislation.
Mr Compton’s Application to Resolve a Dispute (‘the Application’) was registered in the Commission on 21 February 2007 seeking weekly compensation in the sum of $1,271.63 per week from 11 October 2006 to date and continuing and medical expenses. By its Reply filed on 12 March 2007 the issue identified was whether Mr Compton was a worker or an independent contractor.
The matter was listed for conciliation and arbitration on 23 April 2007 when Mr Compton was cross-examined and submissions were heard from both parties’ solicitors. In a reserved decision delivered on 1 May 2007 the Arbitrator found in favour that Mr Compton was at the time of his injury a worker or a deemed worker under Schedule 1 clause 2(1), of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’).
By an ‘Appeal Against Decision of Arbitrator’ filed in the Commission on 28 May 2007 Beach Life Homes seeks leave to appeal the Arbitrator’s decision.
LEAVE TO APPEAL
Monetary Threshold
Before proceeding to deal with an appeal the Commission must determine whether the application meets the requirements of section 352 of the 1998 Act.
The quantum in issue on the appeal is in excess of $5,000.00 and therefore the threshold in section 352(2)(a) of the 1998 Act is satisfied. The whole of the compensation claimed is in issue on appeal and the threshold in section 352(2)(b) is also satisfied.
Time
The appeal was lodged within 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act.
I grant leave to appeal.
PRELIMINARY MATTERS
Section 354(6) of the 1998 Act provides:
“(6)If the Commission is satisfied that sufficient information has been supplied to it in connection with proceedings, the Commission may exercise functions under this Act without holding any conference or formal hearing.”
Having regard to Practice Directions Numbers 1 and 6, the documents that are before me, and the submissions by the parties that the appeal can proceed to be determined on the basis of these documents, I am satisfied that I have sufficient information to proceed ‘on the papers’, without holding any conference or formal hearing, and that this is the appropriate course in the circumstances.
THE DECISION UNDER REVIEW
The ‘Certificate of Determination’, dated 1 May 2007, records the Arbitrator’s orders as follows:
“1.That the Commission has jurisdiction to determine this application.
2.That the Respondent pay the Applicant weekly compensation at the rate of $869.90 from 11 October 2006 to 11 April 2007 under s36 of the Workers Compensation Act 1987 and thereafter at the maximum statutory rate for a worker with one dependant pursuant to s37 of the Act.
3.That the respondent pay the applicant’s costs as agreed or assessed.”
ISSUES IN DISPUTE
The issues in dispute in the appeal are whether the Arbitrator erred in:
(a)finding that Mr Compton was a worker within the meaning of the 1998 Act (‘worker’);
(b)finding that Mr Compton was a deemed worker within the meaning of the 1998 Act (‘deemed worker’), and
(c)finding that Mr Compton’s average weekly earnings were $869.90 per week when there was no evidence to support that finding (‘earnings’).
REVIEW
The nature of a review and the role and function of a Presidential member on appeal has been considered in many cases in the Commission. In The King Island Company Limited v Deery [2005] NSWWCCPD 1 it was held at [19]:
“19. A Presidential Member on appeal has a specific and limited role in the review of a decision of an Arbitrator. The review is not a rehearing. The Presidential member is not dealing with the matter de novo and is not arriving at a fresh decision based on all of the evidence available at a later time (Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; Builders Licensing Board v Sperway Constructions (Sydney) Pty Ltd (1976) 135 CLR 616). The powers of the Presidential Member to revoke the decision pursuant to section 352(7) of the 1998 Act and to substitute a new decision in its place, are exercisable only where it is demonstrated that the decision of the Arbitrator is affected by some legal, factual or discretionary error (Allesch v Maunz (2000) 203 CLR 172). Alternatively, the Presidential Member may remit the matter back to the Arbitrator concerned, or to another Arbitrator, for determination in accordance with any decision or directions made.”
The nature of a review was considered by the Court of Appeal in Aluminium Louvres & Ceilings Pty Limited v Zheng [2006] NSWCA 34 where Bryson JA said at [38]:
“A review is a different process to an appeal and the matters which may be considered and the manner in which they may be considered are somewhat wider. See Boston Clothing Co Pty Ltd v. Margaronis (1992) 27 NSWLR 580 at 584 (Kirby P). An attack, on review or otherwise, on an Arbitrator's discretionary decision in controlling procedure may be based on the test stated in House v. R (1936) 55 CLR 499 at 504 - 505; but that is not the only basis on which the Presidential member may act. The powers of a Presidential member on review are somewhat wider and extend to power to reopen consideration of a matter of which an Arbitrator has disposed; the manner in which the powers of the Presidential member are to be exercised is itself the subject of discretion of the Presidential member.”
This passage was recently quoted with approval by McColl JA in South Western Sydney Area Health Service v Edmonds [2007] NSWCA 16 at [134] (‘Edmonds’). To describe the relative weight and relevance of the expert evidence as “a discretionary decision which could only be disturbed on House v The King principles” was described by McColl JA as “an over-generalisation” (at [133]).
Before an Arbitrator’s decision will be revoked on review it must be demonstrated that it contains or has resulted from an error of fact, law or discretion. The error must be such that, but for it, a different decision should have been made (see Snow Confectionary Pty Ltd v Askin [2004] NSWWCCPD 56; Section 294 of the 1998 Act; YG & GG v Minister for Community Services [2002] NSWCA 247; Absolon v NSW TAFE [1999] NSWCA 311).
I intend to apply the above principles in the matter before me.
THE EVIDENCE
To fully appreciate the parties’ submissions it is necessary to set out the background to Mr Compton’s working career. For about 35 years he has been in a partnership with his wife under the name “I L & L S Compton”. The nature of his relationship with the Appellant Employer is set out in the following paragraphs of Mr Compton’s statement dated 4 December 2006:
“8.I have been working for a company called Swift Contractors for the past thirty four years. This company is the same company as Gerob Investments Pty Ltd trading as Beachlife [sic] Homes. The trading names have varied over the years but it is the same company.
9.I work exclusively for Beachlife [sic] Homes and I am given my job sheets usually by the supervisor. They [sic] way I am given jobs is by way of ‘Purchase Order, Beachlife [sic] Homes’. This purchase order sets out what is required and also has a fixed price. I don’t have the right to negotiate this.
10.I supply my own tools of trade and Beachlife [sic] supply all materials except the nails. The price of the nails is allotted in the fixed price purchase order although I supply them and am reimbursed.
11.Once I have completed stages of the job as set out on the purchase order I supply a draw being an invoice. This draw is for the fixed payment. This is just for the labour component as Beachlife [sic] supply all materials. I submit my draw to the office and am paid the draw amount. I am then required to pay my own GST quarterly. I also pay my own tax. My ABN number with the taxation office is 49127119922.”
The evidence in Mr Compton’s statement dated 16 February 2007 is that the Appellant Employer’s name changed over the last 34 years from Swift Contractors to Country Style Homes to Beach Style Homes and, finally, to Beach Life Homes but he always regarded it as the same company. When Mr Compton first started work for the organisation it was called Swift Contractors and its director was Geoff Pilgrim. Mr Pilgrim remained a director until about 2004 when he sold the business to Peter Hall and John Quinn who are said to be the current directors. Mr Compton makes the following points at page two in his 16 February 2007 statement:
“I have never in the 34 years:
1. Worked for anyone else;
2. Advertised my services with anyone else;
3. Had any period where I was not employed by Beach Life Homes;
4.Inserted anyone to work in my place as a Contractor for Beach Life Homes.”
For most of the last 34 years Mr Compton has had what he describes as a “co-worker who assisted on the various jobs”. That ‘co-worker’ was allegedly engaged by Beach Life Homes on the same terms as Mr Compton. If there were any jobs where Mr Compton was on his own and he required assistance, Beach Life Homes would send a labourer to assist him, at its own expense (Mr Compton’s statement 16 February 2007, page three).
The following additional relevant points are set out in Mr Compton’s statement of 16 February 2007:
a) he had always been given a “Country Style Home/Beach Style homes/Beach Life Homes uniform to wear” (page three);
b) he worked “reasonably flexible” starting and finishing hours (page four);
c) he was directed to start a job on a certain day and have it finished by a certain day (page four);
d) he was frequently asked to leave a job half way through to go to another so that a progress stage could be finished and the company claim a progress payment (page four);
e) his most recent supervisor was Roy who would often give directions about how jobs should be completed (page five). For example, he would ask that planks be ripped up, railings be taken down, posts be re-erected, doors and skirting boards be changed, posts straightened or planks with hammer marks be removed;
f) he would speak to Roy (or the relevant supervisor) every time a decision had to be made that involved some potential change to a plan (page five);
g) on the Irish home (the job on which Mr Compton was injured) two decisions were referred to Roy (page five);
h) all timber, wire, balustrade, skirting boards and similar material was provided by Beach Life Homes (page six);
i) generally Beach Life Homes also provided all nails and screws but if Mr Compton supplied them an allowance would be made for that cost (page six);
j) he never engaged another person to carry out his duties for Beach Life Homes (page seven);
k) he had a “personal relationship with Beach Life Homes which is an employee/employer relationship” which he cannot sell to anyone (page seven);
l) he saw quite a few carpenters, roofers, tilers and others “dismissed” during his time at Beach Life Homes and always presumed that if he did not “do the right thing” he would have been dismissed (page eight), and
m) he always regarded himself as a full time employee of Beach Life Homes “with the obligation of exclusivity to them and an obligation to turn up when, where and how they required” (page eight).
The evidence on behalf of the Appellant Employer came from Mr Quinn, a director of Beach Life Homes, in his statement of 4 December 2006. His evidence may be summarised as follows:
a) he has been a director of Beach Life Homes for three years;
b) the company is a building construction company that builds residential homes from Ballina to Tweed Heads;
c) the only staff employed by the company are in the office plus two supervisors, Roy Van Kessel and Pat Maguire. All other persons are either specialist contractors or subcontractors;
d) the company “employ[s] several contract carpenters” (paragraph eight) one of whom was Mr Compton who was engaged on a “job to job basis” (paragraph nine);
e) Mr Compton was given a purchase order indicating all aspects of the work he was to perform and was required to indicate whether he accepted the job;
f) Mr Compton had been “employed as a contractor for Beechlife [sic] homes [sic] for the past twenty years under the previous directorship and has continued with the current directors” (paragraph 10);
g) Mr Compton provides all his own tools, glue, nails and, on occasions, planking or temporary scaffolding;
h) Mr Compton did not work exclusively for Beach Life Homes but also contracted with “G Pilgrem [sic] builder at Casuarina” and has also done carpentry work in the Newrybar area (paragraph 12);
i) there was no stipulation of days or hours required, but the work was “programmed”. A completion date was set by Beach Life Homes and, though there were no consequences for a contractor for not completing by that date, the company expected work to be completed by the end of the week “as programmed” (paragraph 13);
j) the supervisors visited the job sites to see how the work was progressing but had no control over the contractors (paragraph 14);
k) the obligation was on Mr Compton to achieve the task to the required “Building compliance for the BCA” and invoice accordingly. His work was only checked for workmanship by the relevant council authorities. It was only “checked for completion by the supervisors to cross check against invoicing” (paragraph 15);
l) Mr Compton signed a “TRADE CONTRACTORS STATEMENT” (‘TCS’) with the relevant job name each time he placed an invoice with Beach Life Homes, and
m) prior to the start of each job Beach Life Homes engage contract scaffolders to erect scaffolding and safety railings. That was done for the Irish job and the scaffolding was erected by Ballina Scaffolding;
Mr Compton signed a further statement on 15 February 2007. In it he said:
a) ultimate authority over his work resided with Beach Life Homes both in terms of direction and appraisal of his performance;
b) Beach Life Homes co-ordinated and controlled the work sites;
c) he was at all times directed and instructed by Beach Life Homes and it dictated the place and hours of work;
d) he did not have the opportunity to determine on which job he would work;
e) he was paid a rate, fixed by Beach Life Homes, for each portion of the house construction on which he worked. He never “priced a job” or provided a quote or had any input into the way a job was to be carried out. He never liaised with or took orders from or spoke to the home owners;
f) he was not free to take up other employment or to subcontract work;
g) he did not hire his own employees or subcontract work;
h) he had no right to include ‘variations’ and had to accept the rate specified by Beach Life Homes, and
i) his average weekly earnings for the year ended 30 June 2006 were $1,271.63 based on an annual income of $66,125.00.
Mr Compton’s last statement is dated 21 March 2007 and was prepared in response to Mr Quinn’s statement. In it he added:
a) whilst he did carry a couple of planks in his car and occasionally set up an A-frame to work on eaves, he never provided scaffolding for any job. If scaffolding was required it was organised by and paid for by Beach Life Homes;
b) he never contracted to Mr Pilgrim. He worked on a couple of houses at Casuarina, but all of those had the ‘Beach Life Homes’ sign erected at the front and the work was organised by the Beach Life Homes’ supervisors. He has never been contacted by Mr Pilgrim and asked to work on houses for him at Casuarina;
c) he has only ever worked on two houses in the Newrybar area; one was his own which he owns with his son and the other was “Mable [sic] Roberts’” house when he was engaged by Beach Life Homes in the usual way;
d) time limits for the completion of jobs were enforced;
e) supervisors checked jobs for quality and accuracy. They had the power (which they exercised) to tell someone to pull down part of a job and re-do it. They would also come on site to “hurry things along”;
f) the supervisors were the final arbiters when decisions had to be made about how to complete a specified task in the event that plans were ambiguous;
g) the supervisors did quality checks “all the way”;
h) before he was given a cheque he had to sign a TCS;
i) some payment advices were in the name of both Country Style Homes & Beach Life Homes. If a house was built from brick, it was generally a Country Style Home, but if it was fibro/tin-clad it was usually a Beach Life Home;
j) he worked on many occasions on hourly rates;
k) he carried out all of the maintenance work on Beach Life Homes in the Ballina area. The procedure was that Len at Beach Life Homes’ Ballina office would call him and ask him to attend a certain residence to assess what needed to be done. Mr Compton would then collect the materials from Beach Life Homes’ office, complete the work and charge Beach Life Homes.
Mr Compton was cross-examined at the arbitration and gave the following relevant evidence:
a) the figure of $66,125.00 was arrived at by adding up his income from Beach Life Homes for the financial year ending 30 June 2006 (T6.45);
b) that figure included the Goods and Services Tax (‘GST’) (T7.16) and was arrived at before deducting car and tool expenses (T7.7);
c) he never worked for anyone else (T8.32);
d) he asked for materials to be provided (T8.47-51);
e) he would wait until the supervisor came and told him when a job was ready to start (T9.34);
f) while he supplied the actual work implements, Ramset guns, drills and nail flooring guns were supplied by the firm (T10.15), and
g) his relationship was with the Appellant Employer “or its various types of companies with Geoff Pilgrim and at other times over a long period of time” (T10.20).
Arbitrator’s Decision
In a carefully prepared and well reasoned decision the Arbitrator considered the evidence and made the following unchallenged findings at paragraph 34 of his Reasons:
· “The applicant supplied skilled labour as a carpenter;
· The applicant is licensed as a carpenter;
· The applicant has an ABN number;
· The applicant submits detailed invoices to the respondent on a job by job basis;
· The applicant issues invoices in the name of a partnership of himself and his wife;
· The applicant charges GST on his invoices;
· The applicant supplies his own tools;
· The applicant supplies his own vehicle and fuel;
· The applicant has no requirement to sign on and off the job and can choose his own meal break times;
· The applicant is free to engage in other projects;
· The applicant carries out maintenance work for the respondent remunerated at an hourly rate;
· The applicant is supervised on a minimal basis and no greater than any other subcontractor;
· The applicant has his own personal accident and sickness insurance;
· The applicant’s alleged average weekly earnings do not correspond with his income tax return; and
· The applicant claims business deductions in his income tax return.”
At paragraph 45 the Arbitrator set out the factors weighing against a finding of a contract of employment:
· “The financial arrangements between the applicant and the respondent including the facts that the applicant invoiced the respondent in the name of a partnership, charged GST and had his own Australian Business Number. There was no provision for holiday pay, sick pay or superannuation;
· The applicant’s representations to the Taxation Office that he was in receipt of partnership income;
· The business expenses claims for his vehicle and tools made by the applicant in his tax return;
· The applicant’s renewal of his carpenter registration;
· The lack of a requirement for the applicant to work for set hours for the respondent; and
· The provision by the applicant of his own work vehicle and tools.”
The Arbitrator set out at paragraph 46 the factors he felt weighted in favour of a finding a contract of employment:
· “The applicant worked solely for the respondent for thirty four years;
· The applicant accepted work from the respondent at rates set from time to time by the respondent;
· The applicant wore the respondent’s supplied uniform when working;
· The applicant began and completed jobs as directed by the respondent;
· The respondent exercised a supervisory role over the applicant;
· The applicant did not employ labour;
· The applicant has worked for no other employer for thirty four years;
· The applicant had made no attempt to find other work because as he put it during cross-examination ‘they kept me in work’ and ‘there was always constant work.’
· The respondent was responsible for the provision of materials, supplied some tools and scaffolding;
· The respondent paid the applicant a nail allowance;
· The respondent’s approval being required for any variation to the work specified in the ‘purchase order’;
· The respondent could call the applicant off one job to work on another; and
· The respondent in its paperwork regarded its contractual relationship as being with the applicant personally.”
After considering the relevant authorities the Arbitrator found:
a) the right to set the commencement date and finish date for a project and to set remuneration for a project was evidence of ultimate control being vested in the Appellant Employer (Reasons, paragraph 47);
b) Mr Compton’s relationship with the taxation office was not determinative of the employment relationship (Reasons, paragraph 48);
c) when looked at in the totality of the arrangement and particularly the evidence that the Beach Life Homes saw the relationship as being with Mr Compton personally, the fact that Mr Compton was in partnership with his wife should be disregarded as an indicator of the form or nature of the employment relationship (Reasons, paragraph 48);
d) control alone was not determinative but when taken together with the long term nature of the relationship and the provision of a uniform, the factors in favour of finding an employment contract outweighed those in favour of an independent contractor relationship (Reasons, paragraph 49), and
e) that Mr Compton also came within the definition of a ‘deemed worker’ as defined in Schedule 1 clause 2(1) of the 1998 Act (Reasons, 50).
SUBMISSIONS - WORKER
The Appellant Employer submits that in so far as the Arbitrator relied on the findings set out at [29] above to support his finding that Mr Compton was a worker, he was in error. The argument is as follows:
a) there is no evidence that Mr Compton worked for the same legal entity for 34 years (‘legal identity of the Appellant Employer’);
b) Mr Compton accepted purchase orders from Beach Life Homes which contained work to be performed at agreed set rates (‘purchase orders’);
c) there was no evidence that Mr Compton wore uniforms supplied to him by Beach Life Homes nor that he was required to wear a uniform (‘uniforms’);
d) Beach Life Homes had no control over when Mr Compton performed his work anymore than it had control over the other subcontractors needed to build a house (‘control’);
e) Mr Compton’s oral evidence was that job start and finish times were flexible within a period of one week. Beach Life Homes had no control over when Mr Compton performed his work anymore than it had control over the other subcontractors (‘start and finish times’);
f) Mr Compton gave oral evidence that he required very little supervision because of his experience (‘control’);
g) supervisors visited the worksites as irregularly as once a week and when they did they were inspecting work performed not directing how the work was to be performed (‘control’);
h) Mr Compton conducted his business affairs in partnership with his wife who performed bookkeeping activities (‘partnership’);
i) there was no evidence that Swift Contractors, Country Style Homes and Beach Life Homes were the same corporate entity (‘legal identity of the Appellant Employer’);
j) there was no evidence that Mr Compton “worked for no other employer for 34 years” (‘work for other entities’);
k) Mr Compton did not give evidence that he was not allowed to work for other people. He said he could have worked for other people but did not need to as he had sufficient work from Beach Life Homes (‘work for other entities’);
l) as a licensed builder and head contractor Beach Life Homes would in the normal course of business provide materials, “some tools” and scaffolding to be used by all subcontractors, not exclusively by Mr Compton (‘provision of materials by Beach Life Homes’);
m) the payment of a nail allowance was indicative of a subcontracting arrangement (‘nail allowance’);
n) the need for Beach Life Homes’ approval being required for any variation to the work in the purchase order was indicative of a subcontracting arrangement where additional works would be costed to the customer (‘variations’);
o) that Beach Life Homes could call Mr Compton off one job to another shows that Mr Compton accepted multiple purchase orders and was able to maximise his earnings (‘control’);
p) the relationship between Beach Life Homes and Mr Compton was not personal because Mr Compton submitted tax invoices in the name of the partnership and payments were made to the partnership. Therefore, the contractual relationship was as evidenced in the tax invoices (‘tax invoices’);
q) the evidence is overwhelmingly in favour of a finding that the relationship between Mr Compton and Beach Life Homes was a contract for services (independent contractor) and not a contract of service (employment);
r) the facts in the present matter are identical to those in Yu Cang Zhao v Monlea Pty Ltd t/as Nordex Interiors [2003] NSWWCCPD 11 (‘Zhao’) where the applicant was found to be an independent contractor (‘Zhao’);
The Respondent Worker submits:
a) the Arbitrator considered the totality of the relationship, as required by Stevens v Brodbribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 (‘Stevens’);
b) the Arbitrator accepted Mr Compton as a truthful witness (Reasons, paragraph 17);
c) the Appellant Employer has not shown that the Arbitrator’s decision is affected by some legal, factual or discretionary error or that his discretion has so miscarried that it has not been exercised fairly and lawfully (Knight v Eyles Nominees Pty Ltd [2004] NSWWCCPD 73), and
d) each case must be considered on its merits. Zhao was referred to in T/E Development Group No 3 Pty Ltd v Sheremeta and anor [2006] NSWWCCPD 42 (‘Sheremeta’) where a different conclusion was reached.
Legislation and Authorities - Worker
The term ‘worker’ is defined in section 4 of the 1998 Act as follows:
“worker means a person who has entered into or works under a contract of service or a training contract with an employer (whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, and whether the contract is oral or in writing).”
The Arbitrator referred to Stevens. In that case Justice Mason (as he then was) said at 29:
“…the common law has been sufficiently flexible to adapt to changing social
conditions by shifting the emphasis in the control test from the actual
exercise of control to the right to exercise it, ‘so far as there is scope for
it’, even if it be ‘only in incidental or collateral matters’ (Zuijs v. Wirth
Brothers Pty Ltd, at p 571).” Furthermore, control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.” (emphasis added)
In Boylan Nominees Pty Ltd t/as Quirks Refrigeration v Sweeney [2005] NSWCA 8 Ipp JA noted at [54]:
“The control test remains important and it is appropriate, in the first instance, to have regard to it (albeit that it is by no means conclusive) because, as Wilson and Dawson JJ said in Stevensv Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 (at 36):
‘[I]t remains the surest guide to whether a person is contracting independently or serving as an employee.’”
Wilson and Dawson JJ also said at 35-36 in Stevens:
“The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances. Thus when Windeyer J. in Marshall v. Whittaker’s Building Supply Co. [1963] HCA 26; (1963) 109 CLR 210, at p 217, said that the distinction between a servant and an independent contractor ‘is rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own’, he was really posing the ultimate question in a different way rather than offering a definition which could be applied for the purpose of providing an answer. So too when Denning L.J. in Bank voor Handel en Scheepvaart N.V. v. Slatford (1953) 1 QB 248, at p 295, observed that the test of being a servant does not rest nowadays on submission to orders but ‘depends on whether the person is part and parcel of the organization’. As a restatement of the problem, this observation may place a different emphasis upon the tests to be applied but of itself offers no new test for the solution of the problem, although a submission to the contrary was made on behalf of Stevens in this case. See also Stevenson Jordan and Harrison, Ltd. v. Macdonald and Evans (1952) 1 TLR 101, at p 111 per Denning L.J.; Ready Mixed Concrete (South East) Ltd. v. Minister of Pensions and National Insurance (1968) 2 QB 497, at p 524 per MacKenna J. We would be doing no more ourselves if we were to suggest that the question is whether the degree of independence overall is sufficient to establish that a person is working on his own behalf rather than acting as the servant of another, but putting it that way does at least indicate that the question is one of degree for which there is no exclusive measure.” (emphasis added)
Their Honours noted at 36-37 that:
“11. The other indicia of the nature of the relationship have been variously stated and have been added to from time to time. Those suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or distinct calling on the part of the person engaged, the provision by him of his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of remuneration without deduction for income tax. None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance.
12. Having said that, we should point out that any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance.”
In Australian Air Express Pty Limited v Langford [2005] NSWCA 96 Justice McColl made two important preliminary observations at [15-16] about cases of this kind:
“15 The first concerns the approach an appellate court should take to reviewing an exercise whose resolution is ‘one of ‘fact and degree’ in respect of which views might legitimately differ’: Roy Morgan Research Limited v Commissioner of State Revenue (1997) 37 ATR 528 at 533. In such a case it is not enough that an appellate court might have come to a different conclusion - before an appellate court will intervene the appellant must show error on the part of the primary judge: JA & BM Bowden & Sons Pty Limited v Chief Commissioner of State Revenue (2001) NSWCA 125; (2001) 105 IR 66 at 68 [14] per Ipp JA.
16 The second observation concerns the distinction between an employee and an independent contractor. That distinction has been said to be ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s business, and a person who carries on a trade or business of his own’: Marshall v Whittaker’s Building Supply Co [1963] HCA 49; (1963) 109 CLR 210 at 217 per Windeyer J. Although this statement was criticised by Wilson and Dawson JJ in Stevens (at 34) as ‘posing the ultimate question in a different way rather than offering a definition which could be applied for the purpose of providing an answer’, it was referred to with approval by the majority in Hollis (at 38 – 39 [39] – [40]).” (emphasis added)
Discussion and Findings - Worker
Legal Identity of the Appellant Employer
Mr Compton’s evidence was that his association with the Appellant Employer started about 34 years ago when it traded under a different name (Mr Compton’s statement 4 December 2006, paragraph eight). Whether that entity was a company or a business name is not known but Mr Compton certainly believed, as a layman, that it was the same entity as Beach Life Homes, the Appellant Employer. There was persuasive evidence in support of that view in the statement from Mr Quinn where he said at paragraph 10 that Mr Compton had been employed “as a contractor for Beechlife [sic] homes [sic] for the past twenty years under the previous directorship and has continued with the current directors”.
Whilst no business or company searches were tendered in evidence to enable the full corporate history of the Appellant Employer to be traced, the evidence was sufficient, in light of the concession by Mr Quinn, to support the Arbitrator’s finding that Mr Compton had been engaged by that entity for many years. I do not believe the Arbitrator was in error on this issue. If he was in error, I do not believe that this finding was critical to the ultimate finding that Mr Compton was a worker and it is therefore of no consequence.
Purchase Orders
The submission that the purchase orders contained “work to be performed at agreed set rates” (emphasis added) is not accurate. The evidence from Mr Compton is that the purchase order had a “fixed price” and that “he did not have the right to negotiate” that price (Mr Compton’s statement 4 December 2006, paragraph nine). In his statement of 16 February 2007 at page two he said that Beach Life Homes would “allocate a ‘price’ for the relevant job” and “he and a fellow employee would carry out that work” (Mr Compton’s statement 16 February 2007, page two). Mr Quinn’s evidence was that the purchase orders had the “pricing indicated” and that the “contract price is a fixed price but may vary” (emphasis added) (Mr Quinn’s statement 4 December 2006, paragraph nine). This evidence clearly supported the Arbitrator’s finding that Mr Compton accepted work from Beach Life Homes “at rates set from time to time” by that company. The Arbitrator was not in error in making that finding.
Uniforms
Mr Compton’s evidence was that he had always given a “Country Style Homes/Beach Style Homes/Beach Life Homes uniform to wear” (see Mr Compton’s statement 16 February 2007, page three). He did not say that he actually wore the uniform but that was the clear inference from his statement. He was not cross-examined to the contrary and Mr Quinn did not challenge this evidence. The Arbitrator’s finding that Mr Compton “wore the respondent’s supplied uniform when working” was a reasonable inference from the available evidence, especially in circumstances where Mr Quinn was silent on the issue. I do not think the Arbitrator was in error on this issue. In any event, the wearing of a uniform is only one factor and if the Arbitrator was in error I do not believe the error is such that but for it a different conclusion would have resulted.
Control
I do not accept the Appellant Employer’s submission that it had no control over when Mr Compton performed his work. The evidence is that Mr Compton was “directed to start a job on a certain day” and was “frequently asked to leave a job that we were half way through” to go to another job so that a progress stage could be finished (Mr Compton’s statement 16 February 2007, page four). Mr Quinn’s evidence was that Beach Life Homes set a completion date and expected the “work [to] be completed by the end of the week as programmed” (Mr Quinn’s statement 4 December 2006, paragraph 13). In addition, Mr Compton gave evidence at T9.32-40 that he was given “x amount of time to get” a job done. This evidence provided clear support for the Arbitrator’s finding that Mr Compton began and completed jobs as directed by Beach Life Homes.
Mr Compton was not cross-examined about the degree of supervision exercised over him by Beach Life Homes but he was asked the following questions at T8.42 about materials:
“Q. And from time to time you would contact the supervisors of Beach Life Homes and ask them to provide particular materials. Is that correct?
A. That’s right, yes.Q. And you would also ask for those materials to be provided within a time frame that allowed you to keep working continuously?
A. But you don’t stipulate a time on it but you do ask them to get it there as soon as they can so you can carry on.
Q. Because that’s with your skill as a carpenter, you know where the job is up to and where it’s going to be up to in a few days’ time?
A. Yes.Q. You don’t need somebody to tell you that in a few days’ time you’re going to need, for example, some sarking?
A. Well, presumably if you’re a carpenter you’d know what the flow of the work is and what you’re up to. It’s only ‑ you work it out as a schedule.
Q. Right. Okay.
A. And you virtually ‑ yeah, they’ve got to tell you if a thing is – they’ve got to ‑ they virtually stipulate a time that they want that finished by, so you have to work a schedule up to try and get it finished by that time. If there’s no gear on the job, well, that puts you behind that time, so you have to chase it up.”
Mr Compton did not give oral evidence that he required very little supervision because of his experience, as has been submitted by the Appellant Employer. In his statement of 16 February 2007 Mr Compton said that Roy would often give directions about:
“…how we should complete or carry out jobs. They would ask us to (eg) rip up planks, take down railings, re-erect posts, change doors, change skirting boards, straighten posts, remove planks which might have hammer marks on them etc.” (page five)
In addition, Mr Compton would go to Roy every time there was a decision to be made that involved a potential change to a plan. Mr Quinn’s evidence that supervisors visited job sites from time to time “purely…to see how the work is progressing but have no control over the contractor” (statement 4 December 2006, paragraph 14) was contrary to Mr Compton’s evidence, which the Arbitrator had no hesitation in accepting (Reasons, paragraph 17).
Mr Compton gave further evidence of control at page three of his statement dated 21 March 2007:
“The Supervisors check each of the jobs for quality and accuracy. The Supervisors have the power (which they often exercise) to tell someone to rip down part of a job and to re-do it. Because I have been working for Beach Life Homes for over 30 years, the Supervisors and the Directors have come to accept that my workmanship is very high, and consequently the level of checking is less then [sic] it is for other Beach Life Homes workers.
The Supervisors still come on the job and chase Ken and myself to hurry things along or to go onto other jobs to do other things.
The Supervisors are the final arbiters when decisions need to be made about how to complete a specified task.”
Mr Compton was not challenged on any of the above matters and the Arbitrator was entitled to accept and did accept his evidence. Based on that evidence the Arbitrator found that Beach Life Homes exercised a supervisory role over Mr Compton. That finding was open on the evidence and discloses no error. I agree with it.
The fact that Beach Life Homes could call Mr Compton off one job onto another (Mr Compton’s statement 16 February 2007, page four) highlighted another area over which Beach Life Homes exercised control over where and when he would work. The Appellant Employer’s argument that this indicated that Mr Compton accepted multiple purchase orders and was able to maximise his earnings is irrelevant to the issue of whether he was a worker.
Start – Finish Times
Mr Compton was cross-examined about his start time at T9.30:
“Q. So you didn’t have any fixed starting or finishing time to go and perform your carpentry work?
A. Well, they give you a time. They came and told you when the job was ready to start. You just didn’t go and get on to it. You had to wait until the supervisor came and actually told you when the time was to start. They give you then an X amount of time to get that done because you may have another trade coming in after that, and if you don’t get it done, it’s then holding up another trade. So they give you an estimated time to try and get it done by, yes.Q. Okay. But, for example, if one morning your wife had a doctor’s appointment, you know, you could just go and take her to that doctor’s appointment and start work later on if you wanted to?
A. Well, the thing is you just work longer that day or whatever it was to try and get it done to keep up to your thing there.Q. And that was because you were being paid per part of the job, weren’t you; you weren’t being paid per hour?
A. Not on certain cases, but on some cases, yes, you did do work as per hour.” (emphasis added)
In his statement of 4 December 2006 Mr Compton said he usually worked from 7am until 4pm, being the normal times worked by builders (paragraph 12) but in his statement dated 16 February 2007 he said that he had “reasonably flexible hours of starting and finishing a job” (page four). The Arbitrator did not make a conclusive finding as to start and finish times but found that Mr Compton began and completed jobs as directed by Beach Life Homes (see [43] above). That finding does not disclose any error and was open on the evidence.
Partnership
It was not disputed that Mr Compton was in partnership with his wife and that he split his income 50:50 with her. The Arbitrator’s finding was that Mr Compton did not employ labour. That finding was consistent with the evidence and is not challenged. The importance of the Appellant Employer’s submission that Mr Compton “conducted his business affairs in partnership with his wife” (emphasis added) is dependent on whether he conducted a business. For the reasons set out below in paragraphs [75] and [76] I do not believe Mr Compton conducted a business. The fact that he directed that his earnings be paid to a partnership was not determinative of the issue of worker (see paragraphs [59] and [60] below). The Arbitrator quite properly took this matter into account as one factor in favour of finding Mr Compton was an independent contractor, but after considering the “totality of the arrangement” (Reasons, paragraph 48), found that it was not determinative. I do not believe the Arbitrator was in error on this issue.
Work For Other Entities
There was abundant evidence that Mr Compton did not work for any other entity at the time of or at any relevant time prior to his accident. At paragraph nine of Mr Compton’s statement of 4 December 2006 he said that he worked exclusively for Beach Life Homes. At page two of his statement of 16 February 2007 he said that he had never worked for anyone else in 34 years. In addition, in the course of cross-examination Mr Compton said at T8.29:
“Q. Are you aware, Mr Compton, that it is common in the building industry for carpenter/subcontractors to be paid a nail allowance?
A. That I couldn’t say because I have never bloody worked for anyone else to know what other people pay. All the years I’ve been working I have got that nail allowance.” (emphasis added)
Mr Compton was not cross-examined about this answer. The Arbitrator’s finding that Mr Compton worked for no other employer for 34 years was open on the evidence and discloses no error.
It is correct to say that there was no evidence that Mr Compton was not allowed to work for other people. He agreed in cross-examination that Beach Life Homes always supplied him with constant work (T10.25) which was enough work for him to do and that it was profitable enough to keep him working exclusively for that company (T11.34) and, therefore, he did not chase work. The Arbitrator referred to Mr Compton saying in cross-examination ‘they kept me in work’ and ‘there was always constant work’, as support for the finding that Mr Compton was a worker. Whilst that was the general effect of Mr Compton’s evidence, the Appellant Employer’s argument is that Mr Compton was free to look for other work. He did not chase other work because Beach Life Homes supplied him with constant work. Both points are factually correct. Both are relevant but not determinative of the nature of the relationship. The Arbitrator was entitled to place weight on the fact that Mr Compton worked exclusively for Beach Life Homes. The fact that he may have been free to seek work elsewhere was a factor the Arbitrator noted at paragraphs 34 and 39 of his Reasons. The Arbitrator’s analysis of this issue does not disclose any error.
Provision of Materials by Beach Life Homes
The Appellant Employer provided most of the necessary materials for the work performed by Mr Compton (see Mr Compton’s statement 16 February 2007, page six). It also supplied “Ramset guns and the drills, nail flooring guns” (T10.15) and scaffolding (Mr Compton’s statement 21 March 2007, page one). The fact that other people on the site may have used that equipment was not of any great relevance. The Arbitrator was not in error in taking this matter into account as he did.
Nail Allowance
The fact that a nail allowance was paid was probably more indicative of an independent contractor relationship than one of employer/employee and the Arbitrator was in error to hold to the contrary. I do not believe this error is of such significance as to outweigh the other evidence in support of the Arbitrator’s conclusion.
Variations
The fact that Beach Life Homes had to give approval for any variation to the work on the purchase order was found by the Arbitrator to be a factor indicating that Mr Compton was a worker. I do not see that this factor is determinative for either side. If a variation was required by an employer it would not be uncommon for a written direction to be given, if only to avoid confusion. At best for the Appellant Employer, I see this as a neutral factor. If the Arbitrator was in error (which I doubt) I do not believe that the error is such as to warrant a different conclusion on the issue of worker.
Tax Invoices
The submission that Mr Compton submitted tax invoices in the name of the partnership is not entirely accurate. The documentary evidence is inconsistent. Two of the documents headed “INVOICE/STATEMENT” are in the name of “Ian Compton” and one is in the name of the partnership. Other hand written documents (not headed ‘invoices’) are in the name of the partnership. The evidence also included several documents headed ‘Payment Advice’ from Beach Life Homes to “Compton, Ian - Friday Hut Road Brooklet NSW 2478”. Mr Compton’s wife performed no work in the partnership save for keeping the books. Mr Compton performed all of the income producing work. Without his work the partnership would have had no practical existence. Though it is not expressly covered in the evidence, it is doubtful that Beach Life Homes would have contracted with the partnership if Mr Compton had not been a part of it. Effectively Mr Compton worked as a sole practitioner, but he dealt with his income in a tax effective manner on the advice of his accountant. The Appellant Employer’s dealings were always with Mr Compton. He worked either on his own or with another carpenter, Kenny Smith, with whom he had no contractual arrangement. If he was unable to do a job he was, on one job at least, given a labourer to assist him and that labourer was paid by Beach Life Homes (see Mr Compton’s statement 16 February 2007, page three). The Arbitrator’s finding was that the Appellant Employer “in its paperwork regarded its contractual relationship as being with the applicant personally” (Reasons, paragraph 46). That finding was only partly correct, as the “paperwork” was not consistent. Nevertheless, if the Arbitrator was referring to the ‘Payment Advice’ forms his finding was correct. Considering all of the “paperwork”, I believe that it was open to the Arbitrator to find that the contract was personal between Mr Compton and Beach Life Homes. The company sought Mr Compton’s skill and experience, not that of any business he allegedly conducted.
In any event, if Mr Compton had submitted tax invoices solely in the name of the partnership that fact would not have been determinative of the true nature of the relationship with Beach Life Homes (Pitcher and another v Langford and another (1991) 23 NSWLR 142 at 154G and 163B and Dalgety Farmers Ltd t/as Grazos v Bruce (unreported, NSW Court of Appeal, 3 August 1995, BC9505124)).
Conclusion - Worker
I do not believe the Arbitrator made any error of fact, law or discretion in concluding that Mr Compton was a worker. That conclusion was open on the evidence and the authorities and I agree with it. The Appellant Employer had a close and long standing personal working arrangement with Mr Compton, which involved him in working exclusively for it for many years. Beach Life Homes had the right to and did exercise significant control over Mr Compton, both in the performance of his duties, and in when and where he performed those duties. The arrangement with Mr Compton was personal to him and made the conclusion that he was a worker inevitable.
The case of Zhao turned on its own facts. In that case the Arbitrator found that the applicant was an independent contractor and not a deemed worker. On appeal the Deputy President did not disturb the Arbitrator’s finding and stated that the applicant “clearly carried on his trade or business while working for the Respondent” and he “was in business as, and held himself out to be, a contract plasterer” (at [64]). It was found, contrary to the present case, that there was some evidence of ‘negotiation’ of the mode and rate of payment under the agreement. Crucially, there was also no “particularly close or specific supervision of his work” (at [54]).
Similarly, Sheremeta also turned on its facts and provides little guidance to the resolution of the issues before me.
SUBMISSIONS – DEEMED WORKER
The Arbitrator found that Mr Compton “also” came within the definition of a deemed worker under Schedule 1 (Reasons, paragraph 50). Whilst it was open to the Arbitrator to make that finding in the alternative, an applicant cannot be both an employee and a contractor who is deemed to be a deemed worker under Schedule 1. I do not believe anything turns on this point.
If I am wrong in accepting the Arbitrator findings on worker, it is appropriate that I consider the Appellant Employer’s submissions on the issue of deemed worker in the alternative.
The Appellant Employer submits:
a) Mr Compton was carrying out work incidental to a trade or business regularly carried on by him in his own name or under a business or firm name;
b) the fact that Mr Compton invoiced the Appellant Employer in the name of his partnership was evidence that he had an existing business in the course of which he carried on his trade regularly, either in his own name or under a firm or business name;
c) reliance is placed on the following statement by Dixon J in Humberstone v Northern Timber Mills (1949) 79 CLR 389 (‘Humberstone’) at 402:
“…that a person conducting a business in the course of which he contracted to perform work should himself carry the risk of personal injury as one of the hazards of his business, while the man who worked under contract but only for the employer or without any general trade or business or outside his trade or business should, like an ordinary employee, be insured by the Act against the risk of injury in his work.”
d) Mr Compton had his own personal accident insurance and has received benefit under that policy;
e) there is no evidence that Mr Compton was performing any work other than the work normally carried on in his trade as a licensed carpenter when he was injured;
f) in Zhao the worker did not work for anybody else during the period when he was periodically engaged by Monlea but there was no reason why he could not have worked for others given that he was in business and held himself out to be a plasterer. Mr Zhao was held not to be a deemed worker;
g) Mr Compton did not work for anybody else during the period when he was periodically engaged by the Appellant Employer though he was free to do so, but chose not to because the Appellant Employer provided him with sufficient work, and
h) reliance is placed on the decision of Polak v Feature Homes Pty Ltd [2005] NSWWCCPD 125 (‘Polak’).
The Respondent Worker submits:
a) Mr Compton was not carrying on a business on his own but was effectively ‘integrated’ or ‘assimilated’ into the larger organisation;
b) Mr Compton worked only for Beach Life Homes and, as the issue of a uniform suggests, was held out to be part of its business;
c) the Appellant Employer has not shown that the Arbitrator’s decision is affected by some legal, factual or discretionary error, and
d) it is not manifestly obvious that the discretion has so miscarried that it has not been exercised fairly and lawfully.
Legislation and Authorities – Deemed Worker
The deemed worker provisions are set out in clause 2(1) of Schedule 1 of the 1998 Act (‘Schedule 1’):
“(1) Where a contract:
(a) to perform any work exceeding $10 in value (not being work incidental to a trade or business regularly carried on by the contractor in the contractor’s own name, or under a business or firm name), or
is made with the contractor, who neither sublets the contract nor employs any worker, the contractor is, for the purposes of this Act, taken to be a worker employed by the person who made the contract with the contractor.”
The above provision was considered by the Court of Appeal in Scerri v Cahill & another (1995) 14 NSWCCR 389 where Bainton A-JA (with Kirby A-CJ and Rolfe A-JA agreeing) held that an applicant who relies on Schedule 1 must prove:
a) that he was a party to a contract with the respondent to perform work; and
b) that work exceeds $10.00 in value; and
c) that the work is not work incidental to a trade or business regularly carried on by the applicant in his own name or under a business or firm name; and
d) that the applicant has neither sublet the contract nor employed workers in the performance of it.
In Humberstone, Dixon J said at 401:
“In my opinion the work which the deceased was performing for the respondents was not work incidental to a trade or business regularly carried on by him in his own name within the meaning of the sub-section and of course no such trade or business was carried on by him under a firm or business name. I think that the purpose of the exception or exclusion expressed by the words in question was to confine the benefit of the conclusive presumption which it establishes to persons who do not conduct an independent trade or business, who are not holding themselves out to the public under their own or a firm or business name as carrying on such a trade or business and who do not in the course of that trade or business, as an incident of its exercise, undertake the work by entering into the contract. The provision will thus cover men who work for the principal but have no independent business or trade and men who though carrying on an independent trade or business undertake a contract outside the scope or course of that trade or business. The word ‘trade’ is capable of including any handicraft and in that sense it may seem to lack the element of systematic practice or holding out which the idea of openly conducting a distinct or independent trade or business and seeking custom implies. But a consideration of the policy of the provision as well as of its text appears to me to show that the distinction it seeks to draw is between on the one hand an independent contractor whose relation with the principal is special or particular either because it is outside the course of the general business of the contractor or the general practice of his trade or because he has no such general business or is not a general practitioner of his trade, and on the other hand an independent contractor who performs work successively or perhaps concurrently for his customers or others in the course of a definite trade or business carried on systematically or who holds himself out as ready to do so.” (emphasis added)
In Turner v Stewardson [1962] NSWR 137 the Court of Appeal considered the situation where a carpenter, who contracted his work when employment was difficult to obtain, was regularly carrying on a trade or business:
“Looked at broadly the Legislature meant to provide that persons who are in business for themselves and who systematically and regularly accept work to be done under contract and who hold themselves out as open to be employed under contract are expected to undertake the risk of injury and not to rely for compensation upon the principal whose contract work they are performing at the moment of injury. The original notion that the contractor is deprived of the benefits of the Act because he is not a worker has disappeared and today many small contractors are covered by the Act. This is in keeping with modern practice as to payment for labour at piece work or contract rates.” (emphasis added)
The question of whether there must be a ‘holding out’ before an applicant is prevented from relying on Schedule 1 was considered by the High Court in Higgins v Jackson (1976) 135 CLR 174 (‘Higgins’) at 176 where Barwick CJ (Stephen, Mason and Murphy JJ concurring) said:
“The subsection requires the business to be carried on with regularity. Thus a contractor who regularly contracts can scarcely be said not to hold himself out as carrying on the business in the course of which he makes the contracts. But in my opinion, there is no separate element required by the subsection of holding out. It is sufficient, as I have said, that the contractor regularly carries on business in his own or a firm name.”
In Cam v Cousins Interstate Transport Pty Ltd [1964] NSWR 1288 the applicant was the owner and driver of a large truck registered in his name. He was injured in the course of a journey from Melbourne to Sydney when he was carrying steel for the respondent at a fixed rate per ton. For six months prior to the accident he had ceased to regularly carry on the business of a carrier, but operated his truck solely for the business of the respondent. He had no business address or telephone book entry relating to an occupation or business as a general carrier, nor did he advertise or hold himself out to the public as being in the trade or business of a carrier. On appeal it was held that the trial judge was not in error in holding that the applicant was a deemed worker under the provisions of section 6(3A) of the Workers Compensation Act 1926, which was in similar terms to Schedule 1. This decision must now be read in the light of the High Court decision in Higgins, but it remains relevant as it illustrates some of the matters to be considered in determining whether a business is being conducted.
Discussion and Findings – Deemed Worker
The onus is on Mr Compton to prove the elements to entitle him to the benefit of Schedule 1. In the present matter the only issue is whether Mr Compton was injured whilst performing work incidental to a trade or business regularly carried on by him in his own name or under a business or firm name.
In finding that Mr Compton was a deemed worker the Arbitrator found at paragraph 53 of his Reasons:
“The work was not incidental to a trade or business regularly carried on by the applicant in his own name or under a business or firm name. The applicant only worked for the respondent. He did not advertise for other work and he did not employ or engage any other person to carry out work for him or under his name.”
The above findings were open to the Arbitrator and clearly supported the Arbitrator’s conclusion that Mr Compton was not injured while performing work incidental to a trade or business regularly carried on by him. His finding was consistent with the facts found and the authorities and does not disclose any error of law, fact or discretion. The following additional factors are relevant and, though not determinative, also support the Arbitrator’s finding:
a) Mr Compton had no ‘goodwill’ to sell (Mr Compton’s statement 16 February 2007, page seven);
b) Mr Compton had a personal relationship with Beach Life Homes and he could not “sell to any person the right to undertake the Beach Life Homes work” (Mr Compton’s statement 16 February 2007, page seven);
c) there was no evidence that Mr Compton had a ‘place of business’ or a ‘business name’ (other than the partnership name), and
d) most businesses have the right to set or negotiate the price for their services. Mr Compton did not have that right.
Whilst Mr Compton had his own personal tools and was in partnership with his wife, those facts do not, on their own, establish that he was conducting a business.
Polak was decided on its own facts. In that matter it was not disputed on appeal that the applicant was an independent contractor who carried on the business of a house painter (at[22]). The argument that he was a deemed worker was based on the fact that he was injured while erecting scaffolding, not painting. That argument was rejected because it was held that the erection of the scaffolding was incidental to the business of a house painter.
Conclusion – Deemed Worker
If I am wrong in upholding the Arbitrator’s decision on the issue of worker, I believe the Arbitrator’s decision discloses no error of fact, law or discretion on the issue of deemed worker. I agree that, in the alternative, if Mr Compton was not a worker, he was a deemed worker under the provisions of Schedule 1.
SUBMISSIONS - EARNINGS
The Arbitrator seems to have found Mr Compton’s average weekly earnings and his current weekly wage rate to be $869.90 per week.
Mr Compton’s earnings were set out in his 2005 tax return. That document disclosed his income from his partnership to be $24,728.00, less deductions of $13,931.00. In addition, Mr Compton gave oral evidence that his gross income for the 2006 financial year was $66,125.00 (T6.45), but he gave no evidence as to his expenses.
The Arbitrator rejected Mr Compton’s submission that the figure of $24,728.00 should be doubled and then divided by 52 weeks (T4.22). The Appellant Employer’s submission before the Arbitrator was that there was insufficient information available to make a proper assessment under sections 42 and 43 of the 1987 Act. In the alternative it was argued that the figure of $24,728.00 should be divided by 52 (T4.50).
The Arbitrator rightly rejected both of these approaches and informed himself of the award rate under the Building and Construction Industry (State) Award (‘the Award’). The rate for a permanent full time carpenter was $18.85 per hour or $754.00 per week. For a casual carpenter the rate was $23.56 per hour or $942.40 per week. For each calculation the Arbitrator assumed a 40-hour week. He preferred the rate for a casual carpenter because it made allowance for the lack of holiday and sick pay but he also took into account the probability that Mr Compton would have taken four weeks holiday per year. Allowing the rate of $942.40 per week for 48 weeks gave $45,235.20, or an average over a full year of $869.90 per week. The Appellant Employer challenges this figure on the ground that there was no evidence in support of it.
The Appellant Employer’s submission overlooks the fact that the Commission is entitled to inform itself “on any matter in such manner as the Commission thinks appropriate and as the proper consideration of the matter before the Commission permits” and that the Commission is “to act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms” (subsections 354(2) and (3) of the 1998 Act). In informing itself the Commission is to bear in mind the principles set out in Rule 15 Part 15.2 of the Workers Compensation Commission Rules 2006 which state:
“(a)evidence should be logical and probative,
(b)evidence should be relevant to the facts in issue and the issues in dispute,
(c)evidence based on speculation or unsubstantiated assumptions is unacceptable,
(d)unqualified opinions are unacceptable.”
However, the Arbitrator was in error in adopting a 40-hour week without first making a finding of the number of hours Mr Compton worked. In his statement of 4 December 2006 at paragraph 12 Mr Compton said he usually worked from 7am until 4pm Monday to Friday. However, the evidence did not disclose if that was a regular occurrence and in his statement of 16 February 2007 he said that he had “reasonably flexible hours of starting and finishing a job” (page four). Whilst it was accepted that Mr Compton did not work for anyone else, the exact number of hours he worked for Beach Life Homes remains unclear. Further, so far as I am aware, the Arbitrator did not inform the parties of his intention to use the Award rate of pay for a casual carpenter. In light of the Arbitrator adopting the Award rate, the parties may have wanted to call further evidence about earnings, or make further submissions. Therefore, whilst it will often be appropriate for an Arbitrator to inform himself or herself about award rates of pay, it is essential that that be done in compliance with the rules of procedural fairness. Those rules require that the parties be informed of the ‘matter’ on which the Commission intends to inform itself and be given the opportunity to respond to it with further evidence or submissions, as appropriate (see Paul Segaert Pty Limited t/as Lidco v Narayan [2006] NSWWCCPD 296).
In addition, the Arbitrator was in error in adopting the casual hourly rate of pay and multiplying it by 40 to determine the current weekly wage rate. The relevant Award is based on a 38-hour week and section 42 requires that the current weekly wage rate be calculated by reference to the “weekly” rate under the award. As at 11 October 2006 (the date on which Mr Compton’s claim commenced), that rate for a carpenter was $695.02 per week.
In respect of Mr Compton’s average weekly earnings, section 43 of the 1987 Act requires that the rate be calculated in such manner as is best calculated to give the rate per week at which the worker was being remunerated. In the case of a worker in Mr Compton’s circumstances, what is required is a determination of the commercial value of his labour (Hill v Bryant [1974] 2 NSWLR 423 at 428). That determination can be made by either calculating the worth of his or her work to the business, or by calculating what it would cost the business to employ someone else to do his or her work (J & H Timbers Pty Ltd v Nelson (1972) 126 CLR 625 at 631 and Cage Developments Pty Ltd t/as Monaro Mix Specified Concrete v Schubert [1981] 2 NSWLR 227). His worth to the business for the 2006 financial year was $66,125.00. However, an allowance has to be made for expenses incurred and the evidence did not address that issue. The alternative method (the cost of employing someone to do Mr Compton’s work) would require the calculation of the commercial hourly rate of employing a carpenter. The minimum rate to employ a qualified carpenter to do Mr Compton’s work would be the Award rate for a casual carpenter. That figure must be determined by reference to the number of hours worked and those hours are not known.
Conclusion – Earnings
As a result it is necessary for the quantum of Mr Compton’s current weekly wage rate and his average weekly earnings and, therefore, his award to be re-determined by the Arbitrator in accordance with the reasons in this decision.
DECISION
Paragraph two of the Arbitrator’s decision dated 1 May 2007 is revoked and the matter is remitted to the same Arbitrator for the Respondent Worker’s current weekly wage rate and average weekly earnings to be re-determined in accordance with the reasons in this decision.
Paragraphs one and three of the Arbitrator’s decision are confirmed.
COSTS
Whilst the Respondent Worker’s wages and, therefore, the award must be re-determined, the Appellant Employer has substantially failed in its appeal. In these circumstances the proper order as to costs is that the Appellant Employer is to pay the Respondent Worker’s costs of the appeal.
Bill Roche
Deputy President
20 August 2007
I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.
ASSOCIATE
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