Gurran v Tarbook Pty Ltd

[1996] IRCA 424

DECISION NO: 424/96

CATCHWORDS

INDUSTRIAL RELATIONS - unfair dismissal - meaning of "employee" under Division 3 Part VIA of the Industrial Relations Act 1988 - whether payments of retainer and commission constitute "relevant wages" - distinction between contract for services and contract of service.

Income Tax Assessment Act 1936
Industrial Relations Act 1988 Division 3 of Part VIA; Schedule 10; ss 170CD, 170EE; sub-s 170CD(4)

A. Brooks, "Myth and Muddle - An Examination of Contracts for the Performance of Work", UNSWLJ 11 (2) (1988) 48

B. Creighton & A. Stewart, Labour Law, (2nd Ed), (Sydney: The Federation Press, 1994)

C. Fenwick, "Shooting for Trouble? Contract Labour-hire in the Victorian Building Industry", Australian Journal of Labour Law, 5 (3) (1992) 237

R. Hunter, "The Regulation of Independent Contractors:  A Feminist Perspective", Corporate and Business Law Journal, 5 (2) (1992) 165

Economic Planning Advisory Commission, The Changing Australian Labour Market, Commission Paper No 11 (Canberra: AGPS, March 1996)

Alman v Unwin [1983] WAR 157
Australian Mutual Provident Society v Allan (1978) 52 ALJR 407
Commissioner of Pay-roll Tax v Reserve Bank of Australia (1986) 66 ALR 677
Esber v Commonwealth (1992) 174 CLR 430
Leighton Contractors Pty Ltd v Panizza, Full Court, Supreme Court of Western Australia, 19 October 1995 (unreported)
Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374
Mutual Acceptance Co Ltd v FCT (1944) 69 CLR 389
Narich Pty Ltd v Commissioner of Pay-roll Tax (1983) 50 ALR 417
Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
The Transport Workers' Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1990) 34 IR 138
Zuijs v Wirth Brothers Proprietary Limited (1955) 93 CLR 561

NEIL EDWARD GURRAN V TARBOOK PTY LTD (ACN 009 004 675)
WI95/1261

LEE J
PERTH
13 SEPTEMBER 1996

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA  )
WESTERN AUSTRALIA DISTRICT REGISTRY                )

NO. WI95/1261

B E T W E E N:             NEIL EDWARD GURRAN

Applicant

and

TARBOOK PTY LTD

(ACN 009 004 675)

Respondent

MINUTE OF ORDER

JUDGE MAKING ORDER:    LEE J

DATE OF ORDER:        13 SEPTEMBER 1996

WHERE MADE:           PERTH

THE COURT ORDERS THAT:

The application be dismissed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Industrial Relations Court Rules.

IN THE INDUSTRIAL RELATIONS COURT OF AUSTRALIA  )
WESTERN AUSTRALIA DISTRICT REGISTRY                )

NO. WI95/1261

B E T W E E N:             NEIL EDWARD GURRAN

Applicant

and

TARBOOK PTY LTD

(ACN 009 004 675)

Respondent

CORAM:     LEE J
DATE :     13 SEPTEMBER 1996
PLACE:     PERTH

REASONS FOR JUDGMENT

Between February 1992 and February 1995 the applicant ("Gurran"), as Sales Manager and as General Manager, rendered services to the respondent ("Tarbook") which carried on a boat-selling business under the name "Captain Blackbeard's Boat City".  Tarbook conducted the business as trustee of a unit trust.  The holders of units in the trust were brothers Brenton and Darryl Black ("B. & D. Black") and "Black No. 3 Trust", presumably an oblique description of a trustee of a discretionary trust.  The controllers of Tarbook were B. & D. Black.

Until about February 1992 Gurran Agencies Pty Ltd ("Gurran Agencies") and Murray Small and Associates Pty Ltd carried on a boat-selling business in partnership under the name "Neil Gurran's Boat City".  Gurran is the controller of Gurran Agencies.

Gurran Agencies received "management fees" from the partnership, presumably for the provision of managerial services to the partnership by Gurran.

In late 1991 the business of the partnership began to falter and the partners sought to sell the business as a going concern.  Small, the controller of Murray Small and Associates Pty Ltd, and Gurran discussed with B. & D. Black a proposal that Tarbook acquire the partnership business.  Tarbook declined to purchase the business but in February 1992 did agree to purchase stock and other assets of the business and the right to use the name "Boat City".

Tarbook contends that an oral agreement was made between B. Black for Tarbook and Gurran for Gurran Agencies under which Tarbook agreed to purchase the business assets of the partnership.  Tarbook says that it was an "express condition" of the agreement that Tarbook engage Gurran Agencies to provide "management services" to the business to be conducted by Tarbook under the name "Captain Blackbeard's Boat City" at boat yards at North Perth and Welshpool.

Gurran contends that by an oral agreement made between himself and B. & D. Black on behalf of Tarbook it was agreed that Tarbook employ Gurran as the Sales Manager of the Tarbook business.

Without determining at this point who the contracting parties were or the terms of that contract, it was obvious from the case presented at trial that the agreement made in respect of the performance of the duties of Sales Manager of the Tarbook business was a separate agreement whether or not that agreement was in performance of a condition of another contract for the sale and purchase of assets of the business "Neil Gurran's Boat City".

Gurran commenced duties as the Sales Manager of Captain Blackbeard's Boat City in February 1992 and from May 1992 was known as the General Manager.

In substantial respects the parties were "ad idem" as to the form of remuneration that was paid for the services performed by Gurran, namely, a monthly fee described as a retainer and a commission on gross profit on sales.  It was not in issue that at the commencement of Gurran's services payment was made at the rate of $3,000 per month, later increased to $4,000 per month and then $5,000 per month.  The parties agreed that in the period of twelve months before February 1995 the remuneration paid by Tarbook for Gurran's services was approximately $109,000 of which $44,000 was paid by way of the retainer fees.

The principal question to be answered in this application is whether Gurran was an employee of Tarbook within the meaning of that term as used in Div 3 of Pt VIA of the Industrial Relations Act 1988 ("the Act"). It was submitted by Tarbook in respect of that issue that there was a threshold issue to be determined, namely, whether pursuant to s170CD of the Act Gurran was not an employee to whom the provisions of Div 3 of Pt VIA of the Act applied, being an employee who was "not employed under Award conditions" and whose "relevant wages" exceeded the "applicable amount" prescribed in s170CD.

Section 170CD of the Act, relevantly, provides as follows:

"170CD(1)The following Subdivisions do not apply to a termination of employment of an employee who is not employed under award conditions if:

(a)in respect of an employee who was continuously employed by the employer during the period of 12 months immediately before the termination day - on the termination day for employee's relevant wages exceeded the applicable amount; or

...

(2)The applicable amount for the purposes of subsection (1) is:

(a)subject to paragraph (b), $60,000; or

(b)if regulations made in accordance with Subdivision CA prescribe a formula for the annual indexation of the amount referred to in paragraph (a) - the amount worked out using that formula as it applies from time to time.

(3)For the purposes of this section, an employee is taken not to be employed under award conditions if wages and conditions of employment of the employee are not regulated by one or more relevant awards that bind the employer of the employee.

(4)In this section:

...

"relevant wages", in relation to an employee, means the total amount of the wages that the employee received, or was entitled to receive, from the employer in respect of:

(a)if paragraph (1)(a) applies to the employee - the period of 12 months referred to in that paragraph; or

(b)if paragraph (1)(b) applies to the employee - the lesser period referred to in that paragraph;

but, in relation to an employee whose contract of employment prescribes normal hours for the performance of work (whether by prescribing the number of hours in which, or the times at which, work is normally to be performed in a particular period), does not include any wages, additional to normal wages, in respect of additional hours of work performed or in respect of work performed at other times;"

It was not suggested by Gurran that the contract of employment with Tarbook prescribed "normal hours" for the performance of his work.

Tarbook submitted that the retainer and commissions paid for Gurran's services were "relevant wages" for the purposes of s170CD. Gurran did not contend that the "retainer" was not within the meaning of "relevant wages" but did argue that the payments of commission could not be so described.

If the commissions were "relevant wages" the Court had no jurisdiction to determine Gurran's claim.

The retainer and the commissions were paid irregularly by cheques drawn payable to Gurran Agencies, perhaps with one exception.  The commissions were earned in two ways.  The principal commission was payable on the gross profit on sales earned by the business.  It accrued regularly each month as profits on sales were realized.  The second form of commission was a commission paid on the gross profit of any sale made by Gurran personally.  Such commissions were earned irregularly and were for relatively small amounts.

Cheques in payment of the retainer and commissions were paid several times a month usually as a composite payment.  In most cases the cheques were made out in round figures on account of the amounts payable by way of retainer and for commissions earned.

The commission payable on gross profit on sales was an incentive to Gurran to improve the sales performance of the business.  It was not tied to Gurran's presence in the sale yard nor to his personal ability to generate and complete sales and to that extent the major commissions earned were monthly earnings, similar in character to the retainer.

Section 170CD was enacted to remove an existing right enjoyed by certain employees to seek relief under the Act. Accordingly, if the words used by Parliament leave any doubt as to Parliament's intention that doubt should be resolved by applying the meaning that is consonant with the continuation of the right. The removal of such a right must be effected by words of clear meaning. (See: Esber v Commonwealth (1992) 174 CLR 430.)

By s170CD the right to seek redress under the Act was available only to an employee who received, or was entitled to receive, wages in an amount that did not exceed the applicable amount. Subject to the qualification made below, the meaning of wages in ordinary usage is well-known. Unless the context in which the word is used suggests that the word has another meaning it should be assumed that Parliament intends the word to be used in its accepted sense.

The context provided by Div 3 of Pt VIA of the Act, in which s170CD appears, is a set of provisions intended to implement the Termination of Employment Convention 1982 ("the Convention"), the English text of which is set out in Schedule 10 of the Act. The Convention, according to Article 2.1 of the English text, "applies to all branches of economic activity and to all employed persons". The relevant Articles of the Convention, however, which deal with the termination of employment refer to the employment of a "worker".

In its ordinary meaning the word "wages" has been used to describe the regular payments made by an employer to a worker for labour provided to the employer by the worker, that is, the payments made for other than "white-collar jobs".  (See:  Mutual Acceptance Co Ltd v FCT (1944) 69 CLR 389 per Rich J at 398.) It is to be distinguished from the meaning applied to the word "salary" which refers to a fixed sum or stipend paid by periodical instalments to an employee for regular work performed by the employee being work of a non-manual or non-mechanical kind.

In common parlance the difference between "wages" and "salary" has become blurred in recent years and occasionally wages may be used in a generic sense to include payments received as salary. There is nothing in Div 3 of Pt VIA to indicate that the terms of the Division are restricted to employees who are workers who receive wages stricto sensu and that the Division does not extend to employees who receive salary. Having regard to the secondary meaning of the word wages and the apparent application of Div 3 to employees generally, the expression "relevant wages" used in s170CD should be taken to include salary paid to an employee.

However, the words used in s170CD do not suggest that wages has such an expanded meaning as to mirror the meaning of words such as "emoluments" or "remuneration". Indeed, the terms of sub-s170CD(4), which define the expression "relevant wages" by excluding "wages additional to normal wages" paid for overtime hours or for hours other than the "normal hours" of employment under a contract which prescribes "normal hours" for the performance of work, suggest that "relevant wages" is to be taken to be the sum which accrues to an employee from day to day as the base amount to be paid for the performance of the ordinary services required to be rendered by the employee under the contract of employment.

Accordingly, additional sums that may become payable under, or in respect of, the contract of employment such as bonuses, gratuities, reimbursements and occasional allowances do not appear to be included in the meaning of "relevant wages" under s170CD.

As stated above, the commissions earned were of two types: one commission was earned by reason of Gurran's appointment as manager payable on the gross profits of sales, and the other was earned by the performance by Gurran of specific services, namely, the negotiation and completion of sales.  As may be expected the first-mentioned commission was a major source of remuneration and, indeed, the amount earned regularly exceeded the remuneration payable by way of retainer.  A commission payable for Gurran's services by reason of his occupation of the position as manager, may suggest that the commission has the character of a component of remuneration paid for the services rendered as a manager.  Indeed, the payment of composite amounts on account of retainer and commission tend to support that characterization.

However, such a commission is not a regular periodical sum paid for work performed and although it may have been an entitlement obtained pursuant to a contract of employment and have been remuneration for Gurran's services, it did not have the character of wages whether or not that word is taken to include salary.  A payment by way of commission is not within the ordinary concept of wages.  (See:  Commissioner of Pay-roll Tax v Reserve Bank of Australia (1986) 66 ALR 677 per Brooking J at p686.)

If Parliament had intended the words "relevant wages" to include such payments it would have been a simple task for words appropriate for that purpose to have been used. It is to be noted that s170EE of the Act, which deals with the assessment of the appropriate compensation to be paid by an employer to a person entitled to a remedy in respect of the termination of the employee's employment, requires the Court to have regard to the "remuneration" that an employee would have received, or would have been likely to receive, if the employer had not terminated the employment. In so providing, Parliament made it clear that "wages" and "remuneration" have been used in that part of the Act for their different and distinct meanings.

If Gurran is an employee to whom Div 3 of Pt VIA of the Act applies he is not an employee who received, or was entitled to receive, relevant wages that exceeded the applicable amount prescribed in s170CD and, therefore, the subsequent sub-divisions of Div 3 would apply.

I turn now to the question whether Gurran was an employee to whom the Act applied.

It was not submitted that the term "employee" as used in Div 3 of Pt VIA of the Act has a meaning other than that which has been applied to the term elsewhere in the Act and at common law. In particular it was not submitted that the meaning of "employee" in s170CD of the Act included a person who performed duties under an employment relationship formed by a contract for services.

Where the nature of the contractual relationship between a person who requires work to be done and the person who performs that work is uncertain, the indicia provided by the manner in which the work is performed and the conduct of the respective parties may be considered to determine that question.  (See:  Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Zuijs v Wirth Brothers Proprietary Limited (1955) 93 CLR 561; Australian Mutual Provident Society v Allan (1978) 52 ALJR 407; Narich Pty Ltd v Commissioner of Pay-roll Tax (1983) 50 ALR 417; Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374; B. Creighton & A. Stewart, Labour Law, (2nd Ed), (Sydney: The Federation Press, 1994), pp128-136.)

However, the first step to be taken is to ascertain the identity of the contracting parties and, where the contract is formal, or has express terms, to consider the terms of the contract that have been formed.

As stated earlier the agreement negotiated by B. Black and Gurran under which Gurran rendered services for Tarbook was oral.  Although the identity of the party with which, or with whom, Tarbook contracted is in issue, the parties agree in substantial measure as to the terms of the contract.

Tarbook contended that it made an agreement with Gurran Agencies for Gurran Agencies to provide "management services" in respect of Tarbook's business and that it was part of the agreement that Gurran Agencies would engage Gurran to provide those services.  It was said that B. & D. Black, as the controllers of Tarbook, were keen to "stand back" from the boat selling business of Tarbook and pursue other business interests.  The term of the contract was said to be for one year and that "from February 1993...was extended by conduct on the same terms and conditions".  It was Tarbook's case that "in or about December 1994 [Tarbook] orally notified [Gurran Agenices] of its intention not to renew the service contract when it expired on the 11th February 1995".

Gurran's case was that by an agreement made between himself and Tarbook, Gurran was employed by Tarbook as Sales Manager, and later as General Manager, and that it was a term of that agreement that Gurran's "base retainer and commissions" be paid to Gurran Agencies.

It is not in issue that, perhaps with the exception of one cheque, the cheques drawn by Tarbook in payment of retainer and commissions were made payable to Gurran Agencies.  The first three cheques drawn by Tarbook were paid by Gurran into his own account.  According to Gurran's evidence he was advised by the accountant for Gurran Agencies, Mr Settineri, that his "wages" could be paid to Gurran Agencies and that Gurran Agencies could offset accrued tax losses against such monies paid to it by Tarbook.  Gurran said that the payment of cheques to Gurran Agencies was suggested by B. Black after Gurran's employment had commenced.

I am satisfied that the proposal prepared by Gurran on behalf of Gurran Agencies, and put to B. Black for Tarbook before the employment arrangement was made, was that which was put to Mr Settineri for advice in respect of its taxation consequences.  I will deal with the terms of the proposal later in these reasons.

Directions that may have been made for the receipt of remuneration and the manner in which the incidence of taxation on that remuneration may have been treated by the parties will not, of itself, determine the nature of an employment contract nor the identity of parties who have contracted for the provision of the services for which the remuneration is paid.  (See:  Alman v Unwin [1983] WAR 157; Leighton Contractors Pty Ltd v Panizza, Full Court, Supreme Court of Western Australia, 19 October 1995 (unreported).)

With the exception of the accounts for the year ended 30 June 1992, the financial statements prepared for Gurran Agencies in the relevant years treated the sums paid by Tarbook as management fees earned by Gurran Agencies.  With regard to the 1992 accounts, it appears that Tarbook's cheques were not treated by Gurran Agencies as monies receivable by it nor as an advance to Gurran.  The accounts were prepared by accountants on instructions provided by Gurran.  Gurran filed no income tax returns in the relevant years and Tarbook did not deduct from the monies paid for Gurran's services any sum to be remitted to the Commissioner of Taxation under the Income Tax Assessment Act 1936. Gurran Agencies submitted no invoices to Tarbook for the management services provided by Gurran. Gurran was engaged exclusively by Tarbook and was fully occupied in providing services to Tarbook.

With regard to the business conducted by Gurran Agencies in partnership, the relevant accounts of the partnership and of Gurran Agencies before the business ceased showed that management fees had been paid by the partnership to Gurran Agencies for managerial services provided to the partnership, presumably by Gurran.

Although Gurran's evidence was equivocal it is clear that a written proposal was received by Gurran from B. Black on behalf of Tarbook on or about 5 February 1992 which included the following:

"Gurran Agencies Agrees to

1.Indemnify Captain Blackbeard against any claims from any third parties occurring as a result of this agreement and warrants that all goods purchased are free of any encumbrances.

2.Allow Captain Blackbead to trade from the premises at .... CHARLES ST and to enjoy the facilities thereof and to cause the assignment of the lease to Captain Blackbeard upon request by them to do so.

3.Transfer the TRADING name "BOAT CITY" to Captain Blackbeard.

4.Provide management services by Neil Gurran to Captain Blackbeard on a full-time basis for a minimum period of 6 months for the fixed monthly sum of $2200 plus 5% made by Captain Blackbeard from both locations plus a further 7½% of the gross profit arising from any sale effected solely by Neil Gurran.  Any cash associated with the provision of Neil Gurrans [sic] services during this period will be the responsibility of GURRAN AGENCIES."

The response prepared by Gurran on the letterhead "Neil Gurran's Boat City" forwarded to Tarbook on or about 6 February 1992 included the following items:

"18)G.A. will provide management by N.G. to C.B. on a full time basis (terms and conditions to be laid out in writing) for a minimum period of 6 months with an overall contract of not less than 2 years with a provision in the contract and a formula for N.G. to purchase unit shares in C.B.'s operations if so desired with the view to a full time long term relationship with the opportunity for both parties for future involvements in other ventures entered into by the group.

FIRST 10,000 NO COMMISSION [handwritten]

19)Initial renumeration [sic] for a trial

* period of 6 months and not to be less than that in future.  A retainer of $2200.00/month, 5% on sales of the overall group and 7½% commission to N.G. for all personal sales, an $800/month car allowance for use of N.G.'s personal car on company business which will be extensive between G.A. base at Greenwood, North Perth's location and Welshpool.  G.A. will be responsible for costs incurred by N.G. in the provision of these services ie car, fuel, phone, pager and wages to N.G.

20)The overall intent of this agreement is that of a solid business like [sic] but friendly working relationship between all parties for the betterment of Captain Blackbeard, and that at all times a spirit of mutual co-operation be implemented to assist each other to gain the maximum benefit from this relationship and that we continually work as partners in our joint goal of making Captain Blackbeard's the best boat dealership in Australia.

Scope of authority and duties of N.G. to be outlined and all relevant parties informed of this situation."

I am satisfied that the proposals exchanged and referred to above provided the foundation for the negotiations which followed as to the circumstances in which Gurran would provide services to Tarbook and that at all times the negotiating parties were Gurran Agencies and Tarbook.  I am also satisfied that the agreement made between Gurran Agencies and Tarbook included a provision that Gurran Agencies, by Gurran, provide management services to Tarbook.

I do not accept Gurran's evidence that the agreement for the use of his services was made between himself personally and Tarbook nor his submission that Gurran Agencies "was interposed to receive Gurran's remuneration in order to take advantage of tax losses suffered by Gurran Agencies".

This was not a case of Tarbook employing a manager and making payments of the employed manager's remuneration at the employee's direction to a corporation controlled by the employee.  At the time the agreement was made Gurran and B. Black were experienced businessmen who had been friends for some years and aware of each other's business acumen.  Each had controlled corporations that were the proprietors of businesses and were experienced in conducting businesses through such corporate entities.  Gurran was well aware of the consequence of contracting by a separate entity Gurran Agencies and, in particular, of the effect of the proposal that he put to Tarbook on behalf of Gurran Agencies that Gurran Agencies provide managerial services to Tarbook through Gurran.  When the agreement was made it is probable that the term agreed upon for the provision of managerial services by Gurran Agencies was a period of twelve months and that thereafter the agreement continued as a contract terminable on reasonable notice.  Although it is not a material point, I do not accept that it was a contract from year to year as asserted by B. Black or that the contract was to terminate by effluxion of time on 11 February 1995 if not renewed.

The conclusion that the contracting parties were Gurran Agencies and Tarbook and that the substance of the contract was that Gurran Agencies provide managerial services is based on the contents of relevant documents and on matters that, in the main, form common ground between the parties and is not dependent upon the formation of an adverse impression of Gurran as a witness.  However, in observing Gurran's demeanour I found that in significant respects he was plausible rather than persuasive and in cross-examination he was inclined to fence with counsel on questions that posed difficulties for him and not give a direct and responsive answer to the questions put to him.  By the same token, however, B. Black, the principal witness for Tarbook, was excessively self-assured and prepared to deny anything that did not suit his account and I was not confident that at all times his evidence amounted to a forthright recollection of relevant events.

If parties to an employment contract have attempted in the terms of their contract to describe their relationship in a manner that does not accord with the facts, the relationship established by the facts will prevail.  Therefore, a purported contract for services will be ineffective if a contract of service is established by those facts.  (See:  Narich Proprietary Limited v Commissioner of Pay-roll Tax (1983) 50 ALR 417; The Transport Workers' Union of Australia v Glynburn Contractors (Salisbury) Pty Ltd (1990) 34 IR 138.)

However, unless Gurran Agencies failed to provide managerial services for Tarbook pursuant to the terms of the contract, or the agreement between Gurran Agencies and Tarbook was subordinated to circumstances which established a relationship of employer and employee between Gurran and Tarbook, the conclusion should be drawn that the relationship between the parties was as the parties arranged by their contract.  The following principle of law expressed in Narich by Ld. Brandon (p421) in relation to a written contract applies equally to an oral contract which contains an express term to like effect:

"The third principle relates to cases where the parties have, as in the present case, included in their written contract an express provision purporting to define the status of the party engaged under it, either as that of employee on the one hand, or as that of independent contractor on the other.  With regard to a clause of this kind Lord Fraser of Tullybelton said in the A.M.P. case at 389-390:

'Clearly cl. 3, which, if it stood alone, would be conclusive in favour of the Society, cannot receive effect according to its terms if they contradict the effect of the agreement as a whole.  Nevertheless, their Lordships attach importance to cl. 3, and they consider that the following statement by Lord Denning M.R. in Massey v. Crown Life Insurance Co. [1978] 1 W.L.R. 676 correctly states the way in which it can properly be used; "the law, as I see it, is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it.... On the other hand, if their relationship is ambiguous and is capable of being one or the other other [i.e. either service or agency], then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them."

In the present case, where there is no reason to think that the clause is a sham, or that it is not a genuine statement of the parties' intentions, it must be given its proper weight in relation to other clauses in the agreement.'"

Therefore, unless the circumstances of this case dictate otherwise, the characterization of the employment relationship is to be found in the contract under which the services are rendered.  (See:  Neale v Atlas Products (Vic) Pty Ltd (1955) 94 CLR 419 at 428.)

Tarbook agreed with Gurran Agencies that Gurran Agencies would provide managerial services to Tarbook by Gurran and that Gurran Agencies would earn a monthly fee, a commission on the gross profit of all sales made by the business and a further commission on the profit of the sales made by Gurran. Unless it is found that the contract made between Gurran Agencies and Tarbook was incapable of being performed as a contract for services or that it disguised a contract of service made between Gurran as employee and Tarbook as employer or that Gurran and Gurran Agencies severally contracted with Tarbook, for example, that Gurran Agencies would make Gurran available to contract with Tarbook and Gurran entered a contract of service with Tarbook, the consequence must be that Gurran is not an employee of Tarbook to whom Div 3 of Pt VIA of the Act applies.

At one time it may have been considered unlikely that the services of a manager of a business such as that conducted by Tarbook could be provided under a contract with a third party for the provision of managerial services as opposed to the employment of an employee by the proprietor of the business but it is now not unknown in modern industrial practice for managerial duties to be provided under a contract with an independent contractor or with a party in the business of providing such services.  (See:  Economic Planning Advisory Commission, The Changing Australian Labour Market, Commission Paper No 11 (Canberra: AGPS, March 1996) p50.)

Given that the contract was capable of being performed in its terms, was it nonetheless a fact that Gurran was employed directly by Tarbook as an employee and the terms of the contract with Gurran Agencies not performed?

The relevant facts were as follows.  Gurran Agencies was not required to supply any equipment, facilities or staff other than Gurran.  It was required to meet incidental outgoings incurred by Gurran in the performance of his duties.  It would appear that those outgoings were of a type that would be met by an employee in any event unless the employer agreed to reimburse an employee for the use of the employee's personal time and facilities in the service of the employer.

Before contracting with Tarbook, Gurran Agencies had been in the business of supplying managerial services but that aspect of its business was limited to the use of Gurran.

At the time Gurran commenced his duties as a manager with Tarbook, the partnership business in which he had been involved had ceased and Gurran and Gurran Agencies had to find another source of income.  Tarbook was interested in using Gurran's experience to develop and expand its own business.  The agreement between Tarbook and Gurran Agencies was an experiment to see if the services of Gurran as manager could lift the performance of Tarbook's business.  It was intended that, depending on Gurran's performance, the organization of the business would be reviewed and that acquisition of equity in the business by Gurran, or by an entity controlled by him, would be discussed.

In performing his services Gurran was not subject to control as to the hours he worked nor instruction in the manner in which he carried out his duties, although ultimate control was exercised by B. & D. Black as signatories to any cheques drawn on behalf of the business.

The absence of direct control and the ability of Gurran to decide when, and for how long, he would take leave from his managerial services may suggest no more independence than would be expected to be within the managerial prerogative of a person occupying a like position as an employee.

With respect to the incorporation of the managerial position within the organisation of Tarbook's business, it is obvious that the function performed by Gurran was central to the conduct of Tarbook's business but, as stated earlier in these reasons and notwithstanding the integral nature of the position, it was capable of being performed under a contract for the supply of services.

Gurran had power to hire and dismiss employees and was responsible for the trading policies of the business.  It was suggested by Tarbook that Gurran directed the principals of Tarbook in the running of the business but I am satisfied that B. Black took direction from no one and that ultimate control of the business rested with Tarbook.  Budgets for the business appeared to consist of loose understandings between Gurran and B. & D. Black.

The scope of a manager's authority and duties as set by the proprietor of a business may make the performance of the managerial services indistinguishable from tasks carried out by an employee of the business occupying the position of manager.  Indicia developed by the common law to determine whether a person is an employee or an independent contractor, such as the degree of control exercised by a party for whom the services are rendered or the degree of integration of the contractor's services in the business for which the services are provided, are less apt to identify the true nature of the employment relationship in the context of modern employment practices.  It is necessary to consider the terms of the contract made between the parties, the relative strengths of the contracting parties and whether there are sound commercial reasons on both sides that give reality to a contract to provide services where normally a contract of service would form the expected employment relationship.  (See:  A. Brooks, "Myth and Muddle - An Examination of Contracts for the Performance of Work", UNSWLJ 11 (2) (1988) 48; R. Hunter, "The Regulation of Independent Contractors:  A Feminist Perspective", Corporate and Business Law Journal, 5 (2) (1992) 165; C. Fenwick, "Shooting for Trouble? Contract Labour-hire in the Victorian Building Industry", Australian Journal of Labour Law, 5 (3) (1992) 237.)

Analysis of the indicia provided by the day to day performance of the services by a person providing work for another will not, in all cases, define whether the provider of the services does so under a contract of service or under a contract of services.

In many cases the manner of provision of services under a contract for services may, on analysis, differ inconsequentially from the manner of performance of a contract of service.  The distinction will be found in the terms of the contract that has been formed between the provider of the work and the recipient of those services.

Where a contract for the supply of work is to be taken to have been formed from the commencement of such work without express terms being agreed upon, the nature and terms of the contract will be divined from indicia provided by the matrix of facts which describe how the contract came into existence and the circumstances in which the work is carried out.

The present matter is a case where the nature and terms of the contract for the supply and use of services were agreed in express terms by the parties and those terms provided for the employment relationship to be for the supply of services and not a contract of service.

There were commercial reasons and perceived benefits on both sides for the formation of such a contract.  The business conducted by Gurran Agencies, in addition to the business carried on in partnership, had included the provision of management services in return for fees.  The area of trade or commerce in which it had provided such services was in the field in which Tarbook carried on business.

Having found that Gurran Agencies and Tarbook made the contract for the supply of Gurran's services, there is no evidence that warrants a finding that the contract was a facade, or was abandoned, or was supplanted by a separate contract of service between Gurran and Tarbook.

Having regard to all these matters I am satisfied that the contract was intended to be performed, and was performed, in the terms in which it was made by Gurran Agencies and Tarbook, namely, that Gurran Agencies would provide for the management of Tarbook's business by providing the services of Gurran as manager for, at the commencement, a period of twelve months and thereafter for an indeterminate period.

It follows that Div 3 of Pt VIA of the Act has no application to the services provided by Gurran to Tarbook under the contract made between Tarbook and Gurran Agencies.

For the reasons set out above the application must be dismissed.

I certify that this and the preceding twenty-six pages are a true copy of the Reasons for Judgment of his Honour Justice Lee.

Associate:
               Date:

APPEARANCES

Counsel for the Applicant:  R.J. Nash
Solicitors for the Applicant:  Murcia Penkin

Counsel for the Respondent:  S.E. O'Brien
Solicitors for the Respondent:  Talbot & Olivier

Dates of Hearing :  13, 14 November 1995, 7, 8 March 1996,
               26, 29 April 1996, (21 May 1996, 6 June 1996 -
               lodgment of written submissions)

Date of Judgment :  13 September 1996