Hayward v Mitsui OSK Lines (Australia) Pty Ltd

[1996] IRCA 471

DECISION NO:471/96

CATCHWORDS

INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - complaint of
UNLAWFUL TERMINATION - whether applicant was an employee - whether alteration to employment arrangements amounted to a “sham” - meaning of “sham” - claim in accrued/associated jurisdiction - whether applicant entitled to long service leave and/or annual leave 

Industrial Relations Act 1988 s 170EA
Companies Act 1981 (SA)
Long Service Leave Act 1987 (SA)

Albin Erich Richtsteiger v Century Geophysical Corporation TI 95/1256, Marshall J, 26 April 1996, (unreported)
Albin Erich Richtsteiger v Century Geophysical Corporation TI 95/1256, Marshall J, 9 May 1996, (unreported)
Sharrment Pty Ltd and Others v Official Trustee in Bankruptcy (1988) 82 ALR 530

No. TI 95/1256

ALBIN ERICH RICHTSTEIGER V CENTURY GEOPHYSICAL CORPORATION

JUDGE:    Marshall J
PLACE:    Melbourne (heard in Adelaide)
DATE:     8 October 1996

IN THE INDUSTRIAL RELATIONS      )
COURT OF AUSTRALIA               )
SOUTH AUSTRALIA DISTRICT REGISTRY )   
  No. TI 95/1256

BETWEEN:    ALBIN ERICH RICHTSTEIGER

Applicant

AND: CENTURY GEOPHYSICAL CORPORATION
  Respondent

JUDGE:    Marshall J
PLACE:    Melbourne (heard in Adelaide)
DATE:     8 October 1996

ORDER

THE COURT ORDERS THAT:

1.The application be dismissed.

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

IN THE INDUSTRIAL RELATIONS      )
COURT OF AUSTRALIA               )
SOUTH AUSTRALIA DISTRICT REGISTRY )   
  No. TI 95/1256

BETWEEN:    ALBIN ERICH RICHTSTEIGER

Applicant

AND: CENTURY GEOPHYSICAL CORPORATION

Respondent

JUDGE:    Marshall J
PLACE:    Melbourne (heard in Adelaide)
DATE:     8 October 1996

REASONS FOR JUDGMENT

INTRODUCTION

This matter is an application pursuant to s170EA Industrial Relations Act 1988 (“the Act”) for a remedy in respect of what the applicant alleges was the unlawful termination of his employment by the respondent. The applicant also seeks relief in the Court’s accrued and/or associated jurisdiction for the payment of allegedly unpaid holiday pay and long service leave.

The matter has already been the subject of two decisions of the Court as currently constituted.  On 26 April 1996 the Court extended the time for the filing of the application to date of its filing: see Albin Erich Richtsteiger v Century Geophysical Corporation TI 95/1256, Marshall J, 26 April 1996 (unreported).  On 9 May 1996 the Court refused to accede to the respondent’s submission that it had no case to answer: see Albin Erich Richtsteiger v Century Geophysical Corporation TI 95/1256, Marshall J, 9 May 1996 (unreported).  The reasons for judgment in this matter should be read together with the reasons for judgment in the two decisions referred to above, especially those of 9 May 1996.  At 2-9 of the judgment of 9 May 1996 the Court set out the state of the evidence before it after the close of the applicant’s case.  The Court has now had the benefit of the evidence of the respondent.  It will revisit the critical findings made on 9 May 1996 in light of that evidence to determine the central issue in this matter, i.e., was the applicant employed by the respondent at the date of the cessation of the applicant performing work in respect of the respondent’s operations.

FINDINGS MADE ON 9 MAY 1996 PUT IN ISSUE BY THE RESPONDENT’S EVIDENCE

• The suggestion by the respondent to the applicant that he might like to manage the respondent’s operations as “a contractor”

It was the evidence of Mr McCormick, the Chief Executive Officer of the respondent, that the applicant, in mid-1989, raised the issue as to the basis upon which he would continue to perform work for the respondent.  He said that the applicant asked to be treated as a contractor because of the tax advantages that would accrue to him.  Mr McCormick said that he agreed to the applicant’s request with some reluctance but with a desire to keep the applicant “happy”.  This evidence of Mr McCormick is consistent with the evidence of another witness called by the respondent, Mr Everson, a former employee of the respondent.  Mr Everson gave evidence that after he noticed that the respondent had commenced to make payments to the applicant’s company the applicant said to him words to the following effect:

“I have my own company and I am (or possibly my company’s) a contractor.  I am not an employee.  It is a good arrangement because there are tax advantages for me”.

Mr Everson further said that:

“His manner of telling me this suggested to me that the arrangement was his idea ...”

Mr Everson was not cross-examined on this evidence.

Considering the evidence in totality, including the earlier evidence given by the applicant, I find that the change in status of the applicant in relation to the respondent was not suggested by the respondent but by the applicant himself.

• The June 1989 insistence that the applicant be put “off-payroll”

Mr McCormick swore an affidavit, dated 16 July 1996, which was admitted into evidence in the proceeding.  Paragraphs 5 to 7 inclusive in that affidavit are as follows:

“5.I am sure that it was the applicant and not myself who suggested that we change the arrangements from employment to a contract arrangement with his company.  This occurred in about June or July 1989 during my trip to Australia.

6.He told me that he wanted to gain income tax advantages from the arrangement.  I am quite sure about this.

7.During the discussions in about June or July 1989, the applicant told me that he had discussed with his solicitor the arrangements for a Service Agreement between the respondent and his company.  He said his solicitor had advised him what items were necessary to ensure that the contractual arrangements would be legal.  He said his solicitor had told him that the contract should be between Century Geophysical Corporation and the applicant’s company, and that the contract must be reduced to writing.  The applicant told me that the change in arrangements would not incur expenses in having the Service Agreement drawn up, because his solicitor was a friend with whom he had gone to school and could draw up the Service Agreement at no cost.”

Mr McCormick was not seriously challenged on the content of those paragraphs of his affidavit whilst under cross-examination; although some criticism was sought to be levelled at such evidence given that Mr McCormick was unable to remember the circumstances surrounding the relevant conversations.

Having observed Mr McCormick give evidence, I have no doubt that the relevant conversations occurred and that Mr McCormick did his best to honestly recollect the content of the material portions of those conversations.  Generally, where the evidence of Mr McCormick conflicts with that of the applicant, on balance, I prefer the evidence of Mr McCormick, who particularly impressed me as a witness of the truth.  On the totality of the evidence I now also consider that it is not open to the Court to find that Mr McCormick told the applicant to change the method by which he was paid so as to remove the applicant from the respondent’s payroll.

• The concern of the respondent about workers’ compensation premiums

The applicant’s evidence was that Mr McCormick was motivated in seeking to have the applicant “off the books” by a desire to reduce its liability for workers’ compensation premiums.  Mr McCormick gave evidence that he did not know what the workers’ compensation levy on the applicant’s wages was and that he did not discuss any such issue with the applicant.  Again, Mr McCormick was not seriously challenged on this issue whilst under cross-examination.

On the totality of the evidence, I am not satisfied that Mr McCormick “was concerned about the cost to the respondent of the workers’ compensation premium” required to be paid by the respondent in respect of the applicant’s employment up to mid-1989.  Consequently, the Court is unable make the finding that Mr McCormick wanted the applicant “off the books” for that reason.

Conclusion on “sham”

Having regard to the evidence of Mr McCormick and the supportive evidence of Mr Everson, the Court cannot in good conscience find that the applicant was effectively forced out of his employment with the respondent.  The better view of the totality of the evidence is that the applicant, himself, sought the change of status for reasons which at the time he considered were to his advantage.

In Sharrment Pty Ltd and Others v Official Trustee in Bankruptcy (1988) 82 ALR 530, 537, Lockhart J said:

“A ‘sham’ is therefore, for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be.  It is a spurious imitation, a counterfeit, a disguise or a false front.  It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not.  It is something which is false or deceptive.”

I do not consider that the applicant and the respondent entered into arrangements in 1989 which constituted a sham in the sense referred to above.  The arrangements made by the applicant and the respondent were undertaken freely by each party without coercion, and, on the better view of the evidence, with willing enthusiasm on the part of the applicant.  I reject the submissions of Mr Crotty, counsel for the applicant, that the arrangements were a sham designed to assist the respondent to avoid its obligations, primarily relating to workers’ compensation.

Consequences of the Court’s conclusion on “sham”

Having found that the arrangement between the respondent and the applicant and his company (Schogar Pty Ltd) (“Schogar”) were not sham arrangements, I consequently find that on 25 January 1995 the respondent did not give notice of its intention to terminate the employment of the applicant but that it gave notice of its intention to terminate its contract with Schogar. The applicant had ceased to become an employee of the respondent prior to that time and had become an employee of Schogar. Therefore this Court has no jurisdiction to grant the applicant’s request for relief under Division 3 of Part VIA of the Act. That application must be dismissed.

Long service leave

The applicant’s claim for long service leave payments must be dismissed as on the most generous view to the applicant of the timing of the arrangements entered into between the respondent and Schogar, the applicant’s employment with the respondent ceased no later than 28 March 1990; only four years after its commencement.  This length of service was insufficient to enable the applicant to qualify for long service leave under the Long Service Leave Act 1987 (SA).

Annual leave

Between 1 July 1989 and 28 March 1990 (the date of incorporation of Schogar) the applicant received monies payable to Schogar by arranging for them to be paid into his solicitor’s trust account.  In July 1990 those arrangements were ratified in a contract entered into between the respondent and Schogar.  An issue has arisen as to whether the applicant is entitled to pro-rata annual leave in respect of the period 1 July 1989 until 28 March 1990.  I am satisfied that he is not so entitled.  Although his company was not incorporated until 28 March 1990, he and the respondent acted in anticipation of the incorporation by their conduct, especially by the applicant’s manner of ensuring that he received remuneration during that period.

I accept the submissions of Mr Schroeder, counsel for the respondent, that the relevant provisions of the Companies Act 1981 (SA) which applied in 1989 and 1990 had the effect of permitting the respondent and Schogar to ratify in July 1990 payments made by the respondent to Schogar from 1 July 1989 until 28 March 1990.  Section 81(2)(b) of that Act then provided that:

“81  (2)  [Ratification by company when formed] Where -

(a)a non-existent company purports to enter into a contract; and

(b)the company is formed within a reasonable time after the contract is purported to be entered into,

the company may, within a reasonable time after it is formed, ratify the contract.”

See now s183 of the Corporations Law.

In my view the period from 1 July 1989 until 30 July 1990 was, in the circumstances, a reasonable period of time, given that no injustice has been occasioned by the delay.

ORDER

The order of the Court is that the application be dismissed.

I certify that this and the preceding 10 pages are a true copy of the Reasons for Judgment herein of his Honour Justice Marshall.

Associate:  

Date:  

Counsel for the Applicant:            J. Crotty
Solicitor for the Applicant:           James Crotty

Counsel for the Respondent:           R. Schroeder
Solicitor for the Respondent:          Knox & Hargrave

Date of hearing:  13 September 1996
Date of judgment:  8 October 1996