Hitchin v Labourforce Solutions Pty Ltd - [2009] SASC 85

SUPREME COURT OF SOUTH AUSTRALIA
(Full Court)
HITCHIN v LABOURFORCE SOLUTIONS PTY LTD
[2009] SASC 85
Judgment of The Full Court
(The Honourable Justice Gray, The Honourable Justice Sulan and The Honourable Justice David)
1 April 2009
INDUSTRIAL LAW - SOUTH AUSTRALIA - REGULATION OF PARTICULAR MATTERS UNDER PARTICULAR STATUTES - LONG SERVICE LEAVE
Appeal from a decision of the Full Industrial Relations Court - whether an employer Labourforce Solutions Pty Ltd took over or otherwise acquired part of business of another employer, Rexco Pty Ltd, also a labour hire company - whether definition of related employer set out in section 3(3) of the Long Service Leave Act satisfied - whether former employee of Labourforce Solutions entitled to pro-rata long service leave having completed seven years' continuous service with related employers.
Held: appeal allowed - Labourforce Solutions acquired a part of the business of Rexco in accordance with section 3(3) of the Long Service Leave Act - Rexco and Labourforce were related employers within the meaning of that section - Labourforce Solutions to pay pro-rate long service leave of $10,304.84.
Long Service Leave Act 1987 (SA) s 3(3) and s 5, referred to.
Action Engineering v Press [2006] SASC 207; Yule v WorkCover (Rexco) [2003] SAWCT 66; Trinne v WorkCover (Rexco) [1999] SAWCT 57; Snell v WorkCover (Rexco) [1999] SAWCT 126; Johnson v Johnson (2000) 201 CLR 488; PP Consultants Pty Ltd v Finance Sector Union of Australia (2000) 201 CLR 648; Smith v Anderson (1880) 15 Ch D 247; White v Federal Commissioner of Taxation (1968) 120 CLR 191; Thomas v Federal Commissioner of Taxation (1972) 46 ALJR 397; Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310; Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1; Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd (2005) 222 CLR 194; Dougal v Ribbon Nominees Pty Ltd (1992) 59 SAIR 750; K-Generation Pty Ltd & Anor v Liquor Licensing Court & Anor [2009] HCA 4, considered.

HITCHIN v LABOURFORCE SOLUTIONS PTY LTD
[2009] SASC 85
GRAY J.

This is an appeal from a decision of the Full Court of the Industrial Relations Court.[1]
[1] Permission to appeal was granted. See Hitchin v Labourforce Solutions Pty Ltd [2008] SASC 278.
The Full Court dismissed an appeal from a Judge of the Industrial Relations Court who had in turn allowed an appeal from an Industrial Magistrate. The appeal raises questions concerning the scope of the “related employer” provisions of the Long Service Leave Act 1987 (SA). More particularly, the question that arises is whether an employer, Labourforce Solutions Pty Ltd, a labour hire company, took over or otherwise acquired part of the business of another employer, Rexco Pty Ltd, also a labour hire company. If it is determined that Labourforce Solutions took over or otherwise acquired part of the business of Rexco, then the definition of related employer set out in section 3(3) of the Long Service Leave Act will be satisfied and a former employee of Labourforce Solutions, George Mettyear, will be entitled to pro rata long service leave having completed seven years of continuous service with related employers.
The Facts
Mr Mettyear is a qualified special class electrician. Between October 1999 and December 2006, Mr Mettyear worked full time maintaining the electrical plant and equipment at the Elizabeth plant of Iplex Pipelines of Australia Pty Ltd. Both Rexco and Labourforce Solutions were the labour hire companies that, at different times, provided Iplex with skilled maintenance workers. Mr Mettyear was first employed by Rexco Ltd. Rexco hired the labour of Mr Mettyear to Iplex from October 1999 until June 2002. In June 2002, Labourforce Solutions became the sole labour hire company to Iplex and became Mr Mettyear’s employer. Mr Mettyear continued with the same maintenance duties at Iplex.
Labourforce Solutions terminated Mr Mettyear’s employment when Iplex ceased using Labourforce Solutions’ labour hire services in December 2006. Mr Mettyear was not paid any redundancy entitlements. He then sought payment in lieu of pro rata long service leave from Labourforce Solutions. In rejecting this request it was said that Labourforce Solutions had been Mr Mettyear’s direct employer for only about four and a half years and denied that Mr Mettyear’s previous service with Rexco could be counted for the purposes of providing long service leave. Labourforce Solutions later sought the review by the Industrial Magistrate of a formal notice issued by SafeWork SA’s inspector for it to pay Mr Mettyear an entitlement of $10,304.84.
Long service leave entitlements are not the product of the contract of employment, but a statutory benefit provided by the Long Service Leave Act. Under this Act, an employee is entitled to receive pay in lieu of pro rata long service leave upon termination after a minimum period of seven years “continuous service” with the same or “related employers”. Section 3 defines employers to be related if one “takes over or otherwise acquires the business or part of the business of the other”.
An entitlement to long service leave derives from service to a business rather than to an individual employer. The entitlement focuses on the business for which a worker has continuously worked over a number of years, rather than on the legal identity of the owner of that business.
There was no issue in this case that Mr Mettyear’s service was other than continuous throughout the seven years, notwithstanding a brief period of being deployed to Holden rather than Iplex in the first few months of him starting work for Rexco. Apart from those few weeks, all other work performed by Mr Mettyear was at Iplex’s Elizabeth premises. It was not in issue that Mr Mettyear was entitled to the sum of $10,304.84 gross as his long service leave entitlement if Rexco and Labourforce Solutions were related employers within the meaning of the Act. It was agreed between the parties that Inspector Hitchin carried the onus of proving Mr Mettyear’s claim on the balance of probabilities.
Mr Mettyear gave evidence that in 1999 he responded to an advertisement placed by Rexco offering work at Iplex. As requested by Rexco, Mr Mettyear forwarded his resumé to an employee of Rexco. Mr Mettyear was offered and accepted employment with Rexco. His labour was hired to Iplex immediately as a special class electrician to undertake maintenance work at Iplex. He understood that Iplex “got rid of their permanent maintenance staff and had decided to go down the casual employment just for their maintenance staff”.
In June 2002, Rexco ceased to be Mr Mettyear’s employer and Labourforce Solutions became his employer. When asked about how the change took place between Rexco and Labourforce Solutions, Mr Mettyear gave the following evidence:
How did that change come about?---Well, we were told by Iplex that they would cease using Rexco as their casual labour hire for maintenance and they were going to use LabourForce Solutions because that was their preferred supplier across Australia, and if we wanted to continue our employment at Iplex we would have to register with them.
So do I take it you resigned your employment with Rexco and took up fresh employment with LabourForce Solutions?---No, I didn’t. There was no resignation. There was just---
You just took up a new position with – or you started being employed by LabourForce?
---Yes. On Friday we were Rexco. There was no paperwork terminating employment with Rexco or anything. We just started on the Monday with Labourforce.
Mr Mettyear outlined the advice he was given about the changeover between Rexco and Labourforce Solutions:
Of the whole group of employees at Iplex, some were employed by Iplex itself?---Correct.
Some were employed by Rexco initially?---Correct, yes.
Were there any employed by other labour supply companies?---Yes, by LabourForce.
…
I understand that after LabourForce took over they were in fact renting some offices from Iplex?---That’s correct.
So whereabouts were those offices that were rented from Iplex?---Well, they were on the Iplex site, I guess between the main Iplex front office and the Iplex canteen.
Did that renting of offices by LabourForce commence before or after or at the same time as you began being employed by LabourForce rather than Rexco?---It was pretty much towards the same time.
Can I just ask you a few questions about the end of your employment at the Iplex site. I think it was on 8 December you were called in for a meeting. Is that correct?---That’s correct, yes.
Who else was there at that meeting?---Rod Bolton, the LabourForce manager; myself; Craig Garde, he was an electrician; and Gordon Wainman who was a fitter.
What were you told at that meeting?---Told our services were no longer required, Iplex intended to have someone else supply maintenance on the site. We were told we would be given one week’s pay. We were told that those people who had started with Rexco, that would be take [sic] into account – that time with Rexco would be taken into account in long service payments.
Who was it that told you those things?---Rod Bolton.
Mr Mettyear explained in evidence that while he was employed at Iplex, the maintenance workers at Iplex were employed by Rexco. He identified and named five such employees. He outlined how Iplex provided training, particularly for working at heights and with respect to first aid. Mr Mettyear also explained that while working with Iplex he acquired skills in relation to complicated machinery and its maintenance.
Robert John Edwards, the South Australian business development manager of Labourforce Solutions at relevant times, provided a witness statement that was tendered as his evidence before the Industrial Magistrate. Mr Edwards was authorised to make the witness statement by Labourforce Solutions. He described the business of Labourforce Solutions in the following terms:
Labourforce is a contract labour supplier. Its business generally involves providing labour to different companies who require labour for various activities they undertake. In order to provide labour to its clients, Labourforce employs its own workforce which it then supplies to its clients. The Labourforce employees remain its employees throughout the duration that their services are provided to Labourforce’s clients. The Labourforce employees’ services are generally provided on the basis that they are under the day to day instruction and supervision of Labourforce’s client at that client’s worksite.
In return for supplying labour to its clients, Labourforce charges its clients a fee. Labourforce’s fees incorporate the cost to Labourforce of employing the labour (including wages, allowances, loadings insurances etc) plus a commercial margin.
Labourforce commenced operations in or about 1998 in New South Wales. Shortly after it commenced its operations in New South Wales, Labourforce expanded into Queensland and Victoria.
In October 2000, Labourforce commenced operating in South Australia.
In his statement, he outlined Labourforce Solutions’ supply of labour to Iplex in South Australia from about October 2000 until the time of the changeover to Rexco. He identified the workers at Iplex in June 2002:
Apart from the Labourforce employees who worked at the Site in June 2002, the following workers also worked at the Site:
(a) about 50 Iplex employees; and
(b)5 maintenance workers, who were employed by Rexco Pty Ltd (“Rexco”). These maintenance workers included 2 electricians. Mr Mettyear was one of the 5 maintenance employees employed by Rexco. From this point onwards, I refer to the above 5 Rexco employees collectively as the “Rexco Site Employees”.
Mr Edwards then outlined the steps taken in the hiring of Rexco employees who were working at Iplex:
In about mid May 2002, I was approached by a member from Senior Management within Labourforce, who was either Mr Steven Brown, Mr Peter White or Ms Leonie Mills, who said to me words to the following effect:
“We need to bring the maintenance employees at Iplex across to Labourforce.”
The person from Senior Management who I spoke to also said words to the effect:
“If the Rexco employees don’t want to come across, we will probably have to replace them.”
On or about 16 May 2002, I had a meeting with Mr Russell Wheeler, the General Manger [sic] of Iplex. This meeting occurred either shortly before or after the discussion which I refer to above. In this meeting, Mr Wheeler said words to the effect of:
“We want Labourforce to do all the maintenance work at Iplex.”
In response, I said words to the following effect of:
“We will need to talk to these people. If they are happy to switch across, that’s fine. But if they won’t come across, we will have to find replacements.”
...
On or about 17 May 2002, I met with Iplex supervisor Mr Ian Brooker, in a follow up from the previous day’s meeting with Mr Wheeler. In my meeting with Mr Brooker, I stated words to the following effect:
“Labourforce is going to handle the maintenance side from now on. Rexco isn’t supplying workers anymore.”
In response, Mr Brooker stated words to the following effect:
“I am comfortable with that. I’m also happy if the current maintenance workers stay on under Labourforce.”
Mr Edwards then discussed the site meeting with Rexco employees at the time of the changeover. In that respect he said:
On or about 29 May 2002, I met with the Rexco Site Employees at the Site. We had a conversation, in which I stated words to the following effect:
“Labourforce is the national labour supplier to Iplex and we will soon be providing maintenance services to Iplex. Rexco is no longer going to provide labour services to Iplex.
You can come across to Labourforce, and we will pay you the same wages you are paid by Rexco. If you want to stay on with Rexco you can. But from 1 June 2002, Labourforce will be running the maintenance operations at Iplex.”
Following this meeting, on 28 May 2002, Mr Edwards emailed others at Labourforce Solutions in the following terms:
I met with with [sic] the (4) maintenance and (1) electrician with Ian Brooker their supervisor this morning explaining to them that Labourforce Solutions is the national labour supplier for Iplex and looking at taking them over to us.
They had several issues as follows;
-2 x metal trades workers are close to 7 years pro rata long service where do they stand with us on this and by leaving Rexco will lose intitlements [sic].
-They say they are working on a new EBA with Rexco and the AMWU as contractors to Iplex, where do we stand on this.
-The Electrician is under the Electrical Contactors [sic] Industry (SA) Award of which is still at 20% casual loading however he and the others believe he should be paid the 25% casual loading under the Iplex EBA agreement + 5% increase as of July.
-Rexco specialise as a [sic] engineering labour hire supplier, most of these guys have been with Rexco for several years at GMH and other sites if Iplex goes quiet they can normally be sent to another site as per their trade qualifications, we don’t have suitable sites.
-According to them Rexco have a clause if they leave to another agency they loose [sic] all entitlements and possibility of a fine.
-These guys are all union members with one of the guys wanting to involve the union representative. Jim Watson in on any further discussions. According to Ian Brooker Jim is a real gun [sic] ho rep.
-A couple asked the question if they didn’t sign over to us where do they stand.
-The maintenance (4) appeared happy that they would be paid 25% casual loading as they are still paid at 20% and in the hands of the union.
-According to Ian Brooker Iplex Maintenance supervisor he believes Russell is to the thought that they will just sign across to us also mentioning that the next EBA won’t have maintenance and electricians included [sic].
They have my card and are aware I will be away next week they do have Leonie’s mobile number as discussed with Leonie, so at this stage unless something developes [sic] next week we are not due to talk until Monday 27/5/02.
Your thoughts & HELP is appreciated.
This email suggests that the issue of long service leave entitlements was raised by at least two metal trades workers. The evidence does not disclose the response to that enquiry, save that Mr Edwards in his statement said:
I have no recollection of informing any of the Rexco Site Employees, in any of my various discussions with them, that Labourforce would recognise their service with Rexco as service with Labourforce. I did, however, inform the Rexco Site Employees that their rates of pay and allowances would remain the same.
In this respect the unchallenged evidence of Mr Mettyear was that at the meeting in 2006, when his employment was terminated with Labourforce, he was told:
…also that those people who had started with Rexco, take [sic] into account – that time with Rexco would be taken into account in long service payments.
The Industrial Magistrate
The Industrial Magistrate made the following findings:
Rexco was in the business of labour supply or labour hire. It was specifically agreed between the parties that Rexco was a labour supply company. I also note that Rexco Limited has been described as a labour hire company or a labour hire firm in a number of published judgments in South Australia.[2]
Rexco’s business was to provide labour to different clients. The provision of all maintenance labour to Iplex was a severable and distinct part of Rexco’s broader business operations. It was not just an ancillary or related activity. It was more than one activity in a chain of or system of related activities that together made up the operation of providing all the skilled labour for Iplex’s maintenance functions. Whilst there was no evidence from Rexco that the provision of labour to satisfy Iplex’s maintenance functions was treated as a discreet profit centre, the circumstances existed for that to have been the case if so desired as it was an exclusive commercial arrangement with one customer. The workers were to provide a defined maintenance function. The work was performed at the same place and on a continuous basis. In my view the exclusive supply of all skilled labour to Iplex for its factory maintenance needs was a part of Rexco’s business.
Can it properly be said that this part of Rexco’s business was acquired by Labourforce? When Rexco stopped supplying labour to Iplex for its maintenance functions Labourforce started to do exactly the same, and again on an exclusive basis. While Mr Mettyear initially worked for an identifiable part of Rexco’s business, and later for an identifiable part of Labourforce’s business, there was no interruption to his work as a Special Class Electrician when Labourforce took over.
Iplex was happy to keep all its existing maintenance workers when Labourforce took over. Labourforce wished to recruit all of the existing workers and took steps toward this goal. It was important that payments were consistent with those made to Iplex’s own employees.
In PP Consultants there was some discussion of the need for there to be a common identity of the parts of the business the claimant works for. Here the identity did not change. The same work tasks were performed at the same place, for the same remuneration, at the same times and under the same control and supervision of Iplex. The only change of any significance was some regular on site Labourforce contact.
Whilst some of the individual workers may have changed, it is not the identity of the particular workers that is important. It is the identity of the business operations. In this regard there was continuity in the exclusive supply of maintenance workers as between Rexco and Labourforce.
These findings allowed the Magistrate to conclude:
In my opinion Labourforce did acquire a part of the business of Rexco and Mr Mettyear worked continuously for that business. He is therefore entitled to payment of pro-rata long service leave.
[2] See Action Engineering v Press [2006] SASC 207; Yule v WorkCover (Rexco) [2003] SAWCT 66,;Trinne v WorkCover (Rexco) [1999] SAWCT 57 and Snell v WorkCover (Rexco) [1999] SAWCT 126.
The Single Judge Appeal

As earlier indicated, an appeal was taken to a Judge of the Industrial Relations Court who upheld the appeal. Judge Gilchrist took issue with the Industrial Magistrate’s factual finding that part of Rexco’s business was the supply of labour associated with all of Iplex’s skilled maintenance workers at the factory. In that respect Judge Gilchrist reasoned:
There was evidence pointing towards this conclusion but there was also evidence pointing the other way.
There was evidence from Mr Edwards about Iplex wanting Labourforce to do all the maintenance work, but Mr Edward’s [sic] statement also referred to Mr Brooker and we know that he was the head of the maintenance team at the factory and that he worked directly for Iplex. It leaves open the possibility that when Mr Edwards was speaking of Labourforce doing all of the maintenance work he meant all of the maintenance work then being carried out at the factory by Rexco.
Mr Mettyear talked of Rexco employing all of the maintenance employees but what is to be made of his evidence regarding Mr Scott Atkins? It strongly suggests that Mr Atkins was working for Iplex by the time Labourforce took over. It leaves open the possibility of an inference that Mr Atkins was working for Iplex as a maintenance worker at the factory.
Finally, what is to be made of the statement in Iplex’s letter of 8 December 2006 about it retaining its existing full time maintenance employees? This strongly indicates that it directly employed maintenance workers at the factory. We do not know when they did so but the statement is consistent with it employing some maintenance workers there when Labourforce began employing Mr Mettyear.
Collectively this evidence places real doubt about the extent to which Iplex supplied some its own staff [sic] to perform maintenance work. We know for certain that when Labourforce began employing Mr Mettyear, Iplex directly employed one maintenance worker, Mr Brooker. It may have employed a second, Mr Atkins. It may have employed others.
There was no discussion about these matters by the learned Industrial Magistrate.
With respect I have two difficulties about this.
The learned Industrial Magistrate may have considered all of the evidence and reached the conclusion that notwithstanding the evidence suggesting otherwise, overall the evidence supported the conclusion that it was part of Rexco’s business to the [sic] supply all skilled maintenance workers at the factory. In that event, with respect, I think his reasons were inadequate.
The adequacy of reasons has to be looked at through the eyes of the hypothetical reasonable bystander that is spoken of in cases such as Johnson v Johnson[3]. The bystander’s views about the adequacy of reasons reflects the parties’ and the public’s need for justice to be “manifestly and undoubtedly be seen to be done”. Absent a discussion of this evidence the hypothetical reasonable bystander would, in my view, conclude that this has not occurred.
The learned Industrial Magistrate’s failure to discuss this evidence may reflect his failure to consider it. In that event he denied himself of the possibility of finding that Rexco supplied some, but not all of the maintenance workers at the factory. That finding could have led to a conclusion that in employing these maintenance workers Labourforce did not take over or acquire part of Rexco’s business.
[3] Johnson v Johnson (2000) 201 CLR 488, 508-9.
The Judge then re-evaluated the evidence and concluded:
Having re-evaluated the evidence I find that Rexco was at all relevant times a labour hire company. I find that as at June 2002 it was supplying five tradespersons to Iplex and that these tradespersons undertook maintenance work at the factory and worked under the supervision of a supervisor who worked for Iplex. In June 2002 these tradespersons began working for Labourforce doing the same work at the same location as they were when they worked for Rexco. At least one of these tradespersons, Mr Mettyear, had been doing the same work at Iplex since October 1999. Mr Mettyear worked continuously at Iplex until December 2006. I do not know what became of the other four tradespersons.
The evidence does not permit me to make any other findings about Rexco. I do not know, for example, whether these five tradespersons were the only tradespersons that Rexco employed in South Australia or anywhere else as at June 2002.
Prior to June 2002 Labourforce was also supplying labour to Iplex at the factory and elsewhere. None of those working at the factory were undertaking maintenance work. The evidence does not permit me to make any other findings about Labourforce. I do not know, for example, whether the five tradespersons who commenced working for it in June 2002 where [sic] the only tradespersons working for it at the factory, or in South Australia, or anywhere else.
As at June 2002 Iplex directly employed at least one person, the supervisor, in connection with the maintenance work at the factory. It may have directly employed another, Mr Atkins to work there. It is conceivable that it may have employed others.
On the hearing of this appeal to the Supreme Court, it was said that the Judge relied on this re-evaluation of the evidence. It was contended that the factual findings of the Industrial Magistrate should be restored.
The Full Court of the Industrial Relations Court Appeal
As earlier observed, the Full Court of the Industrial Relations Court dismissed the appeal from the single Judge. The senior Judge concluded:
The learned Judge’s finding that the learned Industrial Magistrate erred in finding Rexco supplied all of the skilled maintenance workers at the Iplex factory, was well founded, as was his determination that the evidence did not substantiate such a finding.
Without repeating them, I agree with and adopt the various submissions of [counsel for Labourforce Solutions] set out earlier herein. I agree that, generally speaking, the approach of the majority in Gribbles in determining the relevant “business” of an employer represents the correct approach, but that in this case the lack of evidence was such so as to not enable the learned Judge to carry out the relevant assessment.
The application of the test of the majority in PP Consulting represents the correct test. The learned Judge correctly applied that test to the facts and in so doing in the context of the lack of evidence, he was not able to identify the relevant part of Rexco’s business which was said to have been taken over or acquired by Labourforce.
For the reasons given by the learned Judge and also my acceptance of [counsel for Labourforce Solutions] submissions on this topic I reject the submission of [counsel for Ms Hitchin] that the relevant “part of the business” of Rexco was the supply by it of the labour of Mr Mettyear or alternatively the supply by it of the labour of five maintenance employees.
The evidence in this case discloses:
•Labourforce was awarded a contract to supply additional casual labour to Iplex which was one of its existing clients.
•Subsequent to that, Labourforce offered employment to persons including Mr Mettyear who were employed by Rexco being the entity that previously had the right to supply that casual labour.
•If that offer of employment was not taken up or accepted by Mr Mettyear and the other maintenance workers, Labourforce would have employed other people to perform that work.
• Labourforce did not acquire anything from Rexco, least of all part of its business.
The learned Judge’s reasoning, findings and conclusion, disclose no error of fact or law.
In the end, the result is particularly unsatisfactory for Mr Mettyear. Some of the consequences that [counsel for Ms Hitchin] alluded to in respect of potential business practices where organisations use labour hire companies to supply labour resulting in workers being denied entitlements to long service leave (and indeed other entitlements), may be well founded. That is however a matter ultimately for Parliament and not this Tribunal.
Judge Parsons, with whom Judge Farrell agreed, reached the same conclusion. Judge Parsons reasoned:
I cannot agree with [counsel for Ms Hitchinl] submission that the relevant provision should be given the widest possible interpretation to overcome the potential for avoidance of long service leave obligations by the engagement of employees by successive labour hire companies.
The concept of related employers pursuant to the Act, as it presently stands, requires more than that the second employer merely follows the first. Otherwise the action of a third party in changing the identity of its contractor by negotiating directly with that contractor could indirectly impose obligations of a predecessor on the successful contractor without it knowing the extent of those obligations at the time of the negotiations. It could not have been Parliament’s intention to extend the obligations of an employer in that way.
It may be appropriate for Parliament to amend the Act to deal expressly with the obligation of successive labour hire companies to make provision for long service leave. The construction industry provides an example where special legislation has been necessary. The Construction Industry Long Service Leave Act 1987 recognises the portability of employment in the construction industry and provides a levy system imposed upon employers in the industry to meet the long service leave needs of construction workers.
I have not dealt specifically with [counsel for Ms Hitchin’s] submissions that the learned Single Judge erred in his narrow approach to the identification of the relevant part of the business because, in my view it does not matter whether Rexco supplied labour for the exclusive maintenance needs of Iplex or the labour of five maintenance workers or the labour of Mr Mettyear only. Whatever view is taken of the facts the employers were not related. All that they shared was the same business activity. Labourforce did not acquire part of Rexco’s business within the meaning of the Act applying the Gribbles’ approach.
The Appeal to the Superior Court
The Legislation
As earlier observed, this appeal raises a question about the scope of the related employer provisions of the Long Service Leave Act. Section 5 of that Act relevantly provides:
(1)Subject to this Act, a worker who has 10 years or more service is entitled to the following long service leave—
(a)     13 weeks leave in respect of the first 10 years of service; and
(b)     1.3 weeks leave in respect of each subsequent year of service.
(1a)A worker who is entitled to long service leave under subsection (1) becomes entitled to a payment in lieu of the long service leave or a part of the long service leave if an individual agreement to that effect is made and recorded in writing and signed by the employer and the worker after the entitlement to the leave accrues to the worker.
(2)Where the service of a worker who is entitled to long service leave is terminated, the worker is entitled to a payment in lieu of long service leave.
(3)Subject to subsection (4), a worker who has completed seven years service (but less than 10 years service) is, on termination of the worker's service, entitled to a payment equal to the monetary equivalent of 1.3 weeks leave in respect of each completed year of service.
...
(6)Where long service leave has been taken by a worker or a payment in lieu of long service leave has been made to a worker, the worker's long service leave entitlement is reduced accordingly.
(7)An entitlement under this section only arises in respect of completed years of service.
The question that arises is whether Mr Mettyear is a worker falling within the terms of section 5(3). Section 3(1) provides a number of relevant definitions:
“employer” means a person by whom a worker is employed;
“inspector” means an inspector under the Industrial and Employee Relations Act 1994;
“long service leave entitlement” means an entitlement to long service leave or payment in lieu of long service leave;
“related corporations” means corporations—
(a)     that are related to each other for the purposes of the Corporations Law; or
(b)     that have substantially the same directors or are under substantially the same management;
“the relevant date” means the day on which long service leave is commenced or an entitlement to payment in lieu of long service leave arises;
“service” means continuous service with the same employer or with related employers under a contract of service or a series of contracts of service;
“worker” means a person employed under a contract of service.
Section 3(3) provides:
Employers are related for the purposes of this Act if—
(a)     one takes over or otherwise acquires the business or part of the business of the other; or
(b)     they are related corporations; or
(c)     a series of relationships can be traced between them under paragraph (a) or (b).
In the circumstances of the present proceeding, the parties’ submissions focused on section 3(3)(a) and whether it could be said that Ms Hitchin had established that Labourforce Solutions had taken over or otherwise acquired the business or part of the business of Rexco.
At the outset it is to be recognised that the relevant provisions of the Long Service Leave Act are intended to be beneficial in their operation and, in particular, provide protection for an employee who undertakes continuous service where there is a change of his employer in circumstances where one employer has taken over or acquired the business of the other. Accordingly, any ambiguity in the wording of the relevant provisions should be interpreted with these purposes in mind.
Similar, although not identical, legislative provisions from other States have been the subject of recent consideration by the High Court. The decisions in those authorities provide considerable guidance as to the approach to be taken to the construction of the legislation in issue in these proceedings. However, it is to be borne in mind that there are differences in the legislation that need to be brought into consideration.
In PP Consultants Pty Ltd v Finance Sector Union of Australia,[4] the High Court was concerned with the interpretation of the Workplace Relations Act 1996 (Cth) and, in particular, the construction of the phrase “the successor, assignor or transmittee of the business or part of the business”. Gleeson CJ, Gaudron, McHugh and Gummow JJ observed[5]:
Whilst the notions of “profit” and “commercial enterprise” will ordinarily be significant in determining whether the activities of a private individual or corporation constitute a business[6], they play little, if any, role in identifying whether one government agency is engaged in the business of government previously undertaken by another government agency. In that situation, it is sufficient to ascertain whether or not the activities of the former are substantially identical to the activities or some part of the activities previously undertaken by the latter. That is because the word “business” takes on a special or particular meaning in the expression “the business of government”. It is not because, as a matter of ordinary language, “business” means or includes activities undertaken in the course of business.
The question whether one person has taken over or succeeded to the business or part of the business of another is a mixed question of fact and law. For this reason and, also, because “business” is a chameleon-like word, it is not possible to formulate any general test to ascertain whether, for the purposes of s 149(1)(d) of the Act, one employer has succeeded to the business or part of the business of another. Even so it is possible to indicate the manner in which that question should generally be approached, at least when a non-government employer succeeds to the commercial activities of another non-government employer. As already indicated, special considerations apply when one government agency succeeds to the activities of another. And there may well be other considerations where a government contracts with a non-government body for the performance of functions previously carried out by a government authority.
[4]    PP Consultants Pty Ltd v Finance Sector Union of Australia (2000) 201 CLR 648.
[5]    PP Consultants Pty Ltd v Finance Sector Union of Australia (2000) 201 CLR 648 at 654.
[6]    See, for example, Smith v Anderson (1880) 15 Ch D 247, 258 (Jessel MR); White v Federal Commissioner of Taxation (1968) 120 CLR 191, 216 (Barwick CJ); Thomas v Federal Commissioner of Taxation (1972) 46 ALJR 397, 401 (Walsh J); Ferguson v Federal Commissioner of Taxation (1979) 37 FLR 310, 314; 26 ALR 307, 311 (Bowen CJ and Franki J); 322-323; 318-319 (Fisher J); cf Tweddle v Federal Commissioner of Taxation (1942) 180 CLR 1, 6 (Williams J).
In the later decision of Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd,[7] the High Court was concerned with the interpretation of the same provision of the Workplace Relations Act. The question in issue was whether Gribbles was a successor to the business or part of the business of a Melbourne diagnostic imaging group. In the course of their reasons, Gleeson CJ, Hayne, Callinan and Heydon JJ observed:
The expression “business of an employer who was a party to the industrial dispute”, and its legislative predecessors, expresses a compound conception. The “business” must be the business of the person identified in the succession provision. It is that “business” which provides the essential link between the industrial dispute which the award determined and the binding effect of the award upon an employer who was not a party to that dispute. Demonstrating no more than that the two employers engage in identical business activities does not establish that link. It does not do so because it fails to address an important element of what we have identified as a compound conception. It fails to consider whether the “business”, to or of which the new employer is a successor, assignee or transmittee, was the business of the employer who was a party to the relevant industrial dispute.
Section 149 must be read in a way that gives effect, so far as possible, to its legislative purpose. Plainly, the purpose of the section and its predecessor succession provisions is, and always has been, to extend the operation of awards beyond those who were parties to the dispute that the award determined. But identifying that purpose does not answer the question that arises in this matter – how far does the extension go? It is only if some a priori assumption is made about the intended reach of the provision that considering its purpose casts light on the question. To reason in that way begs the question. Rather, it is necessary to consider the words of the provision. It is there that the intended reach of the legislation is to be discerned.
In particular, it is necessary to notice that s 149(1)(d) provides for three different cases (successor, assignee or transmittee) concerning what, for present purposes, can be seen to be a single subject matter (the business or a part of the business of an employer who was a party to the industrial dispute determined by the award). This observation reveals why the “business of an employer” must be understood as a compound conception and cannot be understood as a reference to no more than a kind of business activity.
[7] Minister of Employment and Workplace Relations v Gribbles Radiology Pty Ltd (2005) 222 CLR 194.
Gleeson CJ, Hayne, Callinan and Heydon JJ went on to discuss what constitutes the “business” of an employer. Their Honours considered that in the context of section 149(1)(d), the focus upon succession, assignment and transmission to or of a business which is identified as the business of an employer, requires attention to be given to what it is that the former employer had which can be described as the “business” of that employer. Their Honours addressed this question as follows:
In many cases the answer to the questions just presented will be provided by looking at some transaction between the two employers. Where there has been some transaction between them, it will be possible to see whether the former employer transferred the whole, or part, of its business to the new employer. But in other cases there may be no transaction between the former employer and the employer alleged to be its successor. So, for example, in cases of inheritance between natural persons, there may be no transaction between the two employers but it may be clear that the new employer is the successor of the business of the former employer. Thus, the existence of some transaction between the two employers is not essential in order to show that one is the successor to the business of the other. Further, whether or not there was some transaction between the new employer and the former employer, there may be a real question about whether what the new employer enjoys is the whole or a part of the “business” of the former employer.
The “business” of an employer may be constituted by a number of different assets, both tangible and intangible, that are used in the particular pursuit, whether of profit (if the “business” is a commercial enterprise) or other ends (if the activity is charitable or the “business” of government). In the case of a commercial enterprise, identifying the employer's “business” will usually require identification both of the particular activity that is pursued and of the tangible and intangible assets that are used in that pursuit. The “business” of an employer will be identified as the assets that the employer uses in the pursuit of the particular activity. It is the assets used in that way that can be assigned or transmitted and it is to the assets used in that way that an employer can be a successor.
The new employer may be a successor, assignee or transmittee to or of the business, or part of the business, of an employer who was a party to the relevant industrial dispute if the new employer, having the beneficial use of assets which the former employer used in the relevant pursuit, uses those assets in the same or a similar pursuit. The means by which the new employer came to have the beneficial use of those assets is not determinative of the question presented by s 149(1)(d). Whether the new employer is a successor, assignee or transmittee, will require examination of whether what the new employer has can be described as a part of the former employer's business. That may present difficult questions of fact and degree.
...
The conclusion just reached about this example turns upon what is meant by the “business” of the former employer. It understands that word, at least when applied to a commercial venture, as a reference to the combination of the activities pursued in the business and the assets that are used in that business. The conclusion assumes that, either the asset in question (the motor vehicle) is not the sole or principal asset of the business, or that, if it is, it is replaced by another and similar asset which the former employer will use in the same way. That is, the conclusion assumes that the combination of activities and assets which together constitute the former employer's “business” continues largely unaffected by what has happened. There has been no succession because the former employer has not ceased to enjoy any part of its business.

It was accepted by both parties that these decisions provided broad guidance to the interpretation and construction of the relevant provisions of the Long Service Leave Act. However, it is to be observed that Parliament, in enacting the legislation, elected to use words of a different tenor to those appearing in the Workplace Relations Act. The words “take over or acquire a business or part of a business” may be said to be of wide import.
The scope of the words “otherwise acquire” was addressed by the South Australian Industrial Relations Court in Dougal v Ribbon Nominees Pty Ltd[8], where the learned Magistrate stated:
…'take over' is clearly a wider term than 'transmit', and 'otherwise acquire' is broader still. Provided it can be said that the business (or part) which is being operated after the change of ownership or management is substantially the same business that existed beforehand then a certain degree of legal continuity is deemed to exist;
[8] Dougal v Ribbon Nominees Pty Ltd (1992) 59 SAIR 750, 766 (Mr Cunningham IM).
This breadth of expression may be compared with the High Court decisions relating to the provisions in the Workplace Relations Act.
The intention of Parliament provides further guidance to the interpretation of the Long Service Leave Act. Parliamentary intention can be ascertained by the consideration of the Parliamentary debates preceding the enactment of the relevant legislation. The use to be made of such material was outlined by the High Court in K-Generation Pty Ltd & Anor v Liquor Licensing Court & Anor.[9] The Court observed:
A question also arises in this case about the use which can be made of the Second Reading Speech for the Bill which led to the enactment of s 28A. If the Act were a Commonwealth statute, that Second Reading Speech could be considered pursuant to s 15AB of the Acts Interpretation Act 1901 (Cth). The South Australian Acts Interpretation Act does not contain any equivalent of s 15AB or the similar provisions of other States and Territories. Section 15AB permits consideration of extrinsic materials to determine the meaning of a provision of an Act when the provision is ambiguous or obscure or its ordinary meaning would lead to a result that is manifestly absurd or unreasonable.
The question whether extrinsic materials may be considered in South Australia and in what circumstances they may be considered as an aid to statutory interpretation is to be answered by the common law. The answer at common law is that such materials can be considered to determine, inter alia, the mischief to which an Act is directed. This Court has referred to Hansard in aid of its interpretation of South Australian statutes. In 1996 the Full Court of the Supreme Court of South Australia referred to a minister's Second Reading Speech in order to identify the purpose of a statutory provision.
At common law it is not necessary before entering upon a consideration of such material to surmount a threshold of ambiguity, obscurity or possible absurdity. Statutory interpretation requires the court to have regard to the context in which the words to be interpreted arise and also their statutory purpose. Context includes “the existing state of the law and the mischief which, by legitimate means … one may discern the statute was intended to remedy”.
The relevant extrinsic material is the Attorney-General's Second Reading Speech introducing the amendments which led to the enactment of s 28A. This material may be considered to determine the purpose of the section as an aid to its construction. That does not mean that the words of the Attorney-General can be substituted for its text. That caution is apposite in the present case.
[9] K-Generation Pty Ltd & Anor v Liquor Licensing Court & Anor [2009] HCA 4 at [50]-[53].
In keeping with the High Court’s analysis, it is appropriate to excerpt the relevant section of the second reading speech relating to the Long Service Leave Act:
Subclause (3) provides for the linking of employers to ensure that the continuity of service of a worker who remains with the same business is not affected by a change in his or her employer.
This provides further guidance as to the scope of the words “take over or acquire a business or part of a business”. Section 3(3) should be read in a way that gives effect to its legislative purpose. The purpose of the section is to protect workers who remain working with the same business from losing their relevant entitlements due to a change in their employers.
On this appeal, the debate between the parties ultimately turned on the findings of fact to be made on the evidence, and in particular, the inferences to be drawn from that evidence. Once the facts have been determined, it is then a question of the application of the law to those facts. Has it been established that Labourforce Solutions took over or acquired part of the business of Rexco?
The Business of Rexco
Rexco operated as a labour hire company; that is, Rexco’s business involved the placing of labour to business entities in exchange for consideration. The wages of a worker were paid by Rexco and the worker was an employee of Rexco hired out to a particular business or entity. For Rexco to be able to conduct its business, it needed to engage employees who could be hired out. There is little evidence about how Rexco went about building its business. The primary evidence before the Court on this topic came from Mr Mettyear. As earlier observed, he outlined how he came to be employed by Rexco. The substance of Mr Mettyear’s evidence was that he responded to an advertisement by Rexco seeking a skilled electrician to be placed at the plastics operation of Iplex. Pursuant to Rexco’s request, he provided his resumé.
It appears that shortly thereafter Mr Mettyear entered into employment with Rexco and was hired to Iplex as a specialist electrician involved in maintenance. He gave evidence that Rexco had a number of tradespeople for hire. He also explained that all of the maintenance workers at Iplex were employees of Rexco. He identified the other maintenance employees by name. The employees of Rexco placed with Iplex to attend to maintenance included special class electricians, a welder and fitters. This evidence allowed the conclusion that Rexco’s business was that of a labour hire company and that its assets included the arrangements it had with employees on its books, the contracts for the placing of labour on hire from which it earned fees and the goodwill that was generated from the conduct of the business. It might be presumed that there were other assets, for example, premises and office equipment.
At relevant times, part of the business of Rexco consisted of the hire of labour to Iplex in regard to its maintenance requirements and, in particular, the hiring of skilled tradespersons that performed maintenance work. This part of the business was a distinct activity, capable of being taken over or acquired. This part of the business did not consist of the employment of Mr Mettyear and the five other maintenance employees, but rather the long-term hire of labour to perform particular work at a specific site.
Labourforce Solutions
It was common ground that Labourforce Solutions was a labour hire company that provided workers on hire to Iplex with respect to its operations outside South Australia. Evidently, at the request of Iplex, Labourforce Solutions was asked to meet all its labour hire requirements and, in particular, to do so at the plant of Iplex at Elizabeth in South Australia. This led Labourforce Solutions to provide those labour requirements by way of hire. To meet this arrangement Labourforce Solutions took over, using that term in a most general sense and not necessarily in the statutory sense, the business of Rexco.
When Labourforce Solutions took on the supply of maintenance labour to Iplex, it acquired as an asset the substance of the arrangements that Rexco had with the relevant employees. These assets were applied in the same activity as they had done previously. Labourforce Solutions continued to supply, as its employees, the same skilled labour that had formed the supply of labour hire by Rexco. Furthermore, those employees who constituted the relevant skilled labour continued to perform the same work tasks under exactly the same conditions as they had previously.
It is not to the point that there was no agreement between Rexco and Labourforce Solutions. It is a question of fact whether part of Rexco’s business was taken over by Labourforce Solutions. In my view it plainly was. After June 2002, in every practical way, Labourforce Solutions was operating the same part of the business as was previously operated by Rexco.
There does appear to have been a degree of co-operation and contact between Rexco and Labourforce Solutions. Advice about the change in circumstances was given by Labourforce Solutions to Rexco employees. In the case of Mr Mettyear, an arrangement was made that Rexco would continue to provide his wage until the end of the financial year as a matter of convenience. This evidence provides some support to the conclusion that that part of the business of Rexco was taken over and subject to this particular arrangement.
As a consequence of this analysis, Labourforce Solutions acquired a part of the business of Rexco in accordance with section 3(3) of the Long Service Leave Act, and consequently, Rexco and Labourforce Solutions were related employers within the meaning of that section.
Conclusion
I would allow this appeal. I would order that Labourforce Solutions pay pro rata long service leave of $10,304.84 to Mr Mettyear. I would hear the parties as to interest and costs.
SULAN J: I would allow the appeal. I agree with the reasons of Gray J and the orders that he proposes.
DAVID J. For the reasons given by Gray J, I would allow the appeal. I agree with the orders he proposes.