Karl Maakasa v S Lal Chhabra & K.C Ramrakha T/A Barker Henley

[2021] FWC 2856

[2021] FWC 2856

FAIR WORK COMMISSION

DECISION

Fair Work Act 2009
s.365—General protections

Karl Maakasa
v
S Lal Chhabra & K.C Ramrakha T/A Barker Henley
(C2021/385)

COMMISSIONER PLATT ADELAIDE, 31 MAY 2021

Application to deal with contraventions involving dismissal.

[1] On 25 January 2021, Mr Karl Maakasa lodged a general protections application against S Lal Chhabra & K.C Ramrakha T/A Barker Henley (Barker Henley or the Respondent) under s.365 of the Fair Work Act 2009 (the Act) alleging that on 16 February 2021 he was dismissed in contravention of the general protections provision of the Act.

[2] On 11 February 2021, Barker Henley (a law firm) filed a Form F8A Employer Response and raised a jurisdictional objection that Mr Maakasa had not dismissed as he was not engaged as an employee but as a ‘Partner.’ There was a common view that if the Applicant was engaged as a ‘Partner’ he would not be an employee (and thus not dismissed).

[3] As a result of the decision in Coles Supply Chain Pty Ltd v Milford, 1 I am required to determine the jurisdictional objection before the matter can proceed.

[4] On 1 March 2021, the matter was allocated to me and on 3 March 2021, a Conference was held, and directions were issued for the filing of material. Both parties were granted permission to be represented pursuant to s.596(2)(a) on the basis of complexity and efficiency.

[5] A Hearing was conducted on 21 April 2021, by teleconference. Mr Maakasa was represented by Mr Rich (of counsel) and Barker Henley was represented by Mr Moore (of counsel).

[6] A digital Court Book of the material filed was prepared and distributed prior to the Hearing. Prior to the Hearing the parties’ representatives made certain objections to the material filed. At the Hearing I advised the parties that I would receive all the material and in so far as the evidence might be hearsay, opinion evidence or not relevant I would take that into consideration when assessing the weight to be afforded.

[7] Prior to the Hearing I directed that the Respondent provide a copy of any Partnership Agreement that was in existence. 2 Mr Moore advised that there was no written agreement in place other than that contained in a letter dated 24 May 2020, titled ‘Partnership offer with Barker Henley’.3 I will refer to this document as the ‘offer letter’.

[8] Mr Maakasa submitted a statement dated 9 April 2021 including attachments. Mr Maakasa was not required to attend for cross-examination. The Respondent contended that paragraphs 1 – 32 of Mr Maakasa’s statement were inadmissible. It appears to me that this evidence largely concerns the discussions that preceded the determination of the contractual arrangement between the parties and is both relevant and admissible.

[9] The Respondent appears to contend that I am only permitted to review the offer letter in my determination of this matter. I disagree with this approach, in my view my enquiry as to whether or not Mr Maakasa was an employee in not limited to how the parties described the intended relationship, but also includes what occurred during the relationship and whether that was consistent with how it was described.

[10] It is relevant that both parties in this matter are legally qualified and would have a better appreciation than most as to the need for the accurate drafting of documents.

[11] The Respondent relied on the documentary evidence submitted.

[12] Both parties provided written submissions which were supplemented by oral submissions.

The evidence

[13] It appears that Mr Maakasa was inducted on 8 October 2020. 4

[14] On 4 November 2020, Mr Maakasa sought a copy of the Partnership Agreement/Deed from Mr Ramrakha and sought clarity as to whether he was an employee or a partner. 5

[15] On 6 November 2020, Mr Maakasa corresponded with Mr Ramrakha and raised a number of issues including the question as to whether he was an employee despite being described as a ‘partner’. 6

[16] On 9 November 2020, Mr Lai responded and advised they he would meet with Mr Maakasa to discuss the matters raised.

[17] On 10 November 2020, Mr Ramrakha (Managing Partner) corresponded with Mr Maakasa and confirmed the following 7:

•  His position was a non-equity partner.

•  His remuneration would be $230,000 p.a. without deduction of tax.

•  No Superannuation was payable.

•  Mr Maakasa was required to obtain a disability insurance policy at his own expense.

•  The equity partners maintain a professional insurance indemnity policy for partners and employees.

[18] On 4 December 2020 Mr Lai corresponded with Mr Maakasa and advised that the partnership had determined to extend his probationary period by 3 months. 8

[19] Copies of ‘Partner Drawings’ records were provided. 9 These records indicate that Mr Maakasa was paid regular drawings and instances of sick leave and annual leave were recorded. No taxation appears to have been deducted nor were any Superannuation payments recorded.

[20] On 23 December 2020, Mr Lai (Managing Partner) corresponded with Mr Maakasa and advised that due to operational changes the business model was being restructured and Mr Maakasa was provided with 3 months’ notice of the end of his ‘involvement’ with the firm. 10

[21] On 4 January 2021, Mr Lai wrote to Mr Maakasa and advised him that his ‘involvement’ with the firm would cease that day and he had been paid ‘drawings’ up to 23 March 2021.

Submissions

[22] The Respondent acknowledged the use of the term ‘employment’ in the 24 May 2021 offer letter but contended that it was not intended to refer to a master-servant relationship but rather as employment as a partner.

[23] The Respondent placed much reliance on the case of Comino v Cominos & Anor  11 as to the approach I should take in determining this matter. In Comino the plaintiff claimed unpaid remuneration under what he alleged was a contract of employment between himself and the defendants as employers, who were then solicitors practicing in the firm Stephen Comino and Cominos. In paragraphs [16] to [24] of Comino Justice McGill discusses the meaning of the term salaried partner and how it has evolved over time.

“[16] A partnership is simply the relation which subsists between persons carrying on a business in common with a view to profit. Ordinarily partners have a right to a share in the profits of a business and all of the partners are liable for the debts of the partnership in respect of which they have rights of contribution inter se. Ordinarily as well a partner will own a share in the assets of the partnership and it is admitted by the first defendant that at all material times the defendants owned the firm in equal shares: defence para 1.2. Subject to the terms of any particular agreement, partners are entitled to share in the management and control of the partnership business. All of this really follows from the concept that they are carrying on business in common.

[17] In Memec Plc v Commissioners of Inland Revenue [1998] EWCA Civ 941 Peter Gibson LJ said:

“The relevant characteristics of an ordinary English partnership are these:

(1) the partnership is not a legal entity;

(2) the partners carry on the business of the partnership in common with a view to profit;

(3) each does so both as principal and as agent for each other, binding the firm and his partners in all matters within his authority;

(4) every partner is liable jointly with the other partners for all debts and obligations of the firm; and

(5) the partners own the business, having a beneficial interest, in the form of an undivided share, in the partnership assets including any profits of the business.”

[18] I should say, in view of the use of the word “relevant”, that the case involved a question of the application of complicated provisions of double taxation conventions and related legislation, and the function of his Honour’s analysis was to determine whether a form of partnership known under German law but not known under English law had the characteristics of an English partnership which produced a particular result, “transparency” for the purposes of the double taxation conventions and statutes. One of the issues which arises is whether the characteristics are all necessary characteristics for the existence of a partnership; that the last is not an essential characteristic of a partnership was determined by the Court of Appeal in M. Young Legal Associates Ltd v Zahid [2006] 1 WLR 2562.

[19] It follows that, apart from the statutory definition, there is no specific touchstone as to the existence of a partnership; rather, the situation is always one of the appropriate conclusion in the light of the indications derived from the true contract and intention of the parties as appearing from the whole facts of the case. That approach was applied by the High Court in Canny Gabriel Castle Jackson Advertising Pty Ltd v Volume Sales (Finance) Pty Ltd (1974) 131 CLR 321. The court held that an agreement between a financier and a concert promoter in relation to the public performance of two singers was a partnership. The court in a joint judgment at pp 326-7 said:

“Our conclusion that the joint venture was a partnership … rests upon the following considerations:

1. The parties became joint venturers in a commercial enterprise with a view to profit.

2. Profits were to be shared … .

3. The policy of the joint venture was a matter for joint agreement and it was provided that differences relating to the affairs of the joint venture should be settled by arbitration … .

4. An assignment of a half interest in the contract for the appearances of [the singers] was attempted, although, we would have thought, unsuccessfully.

5. The parties were concerned with the financial stability of one another in a way which is common with partners.

…

In short, it seems to us that the contract exhibited all the indicia of a partnership except that it did not describe the parties as partners and did not provide expressly for the sharing of losses, although we venture to think that it did so impliedly. These considerations on the one side are, in our opinion, outweighed by the considerations upon the other side to which we have already referred.

The nature of a partner’s interest in the partnership property has often been explained. The partner’s share in the partnership is not a title to specific property but a right to his proportion of the surplus after the realisation of assets and the payment of debts and liabilities. However, it has always been accepted that a partner has an interest in every asset of the partnership and this interest has been universally described as a ‘beneficial interest’, notwithstanding its peculiar character. The assets of a partnership, individually and collectively, are described as partnership property … This description acknowledges that they belong to the partnership, that is, to the members of the partnership.”

[20] In M. Young Legal Associates Ltd v Zahid (supra) there was an agreement for a solicitor to be a “partner” of another solicitor under which the solicitor was entitled to be paid a particular amount annually, had no share of the partnership assets or profits, and was not entitled to any share in the management of the firm. Nevertheless, the agreement was held to give rise to a true partnership, specifically because the purpose of the agreement was to satisfy a requirement under the Solicitors’ Practice Rules which would only be satisfied if the parties had entered into something which really was a partnership. That was also a case of an oral agreement. Wilson LJ, who delivered the principal judgment, said at 2566 that “a person’s entitlement to an interest in a firm’s capital and his dominant role in its management may each be a strong indication of his status as a partner in it” but found that they were not a necessary requirement for the existence of a partnership. After rejecting the proposition that a right to receive a share of the profits was a necessary prerequisite for a person to be a partner, his Lordship said at p 2574:

“Nevertheless the absence of a direct link between the level of payments and the profits of the firm is in most cases a strongly negative pointer towards the crucial conclusion as to whether the recipient is among those who are carrying on its business. But the conclusion must be informed by reference to all the features of the agreement. Thus, for example, provision or otherwise for a contribution on his part to the working capital of the firm will be relevant. And it will be important to discern whether, expressly or impliedly, the agreement provides not only that acts within his authority should bind the acknowledged partners but also that their such acts should bind him; for such is provided by s 5 of the Act to be a necessary incident of partnership but would, of course, be inconsistent with his status as an employee.”

[21] This last point was also mentioned in the concurring judgment of Hughes LJ at p 2576:

“On principle it seems to me that if there is an essential element of partnership it is the carrying on of business in common, that is to say in such manner as to make each the agent of the other for all acts done in the course of the business. Having thus constituted themselves, the partners are free under the Act to arrange for the remuneration of themselves in any manner they choose, including by agreement that one or more shall receive specific sums, or that one or more receive nothing, in either case irrespective of profits.”

[22] I do not consider that anything necessarily follows from the use of the term “salaried partner”; what effect appointment to such a position has depends on the whole of the terms of the agreement between the parties under which a person is appointed to that position: Stekel v Ellice [1973] 1 WLR 191 at 198-200; Nationwide Building Society v Lewis [1997] 1 WLR 1181 at 1183;23 M. Young Legal Associates Ltd v Zahid [2006] 1 WLR 2562 at 2573-4.

[23] It was at one time thought that a person in the position of “salaried partner” would ordinarily be a true partner. In Pollock’s Digest of the Law of Partnership (15th ed.) published in 195224 it was said at p 11:

“On the other hand, it is thought that a salaried partner is a true partner notwithstanding that he is paid a fixed salary irrespective of profits and that as between himself and his co-partner he is not liable for the partnership debts.”

[24] In M. Young Legal Associates (supra) Wilson LJ at p 2571 quoted this passage and added:

“Whether the authority cited for that proposition truly supported it is a hare which I will not attempt to chase.””

[24] The observation in Comino that a ‘salaried partner’ may alternatively describe an employee who is not a partner but who is described as a partner to enhance his own status or that of the firm is essentially the submission put by the Applicant in this case.

[25] In Cominos it was said (authorities omitted) that:

‘The subsequent behaviour of the parties purportedly pursuant to the agreement is not something to which regard can be had in interpreting the contract. That is clearly established in the case of a written contract …. Whether there was a partnership is a mixed question of fact and law….it is permissible to look at subsequent conduct in order to determine whether a contract exists, that is to say, whether agreement has been reached….Where specific terms of the agreement between the parties are not proved but are a matter of inference, regard may be had to the subsequent acts and conduct of the parties…”

[26] This approach appears consistent with the approach taken when determining whether a worker is a contractor or an employee, and whether an employee is a permanent employee or a casual employee. The approach was described by Anderson J in Jamsek v ZG Operations Australia Pty Ltd 12:

“Where a court is required to characterise a relationship as that of employment or not, the court should focus on the substance and reality of the relationship, rather than its mere legal form: Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; 228 FCR 346 at [142] per North and Bromberg JJ; WorkPac v Skene [2018] FCAFC 131 at [180] per Tracey, Bromberg and Rangiah JJ; Eastern Van Services Pty Ltd v Victorian WorkCover Authority [2020] VSCA 154 at [36]. An express statement by the contracting parties as to the nature of the relationship will be relevant, but not determinative: ACE Insurance Ltd v Trifunovski [2013] FCAFC 3; 209 FCR 146. For instance, by labelling their relationship an independent contract, the parties cannot alter what is in reality an employment contract: Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 at 409 per Lord Fraser for the Privy Council (otherwise reported as Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389); Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 at 184 per Gray J; Workpac Pty Ltd v Rossato [2020] FCAFC 84 at [590] per White J

[27] The Commission, based on the authority of the Courts, has generally used a multi-factor test for distinguishing between independent contractors and employees. 13 This test requires consideration of the totality of the relationship when considering the true nature of it, including various factors outside of the written agreement.

Consideration

[28] I now consider the facts in light of the law.

[29] I make the following observations with respect to the 24 July 2020 offer letter.

•  The offer letter is ambiguous in that it contains references that support a characterisation of Mr Maakasa as a true partner and an employed salary partner.

•  The references to the terms partner in the heading, paragraph 2, 3, 4 are consistent with that of a true partner or an employed salaried partner.

•  The reference to the remuneration being without deduction of tax is consistent with a true partner arrangement.

•  The reference to a probationary period is consistent with an employed salaried partner, particularly in the absence of a Partnership Agreement or Deed which permits such arrangements.

•  The reference to the capacity to ‘terminate your employment’ during the probationary period in a document agreed by legally qualified persons, is a strong indicator of an employed salary partner.

•  The reference to ‘...agree to the conditions of employment set out herein’ in the acceptance section at the foot of page two, is a strong indicator of an employed salary partner.

•  The remaining references to the terms partner in the letter of offer are in my view neutral.

[30] The statement of Mr Maakasa provides uncontested evidence of:

•  a substantial amount of control by Mr Lai;

•  the threat of dismissal by Mr Lai;

•  no involvement in the management of the partnership;

•  little liability of the firm’s debts (unless the indemnity failed); and

•  the unilateral extension of Mr Maakasa’s probationary period, without reference to the management of the partnership (which it is expected would have included Mr Maakasa if he was a true partner).

[31] In my view all of the above matters are indicators of an employed salary partner.

[32] Having considered the evidence and submissions of the parties I concluded that Mr Maakasa was an employee, despite being described as a salaried partner, and as a result was dismissed by the Respondent on 4 January 2021.

[33] At the conclusion of the Hearing, I asked the parties if they believed that the matter could be resolved by conciliation. There was a consensus that the matter had been the subject of extensive conciliation and that in the event I found that Mr Maakasa was dismissed, a Certificate should be issued. Accordingly, I will issue a Certificate pursuant to s.368(3) of the Act.

COMMISSIONER

Appearances:

A Rich for the Applicant

R Moore for the Respondent

Hearing details:

2021.
Adelaide:
April 2021.

Printed by authority of the Commonwealth Government Printer

<PR729967>

 1 [2020] FCAFC 152 at [51].

 2   See also PN134-135

 3   Page 23-24 and an annotated response at 32-33 of the Court book. Refer Transcript PN39

 4   See Court book pages 135-137

 5   Page 37 of the Court book

 6   Page 42 of the Court book

 7   Page 45 of the Court book

 8   Page 47,48 of the Court book.

 9   Pages 26-29 of the Court book

 10   Page 52 of the Court book

 11 [2010] QDC 156

 12 [2020] FCAFC 119 at [182]

 13   Jiang Shen Cai trading as French Accent v Rozario [2011] FWAFB 8307 at [30] (French Accent) applying Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Roy Morgan Research Pty Ltd v Commissioner of Taxation [1997] 37 ATR 528 and Hollis v Vabu [2001] HCA 44.