Kozma v Chats House Investments Pty Ltd

[1996] IRCA 473

DECISION NO:473/96

CATCHWORDS

INDUSTRIAL LAW - UNLAWFUL TERMINATION - independent contractor - understanding of English - No VALID REASON - Application Amicus Curiae

Industrial Relations Act 1988 s 170EA

Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179
Humberstone -v- Northern Timber Mills (1949) 79 CLR 389

ZARKO KOZMA -v- CHATS HOUSE INVESTMENTS PTY LTD

No. NI 1191 of 1996

BEFORE:     WALKER JR
PLACE:       SYDNEY
DATE:          6 SEPTEMBER 1996

IN THE INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY

No. NI 1191 of 1996

BETWEEN

Zarko KOZMA
Applicant

AND:

CHATS HOUSE INVESTMENTS PTY LTD
Respondent

BEFORE:     WALKER JR
PLACE:       SYDNEY
DATE:          6 SEPTEMBER 1996

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The respondent pay to the applicant the sum of $3,500.00.

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
NEW SOUTH WALES DISTRICT REGISTRY

No. NI 1191 of 1996

BETWEEN

Zarko KOZMA
Applicant

AND

CHATS HOUSE INVESTMENTS PTY LTD
Respondent

REASONS FOR JUDGMENT
(Delivered ex tempore)

This is an application for unfair termination pursuant to section 170EA of the Industrial Relations Act. The applicant gave evidence that he was a computer person, and that he was interested in finding a job which involved financial analysis where he could utilise his experience with computers.

He said he saw an advertisement in the Hornsby Advocate on 15 November 1995, and made arrangements for an interview.  The advertisement is as follows:

"Sales 1500 per week.  Enthusiastic full or part-time persons willing to train invited to apply with foreign currency trading company in Chatswood on commission.  Call Alan on 411 7271."

On 1 December 1995 the applicant attended an interview with Mr Albert Chan, a director of a company, and along with three other people attended a three day training and induction course commencing on 4 December 1995.  The applicant said that it was his understanding that he was to be employed as a foreign exchange broker and that he was to be paid on a commission basis.  His evidence was that he was told that by being paid this way he would receive more money.  He said that it was on the basis that he had signed a representation agreement on 7 December 1995.

It appears from his evidence that it was not until after he commenced working with the respondent that he became aware that he had to actually procure clients before he was able to undertake foreign exchange transactions, that it was conditional on introducing a client before he would then receive a fee.  The applicant then went about arranging interviews with clients and following leads in order to develop a client base, however before he was able to achieve this he received a letter of termination on 29 January 1996.  He says that at this stage he was not able to sign up a paying client and therefore had never received a commission.  The letter of termination is as follows:

"Dear Zarko:  This letter is to state that in respect that the representation agreement dated 7 December 1995 between ourselves, Chats House Investments Pty Limited hereby give you notice of termination on 29 January 1996.  We regret this decision and wish you every success in your future endeavours,

Yours sincerely,

Spencer Borich, Sales Manager."

There was no appearance by the respondent at the hearing today as it would appear that the company has stopped trading and the principles have left the country. Mr McNeilly has appeared on behalf of the Australian Competition and Consumers Protection Commission as amicus curiae. His application was based upon the fact that the Australian Competition and Consumer Commission has taken action against the respondent company pursuant to the Trade Practices Act, seeking injunctions and the recovery of funds which it alleges investors have lost through the respondent's breaches of the Act. However, I have granted the application of Mr McNeilly. He has tendered the representation agreement signed by the applicant on 7 December 1995 and claims that on the basis of this document, the applicant is an independent contractor and is therefore excluded from the operations of the Industrial Relations Act 1988.

Certainly on the face of this document, it would appear that the applicant would not be acting as an employee but as an independent contractor.  However, in order to determine whether a worker is an employee, it is necessary for the court to consider all the circumstances of the employment relationship. In Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 at 184, Gray J was of the opinion that, and I quote:

"A court determining whether a particular relationship is that of employment or some other kind can therefore only resort to the process of balancing all of the factors or as they are called in Stevens and other cases, the “indicia”.  In truth the result may be a matter of impression.  It is unfortunate that this is so.  It should not be necessary for people to obtain a decision of a court in order to know the true nature of their relationship.  Unfortunate or not, that is the case.  Although the parties are free, as a matter of law, to choose the nature of the contract which they will make between themselves, their own characterisation of that contract will not be conclusive.  A court will always look at all of the terms of the contract, to determine its true essence, and will not be bound by the express choice of the parties as to the label to be attached to it.  As Mr Black put in the present case, the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck."

The ultimate question as to whether a person is acting as an employee or working on his own behalf may be indicated in ways which are not always the same and which do not always have the same significance.  However, it would appear that the degree of control by the employer of the employee in such areas of the mode of work, the place where the work is to be performed, the time the work is to be performed, the designation of the actual work to be undertaken and the way in which the work is to be carried out is to be considered in the process of determination.  In Humberstone v Northern Timber Mills (1949) 79 CLR 389 at 404, Dixon J said:

"The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions... The essence of a contract of service is the supply of the work and skill of a man."

The applicant in this case has given evidence he was in fact told what to do with regard to his work and the manner in which it was to be done.  He said his direct supervisor was Mr Walt Port and he gave him instructions as to how he should carry out his work.  He said there were regular production meetings where he was given instructions.  He also used the company equipment such as telephones and computers.  He said he did not pay PAYE tax but rather PPS tax, however, this does not necessarily mean that he is an independent contractor.  I have also taken into account the fact that the applicant came to Australia from Czechoslovakia in 1985 and does not have fluent English.  Because of this I am satisfied that he did not sufficiently understand the contents of the agreement he signed on 7 December 1995 and as a result his intentions at the time of this agreement are not necessarily expressed in that document.

His intentions he said, were to be an employee and not therefore the type of work that was expressed in that agreement.  Of course, the advertisement of 15 November 1995 in the Hornsby Advocate conveniently does not indicate the way one way or the other.  From the evidence given by the applicant, I am satisfied that he was an employee rather than an independent contractor.  I am also satisfied that the termination of his employment was not for a valid reason connected with his capacity or conduct or both on the operational requirements of the undertaking, establishment or service.  

Remedy:  In the circumstances reinstatement is not possible and the applicant's claim is for compensation only.  To assess compensation under section 170EE(3) the Act requires that the court have regard to the remuneration the employee would have earned or would have been likely to have received.  In this case, the applicant has not earned any income as a result of his employment and I therefore have little information to guide me.  What is clear, however, is that some time after the applicant was terminated the respondent company ceased trading.  This I assume was probably due to the fact that the Australian Competition and Consumers' Commission initiated a representative action in the Federal Court of Australia seeking injunctions and damages on behalf of all persons who invested money with the respondent company.  It would appear that injunctions restraining the company from engaging in foreign exchange margin trading and the pending default judgment have brought to an end any further employment by this respondent.

It follows from this that the applicant would in any case have been made redundant at that time.  The applicant was employed for about 7 weeks, this period mainly over the Christmas holidays.  In awarding compensation I have based my calculation on a nominal sum of $500.00 per week over a period of 7 weeks.  This amounts to a sum of $3500.00.  I order the respondent company to pay to the applicant the sum of $3500.00.  I will now adjourn.

I certify that this and the preceding five(5) pages are a true copy
of the reasons for decision of Judicial Registrar Walker as recorded
in the transcript and revised by the Judicial Registrar.

Associate:
Date:    9 October 1996

APPEARANCES
Applicant:                In person

Respondent:             Mr McNeilly of the
  Australian Government Solicitor (amicus curiae)