Leach v Prestige Real Estate Services Pty Ltd
[2022] FedCFamC2G 1022
Federal Circuit and Family Court of Australia
(DIVISION 2)
Leach v Prestige Real Estate Services Pty Ltd [2022] FedCFamC2G 1022
File number(s): SYG 1896 of 2018 Judgment of: JUDGE OBRADOVIC Date of judgment: 7 December 2022 Catchwords: INDUSTRIAL LAW – Contract of Employment – whether the first applicant was an employee – whether the second applicant company was contracted to the first respondent – whether the applicants were entitled to commission – whether there was a breach of contract – applicants held to have not established their claims – application dismissed – payment of outstanding invoice to second applicant. Legislation: Fair Work Act2009 (Cth) ss.44, 45, 535, 545, 546
Superannuation Industry (Supervision) Act 1993 (Cth)
Real Estate Industry Award 2010 (Cth)Cases cited: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd[2022] HCA 1
Dare v Pulham [1982] HCA 70
Fish v Solution 6 Holdings Limited [2006] HCA 22
Hollis v Vabu Pty Ltd [2001] HCA 44
Mealey v Power [2015] NSWSC 167
Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd [1986] HCA 34
Pigozzo v Mineral Resources Ltd [2022] FCA 1166
Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1
Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15
WorkPac Pty Ltd v Rossato [2021] HCA 23
Division: Division 2 General Federal Law Number of paragraphs: 116 Date of last submissions: 7 April 2022 Date of hearing: 3 and 4 May 2021 Place: Parramatta Solicitor for the Applicants: Evan Bongarzoni Lawyers Counsel for the Respondents: Mr Miles Solicitor for the Respondents: Jemmeson & Fisher Solicitors & Accountants ORDERS
SYG 1896 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: DARREN EDWARD LEACH
First ApplicantJDH PROPERTY SERVICES PTY LTD
ACN 609 806 233
Second ApplicantAND: PRESTIGE REAL ESTATE SERVICES PTY LTD
ACN 147 861 201
First RespondentMICHAEL BUCKLEY
Second Respondent
order made by:
JUDGE OBRADOVIC
DATE OF ORDER:
7 December 2022
THE COURT ORDERS THAT:
1.Within 28 days, the First Respondent pay to the Second Applicant the sum of $17,115 together with interest at the applicable pre-judgment rate pursuant to Rule 22.07 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021.
2.The Amended Statement of Claim filed 7 May 2020 is otherwise dismissed.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE OBRADOVIC:
Introduction
Mr Darren Leach (“Mr Leach”), the first applicant, and Mr Michael Buckley (“Mr Buckley”), the second respondent, met in 2009. They both worked and continue to work in the real estate industry.
Mr Leach and Mr Buckley were in business together between June 2012 and November 2015. The business[1] operated through the first respondent, Prestige Real Estate Services Pty Ltd ACN 147 861 201 (“Prestige”), which both Mr Leach and Mr Buckley were directors of at the relevant time.
[1] See [21] of these Reasons for Judgment
From 14 December 2015, Mr Leach has been, and continues to be, a director of the second applicant, JDH Property Services Pty Ltd ACN 609 806 233 (“JDH”).
After the sale of the business in November 2015 to Mr Buckley[2], Mr Leach continued to perform work for the business and Mr Buckley continued to run and work in the business.
[2] And another
By about December 2017, the working arrangements between Mr Leach and Mr Buckley had started to sour and they completely fell apart by late March 2018.
After its incorporation in late 2015 until 28 March 2018, JDH issued invoices to Prestige for commission in respect of sales of real property that Mr Leach says he was responsible for selling. Mr Leach and JDH assert that some of those invoices remain unpaid.
Mr Leach and/or JDH assert that Mr Buckley and/or Prestige have failed to pay them commission in respect of a number of sales of real property in accordance with the agreement that had been in place at the relevant time.
Mr Leach also asserts that he was employed by Prestige from 18 June 2012 until 28 March 2018.
Mr Leach asserts that Prestige, and Mr Buckley, by virtue of accessorial liability, have breached the Fair Work Act 2009 (Cth) (“the Act”) and the Real Estate Industry Award 2010 (Cth) (“Award”) by failing to accord him his legal entitlements.
Mr Buckley and Prestige say that Mr Leach was not employed by Prestige after 13 November 2015, and that neither Mr Leach nor JDH are owed the commissions as claimed.
As such, the key issues for the Court’s determination are as follows:
(a)Whether between November 2015 and December 2017, a contractual relationship existed between Mr Leach, and/or JDH, and Prestige. And if so, on what terms was such a relationship established and what was the method of remuneration agreed to;
(b)Whether a second contractual relationship existed after December 2017 and the terms of that relationship;
(c)Whether any amounts are outstanding to Mr Leach and/or JDH, and if so what amounts; and
(d)Whether there was a breach of the Award and the Act, and if so, whether Mr Buckley was knowingly involved in the breaches.
The fine detail of the arrangements between the parties is as set out in these Reasons for Judgment, and the above paragraphs provide only a brief overview of what happened and the legal issues which the Court is to determine.
The Claim
The applicants seek to rely on the (3rd further) amended statement of claim filed on 7 May 2020 and seek the following:
(a)A declaration that Mr Leach was an employee of Prestige from 13 November 2015 to 28 march 2018;
(b)Declarations that Prestige contravened ss.45, 44 and 535 of the Act;
(c)A declaration that Mr Buckley was involved in each contravention;
(d)That Prestige and Mr Buckley pay Mr Leach $101,762.56 pursuant to ss.545(1) and 545(2) of the Act;
(e)That any interest accrued is paid to Mr Leach pursuant to s.545(2) of the Act;
(f)That Prestige and Mr Buckley pay penalties pursuant to s.546(1) of the Act; and
(g)That any penalties are paid to Mr Leach.
The respondents rely on their defence to the third amended statement of claim filed 9 June 2020, and deny all relief sought by the applicants.
The parties are bound by their pleadings. Pleadings define the issues for decision in the litigation and, thereby, enable the relevance and admissibility of evidence to be determined at the trial. Apart from cases where the parties choose to disregard the pleadings and fight the case on different issues chosen at the trial, the relief, which may be granted to a party, must be founded on the pleadings.[3] This is particularly important where pleadings have been amended, and in this instance, the statement of claim relied upon is the fifth version of the applicant’s claim.
[3] Dare v Pulham [1982] HCA 70 at [6]; Thomson v STX Pan Ocean Co Ltd [2012] FCAFC 15 at [13]; Pigozzo v Mineral Resources Ltd [2022] FCA 1166 at [17]
For reasons that follow, the Court is not satisfied that Mr Leach has established any claim and that JDH has only established one part of its claim. Accordingly, the claims in the Amended Statement of Claim filed 7 May 2020 are to be dismissed except as to the payment of one invoice for commission, as explained below.
Findings of Fact
Background
Both Mr Leach and Mr Buckley are licenced real estate agents.
Mr Leach and Mr Buckley met in 2009, when they were both working for the same real estate agency. Over the years, and despite both thereafter working at different real estate agencies, the two kept in contact with each other and looked at opportunities to set up their own agency.
Prestige was registered on 14 December 2010. Mr Buckley is the director of Prestige and has held that position from its registration to present. He was also a shareholder at the time of Prestige’s incorporation. Mr Buckley’s partner, Ms Christine Radovan (“Ms Radovan”), was a shareholder and secretary of Prestige.
In 2012, Mr Leach and Mr Buckley came to an agreement to purchase the real estate agency business known as Professionals Real Estate, Frenchs Forest (“Professionals”). It was agreed that the business would be purchased through Prestige. On 18 June 2012, Mr Leach became a shareholder and director of Prestige and Mrs Julia Leach (Mr Leach’s wife) (“Mrs Leach”) became a shareholder at or about the same time. Ms Radovan ceased being the company secretary but remained a shareholder. Therefore, from 14 December 2012, Mr Buckley and Mr Leach were the directors of Prestige, while Mr Buckley, Mr Leach, Ms Radovan and Mrs Leach were all shareholders.
Prestige purchased the business of Professionals in about June or July 2012, and from about that time, the business traded under the name “First National Frenchs Forest” (“business”).
The management of the business was split between Mr Buckley and Mr Leach; however, both Ms Radovan and Mrs Leach also worked in the business. Mr Leach was responsible for the accounts, employee management and day-to-day running of the business. Mr Buckley was responsible for the income producing aspects of the business including obtaining new clients and the selling of properties.
From about July 2013, Prestige paid both Mr Buckley and Mr Leach on a monthly basis.
Mr Leach ceased being a director of Prestige on 30 September 2015.
Until 12 November 2015, Prestige paid Mr Leach an annual salary of $80,000 on a monthly basis, it issued pay slips to Mr Leach, deducted tax from his monthly remuneration and paid superannuation contributions on his behalf. Mr Leach also took paid annual leave and paid sick leave.
Part of Mr Leach’s role at Prestige prior to 13 November 2015, had been to deal with employee related matters, including sending details of employees to Prestige’s accountants, and sending details of hours worked by employees, commission entitlements, leave details and other related employee information to the accountants.
On 13 November 2015, Mr Buckley and Ms Radovan purchased Mr Leach and Mrs Leach’s shares in Prestige. This was done pursuant to a share sale contract (“Deed of Sale”) dated 13 November 2015.
While Mr Leach was no longer a director of Prestige at the time of the Deed of Sale, he had been a director from 18 June 2012 to 30 September 2015, and the person responsible for employee related matters.
The Deed of Sale contained the following clause:
H. Employees
(a) The Company maintains adequate records as required by law relating to existing and former employees.
(b) The Company has no present or contingent liability to any former employee for any entitlements arising out of the employment by the Company, including for compensation or damages for wrongful or unfair dismissal or for redundancy.
(c) The Company has complied with its financial obligations to employees posed under any agreement, award, legislation or otherwise,
(d) There has not been any past or pending prosecution, litigation or arbitration relating to the conditions of employment of any of the Company's employees who are currently employed in the business or relating to any breech by the Company or by any of those employees of the contract of employment
(e) There is no written service or other agreement between the Company and any employee except as indicated in Schedule 1.
(f) The Company contributes to a superannuation fund for the benefit of employees particulars of which are indicated in Schedule 1. The Vendors warrant that:
(i) the superannuation fund Is a complying superannuation fund within the 'Superannuation Industry (Supervision) Act 1993 (Cth) and complies with other relevant legislation
(ii) the Company has made all contributions to the fund it is required to make to comply with any contractual obligation with employees, or under any industrial award or agreement, and in accordance with the Superannuation Guarantee Scheme, in respect of all employees, up to the effective date.
Clause 15 of the Deed of Sale reads:
(1)Darren will continue to be employed by the Company and will, while employed, assist the Purchasers in the management and conduct of the business.
(2)Julia will cease to be employed by the Company from the date of this Deed.
Notwithstanding Clause 15 above, Mr Leach was not listed as an employee of Prestige in Schedule 1 of the Deed of Sale. There is no evidence of any written contract of employment between Mr Leach and Prestige that applied at the time of the Deed of Sale, or at any other time. This applies to all relevant periods, namely when he commenced being a director and shareholder of Prestige, at the time that he commenced receiving monthly remuneration, or at any other time, including up to and including 12 November 2015, and from 13 November 2015 onwards.
The Deed of Sale also contained a restraint of trade clause, which prohibited Mr Leach from carrying on or being engaged in real estate work within a 5km radius of Prestige’s office, for a period of 3 years.
Commission Only Agreement
During the negotiations for the sale of shares of the business, in an email dated 21 September 2015, Mr Buckley suggested to Mr Leach that he continue “staying on what your current wage of $5k per month if your (sic) ok with that”.
Shortly prior to the Deed of Sale, Mr Buckley and Mr Leach had a number of conversations about Mr Leach’s continuing role in Prestige.
During such conversations, it is Mr Leach’s evidence that the pair discussed Mr Leach’s remuneration and he confirmed that he was “happy to go commission only”. Mr Leach also says the structure of the commission was to be the “same structure that the other commission only agents” were on. However, there is no evidence as to how the other commission only agents were paid, nor is there any evidence as to what the industry norm might be for commission only agents.
On 11 November 2015, Mr Buckley sent an email to Prestige’s accountants to advise that “Darren is now on Commission only sales person”.
Following these initial discussions, Mr Leach advised Mr Buckley that he wanted to set up a company after receiving advice from his accountant, on the basis that it would be a more tax effective way for him to earn an income than as an individual.
On 12 November 2015, Mr Leach sent an email to Mr Buckley, which read:
Guys after I met with Glenn, he suggested setting up a company for the sales commission agent, as I hope to earn more than $80,000 he thought the business set up would be better tax wise, as Julia could receive some income through dividends, all that structure stuff.
See below, Glenn said we should do up a contract with that in it, incase (sic) I or you get audited
Mr Buckley replied to that email about 10 minutes later with “That sounds fine.” There was never a draft contract, as referred to in Mr Leach’s email of 12 November 2015, proposed by any of the parties, and their arrangement continued undocumented by any written contract.
As such, Mr Buckley agreed to Mr Leach’s proposal, namely that the company which Mr Leach was going to establish would be the medium through which Mr Leach would sell properties for Prestige and be paid commission. It was clear that Mr Leach’s proposal for the company structure would be of benefit to him and his wife.
The evidence around how and when commission was to be paid was confusing, at times contradictory, and difficult to follow. This is so despite the Court raising with counsel for the parties (during the evidence) that these matters were unclear.
The Court finds, after weighing up the evidence, that it was agreed between Mr Leach and Mr Buckley that Mr Leach, through a corporate vehicle, would continue to sell properties for Prestige and that Prestige would pay commission to the corporate vehicle on a sliding scale, namely 50% of the commission of the first listing in any month and then an extra 5% for each subsequent listing.
The Court further finds that it was agreed between Mr Leach and Mr Buckley that commission was only payable by Prestige to the corporate vehicle upon Mr Leach signing an agency agreement with the vendor on behalf of Prestige, Mr Leach selling the property during the term of the exclusive agency agreement, and the sale of the property being completed (i.e. settlement) or the purchaser otherwise forfeiting the deposit. Commission was only payable after settlement of the sale.
The evidence is that for the period 13 November 2015 to early December 2017, Mr Leach caused invoices to be issued for such commission and Prestige paid them.
November 2015 to March 2018
On 14 December 2015, Mr Leach registered JHD, being the sole director of that company.
After the Deed of Sale, Mr Leach continued to sell properties for Prestige, and he did so until December 2017. The commission for such sales was billed by JDH to Prestige. The invoices issued by JDH included a component for the Goods and Services Tax (“GST”). Furthermore, Prestige never remitted any Pay As you Go (“PAYG”) taxation payments for the monies which were paid for the work which Mr Leach did.
Mr Leach conducted client meetings and negotiations and he organised listings, he organised advertising, prepared properties for inspection and supervised inspections. Mr Buckley described him as an excellent sales person. Mr Leach also provided assistance to Mr Buckley as requested from time to time about staffing and employment matters, he continued to be noted as a “Director” on his email signature block from Prestige, he had business cards from Prestige and used an email address of Prestige.
Mr Leach continued to work long hours and he was in and out of the Prestige office doing such work, however, never so at Mr Buckley’s direction. He had the freedom to organise his own schedule and would take days off as he saw fit. Mr Leach worked the hours and the days that suited him and that were convenient to the work that he was doing. Mr Leach also took leave. He did not request nor require Mr Buckley’s approval for the leave. He was not paid during the time he was on leave, nor did he request that he be so paid at the time.
Ms Lisa Kringas (“Ms Kringas”), commenced working for JDH on 8 August 2016. She was not on Prestige’s payroll, and there was no employment agreement between Ms Kringas and Prestige. Ms Kringas was under the sole direction of JDH and Mr Leach. The first week of Ms Kringas’ employment, she was paid by Prestige by way of a loan to JDH, which was paid back the following week.
In February 2018, JDH took on an additional staff member, Mr Todd Moore (“Mr Moore’). Like Ms Kringas, Mr Moore was under the sole direction of JDH and Mr Leach, and not Prestige. Mr Moore was not on Prestige’s payroll, nor did he have any employment agreement with Prestige.
After JDH took on Ms Kringas and Mr Todd, and they all too properties for Prestige, JDH issued invoices in the same manner as it had for Mr Leach for commission payable, and Prestige paid them. That is, JDH issued invoices whether the sales were completed by Mr Leach, Ms Kringas or Mr Todd, with commission being billed in accordance with the scale agreed to in November 2015. However, there is no evidence of the parties ever having any further discussions so as to vary in any way the agreement reached in November 2015.
It made no difference to the arrangement between the parties as to who did the work, invoices inclusive of GST were issued by JDH and Prestige paid them. Usually these invoices would be paid directly to the JDH bank account. On occasion part of the commission would be paid to the JDH bank account and the remainder paid directly to either Ms Kringas’ or Mr Moore’s personal bank account.
From time to time JDH would issue an invoice to Prestige for a rental referral, which Prestige also paid.
The Loretta Place Dispute
In late 2017 a dispute occurred between Mr Buckley and Mr Leach over a property at Loretta Place Belrose (“Loretta Place”), listed with Prestige, and who owned the client. The Agency Agreement was signed by Mr Buckley, although he notes in his evidence that JDH was the selling agent.
At the pre-settlement inspection, Mr Buckley had a conversation with the purchaser where it was alleged an aggressive altercation took place between him (the purchaser) and Mr Leach. Accusations were made by the purchaser that Mr Leach was “aggressive”, “a liar”, “unprofessional”, “waving his fits around”, “and wanted to have a punch-up”. The purchaser also threated to “make a complaint to Fair trading”. The altercation was to do with the removal of some speakers and some damage to the property as a result of the removal of a wall-mounted TV and brackets. Mr Buckley raised these matters with Mr Leach and there were a number of conversations between them. Mr Leach denied that any altercation with the purchaser ever took place. The purchaser’s issue was ultimately sorted out.
However, the dispute over commission between Mr Buckley and Mr Leach continued. Mr Leach indicated to Mr Buckley that if he was not paid 60% of the commission, then he would “go legal”. Mr Leach had told Mr Buckley that he had received legal advice and that Mr Buckley would be “totally screwed” if he was to “go legal on [Mr Buckley]”.
It was at this time Mr Buckley realised that there was no employment contract between Prestige and Mr Leach or between Prestige and JDH.
On 12 December 2017, Prestige and Mr Leach entered into a settlement agreement in respect of work performed by Mr Leach for Prestige between 2 December 2017 and 15 December 2017. Without admission of liability, Prestige and Mr Leach agreed to settle the matter by Prestige paying Mr Leach $9,405.00. JDH was not a party to this agreement.
There is no evidence as to whether the settlement amount of $9,405 was paid to JDH or Mr Leach directly, nor whether that money formed part of JDH’s earnings for the 2017/18 financial year or whether if Mr Leach declared this amount as his income on his annual tax return for the relevant tax year.
Following the Loretta Place dispute, Mr Buckley sought some advice from the Real Estate Employers Federation (“REEF”) about the engagement of Mr Leach. Following the receipt of such advice, Mr Buckley forwarded to Mr Leach a proposed employment contract. Such offer of employment was made by Mr Buckley on behalf of Prestige, and the draft contract is what Mr Buckley refers to as the standard REEF employment contract.
Apart from discussions between Mr Buckley and Mr Leach in respect of the terms of the proposed employment contract, there were no other discussions about the terms of Mr Leach’s engagement. Ultimately, Mr Leach provided some proposed amendments to the contract, importantly including a proposed clause which was as follows:
The employer mentioned in this agreement dated 11/2/2017, discharges the employee Darren Leach of JDH Property Services Pty Ltd of any liability, claims of loss suffered, between 14/11/2015 to 10/12/2017 where there was no employment agreement in place outlining liabilities and undertakings relating to commission only employment.
A most confusing proposed amendment.
Clearly, on both parties’ evidence, neither Mr Leach nor Mr Buckley considered that Mr Leach was subject to any written employment agreement with Prestige at the time of these negotiations. It is also clear on both parties’ evidence that neither Mr Buckley nor Mr Leach had any clear understanding of whether Mr Leach was or was not an employee of Prestige.
Between December 2017 and January 2018 Mr Leach had a number of conversations with Mr Buckley regarding their business relationship “no longer working”. Mr Leach informed Mr Buckley that either Prestige would have to expand or that he would open his own real estate agency.
On 29 January 2018, JDH entered into a lease agreement for an office in Allambie Heights. It is accepted by Mr Leach that the terms of the restraint clause in the Deed of Sale precluded him from opening a real estate agency within 5km of the Prestige office for 36 months. The restraint ended on 13 November 2018.
Between late February and March 2018 a series of letters were exchanged between solicitors for Prestige and Mr Leach’s solicitor and JHD’s solicitor, which originally sought to resolve the dispute between Prestige and Mr Leach, regarding Mr Leach’s plan to set up his own real estate agency but then progressed to a dispute about commissions.
Prestige claimed that Mr Leach used and/or misused company information and property without permission whilst he was doing work for Prestige. This included listing Prestige clients with JDH (or trying to convince them to relist with JDH), downloading the customer relationship management data, downloading client contact lists, failing to update new clients in the databases, and using Prestige signage and equipment.
It was quickly conceded by Mr Leach that the Allambie Heights office was within a 5km radius and he advised that JHD would be operating from another office outside the radius until after the restraint period ended.
On 27 March 2018, Mr Buckley requested that Mr Leach return all Prestige property, including vendor keys, marketing packs, and confidential information.
On 28 March 2018, Prestige sent Mr Leach a letter of termination titled “confirmation of summary dismissal for serious misconduct”. The letter alleges that Mr Leach failed to attend 2 conduct meetings to discuss the matter. Further claims in the letter include JDH staff passing themselves off as working for Prestige, not having proper insurance for the staff, refusal to surrender keys to vendor properties, directing potential clients to sell directly with JDH rather than Prestige, and a formal complaint of “unconscionable conduct” which was referred to NSW Fair Trading.
The dispute about commission has never been resolved. It is Mr Buckley and Prestige’s position that Mr Leach and/or JDH is not entitled to the commissions claimed, as:
(a)Mr Leach was in competition with Prestige from at least December 2017;
(b)The contractual right to commission was between the vendor and Prestige, there was no conjunction Agency Agreement in place between Prestige and JDH.
(c)Mr Leach was rarely at Prestige from January 2018 to the end of March 2018;
(d)Mr Leach was exploiting the customer connection and clients of Prestige for the purpose of diverting those leads to JDH;
(e)Mr Leach made use of Prestige’s confidential information for the benefit of JDH and detriment of Prestige;
(f)Mr Leach was in breach of his restraint under the Deed of Sale; and
(g)Mr Leach was offered an employment relationship but he did not accept it.
The Statement of Claim makes three claims in the alternative as to the payments of the commission, none of those being a claim for quantum meruit.
Relevant legal principles
The recent High Court decisions of Personnel Contracting[4] and Jamsek[5] have displaced the multifactorial test and confirmed that written contractual terms in employment contracts, where the contracts are wholly written, form the primary mode of interpretation of whether a person is to be considered an employee or a contractor.[6]
[4] Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd[2022] HCA 1 (“Personnel Contracting”)
[5] ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2 (“Jamsek”)
[6] Personnel Contracting at [33]-[34] and [59]; Jamsek; WorkPac Pty Ltd v Rossato [2021] HCA 23 at [62]‑[63] (“Rossato”); Fish v Solution 6 Holdings Limited [2006] HCA 22
In cases where an employment arrangement is not the subject of a written agreement, or where such agreement is partly written or partly oral, the characterisation of the relationship is to be determined by “the totality of the relationship between the parties”.[7]
[7] Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1 at [29] (“Stevens”); Hollis v Vabu Pty Ltd [2001] HCA 44 at [33] (“Vabu”)
Further, the label used by the parties is not determinative of the relationship.[8] Rather the relationship is to be determined by its legal character and by the rights and obligations established in the contract and at law.[9]
[8] Personnel Contracting at [63]
[9] Personnel Contracting at [58] and [63]; Rossato at [56]-[66]
When considering the context of a contractual arrangement the general principle of contracts is that “it is not legitimate to use as an aid in the construction of [a] contract anything which the parties said or did after it was made”.[10] However, this does not prevent the court from examining subsequent conduct which does not impact upon the construction of the contract including:
(a)to establish whether a contract was actually formed and when it was formed;
(b)where a contract is not wholly in writing, to establish the existence of a contractual term or terms;
(c)to demonstrate that a subsequent agreement has been made varying one or more terms of the original contract;
(d)to show that the contract was a "sham" in that it was brought into existence as "a mere piece of machinery" to serve some purpose other than that of constituting the whole of the arrangement; and
(e)to reveal "probative evidence of facts relevant to rectification, estoppel or any other legal, equitable or statutory rights or remedies that may impinge on an otherwise concluded, construed and interpreted contract". The relevance of subsequent conduct for the purposes of a particular statutory provision, legislative instrument or award was not in issue in this appeal.[11]
[10]Personnel Contracting at [173]-[178]; Jamsek at [109]
[11] Personnel Contracting at [177]
The main considerations when determining the character of a continual relationship where work is completed by an individual in exchange for some form of remuneration are set out at [113] of Personnel Contracting[12]:
[12] Personnel Contracting at [113]
(a)The first is the extent of the control that the putative employer can be seen to have control over the work performed, including how, where, and when the putative employee does the work;[13]
[13] Personnel Contracting at [42] and [113]
(b)The second is the extent to which the putative employee can be seen to work in his or her own business as distinct from the business of the putative employer, which can include, but are not limited to, the following:
(i)The mode of remuneration;
(ii)The provision and maintenance of equipment;
(iii)The obligation to work;
(iv)The hours of work and provisions for holidays;
(v)Deduction of tax and superannuation;
(vi)The ability of the putative employee to delegate their duties.[14]
(c)A third consideration is the extent to which the work done by the putative employee can be seen to be integrated into the business of the putative employer.
[14] Stevens at [9].
The principles of construction of an employment contract show that it is not necessary to reduce the analysis of the relationship to a simple binary choice of whether the individual in question is an employee or whether they are running their own business. Rather the central question must centre on the nature of the relationship between the parties, which has been created by the contract.[15]
[15] Personnel Contracting at [180]; Stevens at [27]-[28]; Oceanic Crest Shipping Co v Pilbara Harbour Services Pty Ltd [1986] HCA 34 (“Ocean Crest”)
This principle has been expressed at [172] in Personnel Contracting[16]:
In deciding whether a relationship between two parties is one of employment, it is the "totality of the relationship" which must be considered. That approach must be understood in light of the view, recently re-affirmed by six judges of this Court in WorkPac Pty Ltd v Rossato, that "[a] court can determine the character of a legal relationship between the parties only by reference to the legal rights and obligations which constitute that relationship" (emphasis added). In modern times, those legal rights and obligations derive from a contract of employment. That is because "[t]he employment relationship, in Australia, operates within a legal framework defined by statute and by common law principles, informing the construction and content of the contract of employment. Indeed, the evolution of the employment relationship is "a classic illustration of the shift from status (that of master and servant) to that of contract (between employer and employee)".
(Footnotes omitted)
[16] Personnel Contracting at [172]
Further, the principles of contracts in circumstances where the agreement was not reduced wholly to writing is well established. The words said during the course of a conversation that are alleged to legally bind the parties, ought to be recalled with a “degree of precision”.[17] Additionally, the Court is to be aware of the fallibility of human memory and is to have regard to written communications, contemporaneous notes, and post contractual conduct, in aiding it to determine whether a contract was formed, the terms of the contract, and whether there was any subsequent variation of the contract.[18]
[17] Cardtronics Australasia Pty Ltd v FX Investments Australia Pty Ltd [2020] FCA 218 at [8] (“Cardtronics”)
[18] Personnel Contracting at [48], [177], [183], [188] and [190]; Cardtronics [2020] FCA 218 at [8]; Mealey v Power [2015] NSWSC 1678 at [4].
Was there a contract of Employment between Prestige and Mr Leach?
It was the evidence of both Mr Buckley and Mr Leach that prior to 12 November 2015, Mr Leach was an employee of Prestige. This was their understanding. There is however, no evidence of a written contract of employment between Prestige and Mr Leach prior to 12 November 2015. Mr Leach and Mr Buckley are in significant agreement about the role which Mr Leach played at Prestige prior to the Deed of Sale, but in disagreement about what he did at Prestige after the Deed of Sale.
The Court accepts Mr Buckley’s evidence about the much more limited role which Mr Leach had at Prestige after 13 November 2015, but that the two men continued to have an amicable personal (and professional) relationship until late 2017, and that Mr Buckley did turn to Mr Leach from time to time for advice.
What is clear is that prior to 12 November 2015, Prestige issued Mr Leach with payslips, paid him annual and sick leave, remitted PAYG taxation, paid superannuation contributions on his behalf and paid him an annual salary of $80,000. What is also clear is that prior to 12 November 2015, Mr Leach had a significant and meaningful input into the operation and management of the business.
After 13 November 2015, none of those things continued. Despite the Deed of Sale stating that Mr Leach would continue to be employed by Prestige, the terms of his engagement with Prestige did not continue.
There was a fundamental change in the relationship between Mr Leach and Prestige after the Deed of Sale.
This is not only because he was no longer a director of the company, but importantly because his managerial responsibilities were mostly done away with and because his role overall changed. Furthermore, he was no longer in receipt of an annual salary, but rather subject to a commission only agreement. He was free to go and do as he pleased, subject to the restraint of trade clause in the Deed of Sale. He continued to sell properties for Prestige, but as it suited him.
There is no evidence of any control being exerted by Mr Buckley over what Mr Leach did, for example such as having to answer to Mr Buckley as to his performance, his arrival and departure times, what he did during the day and what days he came into the office. There is no evidence of any sales targets or key performance indicators. While such autonomy might have been a feature of his previous employment with Prestige and reflective of his role, there is no evidence that they were so.
Furthermore and importantly, from mid-2016, Ms Kringas took on similar work for Prestige to what Mr Leach had been doing. Prestige was invoiced by JDH for her work, in the same manner was it was invoiced by JDH for Mr Leach’s work. It was likewise the case for the work performed by Mr Moore.
JDH charged Prestige GST.
Furthermore, in the period December 2015 to 31 March 2018, JDH incurred expenses of close to $263,000 while generating an income of almost $626,000. The pleadings do not assert that Prestige was liable to reimburse Mr Leach for any expenses he (or JDH) incurred in performing any of the work for Prestige.
Prestige did not remit any PAYG tax for Mr Leach, it did not pay Mr Leach’s superannuation contributions on his behalf, it did not pay him annual or sick leave and it did not issue him with any payslips.
The fact that Mr Leach was represented on Prestige’s website as a “director” when he was not a director cannot be an indicia of employment. It is a misrepresentation of what Mr Leach’s role was. The same can be said of his signature block on the emails Mr Leach sent from Prestige’s email account, where he signed off as a “director”.
In respect of the agency agreements which Mr Leach signed on behalf of Prestige, this is a matter which may be a factor indicating that Mr Leach was an employee. Mr Buckley was not cross-examined about this matter, and it was not put to him for example that only Prestige employees had such authority. It is evident that Mr Leach was an agent of Prestige, who had the authority to enter into agency agreements on its behalf.
The evidence of Mr Leach about the activities he conducted in respect of procuring listings, conducting negotiations, conducing and supervising the listings, organising and attending at auctions, conducting market research, performing market appraisals was not challenged on cross-examination and was largely admitted in the defence. However, simply because Mr Leach engaged in these activities does not make him an employee. They are the activities of a real estate agent engaged in selling real property.
The fact that the second respondent purported to terminate Mr Leach’s employment, does not mean that Mr Leach was employed by Prestige, but rather it is a factor weighing in favour of a finding of an employment relationship. Whether Mr Buckley and/or Prestige were operating under an assumption that Mr Leach was employed by Prestige is not a matter that can be determinate of the issue.
The evidence is clear that neither Mr Buckley nor Mr Leach had a clear understanding of what the legal implications of their relationship were. They operated on the basis that Mr Leach sold properties for Prestige, and that JDH would be paid commission for the work that Mr Leach did when such work was completed. While from time to time both Mr Leach and Mr Buckley raised the issue of there not being a written contract that set out the terms of Mr Leach’s engagement, it was not a matter that was of particular importance to either of them.
What weighs heavily against a finding that Mr Leach was an employee is the way his remuneration was structured, that he caused a company to be registered and that this same company paid others (including for doing work of the type that Mr Leach himself was doing at Prestige). It was so structured not because Prestige required or insisted that Mr Leach work through a company, issue invoices and so on, but rather because this was a structure which was put into place at Mr Leach’s instigation and it was put in place to suit him and his financial requirements.
On balance, the Court finds that Prestige did not employ Mr Leach.
Is any commission owed by Prestige to either Mr Leach or JDH?
It is for the applicants to establish an entitlement to the commission claimed, it is not for the respondents to establish a disentitlement to such commission. To that end, the pleadings are an important consideration for the Court.
As far as the respondents rely on the Deed of Settlement entered into between Mr Leach and Prestige in December 2017, this deed concerned only a limited period and it released the parties from claims relating to that specific limited period. The claims for commission made by the applicants post-date the Deed of Settlement in any event.
The applicants plead:
39. At least 8 sales properties by clients of the First Respondent arose from listings introduced by the First Applicant on or after 13 November 2015 which entitled the First Applicant, or the Second Applicant as the case may be, to payment of commission under the Commission Agreement, which have not been paid.
Particulars
[see Schedule]
40. The First Applicant, or the Second Applicant as the case may be, is entitled under the Commission Agreement to further commissions calculated under the Commission Terms in the amount of $116,042.75 in respect of those sales.
Particulars
[see Schedule]
41. By reason of the matters set out in paragraphs 39 and 40 the First Respondent is liable to pay the First Applicant, or in the alternative the Second Applicant the amount of $116,042.75.
Despite the parties’ affidavits, two days of oral evidence, lengthy and detailed submissions, the terms of the commission only agreement remain only as found at paragraphs [33]-[44] above.
The evidence in chief about the entitlement to commission was simply a bold assertion (i.e. an opinion) that commission was payable in accordance with the table set out, without any evidence which forms the basis of that assertion.
Neither of the applicants has set out any detailed evidence of:
(a)How the purported listings arose;
(b)When the agency agreements were signed, by whom and in what circumstances;
(c)If the agency agreements were not signed by Mr Leach why not, and if they were signed by Mr Buckley why Mr Leach ought to still be considered as the person who procured the listing;
(d)What the other listings during that particular month were and why the commission claimed falls within the particular bracket of the sliding scale;
(e)What Mr Leach did to sell the property;
(f)When the property was sold; and
(g)When settlement took place.
There was some evidence of some of these matters given during cross-examination. Mr Leach conceded that he did not sign all of the agency agreements and that settlement of some of the sales occurred after his relationship with Prestige came to an end, that is, after 28 March 2018.
Mr Leach conceded that the date of listing referred to in his evidence in chief, is a reference to the date on which the agency agreement was signed with the vendor of the property. He also conceded that the date of completion of sale referred to in his evidence in chief was the date of settlement of the sale.
Mr Leach did not explain in his evidence why the sales for which the commission was invoiced, do not follow sequentially, whether by date of introduction or by date of completion. Furthermore, Mr Leach’s recollection of the events giving rise to the claims for commission was very vague.
During cross-examination, Mr Leach also conceded that some of the calculations upon which his claim for commission was based were incorrect. At the conclusion of the hearing, there was no application to amend the claim in accordance with the concessions made by Mr Leach during his evidence.
As noted above at [44] the evidence is that for the period 13 November 2015 to early December 2017, JDH issued invoices for commission and Prestige paid such invoices. There is however, no evidence of the detail of each particular commission payment pre December 2017 consistent with [104] above.
Given that there is no dispute between the parties about the commission payments between November 2015 and December 2017, the lack of such detail in respect of those commission payments is not a matter which affects the determination of the claim for commission post December 2017, nor does it assist the applicants in establishing that monies are owed to them in accordance with what had previously occurred.
In all of the circumstances, the Court finds that Mr Leach (on behalf of JDH) continued to provide sales services to Prestige after December 2017 until the termination of the parties’ commercial relationship on 28 March 2018 (despite Mr Leach’s claim that he was an employee of Prestige), and that such sales were the subject to the same commission payments as had been agreed to by the parties in November 2015.
Importantly, the agreement reached in November 2015 was in respect of the work which Mr Leach did for Prestige. At the time, JDH did not engage anyone other than Mr Leach to conduct such work, Ms Kringas did not commence doing the sales work for JDH until mid-2016, and Mr Moore until early 2018. As such, the agreement reached in November 2015 did not entail any work being carried out by anyone other than Mr Leach.
The fact that Mr Leach did not complete the work means that the applicants are not entitled to payment pursuant to the agreement reached in November 2015. The applicants make no claim for partial payment nor quantum meruit. The applicants do not plead that the parties entered into any other commission agreement except as agreed in November 2015.
As such, the commission payable is calculated to be as follows:
Invoice 0052: 23 Pound Ave Frenchs Forrest
(a)Mr Leach has not established that he procured the listing, signed the agency agreement nor sold the property;
(b)The evidence suggests that it was Ms Kringas, not Mr Leach, who performed the sales work.
(c)There is no entitlement to payment of invoice 0052.
Invoice 0054: 19 Sir Thomas Mitchell Drive Davidson
(a)The respondents concede that in circumstances where the Court concludes that the commission agreement between Prestige and JDH continued beyond December 2017, that Prestige is required to pay JDH the amount claimed.
(b)JDH is entitled to payment of invoice 0054.
Invoice 0055: 73 John Oxley Drive Frenchs Forrest
(a)Mr Leach conceded that the rates claimed are erroneous.
(b)There is no entitlement to payment of invoice 0055.
Invoice 0056: 11 Halloran Ave Davidson
(a)The amount of commission claimed on the invoice is inconsistent with the rate of 50% claimed. Mr Leach was unable to identify which month he claimed the property was the fourth of, nor was he able to identify the three preceding sales that month. Sequentially the invoices also do not follow.
(b)There is no entitlement to payment of invoice 0056.
Invoice 0057: 8 Vista Place Belrose
(a)There is no evidence that Mr Leach signed the agency agreement.
(b)The evidence shows that Mr Leach negotiated with potential purchasers and that he advised them that their offer was accepted.
(c)Contracts for the property were exchanged in February 2018 and the sale was not completed until after 28 March 2018.
(d)There is no entitlement to payment of invoice 0057.
Invoice 0058: 1/3 Panorama Crescent Frenchs Forrest
(a)There is no evidence that Mr Leach signed the agency agreement.
(b)The evidence only shows that Mr Leach negotiated with potential purchasers, not that those negotiations were successful or that the sale was closed by him.
(c)There is no evidence of when contracts were exchanged.
(d)The sale was completed in May 2018, which was after 28 March 2018.
(e)There is no entitlement to payment of invoice 0058.
Invoice 0059: 8 William Lord Place Belrose
(a)There is no evidence that Mr Leach signed the agency agreement.
(b)The evidence only shows that Mr Leach negotiated with potential purchasers, not that those negotiations were successful or that the sale was closed by him.
(c)The evidence shows that Ms Kringas negotiated with potential purchasers, and that she advised of an acceptance of an offer by the vendors.
(d)The sale was completed in May 2018, which was after 28 March 2018.
(e)There is no entitlement to payment of invoice 0059.
Invoice 0060: 37 John Oxley Drive Frenchs Forrest
(a)Ms Kringas is the person who signed the agency agreement on behalf of Prestige, not Mr Leach.
(b)The contracts for sale were not exchanged prior to 28 March 2018. Settlement occurred well after 28 March 2018.
(c)There is no entitlement to payment of invoice 0060.
Therefore, there will be an order that the first respondent pay the second applicant the sum of $17,115, together with interest.
Conclusion
For all of those reasons, orders as set out at the forefront of these Reasons for Judgment will be made.
117 I certify that the preceding one hundred and sixteen (116) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic.
Associate:
Dated: 7 December 2022
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