Li v KC Dental Pty Ltd
[2019] FCCA 104
•24 January 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
LI v KC DENTAL PTY LTD & ORS [2019] FCCA 104
Catchwords:
INDUSTRIAL LAW – Fair work – claims for workplace rights – claims for alleged contraventions of Fair Work Act 2009 – claims of accessorial liability – claims arose from performance of professional services as a dentist – oral agreement – whether independent contractor or employee – applicable principles – measure of control – respondents prepare applicant’s invoices – respondents unilaterally change manner of calculating applicant’s remuneration – applicant not an employee – claims under the Act dismissed – underpayment as independent contractor – applicant entitled to award of compensation for termination of independent contract without proper notice.
Legislation:
Fair Work Act 2009 (Cth), ss.13, 44, 87, 340, 341, 342, 343, 358, 550, 535, 538,
545, 546
Fair Work Regulations 2009 (Cth), reg.3.42
Federal Circuit Court of Australia Act 1999 (Cth), s.76
Federal Court of Australia Act 1976 (Cth), s.51A
Cases cited:
ACE Insurance Pty Ltd v Trifunovski (2011) 200 FCR 532
ACE Insurance Pty Ltd v Trifunovski (2013) 209 FCR 146
Addis v Gramaphone Co Ltd [1909] AC 488
Amaca Pty Ltd v King (2011) 35 VR 280
Australian Broadcasting Corporation v XIVth Commonwealth Games Ltd
(1988) 18 NSWLR 540
Banque Commerciale SA En Liquidation v Akhil Holdings Ltd (1990) 169 CLR
279
Commission of Pay-roll Tax v Mary Kay Cosmetics Pty Ltd [1982] VR 871
Connelly v Wells (1994) 55 IR 73
Fair Work Ombudsman v Ecosway Pty Ltd (2016) 348 FCR 296
Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR
346; (2015) 256 CLR 137
Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395
Federal Commissioner for Taxation v J Walter Thompson (Australia) Pty Ltd
(1944) 69 CLR 227
Gomes v Higher Level Care Ltd [2018] EWCA Civ 418
Green v Victorian WorkCover Authority [1997] 1 VR 364
Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939
Hollis v VabuPty Ltd (2001) 207 CLR 21
Jiang Shen Cai (t/as French Connection) v Michael Anthony Do Rozario [2011]
FWAFB 8307
Kazar v Kargarian (2011) 197 FCR 113
Lehigh Valley Coal Co v Yensavage 218 Fed 547 (1914 2nd CCA)
Li Ting Sang v Chung Chi-Keung [1990] 2 AC 374
Lopez v Deputy Commissioner of Taxation (2005) 143 FCR 574
Management 3 Group Pty Ltd (In Liq’n) v Lenny’s Commercial Kitchen Pty Ltd
(No 2) (2012) 203 FCR 283
Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014]
NSWCA 425; (2015) 256 CLR 104
Nash v Carroll [2018] FCCA 186
Nationwide Mutual Insurance Company v Darden 503 U.S. 318 (1992)
On Call Interpreters and Translators Agency Pty Ltd v Commissioner for
Taxation (No 3) (2011) 214 FCR 82
Pacific Carriers Ltd v BNP Paribas (2004) 218 CLR 451
Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd
(1924) 1 KB 762
Putland v Royans Wagga Pty Ltd [2017] FCA 910
Queensland Stations Pty Ltd v Federal Commissioner for Taxation (1945) 70
CLR 539
Roy Morgan Research Centre Pty Ltd v Commission of State Revenue (1997) 37
ATR 528
Roy Morgan Research Centre Pty Ltd v Commission of State Revenue (2010)
184 FCR 448
Ruby v Marsh (1975) 132 CLR 642
Salamon v Our Lady of Victory Hospital US Court of Appeals 2nd Circuit,
Amended Opinion [April 22, 2008].
Stagecraft Ltd v Minister of National Insurance (1952) SC 288
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Sweeney v Boylan Nominees Pty Ltd (2006) 226 CLR 161
Tattsbet Ltd v Morrow (2015) 233 FCR 46
Vabu Pty LtdvFederal Commissioner for Taxation (1996) 33 ATR 537
Zujis v Wirth Brothers Pty Ltd (1955) 93 CLR 561
Other texts cited:
Macken’s Law of Employment, 8th Ed (2016)
Applicant: YUANJUN LI
First Respondent: KC DENTAL PTY LTD
Second Respondent: DR SHI
Third Respondent: DR CAO
File Number: MLG 256 of 2017
Judgment of: Judge A Kelly
Hearing date: 27-28 September, 5 October 2017
Date of Last Submission: 5 October 2017
Delivered at: Melbourne
Delivered on: 24 January 2019 REPRESENTATION
The Applicant: In person
Counsel for the Respondents: Mr J.R.M. Tracey
Solicitors for the Respondents: Moray & Agnew ORDERS
(1)There be judgment for the applicant against the first respondent in the sum of $32,984.
(2)Paragraph (1) of this Order may not be enforced above the sum of $31,705 without leave of the Court.
(3)There be a stay on execution of paragraph (1) of this Order until 4.00pm on Friday, 22 February 2019.
(4)By 4.00pm on Thursday, 31 January 2019, the applicant file and serve any submissions (not exceeding 3 pages) in relation to the costs of this proceeding.
(5)By 4.00pm on Thursday, 7 February 2019, the respondents file and serve any submissions (not exceeding 3 pages) in relation to the costs of this proceeding.
(6)The application filed on 7 February 2017 be otherwise dismissed.
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MelbourneMLG 256 of 2017
DR Yuanjun Li Applicant
And
Kc Dental Pty. Ltd. First Respondent
DR FENG SHI Second Respondent
DR ANNIE CAO Third Respondent
REASONS FOR JUDGMENT
Introduction
1.These reasons for judgment explain my conclusions respecting a series of claims made by the applicant (Dr Li) against the respondents including for alleged contraventions of the Fair Work Act 2009 (Cth) (Act) arising from the termination of her engagement by the first respondent (KC Dental).
2.Dr Li’s claims arose from the performance of her professional services as a dentist at a clinic operated by KC Dental that was managed by the second respondent (Dr Shi) and in which his spouse, the third respondent (Dr Cao) was principal dentist. For a brief period in late 2012, Dr Li worked at KC Dental on a part time basis. From January 2013, she progressed to full time work generating substantial income for KC Dental and deriving an entitlement to commission for herself.
3.KC Dental prepared all paperwork including the invoices by which Dr Li claimed her entitlement to payment. Dr Shi contended that she was entitled to be paid 100% of the fees generated from the services that she rendered to the dental patients of KC Dental, less a fee of 60% which KC Dental charged for the rental and provision of the facilities at which she worked. Dr Li was also charged a laboratory fee. KC Dental paid Dr Li at fortnightly intervals and reimbursed her for certain dental supplies that she had obtained.
4.When a question arose in May 2016 whether Dr Li was providing her services as an independent contractor or an employee, Dr Shi presented Dr Li with a written contract that he had ante-dated to the time when she had commenced full-time work in January 2013 and which stipulated her status as being an independent contractor. Dr Shi’s evidence was that the document merely recorded that which had been originally agreed in any event. The document recorded that the parties’ relationship was terminable on the giving of four weeks’ notice. When Dr Li failed to sign the document, Dr Shi terminated her services.
5.Dr Li has brought a proceeding seeking to enforce a large number of claims under the Act alleging that KC Dental subjected her to adverse action and for which, she claims, Dr Shi and Dr Cao are liable as accessories. Each of those claims depend upon a conclusion that Dr Li and KC Dental stood in the relationship of employee / employer. Dr Li also advanced alternative claims based upon the underpayment of sums, which she alleges were due to her as independent contractor. Following the institution of the proceeding, KC Dental made a substantial payment to Dr Li. Further, as to another of those claims, Dr Shi admitted when giving evidence in chief, that Dr Li had not been reimbursed an amount due in respect of certain dental supplies; KC Dental having withheld 60% of that sum on a basis which was not explained. Dr Shi also said that that sum would be paid ‘any time.’
6.I have determined that Dr Li was not an employee with the result that all claims under the Act must be dismissed, including those made against Dr Shi and Dr Cao. Concerning her claims as an independent contractor, Dr Li is entitled to an order that she recover:
a)$28,472 as compensation, representing the balance of the commission which she would have derived had she been given four weeks’ notice in accordance with the parties’ contract;
b)$1,279 being a sum now admitted to be due and not reimbursed for dental supplies. On the basis that Dr Shi has honoured his promise to reimburse Dr Li for those dental supplies, leave of the court will be required to enforce recovery of this sum.
Procedural history
7.On 7 February 2017, the applicant commenced this proceeding by filing an application in the court’s Fair Work division. At the time that the application was filed, Dr Li was represented by lawyers.
8.By their Response, the respondents opposed the making of all orders sought on the ground that the applicant had been engaged as an independent contractor such that the Act did not apply to her and on the further ground that Dr Li had not been dismissed from employment. The respondents denied that any breaches of the Act had occurred and further denied that “the applicant was underpaid leave entitlements or monies for work performed during her engagement.” Those denials are now to be assessed in light of the matters in [5] above.
9.Shortly before the trial of the proceeding, the applicant filed an application in a case seeking an adjournment. The application was opposed. The application was refused.
10.Dr Li was self-represented at the hearing and appeared with the assistance of her son, who is a law student.
The pleaded claim and defence
11.The following allegations were made by the applicant and either admitted or put in issue by the respondents.
12.It was common ground that KC Dental, an incorporated entity, managed and operated a dental practice trading as City Dental Care at Neo Spencer.
13.It was admitted that Dr Shi, was the practice manager of the dental practice having responsibility for, and otherwise being materially involved in, the management of the dental practice including the management of employees on behalf of KC Dental. It was further admitted that Dr Shi was responsible for or materially involved in the compliance by KC Dental with its obligations under the Act.
14.It was admitted that Dr Cao was the principal dentist at the dental practice and was responsible for or materially involved in the management of the dental practice, including the management of employees on behalf of KC Dental with corresponding responsibility and involvement for compliance with its obligations under the Act.
15.It was admitted that Dr Li commenced working for KC Dental as a dentist in about November 2012.
16.The parties were in contest as to the terms of Dr Li’s engagement.
17.Dr Li pleaded that she was engaged by KC Dental on the basis that she would work two days per week, whilst KC Dental contended that Dr Li had been engaged by it to provide the services of a dentist working one or two days per week depending upon patient appointments.
18.The parties were further in contest in relation to the question whether, in late December 2012, KC Dental had offered Dr Li a full time position in the dental practice with effect from January 2013. Dr Li contended that Dr Cao had made this offer on 22 December 2012 in the course of a meeting held at the dental practice at the end of work on that day. The particulars to Dr Li’s allegation was that during the course of the conversation held on 22 December 2012, Dr Cao had said that the position would be full time, working five days per week, with the hours of work being from 9:30am to 5:30pm, including a Sunday, and that Dr Li would receive 40% commission, minus laboratory fees. KC Dental denied those allegations, pleading instead that it was a term of Dr Li’s engagement that she would receive 40% commission minus laboratory fees. KC Dental claimed that in about December 2012, Dr Li had approached Dr Cao and requested an increase in employment so that she could work a five-day week and that this request was accepted, subject to sufficient patient appointments being confirmed to support the increase in working time. KC Dental pleaded that Dr Li did not consistently work five days per week at the dental practice until March 2013 and further that Dr Li chose which five days in each week she would work. It was also pleaded that Dr Li’s work roster was subsequently structured according to Dr Li’s choice of working days.
19.Dr Li pleaded that she accepted the offer of full time employment made by KC Dental and commenced working in a full time capacity with effect from 1 January 2013. KC Dental admitted that from 1 January 2013, Dr Li generally worked five days per week but relied upon its version of the terms of the engagement as set out at [18] above.
20.Dr Li further alleged as follows:
a)she would receive 40% of all money earned by KC Dental from the patients whom she treated (Payments);
b)she was not personally permitted to book in patients for dental work and that such bookings were undertaken by KC Dental;
c)she worked regular and systematic hours for KC Dental (being full time work, five days per week, 9:30am to 5:30pm, including Sundays and receiving a 40% commission minus laboratory fees);
d)she was unable to access the surgery of KC Dental with all such access being controlled by the nurses employed by KC Dental;
e)she had no ability to sub-contract her duties to another dentist;
f)she was not permitted to work for another dental practice whilst engaged by KC Dental;
g)she was not permitted to promote her own business as a dentist during her engagement with KC Dental;
h)all equipment, materials, dental assistants and office staff were provided by KC Dental;
i)she was issued with business cards containing the details of KC Dental’s dental practice;
j)she was listed as a dentist on the website of KC Dental;
k)she was otherwise under the direction and control of KC Dental in the conduct of her practice.
21.Relying upon those matters, Dr Li pleaded that she was an employee of KC Dental and thereby a national system employee for the purposes of s 13 of the Act.
22.Responding to those allegations, KC Dental pleaded by way of defence that Dr Li:
a)worked as a professional, registered and qualified dentist;
b)provided services to KC Dental under an Australian Business Number (ABN);
c)charged KC Dental Goods and Services Tax (GST) for her services and remitted that GST to the Australian Taxation Office;
d)received 40% commission of the income generated from the services she provided, less the laboratory fees;
e)paid the laboratory fees to KC Dental in consideration of her using the premises and equipment of KC Dental;
f)invoiced KC Dental in respect of the commissions she claimed;
g)paid KC Dental for rental of the facilities and equipment;
h)claimed that the commission arrangement between Dr Li and KC Dental was a common arrangement within the dental industry;
i)was responsible for managing her patient appointments and instructed KC Dental’s administrative staff to book patients according to the days and times which she chose to work;
j)generally worked five days per week with effect from 1 January 2013, but chose the hours and days of work and changed her roster according to her personal requirements;
k)did not have access to open the dental premises but did lock those premises at the close of business if she was the last person to leave them on a day of work;
l)could delegate her duties to other suitably qualified dental practitioners and did so. KC Dental provided particulars that Dr Li had arranged for another contracted dentist to take OPG x-rays (x-rays) for one of her patients and had paid that contracted dentist for that service from her own income;
m)was able to work at other dental practices and promote her dental services if she chose to do so;
n)was able to use large items of dental equipment and a dental laboratory, all of which was provided by KC Dental and the cost of which was covered by Dr Li’s laboratory fee;
o)had the assistance of dental nurses and administrative staff provided by KC Dental with Dr Li choosing which of those staff she wished to assist her in the performance of her professional services and directing those dental nurses and administrative staff as to her requirements for her practice including the making of appointments for, and the treatment of, her patients;
p)made her own arrangements in the purchase of smaller items of dental equipment as and when required for her patients;
q)managed and controlled her own dental practice;
r)had her own business cards which confirmed she worked at KC Dental’s dental practice and was listed on its website.
23.By way of reply to these allegations, Dr Li pleaded that she had not at any relevant time provided invoices to KC Dental and contended, to the contrary, that KC Dental had generated documents “described as invoices containing the details of the applicant’s pay and provided them to the applicant each fortnight” and that KC Dental was solely responsible for the contents and details of those ‘invoice’ documents. Further, as concerned the payment of GST, Dr Li alleged in reply that:
a)between 2 December 2012 to 15 September 2013, KC Dental would pay to Dr Li a contribution marked ‘GST’ and paid her that sum in addition to her salary;
b)from 15 December 2013 to 3 October 2016, KC Dental began to deduct a GST contribution from her salary;
c)she did not sign or otherwise authorise the deduction of the GST amounts from her salary;
d)she did not sign or otherwise authorise any change to the manner in which GST deductions would be treated by KC Dental.
24.Concerning the allegation by KC Dental that Dr Li had delegated her work to other suitably qualified dentists, Dr Li responded by way of reply that to the extent any such delegation had occurred:
a)the delegation of any such work had been done at all relevant times at the direction of KC Dental;
b)KC Dental would then deduct money from Dr Li’s salary to pay the other dentist “that had been engaged without the applicant’s permission”;
c)at no time had KC Dental permitted Dr Li to delegate or otherwise subcontract any of her duties without its prior approval.
25.KC Dental denied that Dr Li was an employee and alleged that she had at all times been engaged by it as an independent contractor pursuant to a contract for services.
26.Dr Li pleaded that in about May 2016, she had received an email from Dr Shi in relation to the subject, superannuation contributions, indicating that he had received advice that Dr Li was an employee. Dr Shi admitted the transmission of that email.
27.Dr Li pleaded that in about May 2016, she had made inquiries of the ATO concerning the status of her engagement with KC Dental. The respondents did not admit those allegations.
28.Dr Li then pleaded that in about May 2016, she had telephoned Dr Shi advising him of the fact of her having made a telephone call to the ATO and of the advice she had received that she was an employee of KC Dental. Dr Shi denied that allegation.
29.Dr Li pleaded that on about 23 June 2016, Dr Shi had transmitted to her by email a proposed “independent contract agreement” (proposed agreement). This was admitted.
30.Dr Li pleaded in relation to the proposed agreement that:
a)it was intended to alter Dr Li’s relationship with KC Dental so as to express that her relationship was that of an independent contractor. She relied upon Dr Shi’s email of 23 June 2016 which stated:
City Dental Care needs to have a written agreement with its assistant dentists in order to have a contractor relationship according to ATO’s suggestion.
b)the proposed agreement (by cll 1-3 thereof):
i)was backdated to 4 January 2013 (being the commencement of Dr Li’s full time engagement with KC Dental);
ii)expressly permitted Dr Li to subcontract her work to another dentist if she so chose;
iii)required Dr Li to make rental payments to KC Dental for the use of the surgery and for her equipment.
31.The respondents admitted the proposed agreement and that it was to be backdated to the date when Dr Li had commenced working in the dental practice on a full time basis but otherwise denied these allegations. The respondents contended that the proposed agreement merely “confirmed in writing KC Dental’s existing engagement of Dr Li as an independent contractor.”
32.It was common ground that in the period 23 June – 15 October 2016, Dr Li had not signed the proposed agreement.
33.Dr Li further alleged that on about 15 October 2016, Dr Shi advised her that he would cease paying her if she did not sign the proposed agreement. Dr Li relied upon the contents of an email transmitted by Dr Shi to her on 15 October 2016. The respondents answered this allegation on the following basis:
a)between June – October 2016, Dr Shi had requested Dr Li to sign the proposed agreement;
b)Dr Li had not signed the proposed agreement and failed to explain why she did not sign or intend to sign that agreement;
c)in requesting Dr Li to sign the proposed agreement, Dr Shi was merely trying to ensure that oral agreements with dentists were formalised and “in accordance with what he understood were legal and industry requirements”;
d)Dr Shi understood those requirements to include that those who worked for KC Dental, whether as independent contractors or as employees, needed to have written rather than oral agreements;
e)Dr Shi further understood those requirements to include that KC Dental could not continue to make payments of fees to independent contractors in the absence of a written agreement;
f)on 15 October 2016, Dr Shi had transmitted an email to Dr Li advising that he would stop paying her because she had not entered into the proposed agreement;
g)on 15 October 2016, Dr Shi had again emailed Dr Li asking her why she was not signing the proposed agreement and that without a written contract from that point forward she could not work as a contract dentist or employee.
34.The parties were agreed that by an email sent on 15 October 2016, Dr Li then stated “I will take legal action if you refuse to pay me.”
35.The parties were in disagreement that Dr Shi replied to Dr Li that she would not be permitted to continue working in the dental practice if she did not sign the proposed agreement within two weeks. Dr Li relied upon a further email transmitted by Dr Shi on 15 October 2016.
36.It was agreed that, as at 15 October 2016, Dr Li had not signed the proposed agreement.
37.Dr Li claimed, and the respondents denied that, as at 15 October 2016, she was entitled to the following workplace rights under the Act:
a)to be paid for her work and otherwise receive all applicable employee benefit entitlements (s 341(1)(a));
b)to be able to initiate or participate in legal proceedings in relation to her status as an employee (s 341(1)(b));
c)to be able to make a complaint or enquiry to the ATO in relation to a status as an employee (s 341(1)(c)(i)).
The implicit basis for KC Dental’s denial was that Dr Li was not an employee and had no rights of the kind as were conferred by the Act.
38.It was further alleged that Dr Li was entitled to the same workplace rights set out in [37] above, between 15 October – 10 November 2016.
39.Dr Li pleaded that in consequence of the aforesaid matters,[1] as at 15 October 2016 she had exercised or purported to exercise one or more of her alleged ‘work place’ rights. Dr Li pleaded that the exercise or purported exercise of one or more of those rights constituted what was variously described as:
a)a Payment Threat coercion action (Statement of claim (S/C), [21];
b)a Termination Threat coercion action: S/C, [24];
c)a Termination adverse action: S/C, [32];
d)a Failure to Roster Patients adverse action: S/C, 35].
[1]Namely, her receipt of the superannuation contributions email in May 2016, her inquiries of the ATO concerning her status of her engagement with KC Dental, her communications with the respondent concerning these matters, KC Dental’s provision of the proposed agreement, the terms of that agreement, the requirement to sign the proposed agreement, the advice that KC Dental would cease paying Dr Li if she did not sign the agreement, Dr Li’s response that she would take legal action if she were not paid, the response of KC Dental that Dr Li would not be permitted to continue working in the dental practice if she did not sign the proposed agreement and that that agreement was not signed as at 15 October 2016.
40.The parties were in dispute whether:
a)the Payment Threat was made by KC Dental, or
b)the Termination Threat was made by KC Dental,
and whether, if either threat had been made, it had intended to use unlawful and/or unconscionable means to coerce Dr Li to not exercise her workplace rights and thereby contravened s 343(1) of the Act.
41.It was alleged that on about 16 October 2016, Dr Cao wrote to Dr Li asking for feedback on the proposed agreement and for her to sign it. It was admitted that Dr Cao had sent this email communication.
42.Further, on 16 October 2016, Dr Shi advised Dr Li that her employment would be terminated and that she would not be booked with new patients on the basis that she had refused to sign the proposed agreement. Dr Li relied upon an email sent on 16 October 2016. The respondents answered this allegation as follows:
a)on 16 October 2016, Dr Shi advised Dr Li via email that he would stop booking her new patients with effect from 17 October 2016;
b)the advice that no new patients would be booked for Dr Li was (not on the basis that she had refused to sign the proposed agreement) but because she had evinced an intention no longer to continue to provide services and/or repudiated her contract for services. The respondents relied upon Dr Li’s email sent on 15 October 2016 in which she stated “you can fire me if you want” and/or Dr Li’s refusal to advise why she was not signing the proposed agreement despite the requests made by Dr Shi;
c)termination of Dr Li’s engagement on about 16 October 2016 had been at Dr Li’s initiative and not that of KC Dental.
43.Dr Li pleaded that the termination of her employment became effective as at 10 November 2016. The respondent denied her allegation.
44.Dr Li claimed that in terminating her employment, KC Dental took adverse action against her for the purposes of Item 1(a) in s 342(1) of the Act. The respondents relied upon the allegations that Dr Li had evinced an intention no longer to continue to provide her services and/or repudiated the contract for services and further that Dr Li had terminated her engagement on about 16 October 2016 at her own initiative and not that of KC Dental.
45.Dr Li further claimed that in declining to roster patients for her, KC Dental had taken adverse action contrary to Item 1(c) in s 342(1) of the Act. The respondents denied those allegations.
46.Dr Li further claimed that in the period 15 October – 10 November 2016 she had exercised or purported to exercise her workplace rights in responding to the request to sign and in refusing to sign the proposed agreement following Dr Cao’s communications with her on 16 October 2016. She claimed that KC Dental took adverse action against her because of her purported exercise of those workplace rights.
47.Next, Dr Li alleged that on about 3 November 2016, she had requested KC Dental provide her with copies of records with respect to her hours of work for the duration of her employment. The respondents admitted that Dr Li made such request of its administrative staff, contending that no such records existed, including because she had not “clocked in or off” each day that she had worked, otherwise denying those allegations.
48.Dr Li claimed that KC Dental was required to provide her with copies of her employment records upon request pursuant to s 535(3) of the Act and reg 3.42(1) of the Fair Work Regulations 2009 (Cth) (Regulations). KC Dental denied that it was subject any such requirement.
49.It was common ground that KC Dental had not provided Dr Li with a copy of the employment records that she had requested. KC Dental responded that it was not required to provide such records by reason that she was not a national system employee within the meaning of the Act or reg 3.42(1) of the Regulations.
50.The parties were in dispute whether, in the circumstances, KC Dental had contravened reg 3.42(1).
51.The parties were further in contest whether the National Employment Standards in Part 2-2 of the Act applied to Dr Li and KC Dental. Dr Li claimed that the failure of KC Dental to pay or otherwise make any contribution in respect of her annual leave entitlements pursuant to s 87 of the Act constituted a contravention of s 44 of the Act.
52.Next, it was claimed that Dr Li was entitled to be paid for the performance of her work and that KC Dental had failed to pay her:
a)$13,501.90 for the period 3 October – 16 October 2016;
b)$6,755.88 for the period 17 October – 27 October 2016;
c)$4,343.78 for the period 31 October – 10 November 2016;
d)$2,000 being an amount due by way of reimbursement for dental equipment which Dr Li had purchased for the dental practice.
53.The sums claimed by Dr Li were said to represent 40% of the gross amount that had been earned by KC Dental from the dental services performed by Dr Li during the relevant periods. The total amount of her earnings during each such period was provided.
54.The respondents admitted that Dr Li was entitled to be paid for her services as an independent contractor subject to invoices being submitted but otherwise denied these claims.
55.Next, it was claimed that Dr Li had at all relevant times been an employee of KC Dental and that its threat to dismiss her in order to re-engage her as an independent contractor involved a contravention of s 358. This claim was contested.
56.Claims of accessorial liability were made against each of Dr Shi and Dr Cao which were alleged to constitute a contravention of s 550 of the Act: S/C, [53] and S/C, [56]. These claims were denied.
57.Dr Li claimed damages represented by her loss of remuneration and other employment benefits together with damages for hurt, distress and humiliation.
58.Dr Li made an alternative claim that in the period 1 January 2013 – 10 November 2016, she had been engaged by KC Dental as an independent contractor upon terms, including that she would receive a commission equal to 40% of all money earned by KC Dental from the patients for whom she had provided dental services. KC Dental admitted the alternative claim but challenged the scope of the entitlement to payment, contending instead that Dr Li was entitled to a 40% commission, less laboratory fees, based on the revenue generated from the provision of services to the patients whom she had treated.
59.The parties were in dispute whether KC Dental had failed to pay Dr Li her accrued entitlements to commission as an independent contractor. As pleaded, Dr Li claimed the same substantive relief whether as employee or independent contractor.
60.Dr Li also claimed for declarations in respect of the alleged contraventions by KC Dental of ss 44, 340, 343 and 358 of the Act and reg 3.42(1) of the Regulations and that Dr Shi and Dr Cao were involved as accessories to the contraventions by KC Dental.
61.The relief claimed by Dr Li also included claims for compensation pursuant to s 545(2)(b) of the Act and penalties pursuant to s 546 of the Act and that such penalties be paid to her. Dr Li also claimed compensation for unpaid annual leave and unpaid monies for the work which she had performed; alternatively, for unpaid commissions together with interest and costs.
The evidence
62.Evidence was given at the trial of the proceeding by Dr Li and Dr Shi. Dr Cao did not give evidence. Each of Dr Li and Dr Shi filed a trial affidavit (Dr Li had prepared her own).
63.Dr Li was unfailingly polite throughout the hearing. In the course of the hearing it emerged that Dr Li’s hearing was somewhat imperfect as was her command of spoken English. She was a candid, forthright and for the most part, impressive witness. To my observation, Dr Shi was demonstrably less so. My findings on the evidence are below.
64.Dr Li is a widow who has worked as a professional dentist for some 25 years. She has obtained two tertiary qualifications in dentistry. The first was obtained in China in 1992 and the second in New Zealand in 2010. Dr Li moved to Australia in about 2010 and has since worked as a dentist in Kilmore, Ocean Grove and then Werribee. She said that she had worked as an employee in the Kilmore and Ocean Grove practices but had then obtained an Australian Business Number (ABN) and had worked as an independent contractor for the Werribee practice.
65.Dr Shi obtained a medical degree at Beijing University and a PhD in biotechnology at RMIT, in 2001. Dr Shi works as the Practice Manager of KC Dental and is married to Dr Cao who is the principal dentist as KC Dental. His evidence was that he had 100% of the responsibility for the management and administration of KC Dental. In cross-examination he said that he had responsibility for KC Dental’s payroll.
66.Until December 2011, Dr Shi and Dr Cao conducted a dental practice in Norlane, Geelong. They sold this business and set up a new dental practice in metropolitan Melbourne. The practice they established was KC Dental at 200 Spencer Street, Melbourne, trading as City Dental Care at Neo on Spencer.
67.Dr Shi described the dental practice as one which offered a wide range of dental services including general and family dentistry and cosmetic procedures such as teeth whitening, implants, crowns and veneers. He said the clinic was open seven days per week from 9am to 5:30pm.
68.Dr Shi said that dentists who worked at KC Dental were either employees or independent contractors but that currently all 11 dentists working at KC Dental were engaged as independent contractors.
69.In addition, KC Dental employed administrative staff having responsibility for booking patients, invoicing patients, dealing with patient enquiries and providing administrative support to dentists.
70.KC Dental also employed dental nurses who were required to assist dentists in the provision of their professional services.
71.Dr Shi gave evidence as to the terms and conditions upon which the dentists who worked as independent contractors for KC Dental were engaged including, as he contended, that they:
a)performed dental work as sole traders using an ABN;
b)were registered for and charged GST for the dental services which they provided;
c)had complete control over the manner in which they ran their businesses;
d)were paid according to the completion of their work, with an invoice for payment;
e)had complete access to profits generated through their businesses which meant that they received 100% of their patient fees;
f)reimbursed KC Dental 100% of their laboratory costs and paid it a sum equal to 60% of their gross income, including for equipment rental, dental supplies and an administration fee;
g)could work at other dental practices if they wished;
h)chose their days and hours of work;
i)determined their patient fees and were free to offer discounted fees to their patients;
j)were solely responsible for the treatment of their patients, including for the preparation of treatment plans;
k)could delegate the treatment of their patients to other suitably qualified dentists;
l)were solely responsible for the work that they performed and for rectifying any dental procedures that failed or which had obtained an unexpected outcome;
m)were required to have, and pay for, their own professional indemnity insurance.
72.Dr Shi gave somewhat contradictory evidence in relation to the terms and conditions of the employee dentists. As his affidavit deposed, all of the 11 dentists who worked at KC Dental were engaged as independent contractors. Yet, he also deposed as to the terms and conditions of employee dentists as being that they were:
a)paid a wage for the time they worked with PAYG tax deducted from their gross pay;
b)required to work fixed working hours;
c)directed as to the dates and times that they worked and the number of patients they were required to treat;
d)covered by KC Dental’s professional indemnity insurance; and
e)required to work only for KC Dental during the period of their employment.
Engagement of applicant
73.Dr Shi said that he was first introduced to Dr Li in August 2010 and that the introduction was made by Dr Guo, another dentist who was then working for KC Dental. Dr Li contended that Dr Shi had become aware of her availability from an advertisement she had placed on a dental job seeking website.
74.Dr Shi said that in about mid-November 2012 he was interested in, as he said, either engaging or employing another dentist at KC Dental and that he called Dr Li and asked if she was interested in working for KC Dental. He said that Dr Li replied she was interested in doing so.
75.A meeting was arranged at a local café to discuss the possibility of such an engagement. Dr Shi said that when he met with Dr Li he explained that KC Dental employed dentists or engaged them as independent contractors. He said that he explained the different pay structures and asked Dr Li if she was interested in working at KC Dental as an employee or an independent contractor. Dr Shi deposed that Dr Li replied that she wanted to be engaged as an independent contractor. Dr Shi said he was not surprised by Dr Li’s response as, in his experience, it was commonplace for professional dentists to be engaged as independent contractors so that they could retain the advantage of taxation benefits which applied to such working arrangements.
76.Dr Shi said that during this initial discussion, Dr Li also mentioned she was working at another dental practice part-time. Again, Dr Shi deposed that it made sense to him that Dr Li would wish to continue to have the option to work at other dental clinics. Dr Li agreed that she was working at the Werribee practice at this time.
77.Dr Li agreed that she had met Dr Shi at a local café but denied that there was any discussion concerning different pay structures of employees and independent contractors. She said that the only discussion was in relation to her experience, that the practice had two chairs and that she would be paid a 40% commission. The respondents did not contradict Dr Li’s version of these events.
78.Dr Li commenced work as an assistant dentist with KC Dental on 28 November 2012, initially working two days per week. It was common ground that she did so pursuant to an oral agreement.
79.Dr Shi deposed that the terms and conditions pursuant to which Dr Li provided her professional services were as follows:
a)dental services were provided by Dr Li as a sole trader under her ABN 71 337 162110;
b)Dr Li was to be registered for GST;
c)Dr Li was to work at KC Dental for one or two days per week depending upon the number of patients who were booked;
d)Dr Li would choose her days and hours of work;
e)Dr Li would choose the type of dental services she provided and was to be solely responsible for the manner in which she performed this work;
f)KC Dental was to allocate administrative staff and a dental nurse to assist Dr Li in her work on her chosen days and hours of work;
g)payments were to be made to Dr Li based on the dental services that she performed;
h)GST was to be charged by Dr Li in respect of the dental services she provided;
i)Dr Li was responsible for paying superannuation payments to herself if she chose to do so;
j)Dr Li was to receive 100% of the income and profits as generated from her patients, from which she would reimburse KC Dental 60% of that income and the total cost of her laboratory fee equipment rental, dental supplies and administrative costs.
The respondents relied upon this part of Dr Shi’s evidence as reflecting his understanding of the terms of the parties’ agreement. Although it was agreed that the parties’ agreement was oral, no evidence was given as to any discussion in which these matters had been agreed.
80.Dr Shi further deposed that, in addition to what he said were the terms and conditions of Dr Li’s retainer, she was also:
a)required to be registered as a dental practitioner with the Australian Health Practitioner Regulation Agency (AHPRA);
b)required to apply for and obtain a unique Medicare provider number so as to be able to claim the Medicare benefits as applied to her treatment of her patients at KC Dental; and
c)responsible for paying for her membership with the Australian Dental Association and for her own professional indemnity insurance.
This evidence was at odds with Dr Shi’s version of the café conversation inasmuch as he did not give any evidence of any discussion of any of these terms or any agreement as to any of them.
81.Very little direct evidence was given by either party in relation to the terms of the conversation which occurred in November 2012 before KC Dental offered, and Dr Li accepted, that part-time appointment. Neither party suggested there was more than one conversation. It seems inherently improbable that the terms of Dr Li’s engagement were as carefully defined in the conversation as was being suggested by Dr Shi’s affidavit. No direct evidence was given as to any actual discussion whether Dr Li had a choice to work as an employee or as an independent contractor. As appears below, in May 2016, Dr Shi was quite unclear as to the distinction between an employee and independent contractor. Neither party gave evidence that there was any such conversation. Nor did they give any evidence that there was any discussion as to Dr Li’s ABN or whether Dr Li was registered for GST.
82.It appeared to be common ground that Dr Li was offered part-time work either one or two days per week but that the volume of work was dependent upon the number of patients which were booked at any time.
83.It also seemed inherently improbable that Dr Li had significant choice as to her days and hours of work. It is clear that the patients who chose to seek dental treatment at KC Dental did so by contacting that dental practice. When they did so they obtained a booking that was provided by one of KC Dental’s administrative assistants. From that perspective, it seemed more probable that Dr Li had a choice whether or not to work the two days that she was offered at KC Dental; however, her actual hours of work were objectively a direct product of the volume of appointments that had been booked by patients of KC Dental. Again, from this perspective, it seemed quite inaccurate for Dr Shi to describe those persons as being patients of Dr Li at any time before they attended the practice and she provided her professional services. In the course of cross-examination Dr Shi stated that, on occasion, persons making an enquiry as to treatment would ask for a quote as to the possible cost of the dental service.
84.Nor does it seem probable that Dr Li had significant choice in the type of dental services that she provided. In the nature of the professional encounter, the patient would make an appointment and seek whatever type of dental consultation they required. The more clinically minded patient might schedule a dental check-up annually whilst those with less refined dental hygiene might only seek an appointment in response to dental pain. The type of dental services provided by Dr Li would in large part be dictated by the nature of the consultation. Of course, Dr Li might make a recommendation for particular dental treatment; however, the cost of accepting and implementing that recommendation might be a very real issue for the individual patient. In the end result, I find that Dr Li offered to provide particular dental services to patients who booked an appointment at KC Dental but that the choice whether to obtain such treatment was largely a matter for the individual patient.
85.Dr Li described the types of dental treatment which she provided which included check-ups, fillings, crowns, restorative work, and endodontics (root canal treatment), but not dental implants. For more complicated dental services, Dr Li would prepare a dental plan for the patient’s consideration. I accept that Dr Li bore professional responsibility for the manner in which she performed her work including any repairs which may have been required except on occasions that the patient may have requested the services of another dentist. Dr Li accepted that she had the professional duty to render her services with due care. Insofar as KC Dental suggested that it had no control over the provision of those services, the guidelines which it promulgated suggested otherwise. In particular, KC Dental proscribed the provision of certain dental services until the patient had prepaid the quoted cost of that service. Until that had been done, Dr Li was unable to provide the dental service which she may have recommended.
86.KC Dental provided the largest items of dental equipment required for the provision of dental services to patients at the dental practice. Dr Shi identified the equipment so provided as including the dental chairs, associated equipment and x-ray machines. However, Dr Shi stated that Dr Li chose and selected the dental equipment and tools which she used to treat patients. He also deposed that Dr Li purchased dental supplies and services from her chosen supplier and that KC Dental reimbursed Dr Li for some of those purchases.
87.KC Dental also allocated administrative staff and a dental nurse to assist Dr Li on the occasions that she provided her professional services to patients at KC Dental. Dr Shi said that Dr Li selected the dental nurse and receptionist with whom she would work and gave directions to that dental nurse and that receptionist in the performance of their respective duties.
Progression to full-time work
88.Dr Li deposed that during a conversation in late December 2012 she was offered full-time work at KC Dental working five days per week; that the hours of work would be from 9:30am to 5:30pm, including Sundays, and that she would receive a 40% commission minus laboratory fees. She deposed that there was no written agreement between herself and KC Dental in relation to this arrangement. In contrast with the pleaded claim, the evidence was not clear whether the conversation in December 2012 took place between Dr Li and Dr Cao, Dr Li and Dr Shi or between Dr Li, Dr Shi and Dr Cao.
89.Dr Shi disagreed with the matters deposed to by Dr Li and what she had said about work arrangements with KC Dental. However, consistently with the respondents’ defence, he accepted it was agreed that Dr Li was entitled to commission of 40% on the total fees earned from the patients that she had treated. He deposed that Dr Li was not offered a full-time position by KC Dental in December 2012 and said that she continued to work as an assistant dentist one or two days per week. He said that the amount of work depended upon the patient bookings made by the administrative staff of KC Dental. Dr Shi also deposed that Dr Li did not have sufficient bookings at that time to perform more than two days’ work. He also deposed to a belief that Dr Li worked at other dental practices at about this time.
90.Dr Li’s evidence was that she worked exclusively for KC Dental on a full-time basis from 2013. Dr Li said that her initial work with KC Dental on a full time basis overlapped by a period of about three weeks with the work she was then performing for Primary Dental at a dental clinic in Werribee. I understood this to mean that she worked for the Werribee clinic in November – December 2012. KC Dental adduced some evidence that Dr Li had also worked in the period January 2013 – March 2013 at the Werribee clinic. In this connection, a number of bank statements were tendered in evidence confirming that Dr Li had had monies credited to her bank account in the period January – March 2013 for the provision of dental services with. The total of the sums credited to her account was slightly less than $6,000. Contrastingly, a deed of settlement relating to Dr Li’s work for the Werribee clinic provided by cl 1 that “Dr Li must continue to render dental treatment from the Centre until 21 December 2012.”
91.The respondents tendered in evidence a copy of an email sent by Dr Li in April 2017 in which she provided details of a Medicare provider number which was not related to and different from that which she used when charging patients at KC Dental. Dr Shi stated that this indicated Dr Li was able to claim Medicare benefits for the treatment of patients at another dental practice. There was otherwise very little evidence to suggest that Dr Li had worked at other dental practices in the period in which she had worked at KC Dental. In the course of the hearing, Dr Li explained that the Medicare provider number unrelated to her work at KC Dental had been obtained following the unexpected death of her husband and at a time when she contemplated moving with her son to Queensland but that this plan was not implemented. She said that the other Medicare provider number was only available to be used in Queensland and had not been used. Dr Li worked for KC Dental five days per week.
92.KC Dental invoiced patients for the dental services provided by the dental practice. It employed a centralised accounting system to invoice payments and to process their insurance claims. Where patients had private dental cover, KC Dental would process payment in part using the health industry claims and payments service (HICAPS). Contrastingly, Dr Shi deposed that patients who had no private dental cover and patients who needed to pay the gap in fees not covered by their private dental cover would generally effect payment via EFTPOS. Dr Shi said it was only possible for there to be one HICAPS machine per dental practice and said it would be impracticable for each dentist to collect his or her own fees.
93.Dr Li was required to be and was registered as a dental practitioner with AHPRA and had applied for and obtained her unique Medicare provider number so as to be able to claim Medicare benefits with respect to the dental treatment that she provided to patients of KC Dental. Dr Shi conceded that he had little understanding of the HICAPS electronic payment system which had been installed at each of the dental clinics and seemed to accept that Dr Li would be able to use her Medicare provider number using the HICAPS system at each of those clinics. The attempt to demonstrate that Dr Li had worked as a contractor at other clinics was not pursued.
94.Otherwise, the extent to which Dr Li may have worked in other dental clinics at any time from 2013 was not explored in any detail. Viewing the matter overall, I find that Dr Li had ceased work at the Werribee clinic by that date and was paid for her work in the following month.
95.Dr Shi accepted that by April 2013, Dr Li was consistently working five days per week. He attributed this to an increasing demand for her business, again deposing that she chose her hours and days of work and stated that from April 2013, Dr Li worked on Mondays, Wednesdays, Thursdays, Fridays and Sundays and often worked outside the ordinary business hours of KC Dental.
Invoicing arrangements
96.KC Dental paid Dr Li at fortnightly intervals. Dr Shi said that Dr Li was paid “100% of the gross income for the previous two week period and that in turn Dr Li paid KC Dental 60% from her gross (minus lab fees) plus GST for rental equipment, dental supplies and administrative costs”. He also said that as a part of the ‘service’ KC Dental prepared the dentists’ tax invoices and related documents. In the result, Dr Shi retained control of the documents by which Dr LI invoiced KC Dental for the services which she provided.
97.Dr Shi said that KC Dental collected and recorded the gross income generated by Dr Li. So much followed from the fact that KC Dental invoiced each patient for the total fee charged to that patient.
98.KC Dental provided dentists with three documents per fortnightly payment cycle, being: (a) daily reconciliation; (b) payment statement; and (c) tax invoice. Each of these documents was prepared by KC Dental. Examples of these documents were tendered by KC Dental.
99.The daily reconciliation contained line items describing the date, patient name, treatment and cost together with a running daily total. An example of the Invoices and Payment Advices as prepared by KC Dental are reproduced below. The payment statements prepared by KC Dental separately identified each of the dental costs incurred by Dr Li and refunded by KC Dental.
100.The invoices prepared by KC Dental on Dr Li’s behalf were expressed to be for “premise (sic) and equipment rental.” For example, in the fortnightly period ended 21 August 2016, KC Dental invoiced Dr Li a rental fee of $29,608.72 which sum was inclusive of GST.
101.Dr Li contested that KC Dental had provided her the documents comprising the reconciliation statement, payment statement and invoice. Her evidence is to be considered in the context that Dr Li deposed that her requests for discovery from the respondents were denied. Her evidence as to this was not contested.
102.In particular, Dr Li said that she had initially received a 44% share of the fees, which had been generated from the services she provided to patients of KC Dental. Dr Li produced some examples of invoices which confirmed her version of events. While the absence of discovery precluded any more detailed consideration to be given to that issue, it was within the power of KC Dental to have produced those documents. In addition, in the course of cross-examination Dr Shi stated that Dr Li had not sent the invoices to KC Dental because those invoices had been prepared by KC Dental. That KC Dental prepared the documents obviated the need for them to be re-sent at all.
103.As to payment, Dr Shi said that Dr Li’s income varied each fortnight according to the number of patients that had been treated and the type of dental services that had been provided. It is clear that Dr Li’s remuneration was calculated on a commission basis upon fees paid for the dental work that she performed. It is also plain that Dr Li charged KC Dental GST in respect of her work. However, in practice, the invoices were made up by Dr Shi or under his direction. As a result, it was he who made the calculation of the commission due to Dr Li. KC Dental prepared all of the paperwork relating to the recording of patients who had been seen by Dr Li including the daily reconciliation of the patients to whom she had provided services, her invoice and a payment statement. At all times KC Dental retained control of the financial aspects of the relationship. Monies paid by a patient, and those paid by Medicare or a private insurer, were all retained in the account of KC Dental.
104.Of greater concern was Dr Shi’s evidence that KC Dental only started preparing invoices from April 2016 but that documents sent before that date had not been ‘in proper format’. Dr Shi then stated that invoices had been prepared in three different formats over the relevant period. Dr Shi was shown examples of the invoices which had been prepared by KC Dental. In the first invoice, Dr Li’s name had been shown and given the designation as being an employee whereas in the second, her name and ABN had been stated. Dr Shi agreed in cross-examination that he had made the change in format on the Payment Advice from Employee to Independent Contractor without reference to Dr Li.
105.The manner of invoicing changed markedly over time. KC Dental had initially prepared Dr Li’s invoice on the basis that she was paid an amount equal to 40% of the gross fees generated by Dr Li (less a laboratory fee) to her account. KC Dental retained the balance of 60% of those fees which were characterised as being for rent and the provision of certain facilities. The respondents’ case that Dr Li retained 100% of all fees generated and then paid KC Dental a sum equal to 60% (and a laboratory fee) was accurate only insofar as it reflected the book entries made by KC Dental. In every sense, KC Dental retained control over the entire financial relationship.
106.As the evidence unfolded it became apparent that Dr Shi had changed the bases on which Dr Li was paid on a number of occasions, including in relation to GST, and that he had done so without consulting her or securing her agreement to do so. By way of overview:
a)the first 13 Payment Advices referred to Dr Li as an employee;
b)in a second iteration, Tax Invoices were prepared in which Dr Li was referred to as a contractor and her ABN was quoted. The commission payable was quoted as 40%;
c)in a third iteration, Dr Li was referred to as a contractor and her ABN was quoted. The reference to a 40% commission was removed. In its place was a reference to a Service Fee rate: 60% which, together with the reference to GST, produced the result that Dr Li was now paid a sum equal to 34% of the fees generated. The Pay Advice also referred to a Service Fee and Total service fee.
The third iteration was apparently a composite form of Tax Invoice and Payment Advice.
107.An example of the initial Payment Advice as prepared by KC Dental and which referred to Dr Li as an employee is reproduced below:
108.An example of the Tax Invoice as prepared by KC Dental for Dr Li is reproduced below:
109.An example of the composite form of Tax Invoice and Payment Advice as prepared by KC Dental for Dr Li is reproduced below:
110.In cross-examination, Dr Shi agreed that these changes to the Tax Invoices and Pay Advices had been made without any consultation. In the course of cross-examination, Dr Shi asserted to Dr Li that she had not ‘objected’ to the change whereby Dr Li was originally paid 40% commission and was then paid a 34% commission and left to recover the GST at the end of the financial year. His statement to this effect was immediately challenged by Dr Li and the position that he adopted seemed inherently implausible. Dr Li’s evidence had been that she was engaged in November 2012 on the basis of a 40% commission. The respondents’ defence was that Dr Li was entitled to a 40% commission. Dr Shi had unilaterally reduced this to 34% and thought it sufficient that Dr Li had ‘not objected’ to the change. Dr Shi took the position that to pay Dr Li a commission of 34% was best for ‘cashflow’ and that Dr Li would be able to recover the GST at the end of the financial year. In cross-examination, Dr Shi stated:
You receive whatever you charge. We’re withholding the money for you and did the calculation. You pay – on our agreement as a contracted dentist, you pay us 60 per cent rental and supply cost, administrative cost, plus GST, and the rest will be yours.
111.Viewed more broadly, the financial and administration affairs of KC Dental, including the preparation of Dr Li’s invoices and the making of all payments, was controlled directly by Dr Shi. A substantial change was effected by Dr Shi whereby he:
a)initially, created invoices whereby Dr Li charged KC Dental for 40% of the fees which she generated;
b)later, created invoices whereby KC Dental charged Dr Li a service fee of 60% of those fees plus GST, leaving her to recover that GST at the end of the financial year.
Despite the express terms of the parties’ agreement, Dr Li was thereafter paid an amount equal to 34% of the total fees which she derived for providing her dental services and left to recover the GST.
Work rosters
112.Dr Li deposed that during the period she worked at KC Dental, the work rosters of KC Dental were organised by Dr Shi. She deposed that she would generally receive a roster one day in advance and that it would be sent to her by SMS text message. She deposed that the patients allocated to the roster had been organised by KC Dental. She also deposed that where rosters were organised more than one day in advance they were communicated by email.
113.Dr Shi deposed that on 12 June 2014, Dr Li had “indicated to me verbally that she wished to change her working days”.[2] In cross-examination, he was less clear and suggested that the request may have been by email. At all events, Dr Shi deposed that on 18 June 2014 he sent an email to Dr Li confirming that KC Dental had agreed to change her working days. He relied on an email which stated as follows:
[2]The basis for his recollection that this request had been made on 12 June 2014 was not explored.
Hi Rebecca
I am trying to arrange the work shift for our staff next month. We will change your Friday shift to Saturday as you wish, starting from 12th July (SAT) Dr Cao will be away from this (Sat). Just wondering if you can work two extra Fridays (the 11th and 18th July) while Dr Cao is away (sick)? CHECK
Let me know so I can arrange the nurses for you.
The email does not fully support Dr Shi’s evidence that Dr Li had made a request for change of working days. To the contrary, it suggests that it was Dr Shi who was trying to arrange work shifts for “our staff next month” and that this was due, in part, because Dr Cao would be away on a number of days in July 2014. This email also confirmed that Dr Shi bore responsibility for making arrangements to provide the nursing staff to support Dr Li in the performance of her professional duties.
114.While Dr Shi said that KC Dental had originally had two dental chairs, the evidence was less clear as to the number of chairs which it obtained to accommodate its increase in business such that it had some 11 dentists engaged at the practice. Dr Shi’s evidence was that KC Dental engaged 11 dentists at the practice as at November 2016. Other evidence given by Dr Shi was that in 2014 he had opened another dental clinic some 400 metres distant from KC Dental and had six dental chairs at each of those clinics.
115.Dr Li put to Dr Shi in cross-examination that her request for a change in her rostered work days had only been approved once Dr Shi had opened a new dental clinic ~400 metres from KC Dental and that this had meant there were more dental chairs available for dentists to work from. Dr Shi agreed that that could have been the case.
116.Dr Shi deposed that on 6 April 2016, Dr Li had expressed a wish to start work at 8:30am and finish before 5:30pm so as to be able to spend more time with her son. Dr Shi deposed that KC Dental arranged for administrative staff to commence work earlier and for dental nurses to be made available to Dr Li for this reason.
117.Dr Shi deposed that Dr Li changed her working days and hours according to her personal plans including such as taking holidays. He deposed that Dr Li did not seek permission to change working days or hours but simply made changes in the booking system of KC Dental. It seems that there was a degree of give and take in relation to the days and hours that were worked by dentists including Dr Li. Dr Shi agreed that the dental practice was not open on public holidays and that the precise days on which dentists would work was a matter of negotiation. It seems inherently likely that the times which dentists were required to work was a direct product of the demand placed on the practice for the provision of dental services and that this in turn was the result of the number of bookings which existing or intending patients had made.
118.Dr Li tendered a number of emails to illustrate the arrangements for work rosters as follows:
a)on 12 November 2015, Dr Shi sent an email stating “Are you going to take any holiday in January or February 2016. Please let me know soon as you make your decision so I can arrange the roster accordingly.”
b)on 12 March 2013, Dr Shi sent an email to staff at KC Dental stating “I have arrange the work shift for all staff during holiday season. Please see attached file of your shift. Let me know if you have any difficulties to take any shift as assigned…” Dr Li produced another email that was in near identical terms.
119.The tenor of Dr Shi’s emails indicates that while the personnel working at KC Dental would make their preliminary decisions respecting holidays, KC Dental assumed responsibility for preparing the rosters. The nature of these arrangements indicates that KC Dental needed to know when dentists and other staff were available so that dental services could be provided to persons who had booked appointments as were then reflected in those rosters for work.
120.Dr Shi contested the evidence by Dr Li in relation to work rosters. While accepting that KC Dental had work rosters, he stated that the purpose of a roster was to ensure that each dentist had an allocated dental nurse for their assistance on each day that they worked and that there was sufficient administrative support. He contested that the work roster had been organised to direct what hours and days each dentist worked. It seemed tolerably clear that if patients had no demand for the dental services offered by KC Dental, they would not book appointments and, accordingly, there would be no work for the dentists to perform, whether as employees or independent contractors. Other evidence from the respondents confirmed that they made attempts to promote custom during quiet periods of the year.
121.Dr Li’s evidence, which was not contested, was that while she was able to access the work rosters using a password, she had no ability to block bookings or to take off time except with the permission of KC Dental. In response to this, Dr Shi at first said in cross-examination that a roster for the period December 2012 – April 2013 related to administrative and nursing staff and that he had not sent that document to Dr Li. When presented with an email addressed to Dr Li which attached it, he conceded that the roster had in fact been sent to her.
122.Dr Shi agreed in cross-examination that Medicare had cancelled KC Dental’s accreditation at some point during the time at which Dr Li had worked at the dental practice. He also agreed that the dentists working at KC Dental lost their preferred provider status as a result.
Adherence to KC Dental policy
123.Dr Li deposed that she was strictly required to follow policies of KC Dental and tendered in evidence a number of emails which she relied upon as establishing this fact. The content of those communications was somewhat illuminating:
a)on 28 January 2015, Dr Cao sent an email to all staff addressing an aim of KC Dental to boost client-flow during the quieter period of February 2015 and the stated goal of KC Dental to build up the client base. Dr Cao’s directions were as follows:
1. Please provide proper treatment plan if patients wanted;
2. Try to arrange second appointment after the first visit;
3. Whitening patients, please make sure to let them know about the dehydration and later boosting method, home bleaching kit another in-share whitening treatment after one year or two; change old filling, old crown after one week or reasonably could porcelain veneer.
4. For general patient, try to arrange six months recall . . . ;
5. . . . please make sure to complete other treatment before you provide crown-like RCT, post in core, fillings, S-C . . .
6. If the tooth need other treatment but patient refused to do or major treatment risk-related like RCT, crown, wisdom teeth surgical removal, please recall the discussion in patient’s file, and make sure they signed consent form before start treatment . . .
b)on 2 February 2015, Dr Shi sent Dr Li an email which stated:
I am not happy to the attitude you talked to Dr Cao over the phone tonight which was really annoying. You may not be happy with our management but please respect our decision. As long as you work in our surgery, please follow the way of our management.
c)on 15 June 2015, an email was sent by KC Dental to its dentists and receptionists in relation to a problem of patients who were evading the payment of fees for treatment. KC Dental directed dentists that patients who had come, for example, for emergency treatment from the Spencer Street Railway Station were not to obtain their dental services until they had first paid the quoted fee for the provision of those services;
d)on 27 October 2015, KC Dental sent an email to its dentists providing detailed instructions as to the procedure to be adopted in relation to teeth whitening treatments. The instruction identified that several patients had recently experienced heightened sensitivity following “zoom whitening” and provided detailed instructions on the procedure to be adopted so as, I assume, to reduce the risk of such post-treatment issues;
e)on 28 March 2016, Dr Shi sent Dr Li an email as follows:
I am very disappointed to hear that you cancelled all your booking yesterday on 27th March Sunday due to not happy with your booking. I don’t think what you have done yesterday was professional. Your book patients have been informed by twice system messages and also phone call confirmation. Some received more than three times messages if they could not be contacted by phone call. I have heard a few complain of too many messages from us. I don’t think the same day cancellation is fair to your patients, especially after too many messages and the reason of cancellation is due to the dentist’s bad mood. One of the patients yesterday is my friend who came from Canberra for his appointment booked a long time ago. He was not very happy and called me to complain his precious holiday time was wasted.
I heard your complain regard your booking is a few times in the past couple of years. I just want to restate to you that booking patients in our surgery is the job of our front desk receptionist which follows the rule of benefit most to our patients and our surgery, not just favour to certain dentists. We had an agreement that you have the priority to take the new patients because you joined our team earlier and have more experience. Our booking policy has been listed in our staff training book which all our front desk staff has studied before they started their job. We have been always trying to do our best to apply this policy. However, it seems we still could not make you satisfied. I hope you can understand that there is always a reason that a new patient could not be booked with you due to all sorts of the reasons, such as patients requested time does not fit to your available time and you do not see certain patients (discounted price). Occasionally, our staff may make mistakes. I wish you can be understandable and have some trust to our receptionists and our phone calls and knowing the patients’ request. You may contact our practice manager if you have any issues about your bookings. But we don’t accept your unreasoned doubtful of our staff work which already caused panic to some of the staff and made our working place unpleasant.
I wish you can respect our rules and policy of managing our dental surgery in the future and helping to create a harmony and relax work environment to everyone.
Dr Li relied upon those emails as indicating that she was not allowed to exercise autonomy or to question the respondents’ decisions. There was some force in that submission.
124.Dr Shi accepted that Dr Li was required to follow the guidelines, policies and management protocols of KC Dental. Dr Shi’s affidavit stated repeatedly that Dr Li was expected to follow the policies, guidelines and processes of KC Dental but, at the same time, asserted that she was solely and independently responsible for the performance of her work. My impression of Dr Shi was that he enforced his view as to what was expected of dentists and that he did so irrespective of whether or not the dentist had been consulted or agreed to the manner in which KC Dental would deal with an issue. His unilateral decision to alter the manner of Dr Li’s remuneration was also illustrative of the extent of the control which was exercised in a practical way.
125.So far as Dr Li deposed to having no autonomy in the business, Dr Shi insisted that it was not Dr Li’s role to make operational decisions in the business and that “operational policies, procedures and guidelines were developed to ensure that the business operated smoothly, and did not direct [Dr Li] in relation to the performance of her work”.
126.Dr Li said that she was required to perform any work that had been reasonably requested of her and had no choice as to the dental laboratory that she would use for various works associated with her dental services. She deposed that she was unable to promote her own business, adding that she had not formed an incorporated entity. Dr Shi accepted that Dr Li had not established an incorporated entity but contended that instead she operated as a sole trader using an ABN.
127.Dr Li gave evidence that she was identified as a dentist providing services at KC Dental, both by way of business cards, advertising and on the website of KC Dental. The respondents conceded as much. Dr Shi agreed that Dr Li was listed on the advertising materials and website of KC Dental. He agreed that Dr Li performed work which was central to the business of KC Dental.
128.As to issues of control, Dr Shi agreed in cross-examination that:
a)he also employed another business name, Melbourne Dentist Clinic, which was used as part of a marketing strategy to optimise the number of potential customers that might make contact via websites to acquire the dental services which were provided;
b)KC Dental elected which laboratory fees it would bear (for example as part of a promotion), and those for which it would claim reimbursement from a dentist;
c)KC Dental prepared a number of documents in relation to dealings with particular patients in addition to the treatment plans which would be prepared by the treating dentist.
129.Dr Li said that she had no unqualified right to delegate tasks. She provided an illustration on an occasion when another dentist, at the request of Dr Shi, had performed a procedure, an OPG[3], in order that that service was not subcontracted to another dental practice. Dr Li deposed that Dr Shi had said to her that he would regard it as a favour if the OPG could be performed by another dentist at KC Dental. Dr Li later discovered that the cost of the OPG procedure had then been deducted from her salary and that this had been done without her knowledge or consent. By his affidavit, Dr Shi contested Dr Li’s version of events in relation to the OPG procedure. He deposed that Dr Li had asked the other dentist at KC Dental to take the OPG for her and said that Dr Li had paid the other dentist for the performance of this work. The two versions of events was not wholly inconsistent inasmuch as KC Dental prepared all paperwork associated with the practice including the payments made by Dr Li in respect of her dental disbursements. Dr Shi’s affidavit did not distinctly deny that the reimbursement of the cost of the OPG had been effected without Dr Li’s knowledge or consent. When Dr Li’s version of this event was put to him in cross-examination he did not deny it and said that he could not remember the facts. The sum of the reimbursement was $40.
[3]Orthrapantamogram, being a panoramic x-ray which is used to demonstrate the number, position and growth of teeth.
130.There was very little evidence that Dr Li sub-contracted work to others.
131.As concerned the use of tools and equipment, Dr Li said that these were provided by KC Dental and that where dental supplies were required, KC Dental reimbursed her for authorised expenditure. Dr Li tendered an email sent on 21 November 2013 in which Dr Shi stated that he had transferred $1,686.98 to her bank account to reimburse your expenses on capital PDO progressive dental orders. Dr Li said that the practice of being reimbursed for such expenses for authorised expenditure continued in the course of her work at KC Dental. She was not cross-examined on this topic.
132.Dr Shi disagreed with Dr Li’s version of events respecting the provision of equipment. He agreed that KC Dental provided dental chairs and x-ray machines. He said that KC Dental also provided some dental supplies such as implant surgical kits, sinus lift surgical kits, orthodontic instrument kits and orthodontic suppliers. Dr Shi deposed that Dr Li also ordered certain equipment and supplies as required for particular services that she provided to her patients and that the cost of that equipment and supplies was reimbursed by KC Dental. Dr Shi deposed that KC Dental invoiced Dr Li and deducted from her income a service fee for laboratory services, equipment rental and use. He also said that Dr Li was responsible for ordering dental supplies specific to the treatment that she performed for patients on the occasions where the supplies arranged by KC Dental were insufficient or unsuitable. Again, KC Dental reimbursed Dr Li for the costs of such supplies which, as he deposed, was “part of her terms and conditions of [her] engagement”.
133.Dr Shi deposed that Dr Li made the choice as to the type of dental services she wished to provide and was solely responsible for discussing treatment options with her patients the treatment options and preparing treatment plans. Dr Shi tended an example of a diagnosis and treatment plan that had been prepared by Dr Li in 2016.
134.Dr Shi deposed that all dentists were free to choose their preferred dental laboratory provider. He also deposed that over the period of Dr Li’s engagement, KC Dental had received invoices from some 28 different dental laboratories. It was not clear whether these were all dental laboratories used by Dr Li alone or used by all of the dentists who provided dental services at the practice. Dr Shi also deposed that Dr Li used dental laboratories that were not used by other contractors.
135.Dr Shi also deposed that there were times throughout Dr Li’s engagement when she decided not to continue providing dental services to certain patients and that on some occasions when payments had been made in advance she would refund these fees. Again, Dr Shi’s description of these accounting events is more accurately to be understood from the perspective that the fees were paid to KC Dental and refunded by it. The respondents tendered in evidence some examples of Dr Li’s daily reconciliation sheets from the period July – November 2016. Again, I infer that all of these patient records were prepared by the administrative staff of KC Dental and that this was done under Dr Shi’s management and control.
202.Further, it is accepted that from the range of available indicia, some may afford more assistance in a particular case than another and for that reason alone, a multifactorial approach is warranted.
203.The ultimate question turns on the nature of the relationship and in this context, the contract made between the parties will be of importance to the consideration of that relationship: Putland v Royans Wagga Pty Ltd [2017] FCA 910. There, Bromwich J held at [19]:
Assessment of the existence and extent of any right of control assists in guiding and advancing the inquiry, rather than necessarily providing a conclusive answer on its own as to the nature of the legal relationship. The nature of the relationship is the ultimate issue.
204.In deference to Dr Li’s submissions, I note that reliance was placed upon an authority from the US Court of Appeals 2nd Circuit, Salamon v Our Lady of Victory Hospital.[53] The case involved statutory claims by a gastroenterrologist for sexual discrimination and harassment including under Title VII of the Civil Right Act 1964, 42 U.S.C. The US Court of Appeals reversed a decision which granted the defendants summary judgment on the ground that the appellant was an independent contractor and not an employee and having the consequence that the statutory claims must fail.
[53] US Court of Appeals 2nd Circuit, Amended Opinion [April 22, 2008].
205.Sotomayer, Katzmann and Gertner JJ identified the standard of review applicable to summary judgment and held that a genuine issue of material fact as to the appellant’s employment status should go forward for trial. In its consideration of the law governing what was described as the employment status inquiry, their Honours referred to Nationwide Mutual Insurance Company v Darden,[54] where the Supreme Court had held that the definitions of employee, employer and employment were to be determined under the common law of agency in those cases where statutes provided no definition of those terms. The Court recognised that this principle was to be applied, relevantly, in claims under Title VII and that once a plaintiff was found to be an independent contractor such a claim must fail. Their Honours stated:
Whether a hired person is an employee under the common law of agency depends on a fact-specific analysis of thirteen factors articulated by the Supreme Court in Community for Creative Non-Violence v Reid,[55] a case dealing with the ownership of a copyright arising from artwork done for hire. The ‘Reid’ factors as they are called, are as follows:
[1] the hiring party’s right to control the ‘manner and means’ by which the product is accomplished; [;] . . . [2] the skill required; [3] the source of the instrumentalities and tools; [4] the location of the work; [5] the duration of the relationship between the parties; [6] whether the hiring party has the right to assign additional projects to the hired party; [7] the extent of the hired party’s discretion over when and how long to work; [8] the method of payment; [9] the hired party’s role in hiring and paying assistants; [10] whether the work is part of the regular business of the hiring party; [11] whether the hiring party is in business; [12] the provision of employee benefits; [13] and the tax treatment of the hired party.
[54] 503 U.S. 318 (1992).
[55] 490 U.S. 730 (1989).
206.Sotomayer, Katzmann and Gertner JJ observed that that list was non-exhaustive and was not to be applied in a mechanistic fashion. The Court of Appeals held that, in granting summary judgment, the court below had erroneously applied the first of those tests – the ‘manner and means’ by which work was to be accomplished – and given undue emphasis to the physician’s role and professional judgment. Their Honours held: “there is nothing intrinsic to the exercise of discretion and professional judgment that prevents a person from being an employee. The issue is the balance between the employee’s judgment and the employer’s control.” While Salamon has been cited in later authorities it is unnecessary to pursue the decision further.
207.In my view, the principles stated in Salamon are consistent with those applied in relation to an employment status inquiry under the common law of Australia and upon an application for summary judgment. The present case is not an application for summary judgment, however the non-exhaustive list of the so-called Reid factors is instructive.
208.The analytical principles identified above are to be used as tools in the evaluation of whether the underlying relationship is that of employee and employer, or independent contractor and principal. They are used to measure and assess the nature of the relationship and not deployed as a checklist or determinative criterion to the exclusion of any other.
Consideration
209.The parties made detailed and helpful oral and written submissions, the content of which I have re-examined. Mr Tracey, recognising that Dr Li was self-represented, provided particular assistance to the court in elucidating the relevant principles and identifying critical issues.
210.Dr Li’s claims fell into essentially three categories:
a)claims as an employee for contraventions of the Act;
b)claims for accessorial liability against Dr Shi and Dr Cao;
c)alternative claims as an independent contractor.
211.Whether or not Dr Li had the status of an independent contractor or employee was pivotal in the determination of the claims made under the Act. The respondents’ submitted that Dr Li was not at any time an employee of KC Dental and accordingly was not a national system employee within the meaning of the Act and that, in the result, all such claims, including the claims for accessorial liability, must fail.
212.Eleven claims were made on the basis that Dr Li was an employee entitled to protections under the Act; namely:
a)claim 1: for workplace rights;[56]
b)claim 2: the exercise or purported exercise of workplace rights;[57]
c)claims 3 to 11: for contraventions of particular provisions of the Act, including accessorial liability, all of which were premised upon the first two claims; namely, the existence and exercise or purported exercise of workplace rights.
[56] The first claims are S/C, [20] and S/C, [30].
[57]The second claims are Dr Li’s exercise or purported exercise of those workplace rights: S/C, [21], [24], [32] and [35].
213.The respondents accepted that if Dr Li was found to be an employee, she had such workplace rights as were conferred by the Act.[58] Concerning the particular contraventions comprised in the 3rd to 11th claims, Mr Tracey made detailed submissions as to why certain of those claims were not made out and in doing so quite properly made concessions that if Dr Li was held to be an employee, certain of the claims were conceded. In the view that I have taken of the case it is not necessary to rehearse the substance of those submissions.
[58]However, whether the workplace rights as pleaded was an accurate reflex of the statutory entitlements under the Act remained in dispute.
Employee or independent contractor?
214.In the present case there was no written contract but an oral contract which arose by way of implication from the conversation held in November 2012 between Dr Li and Dr Shi. I have made my findings in relation to that café conversation at [75]-[77] and [81]-[84] above. I agree in the respondents’ submission that in large measure there was not a lot of factual dispute in the case and that the most notable area of dispute was the conversation of November 2012. For the most part, I prefer Dr Li’s evidence as to that conversation; in particular, that the gist of the discussion was in relation to her experience, that the practice had two chairs and that she would be paid a 40% commission. I reject the evidence of Dr Shi that there was discussion in relation to the options of working as an employee or independent contractor. The elaborate detail of Dr Shi’s affidavit as to this discussion stood in marked contrast to the tenor of his evidence at the hearing. I take account also of the fact that the parties were giving evidence as to a conversation which had taken place five years earlier and that Dr Shi retreated from parts of his affidavit in which he purported to describe agreed terms of the contract, instead asking that they be read as reflective of his ‘understanding’ of the terms of the parties’ agreement.
215.Further, I accept the respondents’ submission that in any event the parties’ description of their relationship was never determinative yet remained a factor in the evaluation whether the contract was one of employment or a contract for services.
216.I approach this question on the basis that all of the factors comprising the totality of the parties’ relationship and particular factors are to be given appropriate weight in the evaluation of the matter.[59] I also accept that the court cannot, as it was said, ‘dance around the point’ as by asking whether a person was an entrepreneur. The question to be answered is whether or not Dr Li and KC Dental stood in the relationship of employee/employer or under a contract for services.
[59] Cf Hollis v Vabu; Stevens v Brodribb Sawmilling Co, supra.
217.Mr Tracey stated “the authorities tell us to look at the totality of the relationship, to look at the question of control, but not give it – control – the great weight that it was given in the past in cases where it really was of determinant significance.” He accepted that the position had now moved to a multiple indicia test. I accept that submission and that control may be something that is exercised by a putative employer in respect of both core and incidental aspects of the job. As to this, Mr Tracey quite properly conceded that, on the whole of Dr Li’s evidence including as to emails, policies and guidelines (such as for example teeth whitening and incidental matters), there was arguably a measure of control exercised by KC Dental, stating further:
The teeth whitening example is the most obvious one, where the amount of the substance used to perform the whitening is to be carefully administered and not overly used is really the instruction that has been given.
218.Contrastingly, it was submitted that one would not have expected a direct step-by-step instruction as to the manner of performance, for example of a nerve root extraction, given Dr Li’s specialist expertise as a professional dentist in knowing how to perform root canal treatment, how to perform fillings or insert crowns and the like. Dr Li submitted that the guidelines promulgated by KC Dental which imposed strict instructions as to the manner of charging patients and not proceeding with certain dental services until the quoted cost had been paid was clear evidence of the control exercised by KC Dental. Mr Tracey accepted that the issue of control went ‘both ways’. I agree.
219.Accordingly, it was submitted that, in the manner of execution of her roles, Dr Li had near complete autonomy with some limited aspects of control in other areas. Dr Li submitted correctly that, within their particular areas of expertise, dental practitioners exercise autonomous decision-making and that in this sense were independent practitioners. Dr Li submitted that a unique aspect of the nature of her profession required that in the provision of dental care, dentists treated their patients independently and that when doing so they were not subject to control by the clinic in which they worked. Dr Li relied upon Salamon as demonstrating that the multifactorial approach to the issue was appropriate and that accordingly, there was “nothing intrinsic to the exercise of discretion and professional judgment that prevents [such] a person from being an employee.” I accept that submission. As Dr Li emphasised, hospitals would otherwise be full of medical practitioners, all of whom were to be regarded as independent contractors.
220.Mr Tracey sought a finding that at best for Dr Li’s case there was only a limited degree of control insofar as her manner of performing or executing her work was concerned. Reference was made to Dr Li’s choice of hours, the manner of diagnosis and treatment, and the use of treatment plans stating: “all of that supports a conclusion that there was not a right to control or, also, practical control on the part of KC Dental of what Dr Li was doing as part of her job.” It is clear that weight should be given to each of those matters.
221.I do not accept that Dr Li had the degree of latitude suggested by the respondents in relation to her choice of hours or days of work. As the evidence disclosed, the model employed by KC Dental was driven in large measure by the demand by prospective patients for an appointment so that they could receive treatment. Dr Shi had responsibility for, and controlled the rosters of, both administrative and nursing staff and dental practitioners alike. I accept Dr Li’s evidence that although she was able to access the rosters electronically, she was unable to change her hours or days of work unless given permission to do so. The evidence provided one illustration of an occasion on which Dr Shi admonished Dr Li for having done so without permission.
222.Dr Li was paid by result; that is, by reference to the number of patients to whom she had provided dental services and the fees which she had earned. This was not a case, as would commonly be found in a usual employment relationship, where a wage was paid for the number of hours worked. Here, Dr Li was remunerated by commission calculated as a percentage of the gross fees which she generated. The higher those fees, the greater the commission earned.
223.I accept Dr Li’s submission that Dr Shi had unilaterally changed the format of the invoices which were prepared on Dr Li’s behalf for the claims which were notionally submitted for payment of commission. The administrative and accounting arrangements by which KC Dental prepared daily reconciliation statements of Dr Li’s patient services, her invoices or payment advices were not submitted to be a sham. The book entries which they recorded are to be treated as reflecting the parties arrangements. Just as the parties’ subjective expression of their relationship as being one of employment or independent contract is not determinative, nor was the description that was given in those documents by Dr Shi to Dr Li as an employee or contractor determinative of the legal character of the relationship.
224.Equally, a significant level of control was demonstrated by the fact that KC Dental prepared all of those documents, administered the rosters, prepared Dr Li’s invoices, banked all monies and disbursed them according to its view of Dr Li’s entitlement to commission, including in those instances where it recouped monies from her on account of bad debts and refunds that it had given to patients in respect of allegedly defective work. To similar effect, KC Dental appears to have reserved to itself a measure of control respecting those dental supplies for which it would reimburse Dr Li from time to time.
225.Dr Li agreed that she had always used her ABN and that no amounts were withheld or paid as instalments by way of PAYG income tax and that this had been the position for many years. She had always remitted quarterly instalments of GST and no issue as to her status as an employee had been raised, by either party, until Dr Shi’s accountant addressed a complication which had been identified concerning apparent scrutiny of persons who claimed the status of independent contractors but who derived 80% of their income from a single source.
226.Dr Li agreed that she held her own Australian Superannuation account and had paid money directly to that account and that no superannuation contributions were made by KC Dental at any time.
227.Dr Li did not accrue sick, annual or long service leave.
228.As to tax affairs, Dr Li was cross-examined that she had conducted her affairs in the manner of a business operator. Further, it was emphasised that the presence of GST collections by Dr Li pointed quite strongly against the relationship being characterised as one of employment. There was force in that submission; cf Tattsbet v Morrow.
229.As to the use of equipment, it was submitted that the position was mixed. In this case, KC Dental provided the large equipment like dental chairs while Dr Li paid for particular dental supplies. Moreover, service fees were charged for laboratory costs, equipment and administration, all of which were claimed in Dr Li’s tax return as being deductible expenses. Dr Li accepted that KC Dental provided the larger items of dental equipment and made some supplies available but submitted that the only supplies which she purchased were orthodontic supplies. Dr Li remained insistent that KC Dental had not reimbursed her for those supplies until Dr Shi conceded the point.
230.As to payment of insurance, education and work seminar expenses, those matters pointed in favour of the conclusion of that Dr Li was an independent contractor.
231.As to delegation, there was very little evidence that Dr Li had referred work to other dentists and I attach little weight to this factor.
232.It was accepted that the provision of equipment was a factor which militated in favour of an employment relationship. Equally, Mr Tracey noted that the renting of equipment for which Dr Li was charged a fee was also a fact which pointed in favour of an independent contract.
233.Dr Li pointed to the evidence that she was named on the KC Dental website. It was conceded in favour of a conclusion of employment that Dr Li was listed on KC Dental’s advertising materials and website as working at the dental practice.
234.As to goodwill, this was said not to be a factor of particular weight and in any event it was one which I accept supported both positions. While Dr Li’s ability to generate goodwill was somewhat limited by the advertising and website references to her on KC Dental’s materials, from the cross-examination it was apparent Dr Li was able to generate some goodwill in at least as much as patients had followed her from the practice of KC Dental to her new practice.
235.Mr Tracey cited, by way of illustration, that Dr Li had not worn a uniform whilst at her workplace and conceded that, as a professional person, the issue of uniform was not something to be of great weight. Dr Li pointed out that an examination of her tax returns indicated that she had made no claim for the expense of purchasing an uniform and said that she did not use one. I attach little weight to this consideration.
236.In closing submission, Dr Li said that she didn’t care whether she was an employee or independent contractor but that she was entitled to be treated like a human being and fairly.
237.From the accumulation of the detail and the picture which is painted of the case, I conclude that Dr Li was not an employee of KC Dental but had entered into an independent contract for her services. The present case is to be distinguished from Salamon. Putting aside that that appeal concerned a question of summary judgment, Dr Li was not working in a hospital environment, but at a dental practice.
238.Although KC Dental enjoyed a significant measure of control, the parties agreed that Dr Li would work on the basis that she be paid commission from the fees generated in providing dental services for the patients of KC Dental. The manner in which KC Dental organised its affairs and those of Dr Li was in this respect analogous to the arrangements which were held in Tattsbet[60] to be a contract of services. However, a point of distinction between Tattsbet and this case is that the present case did not involve the execution of a written contract. I had real reservations as to the manner in which Dr Shi changed the invoices which he prepared for Dr Li but do not regard his designation of her status in those documents as being determinative. Of greater significance is that throughout the whole or at least the greater period of her work, Dr Li provided her ABN, remitted GST to the ATO, and incurred and claimed substantial business expenses as being deductible in connection with her income earning activities. At all relevant times, Dr Li made contributions to her own Australian Superannuation account. No superannuation contributions were made by KC Dental at any time. Similarly, Dr Li did not claim or take any sick, annual or long service leave.
[60] (2015) 233 FCR 46, [66] (Jessup J, Allsop CJ and White J agreeing).
239.Taking an evaluative and practical view of the totality of the facts and circumstances of the evidence in this case, I conclude that Dr Li was not an employee of KC Dental.
240.It follows that the claims under Act, including the claims against Dr Shi and Dr Cao must be dismissed.
Underpayment claims
241.Concerning the claims for underpayment of Dr Li as an independent contractor, it was submitted that there was no pleading of breach supporting an entitlement to relief. The Statement of Claim alleged at [58]-[59] that in the period 1 January 2013 – 10 November 2016, KC Dental had engaged Dr Li as an independent contractor and that Dr Li was entitled to a commission of 40% of all money earned by KC Dental from the patients whom she treated. Those allegations were largely admitted by KC Dental although it cavilled with the precise basis on which Dr Li was entitled to commission. Having itself pleaded that Dr Li was entitled to a 40% commission (and putting aside the qualifications to that defence as to laboratory fees etc), it was not open to the respondents to raise an inconsistent plea.
242.In the event, I have found that at the material times Dr Li was in fact paid a commission of 34% and left to recover the GST which had been levied on the 60% service fee charged to Dr Li by KC Dental. That may have been good for cashflow but it was a breach of the agreement.
243.The Statement of Claim further alleged at [60]-[61] that KC Dental had failed to pay her commissions in respect of the period 3 October – 10 November 2016. Dr Li’s alternative claims were for recovery of those unpaid commissions. KC Dental denied liability for this claim. Its denial of liability was to be seen in the context that its final pay advice issued shortly before Dr Shi’s affidavit was filed, resulted in Dr Li being paid ~$18,000.
244.The claims so made are to be considered in the context that this court is not a court of pleading and that Dr Li was self-represented. It is also to be considered on the basis of the evidence that was adduced at trial. KC Dental prepared the proposed agreement that it admitted, including that it had been backdated to January 2013, the date that Dr Li had commenced working in the dental practice on a full time basis. By its defence, KC Dental contended that the proposed agreement merely “confirmed in writing KC Dental’s existing engagement of Dr Li as an independent contractor.” The stance taken by KC Dental in relation to the proposed agreement was also proved by Dr Shi’s evidence.
245.Dr Shi deposed that the proposed agreement did no more than confirm the terms and conditions of Dr Li’s existing working relationship with KC Dental as an independent contractor, adding that Dr Li could have made the choice when the agreement was proffered for execution to be an employee but had not done so. He was not challenged as to his evidence. As noted, the proposed agreement – said to be confirmatory of the parties’ existing relationship – provided expressly that: “[KC Dental] may terminate the contract by giving you notice in writing four weeks ahead.”
246.On the basis of its pleading of the proposed agreement and Dr Shi’s evidence, KC Dental was obliged to give Dr Li four weeks’ notice in writing of termination of her engagement. Instead, Dr Shi’s email transmitted on Sunday, 16 October 2016 terminated her engagement with two weeks’ notice. Dr Li was cross-examined that she ceased working at KC Dental in October 2016.
247.While it may have been more clearly articulated, it was plainly apparent on the face of the materials before me that Dr Li had a valid claim for compensation upon her not being given four weeks’ notice of termination. The fact of the proposed agreement was pleaded and admitted. Its terms were proven by the respondents. Dr Shi further proved that he terminated Dr Li’s engagement on Sunday, 16 October 2016. His email stated and he thereby proved that Dr Li was given two weeks’ notice in accordance of termination of her engagement.
248.Dr Li submitted persuasively, and I accept, that on the whole of the evidence she had not resigned her engagement as the respondents submitted. The events of 15-16 October 2016 spoke loudly against such a conclusion and in favour of the view that it was Dr Shi who had terminated the engagement.
249.I consider that Dr Li has proven an entitlement to compensation based upon the failure of KC Dental to give four weeks’ notice of termination. Dr Li’s unchallenged evidence proved that she earned no further income for the ensuing six weeks until she established her own clinic.
250.The court was obliged to decide the case on the whole[61] of all available evidence. In the present case, that included the evidence which was adduced by the respondents, including that Dr Li was entitled to a 40% commission and to four weeks’ notice of termination.
[61] Cf Amaca Pty Ltd vKing (2011) 35 VR 280, [83], [87]-[88] (Nettle, Ashley and Redlich, JJA).
251.In all of the circumstances, I do not consider that the respondents can be heard to complain to the extent that the claim departed from the pleadings: Banque Commerciale SA En Liquidation v Akhil Holdings Ltd.[62] As Mason CJ and Gaudron J explained, an essential function of pleadings is to ensure a “basic requirement of procedural fairness that a party should have the opportunity of meeting the case against him or her.” In the present case, the respondents’ defence and evidence was that Dr Li was entitled to a 40% commission. It was the respondents who pleaded and proved the proposed agreement which, as they contended, reflected the terms of the parties’ oral agreement. Dr Shi’s affidavit tendered the email chain including that sent on 16 October 2016 in which Dr Li was given two, not four, weeks’ notice. On its pleaded case, and having adduced that evidence, the respondents were squarely on notice of these issues.
[62](1990) 169 CLR 279, 286-287 (Mason CJ and Gaudron J)
Claim for compensation
252.Dr Li presented her claim for compensation in a number of ways. I have set out above the claim as it was made in the Statement of Claim. In addition, Dr Li presented a document in closing submissions which was said to represent her claim for compensation. In the circumstance that I have rejected her claim for recovery under the Act, it is unnecessary to address those aspects of her claim in further detail. What follows are my conclusions respecting Dr Li’s claims on the basis that she was entitled to recovery as an independent contractor.
253.Dr Li is entitled to be compensated on the basis that the contract had been performed according to its terms. Had KC Dental provided Dr Li four weeks notice she would have been entitled to earn commission during that four week period. Such commission would have been payable at the rate of 40% of the total fees earned.
254.Dr Li was invited to and did submit a document which set out in summary each of the claims which she made. Insofar as she pressed for relief for termination of her contract, she claimed a sum of $40,800 and provided calculations as to how that was made up. Mr Tracey submitted that Dr Li had not proven any recoverable loss.
(1)Commission
255.The respondents tendered in evidence three of Dr Li’s tax returns.
256.Item P8 of Dr Li’s tax returns stated that the business income which she derived[63] in those financial years was as follows:
a)2012 – 2013: $310,268
b)2013 – 2014: $467,868
c)2014 – 2015: $629,218
[63] Figures stated at P8 were confirmed in the Business Worksheets annexed to the tax returns.
257.As she worked five days per week for KC Dental from January 2013, I am prepared to infer that Dr Li did little if any work in those financial years for any other dental practice. It was not seriously suggested otherwise. On that basis, I conclude that the income disclosed by those tax returns was income derived by way of commission from working at KC Dental. By extrapolating Dr Li’s gross income as representing 34% of the gross fees derived from the dental services which she provided to patients of KC Dental in those financial years, it may be concluded[64] that her total gross fees in those years was:
a)2012 – 2013: $ 912,550
b)2013 – 2014: $1,376,080
c)2014 – 2015: $1,850,640
[64] Using rounded numbers for this and the following calculations.
258.This calculation does not take account of the deductions for laboratory fees made from the 34% commission as paid by KC Dental to Dr Li. Nor does it take account of the GST which Dr Li would have been entitled to recover at the end of the financial year. Nor does it take account of the possibility that Dr Shi might have made further adjustments in calculating Dr Li’s entitlements to commission.
259.The figures set out at [256]-[257] above also support a conclusion that Dr Li’s income in the financial year 2015 – 2016 and in October 2016 was not lower than that proved by her tax returns for the earlier years.
260.In contrast with Dr Shi’s approach, Dr Li was entitled to be paid commission of 40% of the total fees generated from her dental services provided to the patients of KC Dental. Based upon the 30 June 2015 return, and putting aside the other issues and adjustments referred to, in that financial year, Dr Li generated average fees[65] of $35,590 per week, 40% of which equated to weekly commission of $14,236.
[65] Ie $1,850,640 ÷ 52 = $35,590 per week x 40% = $14,236.
261.In my judgment, had Dr Li been given four weeks’ notice of termination she would have derived[66] an entitlement to commission of no less than $56,944. KC Dental withheld new patients from Dr Li in the period from 17 October 2016 until she finished work. Dr Shi agreed in cross-examination that Dr Li may well have lost income as a result. Not without hesitation, I have concluded that KC Dental was entitled to do so. Dr Li suffered no recoverable loss in relation to the commission which she derived in the period to 31 October 2016.
[66] Ie $14,236 x 4 = $56,944.
262.Dr Shi gave Dr Li two weeks’ notice of termination. On the basis set out above I conclude that Dr Li would have earned an entitlement to a 40% commission of no less than $28,472 in a further two week period from 1-15 November 2016.
263.As noted, KC Dental paid Dr Li a sum of $18,303 by a Payment Advice for the period 3 October 2016 – 10 November 2016. This 38-day period straddled 16 October 2016 being the date upon which Dr Shi sent Dr Li the email terminating her engagement. I have considered whether any part of that payment of $18,303 should be applied in reduction of the said sum of $28,472.
264.KC Dental’s evidence was that Dr Li was given two weeks’ notice of termination. That notice was given on Sunday, 16 October 2017. The evidence adduced in cross-examination was that Dr Li ceased work in October 2016. Adopting an assessment that is most favourable to the respondents, I will treat Dr Li as having accrued an entitlement to commission of $18,303 over the period 3 October 2016 – 31 October 2016 notwithstanding that the Pay Advice was issued notionally for the pay period to 10 November 2016 (it was in fact only issued in 2017). I conclude that insofar as the Pay Advice addressed an entitlement to commission, it involved a calculation of that entitlement for work undertaken up to 31 October 2016.
265.Accordingly, I conclude that account need not be taken of the payment of $18,303 that was made for the period ended 31 October 2016.
266.On the basis set out above, I assess Dr Li’s entitlement to compensation for the two week period of notice which she was not given at $28,472.
(2) Reimbursement for dental supplies
267.In addition, Dr Shi conceded that Dr Li was entitled to be reimbursed a further sum of $1,279 in relation to dental supplies. As noted above, Dr Shi conceded that he had ‘miscalculated’ the amount due to Dr Li in reimbursement of these dental supplies and agreed that the correct sum was $1,279. Dr Li did not challenge this calculation. Dr Li’s closing submission was that her claim for reimbursement of $2,000 was a ‘rough figure.’ I accept Dr Shi’s recalculation as being accurate.
268.While Dr Shi’s evidence was that this sum would be paid at ‘any time’ and ‘after court’, I do not know whether that has in fact been paid. In those circumstances, while Dr Li is also entitled to recover that sum, she is not entitled to double recovery. For that reason, Dr Li should not be entitled to recover that sum except with the leave of the court.
(3) Hurt and humiliation
269.Further, Dr Li made a claim for damages for hurt and humiliation. The respondents submitted that that claim was manifestly excessive but did not submit that damages were not recoverable under this head. While this submission may be understood as accepting that such damages may in some circumstances be awarded under the Act, I consider that damages of this kind are not available at common law.[67]
[67]Addis v Gramaphone Co Ltd [1909] AC 488, 491 (Lord Loreburn LC); see also Gomes v Higher Level Care Ltd [2018] EWCA Civ 418, [31]-[33] (Kitchin, Sharp and Singh LJJ).
(4) Interest
270.Dr Li’s statement of claim included a claim for interest. Interest should be awarded on the sums payable ($28,472 + $1,279 = $29,751).
271.Interest may be awarded where the proceedings are “for the recovery of any money (including any debtor damages or the value of any goods) in respect of a particular cause of action”: s 76(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCC Act). The present application is for the recovery of money. Section 76 of the FCC Act does not prescribe the rate at which interest is to be awarded but provides that the court may allow interest at such rate as the court thinks fit on the whole or any part of the money and for the whole or any part of the period between the date on which the cause of action arose and the date of judgment.[68]
[68]FCC Act, s 76(3)(c). The same principles apply in the Federal Court: Federal Court of Australia Act 1976 (Cth), s.51A(1)(a) Kazar v Kargarian (2011) 197 FCR 113, [97] (Foster J, Greenwood and Rares JJ agreeing generally).
272.An award of interest is intended to be compensatory.[69] For that reason, it is inappropriate to employ a rate derived from a penalty interest rate provision. Instead, the appropriate rate should be one that reflects the cost of money to the applicant. One means of ascertaining that cost is by reference to the prevailing market rate for money.[70] Federal Court Practice Note CM 16 states that an appropriate rate for pre-judgment interest is 4% above the Reserve Bank’s prevailing cash rate. The use of a rate calculated on that basis was endorsed as a ‘rough and ready’ guide to the prevailing market rate which should be applied to pre-judgment interest.[71] This practice is endorsed by the replacement Interest on Judgments Practice Note in the Federal Court (GPN-INT), see cl.2.2. An award of interest in this application may be informed by the Federal Court Practice Notes and authorities above. The Reserve Bank prevailing cash rate from 3 Aug 2016 to date is 1.50%.
[69] Ruby v Marsh (1975) 132 CLR 642, 652-3 (Barwick CJ), 664 (Stephen J).
[70]Management 3 Group Pty Ltd (In Liq’n) v Lenny’s Commercial Kitchen Pty Ltd (No 2) (2012) 203 FCR 283, [25] (Lander, Gilmour and Gordon JJ).
[71]Management 3 Group, supra; see also Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (No 2) [2014] NSWCA 425, [18] (Macfarlan, Meagher and Barrett JJA agreeing); rev’d on appeal on other issue; (2015) 256 CLR 104.
273.Adopting the Full Court’s observations above that a rough and ready indication of the cost of money is 4% above the prevailing cash rate, I award interest calculated at a rate of 5.5% for the period of the calculation. Since the award of interest ought to reflect the cost of money to the applicant, the calculation may be made (and as s 76 of the FCC Act provides), from the date that the cause of action arose.[72]
[72] Kazar v Kargarian (2011) 197 FCR 113, [77].
274.Dr Li was entitled to four weeks’ notice and in the ordinary course would have been paid the commission earned in that period by mid-November 2016. The claim will be allowed for simple interest at 5.5% for the period 16 November 2016 to entry of judgment. The calculation of interest is as follows:
16 November 2016 – 31 December 2016 $ 242
1 January 2017 – 31 December 2017 $1,448
1 January 2018 – 31 December 2018 $1,448
1-24 January 2019 $ 95
Total $3,233
The award of interest must be included in the sum for which judgment is given; that is to say, there must be a single judgment.[73]
[73] FCC Act¸ sub-s.76(3).
Conclusion
275.For the reasons above, save for the award of compensation amounting in aggregate to $32,984 for termination of the independent contract without notice and the admitted failure to reimburse Dr Li for dental supplies together with interest, the application must be dismissed.
276.As Dr Shi stated that the said sum of $1,279 would be paid to the applicant, it is appropriate that leave is reserved to the applicant to enforce the order for payment of that sum. Put another way, if KC Dental has now paid Dr Li that sum, it will be unnecessary for her to seek leave to enforce that order as it will already have been paid.
277.I have reflected on whether I should direct the Registrar to provide a copy of these reasons for judgment to the AHPRA. I remain concerned at the manner in which KC Dental had accounted to Dr Li for her commission including by unilaterally changing the basis on which she would be paid from 40% to 34% and the manner in which refunds made to patients would be recouped from Dr Li in subsequent pay cycles. Dr Shi agreed that Medicare has cancelled the accreditation of KC Dental. In those circumstances, I conclude that the appropriate regulatory authorities will monitor and investigate the conduct of persons in the dental industry as and when is required.
I certify that the preceding two hundred and seventy-seven (277) paragraphs are a true copy of the reasons for judgment of Judge A Kelly
Date: 24 January 2019
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