Mark William Hennock v Geoff Didier and Craig Lansom as Trustees for the Didier Family Trust and Ors t/as Capital Doorworks (No 1) - [2013] ACTMC 5

MARK WILLIAM HENNOCK v GEOFF DIDIER and CRAIG LANSOM as TRUSTEES FOR THE DIDIER FAMILY TRUST and OTHERS t/as CAPITAL DOORWORKS (No 1) [2013] ACTMC 5 (11 April 2013)

WORKERS COMPENSATION – whether Applicant a worker who is a contractor or a worker who is not a contractor – test to be applied

Workers Compensation Act 1951 (ACT) ss 8, 11, 21, 22, 24
Superannuation Guarantee (Administration) Act 1992 (Cth)

Queensland Stations Pty Ltd v Federal Commissioner for Taxation (1945) 70 CLR 539
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Daykin v Neba International Couriers [2002] WASCA 213
Commissioner of Payroll Tax v Mary Kay Cosmetics Pty Ltd [1982] VR 871

Yaraka Holdings Pty Ltd v Giljevic [2006] ACTCA 6

No. WC 59 of 2012

Magistrate: Morrison
Magistrates Court of the ACT

Date: 11 April 2013

IN THE MAGISTRATES COURT OF THE         )
  )          No. WC 59 of 2012
AUSTRALIAN CAPITAL TERRITORY               )

BETWEEN:MARK WILLIAM HENNOCK
Applicant

AND:GEOFF DIDIER and CRAIG LANSOM as TRUSTEES FOR THE DIDIER FAMILY TRUST AND OTHERS t/as CAPITAL DOORWORKS
Respondent

REASONS FOR DECISION

Magistrate:  Magistrate Morrison
Date:  11 April 2013
Place:  Canberra

For convenience I refer to Mr Hennock in these reasons as the Applicant. He is in fact the applicant in the originating proceedings but the respondent to the present application. Again for convenience I refer to the employer in these reasons as Capital Doorworks.
I was informed by counsel at the commencement of the hearing that the first issue to be determined by me in these proceedings was whether the Applicant was at the relevant time a common law employee or a common law contractor. I understand that the issue was described to me in those terms because it is accepted by both the Applicant and the Respondent that, insofar as his arrangement with Capital Doorworks is concerned, the Applicant is a worker within the meaning of the Act either by virtue of the definition in Section 8 or the deeming provision in section 11. Framed in terms of the relevant legislative provision, the question to be determined, at least in the first instance, is more precisely put as being whether the applicant is "a worker who is a contractor" for the purposes of Section 22 or "a worker who is not a contractor" for the purposes of Section 21.
The Applicant gave evidence before me on 13 February 2013.
He gave his evidence in a straightforward manner, without overstating matters where it would have been to his advantage to do so, and making candid concessions even where they were contrary to his interests. I find him to be an honest and reliable witness.
The Applicant left school after year 10 and worked in a number of jobs including the public service for about 10 years, as a motor mechanic and as a mechanic groundsman before commencing work for Capital Doorworks.
In about 2004 he also commenced doing delivery work for an entity called Press Express. That work involved picking up bundles of Sydney newspapers from a depot in Fyshwick and delivering them to newsagents and other outlets. He has two vehicles – a Nissan Navarra and a 6.5 tonne truck. He used the Nissan Navarra for the deliveries Monday to Friday and used the truck on weekends. Sometimes the truck was used during the week if the size of the deliveries called for it.
Prior to his injury on 17 October 2011 the Applicant had been doing that work for Press Express for about eight years. There was no written contract in existence but Press Express was happy with his work and his expectation was that the work was available and ongoing for as long as he wanted to do it.
The Applicant started work with Capital Doorworks in 2007 as an installer. That work involved "putting on roller doors, putting in panel lift doors, maintenance work, putting on motors for roller doors, installing gates". He said he would turn up to work at Capital Doorworks each day and that they would issue him with work to do for the day. He said he used his own truck. He did not have any written agreement with Capital Doorworks. He was paid on a per job basis. He said he would typically work five days per week and sometimes on the weekends as well. He used his truck every day on which he worked. Prior to his injury on 17 October 2011 his expectation was that he would continue to work with Capital Doorworks. He submitted invoices to Capital Doorworks for payment. I infer the invoices to have been calculated on the amount agreed in advance for the job.
After his injury the Applicant continued to submit invoices on a weekly basis at the request of Capital Doorworks. Those invoices were calculated differently – by reference to a fixed number of hours and an hourly rate – at the request of Capital Doorworks.
The Applicant said that he started at between 7:00 and 7:30 in the morning each day and that it was Capital Doorworks which set that time. He said that he did not have a set finishing time and that his work finished when the job was finished. He estimated that he worked about 50 hours per week. He also did some Saturday work, saying that he would request extra hours if Capital Doorworks had them to give him. He said that Capital Doorworks determined what work he would do from day to day and the order in which he tackled different jobs on any day. He said that if he required an assistant then the assistant was provided by Capital Doorworks and it determined who the assistant would be. He said that he wore a uniform, supplied by Capital Doorworks, and which bore the Capital Doorworks logo.
When asked about defects in workmanship, the Applicant said that he was required to rectify any defects in his work at his own cost.
The Applicant said Capital Doorworks did not require him to have his own workers compensation insurance and that what he described as "major equipment” was provided by Capital Doorworks. He went on to refer to forklifts and scissor lifts indicating, as I understood his evidence, what he regarded as major equipment. He said that he supplied his own hand tools.
The Applicant said Capital Doorworks did not pay sick leave or recreation leave but did pay compulsory superannuation contributions. Capital Doorworks did not deduct PAYG tax from its payments to him. He said that he included GST in his invoices to Capital Doorworks and then remitted that amount to the Australian Taxation Office (ATO).
The Applicant said that he did not advertise to work for any other people and that he could not have subcontracted out the work he was doing for Capital Doorworks. He was not asked the basis for his understanding that he could not subcontract – that is, he was not asked whether Capital Doorworks expressly forbid it or if he assumed he would not be permitted to do so.
In relation to the work for Press Express, the Applicant said that since the accident he had not personally done any of that work. He said that he arranged for a friend and his brother to do the weekend work and for his wife to do the Monday to Friday work, in each case, because he was unable to do it. He said that arrangement existed until about February 2012 when he had to give up the contract because he couldn't perform the duties.
Under cross-examination the Applicant agreed that he had regarded himself as a sole trader, that he held an ABN and that he had prepared and submitted a regular Business Activity Statement and remitted to the ATO the GST paid to him by Capital Doorworks.
The Applicant agreed that when a job was allocated to him by Capital Doorworks it was on the basis of a predetermined costing and he was paid that amount regardless of the time taken to complete the job.
A document headed "Financial Report for the year ended 30 June 2012" was identified by the Applicant as having been prepared by his accountant on his instructions and was put into evidence as Exhibit R1. The financial report includes income and profit and loss statements for the year ended 30 June 2011 showing revenue of almost $133,000 and depreciation, amortisation and other expenses of about $67,000 leaving a profit for the year figure of $65,500 odd dollars. For the year ended 30 June 2012 the corresponding figures are revenue of about $114,000, expenses of about $62,000 and profit for the year of almost $52,000.
The financial report generally is comprehensive and includes a balance sheet comparison for 30 June 2011 and 30 June 2012, accounting notes relating to the financial statements, a summary of the depreciation calculation and a calculation of what is described as “partners funds”. In several places throughout the document there is a reference to “partners”. I infer that the financial report has been prepared on the basis that the Applicant operates as a sole trader and that the references to partners reflect only what is provided for in the accountant’s standard computer program used to prepare the documents.
The Applicant agreed that he understood in his first application for arbitration that he was described as a contractor. He agreed that was a fair description and that it was how he had described himself. He agreed that the answer to his application suggested that he was not entitled to as much compensation as he had claimed in his original application and that was why he "became described in the amended application as an employee". It seems to me that, in giving of evidence, the Applicant was saying nothing more than that he was seeking to maximise his lawful entitlements under the legislation. I draw no inference of impropriety on his part in the answer which he gave.
Under cross-examination, the Applicant also elaborated on the tools which he supplies for the jobs he does. The list included various drills, hammer drills, angle grinders, a welder and a range of small hand tools. He agreed that, once a job had been allocated to him, matters such as how he did the job and with what tools and the like were all decided by him.
I was referred to various authorities to assist in the determination required of me including: Queensland Stations Proprietary Limited v Federal Commissioner of Taxation (1945) 70 CLR 539; Stevens v Brodribb Sawmilling Co. Pty Ltd (1986) 160 CLR 16; Daykin v Neba International Couriers and Anor [2002] WASCA 213; Commissioner of Payroll Tax v Mary Kay Cosmetice Pty Ltd [1982] VR 871; and Yaraka Holdings Pty Limited v Giljevic [2006] ACTCA 6. Both counsel accepted that the decision of the Vice President, Deputy President and Commissioner of the Australian Industrial Relations Commission in the matter of Abraham Abdalla (C2002/6325) was an accurate and useful analysis of the other relevant authorities.
Speaking of the legal test to be applied to determine whether a person is an employee or contractor in Brodribb, Wilson and Dawson JJ said this:
The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances.
Mr Hausfield for the Applicant conceded, quite properly, that there were, in this case, what he described as “factors on both sides", by which he meant some indicia pointing to the Applicant being a contractor and some pointing to an employment relationship.
Mr Hausfield emphasised in final address that Capital Doorworks set the Applicant’s starting time for work, determined what jobs he did each day and if an assistant was required, Capital Doorworks provided that assistant. The Applicant wore the livery of Capital Doorworks in the form of a uniform with a company logo and he could not subcontract to fulfil his obligations to Capital Doorworks.
In addition, Mr Hausfield pointed out that Capital Doorworks did not require the Applicant to have his own workers compensation insurance and paid compulsory superannuation contributions for him.
I agree with Mr Hausfield’s assessment of the evidence in this case. Some of the evidence indicates the presence of criteria pointing to the relationship being one of employer and employee and some of it indicates the presence of criteria pointing to the relationship being one of principal and contractor.
The decision making required of me does not involve a mere arithmetic exercise. It is not simply a case of determining whether there are more factors indicating the existence of one type of relationship as opposed to the other. The exercise is more subtle. It includes an assessment of which of the criteria is more or less significant than others in this case and I will set out my reasons for the conclusions I have reached about those things.
I start with some observations on the evidence about workers compensation insurance and superannuation contributions. That evidence is that Capital Doorworks did not require the Applicant to have the former and that it made the latter. As I understand the submissions, they are that these two things point to the relationship being one of employer and employee.
It is not completely clear to me what type of insurance was being referred to when the Applicant said in his evidence that Capital Doorworks did not require him to have his own workers compensation insurance. To the extent that the Applicant was indicating that Capital Doorworks did not require him to have workers compensation insurance for any employees of his own that would appear to be irrelevant because there is no evidence that he had any employees. The alternative is that the evidence was intended to establish that Capital Doorworks did not require the Applicant to have some form of personal insurance cover (as opposed to indemnity cover) against the risk of him suffering some injury arising out of or in the course of his work for Capital Doorworks. The structure of the workers compensation scheme is such that the legislature intends that some persons who are contractors are covered by the extended reach of the scheme. Under such circumstances, I cannot see that the absence of a requirement to take out some additional insurance in respect of a person who is covered by the scheme in any event is something to which any significant weight can be attached.
In a similar vein, the provisions of the Superannuation Guarantee Administration Act 1992 (Cth) expand the definition of employee so as to cover some contractors, and again in those circumstances, the fact that contributions are made under that legislation is not something to which any significant weight can be attached.
When asked if he had a set starting time, the Applicant had said that it was between 7:00 and 7.30 am, and that it was Capital Doorworks which set that time.
I infer from the evidence as it came out that Capital Doorworks generated a sufficient number of jobs to keep the applicant working five days per week and occasionally on weekends if he sought weekend work.
In those circumstances, an arrangement whereby the Applicant was required to report at between 7.00 and 7:30 am each day and to undertake jobs in the order determined by Capital Doorworks is not necessarily indicative of an exercise of control over an employee under a contract of service. Such a requirement might equally be seen as a necessary practical requirement of a much used contractor who is relied upon to complete a series of jobs promised by Capital Doorworks to customers.
Indeed, there is a certain lack of precision in the Applicant’s reference to his starting time as between 7.00 and 7.30 which suggests that the designation of a start time is something other than the exercise of control under a contract of service. As Wilson and Dawson JJ pointed out in Brodribb, “.... even the most independent of independent contractors is subject to some direction in the performance of his work”.
The evidence of the start time must also be viewed in light of the evidence on what are related points; that is, that the Applicant was paid on a per job basis and that he did not have a set finishing time, such that his work finished for the day when the job was complete.
For those reasons, I do not attach significant weight to the evidence that Capital Doorworks set the Applicant’s start time.
I do attach significance to the fact that the Applicant worked for none other than Capital Doorworks, that he wore its uniform and that he could not subcontract his work. Those things do point strongly to the relationship being one of employer and employee.
I do not attach significance to the evidence about who supplied tools and equipment. What I mean by that is that the evidence is not all one way in relation to that point. The evidence establishes that Capital Doorworks provided what the Applicant described as “major equipment” although the Applicant in his evidence spoke of a significant list of items which he provided at his own expense, including a range of drills and a welder. He also used his own vehicle. There is no evidence before me as to how frequently or otherwise the Applicant’s usual jobs required the use of Capital Doorworks-supplied major equipment. As I have said, I do not regard the evidence on this point as weighing significantly in favour of a conclusion one way or the other.
I do attach significant weight to the evidence that the Applicant was paid on a per job basis and that he was required to rectify any defective workmanship at this own cost. Those two factors in combination mean that the “profitability” of his work for Capital Doorworks was directly determined by his own efficiency and skill and that he personally carried what is one of the usual and significant business risks - that of ensuring the quality of workmanship. This evidence points strongly to the Applicant acting on his own behalf.
The financial statements which are in evidence have been professionally prepared with some degree of sophistication. The evidence was that the Applicant had not given up the contract with Press Express until February of 2012. I infer that the financial statements in evidence cover the Applicant’s income from both Capital Doorworks and Press Express and also expenses in connection with both sources of income. No attempt was made in cross examination to separate either the income or expenses referred to in the financial statements as between those two sources. As such it is not possible for me to reach any conclusion about the ratio of expenses to income attributable to the Applicant’s work for Capital Doorworks alone. That criterion has therefore not influenced my decision.
I do attach significance to the fact that the Applicant clearly regarded himself as a contractor. I acknowledge that is not of itself determinative of the nature of the relationship. Nevertheless, the steps taken by the Applicant in having the financial statements prepared as they were, his rendering of accounts to Capital Doorworks in the form in which they were prepared and his treatment of his transactions with Capital Doorworks for GST purposes, all demonstrate that he clearly regarded himself as a contractor both in his relationship with Capital Doorworks and his relationship with the ATO.
After referring to considerations of the indicia of the nature of the relationship as mentioned earlier, Wilson and Dawson JJ in Brodribb went on to say:
Having said that, we should point out that any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance.
Whilst accepting, as I have said, that there is evidence of criteria pointing in each direction, I have concluded that, on balance, the weight of the evidence points to the Applicant acting on his own behalf and therefore the relationship being one of principal and contractor.

The next decision required of me turns on the proper interpretation to be given to and the combined effect of Sections 21, 22 and 24 of the Act. I have via my Associate communicated with the parties about a point on which they may wish to make further submissions before I continue my deliberations and I will invite submissions on that point now.
I certify that the preceding 45 paragraphs are a true copy of the Reasons for Decision of His Honour, Magistrate Morrison.
Associate: Gary Khoo
Date: 11 April 2013

Counsel for the Applicant:  S Hausfeld
Solicitor for the Applicant:  Stacks Compensation Solicitors
Counsel for the Respondent:  G Stretton
Solicitor for the Respondent:  King & Wood Mallesons
Date of hearing:  12 February 2013 and 13 February 2013
Date of judgment:  11 April 2013