Mason and Cox Pty Ltd v McCann

[2000] HCATrans 194

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
  Adelaide  No A2 of 2000

B e t w e e n -

MASON AND COX PTY LTD

Applicant

and

CRAIG McCANN

Respondent

Application for special leave to appeal

GLEESON CJ
GAUDRON J

TRANSCRIPT OF PROCEEDINGS

FROM ADELAIDE BY VIDEO LINK TO CANBERRA

ON FRIDAY, 12 MAY 2000, AT 9.34 AM

Copyright in the High Court of Australia

MR S. WALSH, QC:   If the Court pleases, I appear with my learned friend, MR B.F. BEAZLEY, for the applicant. (instructed by Lawson Downs)

MR A.J. BESANKO, QC:   If the Court please, I appear with my learned friend, MR R. SOULIO, for the respondent. (instructed by Alderman Consultant Solicitors)

GLEESON CJ:   Yes, Mr Walsh.

MR WALSH:   Thank you, your Honour.  If the Court pleases this application raises an important issue as to the relationship between employers and workers in the context of changing contractual arrangements because of the use of labour hire agencies.

By looking at the actual facts of the case, we can illustrate the degree of control that can occur in some cases between what is said not to be an employer and a worker.  In this case, for example, the worker, McCann, wished to work or obtain work for Mason & Cox at its foundry.  He did so by contacting a labour hire company called “Somebody Sometime” and they provided his services to Mason & Cox in circumstances where he was to work at the direction of Mason & Cox in all things at the workplace.  He was to be paid the rate agreed between Mason & Cox and the union.  Mason & Cox would pay his wage and all other entitlements to the agency, which included ‑ ‑ ‑

GAUDRON J:   To the agency, though.

MR WALSH:   To the agency, accepted, your Honour.

GAUDRON J:   Yes, but they did not pay it to him, did they?

MR WALSH:   No, that is so, and that is the distinguishing feature – that is the hurdle, of course, which we must overcome.  There was one feature of this relationship, that is the payment of the wage, but all other features we ‑ ‑ ‑

GAUDRON J:   And the existence of the employment relationship.

MR WALSH:   And the existence of the employment relationship, if it is to be ‑ ‑ ‑

GAUDRON J:   Yes, because it was the hire company that attended to superannuation and all those various matters, was it not?

MR WALSH:   Yes, but in this case, it is a curious feature that what happened was that the wage itself was calculated by Mason & Cox, not by the agency.  Superannuation entitlements ‑ ‑ ‑

GAUDRON J:   But pursuant to an agreement with the agency.

MR WALSH:   Oh, indeed, indeed, your Honour.

MR GAME:   The agency had entered into that precise agreement with them.

MR WALSH:   We readily accept that that is the hurdle which we must overcome in terms of whether there is an employment relationship, but what we do say is that the degree of control that occurred in this case meant that there was a shifting of the employment to Mason & Cox in circumstances where it can really be said that Mr McCann impliedly consented to that in any event.  He wanted his employment to be with Mason & Cox, but he could not achieve it directly, so he was able to achieve indirectly that which he sought to achieve directly.

GLEESON CJ:   Do they have a Dial-an-Angel service in Adelaide?

MR WALSH:   There is a Dial-an-Angel service, your Honour.

GLEESON CJ:   Who pays the workers’ compensation insurance for people who come to your home pursuant to that service?

MR WALSH:   I think it is usually the Dial-an-Angel, and in a Dial‑an‑Angel situation, what they do is that they have control over and direction over the employee, whereas in the present case what has happened is that the employee is simply using the agency as a vehicle to get to a particular employer.

GAUDRON J:   Or one other way of looking at it is that the employer is using the agency to avoid entering into a direct employment contract, so that, for example, it is not concerned with redundancy payments and the like. 

MR WALSH:   There is no doubt that that is so and we accept that, but what we say is important in the context of this case is the need to look at whether there is an employment relationship in truth between this ‑ ‑ ‑

GAUDRON J:   What do you mean “in truth”?  In law?

MR WALSH:   Well, in law because of a shifting employment because of the scope of the Act.

GAUDRON J:   A question sometimes arises whether the relationship between X and Y is that of employee and independent contractor, and when you are ascertaining the nature of that relationship, you can ask the sorts of questions you are now asking.  There is no doubt what the relationship was here.  He was employed by the agency, and the agency had entered into an agreement with the company.  There is no point in making those inquiries.

MR WALSH:   There are circumstances acknowledged by the courts, however, where there is a general employer but there is a temporary transfer of employment to another employer.

GAUDRON J:   So you are saying that the arrangement really between Mason & Cox and the agency and also between the agency and the respondent was really just a sham?

MR WALSH:   We say that it was a relationship which involved, at the end of the day, a common law, a relationship between ‑ ‑ ‑

GAUDRON J:   But there is no common law relationship, employment is a contractual relationship.

MR WALSH:   Yes, but we say that there has at common law been a shifting of the employment relationship, as can happen in some cases, as has been accepted by this Court can happen, in certain circumstances.  Usually those circumstances, even though there is a general employer, and that is accepted in this case, normally there will be a transference if there is, in all the circumstances, sufficient control over the employee, albeit that that is not the only test, and we accept that, but if all the other incidences naturally flow in favour of there being an employment between the non‑general employer and the worker, then in those circumstances the common law will accept ‑ ‑ ‑

GAUDRON J:   What?  Impose a contractual relationship on them?

MR WALSH:   And in circumstances ‑ ‑ ‑

GAUDRON J:   Will impose a contractual relationship on them, is that what you are saying?

MR WALSH:   With the implied consent of Mr McCann, because in this case he always really wanted that.  That is what he intended, that is what he wanted.

GLEESON CJ:   But you have concurrent findings of fact in the South Australian courts that there was no contract between Mason & Cox and your client.

MR WALSH:   There was a finding that there was no implied contract and we seek to challenge that in the context of the scope of this Act and the true relationship between the parties, taking into account the relationship between all three parties.  So we say that in this particular case there is something different about this case.  It fits squarely within the sort of case that the High Court have previously been prepared to say might involve ‑ ‑ ‑

GAUDRON J:   Let us assume, for example, that this hire company has not made tax deductions on behalf of the respondent, has not forwarded superannuation contributions on behalf of the respondent.  Can he sue Mason & Cox?

MR WALSH:   It may be that they might not be able to sue but it may be that Mr McCann could in another context.

GAUDRON J:   Well, that is what I am saying.

MR WALSH:   But in other contexts that he could because ‑ ‑ ‑

GAUDRON J:   On a contract?  On an implied contract.

MR WALSH:   On implied contract.  One only needs to look at the scope of the South Australian Act to understand what Parliament was intending.  When one looks at section 54(1), which takes away common law rights, looks at section 54(b) which prevents an employer from being sued by a third party tortfeasor, in other words, it prevents - it allows the employer to sue a third party tortfeasor to recover the compensation paid, does not allow the third party tortfeasor, though, to claim contribution from it because that is barred by the scheme of the Act, so that in this circumstance we have an illogicality whereby a Mason & Cox employee, Mr McCann – a non‑employee, Mr McCann, if that is on the basis of the Full Court decision - can sue Mason & Cox, somebody sometime can also sue for recovery of workers compensation even though Mason & Cox has paid the workers compensation levy to it, and in circumstances where ‑ ‑ ‑

GAUDRON J:   No, he has paid it an amount of money which it has used to pay the levy.

MR WALSH:   True.  Acknowledge, your Honour, but in circumstances where Mason & Cox cannot obtain contribution from the true employer that owed the duty to Mr McCann, the primary non-delegable duty.  In addition, you could have a situation because of the decision whereby there are different “employees” at Mason & Cox.  One employee being Mr McCann, who can sue a fellow employee, and somebody sometime is immune itself from contribution with its duties as an employer because of the Act.  So the scheme of the Act, by way of section 54(1), by way of section 54(4b), by way of section 54(8), which deals with deemed employment because of vicarious liability.  In this case we say clearly the second limb might apply vicarious liability on the part of Mason & Cox for, naming the agencies, breach of duty.

Then, when one goes to the definition sections, again sees very wide words used to try to cast a wide net in terms of who the employer is to be.  The reason is logical, we say.  The reason is because it is intended that there be equity between employers and employees alike, and that is contained in the objects of the Act.  And because it would be unreasonable in circumstances such as the present case that Mason & Cox has complete control over the employee, provides the safety equipment and directs the worker, and pays a workers compensation levy through to the agency, should nevertheless be sued by the putative employer and no recovery of contribution, despite the fact that the employer would be primarily the person negligent and, of course, in circumstances where the employer, if it is to be somebody sometime - we say an employer sometime but not always, if the employer is itself immune from any contribution but owes a non‑delegable duty to the employee.

So we say that it is because of the scope of the Acts which picks up the common law definition of “contract of service” which thereby requires us to consider the way common law looks at the relationship between employer and worker and defines when it exists, taking into account the wide net and the policy behind the legislation leave us with a conclusion that in this case, where there is a labour hire agency, it must be intended that an entity such as Mason & Cox is an employer for the purposes of the Act.  As I say, it picks up the common law definition and that is important of course in the context of this case and the need for special leave because the common law is an important issue at large.

The question of contract of service or the expression “contract of service” is used widely in workers compensation legislation throughout Australia, admittedly different provisions relating to the question of labour hire agencies, and obviously that is a distinction that can be made against us.  We say that in the present case the important feature is that of control.  We rely upon cases such as Oceanic Crest Shipping v Pilbara where there was a temporary transfer of employment that was recognised.

GAUDRON J:   What was the ultimate liability in issue in that case?

MR WALSH:   Acknowledged, your Honour.  But the fact of the matter is though that there can at common law be a transfer of the employment relationship.  There is a South Australian case which is in our list of authorities, Silver Top Taxi Service, admittedly a slightly different definition, but we can argue that our definition is potentially even wider which talks about the de facto situation and concluded, contrary to the Full Court in this case, that there was in fact an employment relationship in similar circumstances, a taxi driver, an employment situation between the person in the position of Mason & Cox and the worker.

GLEESON CJ:   As you say, in fact.

MR WALSH:   In fact.  So what we say is that if it is true that the control test plays an important part in the context of determining the relationship between persons such as Mason & Cox and McCann in this case, if that is true, and if it is also true that the scope of the policy which picks up the common law definition encourages a wide net to be cast for a number of reasons, including the benefit of workers, and if it is true that the totality of the relationship in fact suggests employment with somebody such as Mason & Cox, then, in our respectful submission, the inevitable conclusion should be that they were, in truth, the employer for the purposes of the Act.

It is put against us of course that what we say is the correct interpretation of some of the definition sections, for example, the definition of “employer” with its two limbs, might lead to absurdity, but not so.  It will not lead to absurdity if it is read down in the context of only applying in cases where in truth there is this transfer of employment at common law necessary to constitute a contract of service.

If one looks at the terms of the Act just very briefly, if I may turn to the book of authorities at page 10, at page 10 of the book of authorities you will see section 54(1):

Subject to subsection (2) –

which is not relevant –

no liability attaches to an employer in respect of a compensable disability arising from employment –

so the critical terms are “employer” and “employment”.  Over the page one sees section 54(4b) that where an action is taken against another person, another tortfeasor such as Mason & Cox:

the other person –

that is Mason & Cox –

has no right to recover contribution from the employer.

And when one then turns to page 13 one sees the definition of “employer” in section 54, which is the recovery section, which includes:

(a)  any person for whose torts an employer is vicariously liable;

(b)  any person who is vicariously liable for the torts of an employer.

That is the starting point with respect to the definitions and then if one looks at page 4 of the book of authorities under (a):

“employer” means –

(a)  a person by whom a worker is employed under a contract of service, or for whom work is done by a worker under a contract of service -

and that is the issue that was debated in the Full Court and before his Honour Judge Burley suggesting that might lead to the anomaly of the plumber coming to the home and the householder being the employer and we say not so because you still go back to section 54(1) and ensure that there was an employment by that person in the context of a common law contract of service.  If one turns to “worker” at page 8:

“worker” means –

(a)  a person by whom work is done under a contract of service (whether or not as an employee) -

and that raises that question of employment or otherwise in the earlier workers compensation legislation which was referred to or the subject of the Silver Top Taxi Cab Case.  Then the final definition is the definition of “employment” and “employment” is, again, at page 4:

“employment” includes –

(a)  work done under a contract of service -

and so forth. 

So one can see that the Act ties it back to the concept of a contract of service and it ties back to the contract of service in the context of an employer in the context of employers being immune from suits in tort and casting a wide net under section 54(8) in terms of vicarious liability seeking to define “employer”, “employment” and “worker” very widely in the definition sections and for obvious reasons we say and the control mechanisms that can occur to ensure that there is no illogicality or absurdity, as was said to be an issue in the Full Court and is argued by our learned friends, can be controlled by simply looking back to section 54(1) and always saying it must be at the end of the day a contract of service with that employer and that is achieved in certain cases such as this because of the relationship between McCann and Mason & Cox and the control that they have.  The only thing not being done is to pay the wages.

My learned friend Mr Beazley reminds me that an authority in our book of authorities at page 84 is a Federal Court decision in BWIU v ODCO.  That was a case of a troubleshooter being the agency.  Your Honours will observe at page 84 at about line 20 the conclusion in that case:

that the relationship between Troubleshooters and the workers who use its services is not that of employer and employee.

If that sort of development is to occur, that would mean that it may be that someone such as Mr McCann is not employed by anyone for the purposes of the Act.  So, if that sort of analogy was to be drawn because of the nature of his relationship with somebody some time, namely, what we say is the occasional employer.

So, in our respectful submission, for those reasons there is an important issue that arises in the case.  There is an issue that draws upon the common law definition of “contract of service”.  There are facts in the present case which clearly make it a suitable vehicle to agitate the issue and, in our respectful submission, justify the grant of special leave.  If the Court pleases, they are our submissions.

GLEESON CJ:   Thank you, Mr Walsh.  We do not need to hear you, Mr Besanko.

The Court is of the view that the decision of the Full Court of the Supreme Court of South Australia is not attended with sufficient doubt to warrant a grant of special leave to appeal in this matter, and the application is dismissed. 

Can you resist an order for costs, Mr Walsh?

MR WALSH:   No, we cannot, your Honours.

GLEESON CJ:   The application is dismissed with costs.

AT 9.55 AM THE MATTER WAS CONCLUDED