Merceica v Wade No. Scgrg-00-977

MERCEICA V WADE

[2000] SASC 441

Magistrates Appeal

1................ LANDER J....... This is an appeal from a decision of a Magistrate sitting in the civil jurisdiction of the court dismissing a plaintiff’s claim against a defendant.

The Magistrate also dismissed the defendant’s counterclaim but there is no appeal from that order.
The plaintiff was the owner of premises situated at Paringa in the Riverland in South Australia and licensed as an owner/builder for the purposes of constructing a building on the premises.
The defendant traded as Riverland Bricklaying and Renovations.
It was the plaintiff’s case that in or about September 1999 the defendant agreed to carry out building work “during the construction on the premises on the building”.
The plaintiff claimed that the defendant had failed to adequately carry out that building work. Essentially the plaintiff’s claim was that the defendant had carried out the building work in an unworkmanlike manner.
The plaintiff complained of eight defaults:
“(a) Failed to adequately install fascias;
(b) Failed to adequately install footpaths;
(c).... Failed to comply with the requirements of Ministers Specification SA F1.1 with the fall of the floor in the bathroom;
(d)Failed to adequately seal around the base of the shower cabinet, vanity, spa bath and shower tap penetrations;
(e).... Failed to adequately grout the bottom row of tiles in the shower;
(f)Failed to seal around the cover plate over the cistern inlet pipe or provide an additional tile cut to size;
(g).... Failed to adequately flush ceilings;
(h)Failed to adequately flush arches.”
The plaintiff claimed that the estimated cost of repairs for the faulty workmanship would be $10,270.
The defendant filed a defence and counterclaim.
The defendant claimed that in the month of September 1999 he entered into an agreement with the plaintiff whereby the plaintiff would employ him as a general labourer and bricklayer subject to the supervision and direction of the plaintiff at an agreed rate weekly wage of $1,000, with the plaintiff to deduct taxation at the appropriate rate of $200 per week and pay that taxation to the Commissioner of Taxation.
The defendant’s defence was that he was an employee and not an independent contractor and the plaintiff was thereby disentitled to recover from him, even if the work had been carried out in a faulty manner.
The defendant claimed in his counterclaim that he was employed by the plaintiff to work 50 hours per week for an agreed weekly wage of $1,000. He claimed that the plaintiff had underpaid him in respect of one week’s work. He further claimed that the plaintiff had failed to pay him for an additional 200 hours work carried out during the 13 weeks in which he was employed. He also claimed that the plaintiff had failed to pay him the sum of $1,063.70 for the hire of certain plant and equipment which he had invoiced the plaintiff for on 4 April 1998 and the cost of replacement of a cordless drill damaged by the plaintiff whilst the defendant was employed by the plaintiff.
The defendant’s counterclaim totalled $6,193.70.
The learned Magistrate found that the defendant was a servant and was therefore not liable for any defective work. He discussed the question of damages. In the event that his decision was overturned he said he would have allowed $2,855 in respect of the floor in the bathroom. Otherwise he said he would not allow any damages for any of the other complaints. In respect of some of the other complaints he found that the work had been rectified and in respect of some of the other complaints he found that the defendant was not responsible.
The plaintiff makes three complaints about the judgment:
“(1).. The learned Magistrate erred in finding that the Defendant was an employee of the Plaintiff and not an independent contractor.
(2)The learned Magistrate erring (sic) in finding that there was no evidence that the Defendant was aware that the “Prescribed Payments System” was applicable to contractors forwarding tax to the Taxation Office.
(3)... The learned Magistrate erred in finding the Plaintiff would not have been entitled to damages under various headings in the event that he was found to be an independent contractor.”
Damages apart, the sole question for determination in this case was whether or not the plaintiff had engaged the defendant as an independent contractor or as an employee.
There is no doubt that the parties intended to create a legal relationship of some kind; that is they intended to enter into a contractual relationship. The first question was whether the terms of that agreement created the defendant an employee or whether the parties intended and agreed that he was to be an independent contractor.
It was the plaintiff’s case, as the pleadings demonstrate, that the defendant was retained as an independent contractor. It was the defendant’s case that he was retained as an employee.
The Magistrate preferred the evidence of the defendant to that of the plaintiff and said that where there was any conflict between the two of them he preferred and accepted the evidence of the defendant. Of course, on the very question which had to be determined, there was a conflict.
The Magistrate was apparently referred to a number of decisions of the High Court on the question “control” for the purpose of determining whether persons are engaged as contractors or employees. In my opinion, those cases were really not relevant in this case.
This case had to be determined upon the agreement between the parties and in particular whether the parties had reached the agreement contended for by the plaintiff or by the defendant.
There was no point in determining whether or not the plaintiff exercised control such as to conclude that the defendant was employed or not employed by the plaintiff. Those cases are really relevant in circumstances where the parties had not applied their mind as to the status of the party to carry out the work. In this case the defendant’s case was that the parties had in fact applied their mind to his status and they had agreed that he would be an employee.
The plaintiff’s case therefore had to be decided upon the evidence. It was a question of fact as to what the defendant’s status was. That question of fact had to be determined by reference to the oral evidence given by both the plaintiff and defendant. That evidence had to be weighed in the light of any documentary evidence to determine whose evidence should be accepted.
As I have said, in this case, the Magistrate preferred the evidence of the defendant. In the circumstances of this case that really is almost an end to the matter. The Magistrate had the advantage of seeing and hearing the witnesses. It is not said that he has misused that advantage. Nor is it said that he acted on evidence inconsistent with facts otherwise incontrovertibly established. His findings are not glaringly improbable; Devries v Australian National Railways Commission (1993) 177 CLR 472.
There was documentary evidence but in the end the documentary evidence was equivocal. The plaintiff relied upon an invoice which had been delivered by the defendant to the plaintiff prior to the agreement being entered into. That invoice is under the name of the defendant’s firm and is apparently a quote of $8,000 for total labour costs excluding a number of matters. That invoice, in my opinion, is equivocal. It does not establish or even tend to establish which of the contentions are more likely. The invoice was used by the plaintiff for the purpose of arranging his finance. That may well explain why it was created. It did not establish, on the balance of probabilities, one way or the other which of the contentions was correct.
The plaintiff relied on one specific piece of evidence which he said established or tended to establish the relationship for which he contended.
It is clear enough that the defendant had deducted from the amounts paid to him taxation pursuant to the Prescribed Payment System. In the first instance 20 per cent of the payment was deducted in accordance with that system but that was later amended to a 10 per cent deduction on the application of the defendant.
The plaintiff contended that because the defendant had agreed for a sum to be deducted pursuant to the Prescribed Payment System that indicated that the defendant had agreed that he would carry out the work as an independent contractor.
I do not agree with that contention.
The defendant would have been obliged to either pay income tax on the monies he earned, as he earned them, or when he submitted an income tax return.
There was no system that was able to be put in place to allow the plaintiff to deduct income tax as the relationship continued and as payments were made. In those circumstances it seems to me to be not inconsistent with an employee situation for the plaintiff to have insisted upon and the defendant to have agreed for the parties to deal with each other in accordance with the Prescribed Payment System. Any monies deducted by way of prescribed payments would have been credited against the income tax payable.
On the other hand there was some independent evidence which tended to support the defendant’s contention. The defendant called a Mr Jones, an employee of the office of Consumer Affairs.
He was asked to visit the building site at Paringa. He spoke to the defendant. The defendant told him that he was working on a weekly basis, employed week by week.
The defendant asked Mr Jones if he would like confirmation of that matter and Mr Jones agreed.
The defendant telephoned a number and advised Mr Jones that Mr Jones could speak to the plaintiff. Mr Jones spoke to a person he believed to be the plaintiff who told him the defendant was employed on a weekly basis. It was put in cross-examination to Mr Jones that Mr Jones never had a conversation with the plaintiff.
The plaintiff was recalled after Mr Jones gave his evidence and he was asked whether he had spoken to Mr Jones. His evidence was that he did not have a recollection of that particular conversation. Specifically he said that he could not say whether he spoke to him or not. In cross-examination he went further. He said that he was not asserting that Mr Jones did not ring him only that he could not recall a conversation. That evidence has to be weighed in the light of the cross-examination of Mr Jones which was that the plaintiff had not spoken to Mr Jones at all.
There was therefore some evidence independent of the parties to support the defendant’s account. There was no evidence, in my opinion, which could be said to have contradicted his account.
In the end result the matter had to be decided by preferring one witness to the other.
In my opinion, once that is recognised, it can be seen that this appeal cannot succeed.
In my opinion the appeal should be dismissed.

[2000] SASC 441

21 December 2000