Mr Michael Anthony Do Rozario v French Accent

[2011] FWA 3003

Note: An appeal pursuant to s.604 (C2011/4659) was lodged against this decision - refer to Full Bench decision dated 2 December 2011 [[2011] FWAFB 8307] for result of appeal.

[2011] FWA 3003

FAIR WORK AUSTRALIA

DECISION

Fair Work Act 2009
s.394 - Application for unfair dismissal remedy

Mr Michael Anthony Do Rozario
v
French Accent
(U2010/14791)

COMMISSIONER CARGILL SYDNEY, 20 MAY 2011

Termination of employment - Jurisdiction.

[1] This decision arises from an application for an unfair dismissal remedy made in accordance with section 394 of the Fair Work Act 2009 (the Act). The application was made by Mr M Do Rozario (the applicant) and was lodged with Fair Work Australia (FWA) on 6 December 2010. The applicant alleges that he was employed by French Accent (the respondent). He further alleges that his employment was terminated on 3 December 2010.

[2] In its response to the application the respondent raised a jurisdictional objection on the basis that the applicant was a contractor not an employee.

[3] The substantive matter was the subject of conciliation before an FWA Conciliator on 6 January 2011 but did not settle. It was then allocated to me as part of the jurisdictional roster on 4 March 2011. The matter was adjourned prior to that date at the request of the applicant. That request and other associated issues were the subject of a recorded telephone conference on 2 March.

[4] The jurisdictional objection was heard by me on 29 March and 7 April 2011. The applicant was represented by Mr Briese, barrister and the applicant’s brother in-law. The respondent was represented by Mr Stewart, of counsel.

[5] Evidence for the respondent was given by Mr Jiang Shen Cai, the owner of the business. He provided a witness statement dated 15 February 2011 which was marked Exhibit Respondent 1. A brief supplementary statement dated 16 February 2011 became Exhibit Respondent 2. Mr Cai provided his oral evidence with the assistance of a Mandarin interpreter.

[6] The applicant gave evidence. His witness statement dated 21 February 2011 was marked Exhibit Applicant 5. Two other witnesses also gave evidence on behalf of the applicant:

Mr G Branch A former employer of and a longstanding friend and associate of the applicant. Mr Branch had also had some business dealings with Mr Cai. Mr Branch provided a witness statement dated 20 February 2011 which was marked as Exhibit Applicant 4;

Mr A Do Rozario The applicant’s brother. He is employed by the applicant to assist him in handling his financial affairs, including taxation returns. He describes himself as “H&R Block income tax qualified “and is the director of a mortgage broking company. Mr A De Rozario’s witness statement dated 22 February 2011 was marked Exhibit Applicant 11.

[7] There was extensive evidence and much material provided in these proceedings. Whilst I may not specifically refer to each and every issue raised, in reaching my conclusions I have had regard to all relevant materials and evidence before me.

BACKGROUND AND EVIDENCE

[8] The applicant had been engaged as an employee for much of his working life. During that time he worked for a number of different employers. On two occasions the applicant established his own small business selling furniture and mirrors. Neither of these ventures was successful. The applicant’s evidence is that, after the failure of his second business in 2007 and with the decreasing value of his real estate investments, he was in serious financial difficulties.

[9] The applicant’s evidence is that it was imperative that he find employment or “do something else”. Details of the applicant’s financial position in August 2007 and July 2008 are contained in Exhibit Applicant 9.

[10] In early 2007 the applicant approached Mr Cai about wholesaling furniture for him. Mr Cai agreed and the applicant took possession of some chairs for that purpose. However the applicant was unable to get the business going so returned Mr Cai’s furniture to him.

[11] In August 2007 Mr Cai informed the applicant that he intended to open a furniture shop in Willoughby. They visited the shop together. Mr Cai signed the lease on the premises on 25 September 2007 and began trading as a sole trader under the name of French Accent. His evidence is that he had been a sole trader in various aspects of the furniture trade since 1990.

[12] The applicant did some painting at the shop. He was assisted by a Mr M Alderson. Mr Cai paid about $1,400 for the work. The applicant’s evidence is that this amount was shared with Mr Alderson.

[13] The Willoughby shop opened in October 2007. Mr Bill Barker worked in the shop five days a week. Mr Cai has only ever worked in the shop on Sundays. His wife worked there on Mondays until September 2008. In October 2007 Mr Barker indicated that he wished to leave as he was moving out of Sydney. Mr Cai advertised for someone to replace him but was unsuccessful.

[14] There was a conversation between the applicant and Mr Cai in October 2007. Mr Cai informed the applicant that Mr Barker was leaving. Mr Cai’s evidence is that he then told the applicant that, after Mr Barker had gone, the applicant could bring his furniture and run his business from the Willoughby shop. The applicant’s evidence is that Mr Cai actually asked him to manage the shop. The applicant also says that there was no suggestion that he would be working as a contractor. His evidence is that he had never worked as such and, at the time, didn’t know what it actually meant.

[15] In November 2007 there was a further conversation between the applicant and Mr Cai. Again they provide conflicting accounts of what was said. Mr Cai’s version is that he told the applicant that he could operate his furniture business from the Willoughby shop. He offered the applicant the use of the office and $850 per week. He also told the applicant that he had to provide tax invoices to which the applicant agreed.

[16] The applicant’s version of the conversation is that Mr Cai offered him $850 per week to manage the shop. He denies that there was any mention of tax invoices or of conducting his own business from the premises. The applicant’s evidence is that Mr Cai knew he no longer had a business.

[17] Mr Cai’s evidence is that he did not hire the applicant as an employee or a manager but only to provide sales services as a contractor while he built up his own business. The applicant’s evidence is that this is totally false. Mr Cai’s evidence is that the money he paid to the applicant each week was for providing sales services for the business at the Willoughby shop.

[18] Mr Cai’s evidence is that it is common at the small end of the furniture trade for separate business operators to share the same building. The practice is sometimes known as “selling on consignment”. During the period December 2007 to December 2010 the applicant sold furniture belonging to Mr Cai, a Mr D White, a Mr J M Deplancke and, for a short period of time, Mr Branch. He also sold some items which belonged to himself.

[19] Mr Cai’s evidence is that he estimated that, for most of the period 2008 to 2010, about 20% of the value of the items at the shop belonged to the applicant, 30% belonged to Mr White, 2% belonged to Mr Deplancke and 48% belonged to Mr Cai or his business. Items were identified for accounting purposes as having separate shop numbers 7 to 10. The applicant’s goods were Shop 7. French Accent received a rental commission of 30% of the retail price on each item sold. This included the applicant’s items but presumably not those belonging to Mr Cai or French Accent itself.

[20] The applicant’s evidence is that his items amounted to 3 to 5% of the stock in the shop, Mr White’s 30%, Mr Cai’s 55 to 60% and Mr Deplancke’s and others up to 10%.

[21] The applicant’s evidence is that, during the period 3 December 2007 to 19 June 2009, the value of his own items sold in the Willoughby shop amounted to only $4,419, Exhibit Applicant 8. Under cross-examination he agreed that he had at least 20 to 30 items of furniture for sale. The applicant denied that he was running a business and described it as a hobby.

[22] Mr Cai’s evidence is that the applicant did operate his own business and that it was conducted from the Willoughby shop by both the applicant and Mr Alderson. His evidence is that he sometimes observed Mr Alderson working at the shop.

[23] The applicant’s evidence is that Mr Alderson was his friend. Because of Mr Alderson’s particular personal circumstances, the applicant gave him small tasks to do when he visited the shop. The applicant gave Mr Alderson small amounts of money in return for these jobs. By July 2008 the total amount he had given Mr Alderson was $900. Mr Cai reimbursed him for this money. This transaction is recorded in Tax Invoice/Statement 21 dated 4 July 2008 which is part of Attachment JSC-1 to Exhibit Respondent 1. It is also Exhibit Applicant 2. The invoice notes that the payment is for “cleaning shops etc”.

[24] Mr Cai’s evidence is that, until July 2008, the applicant had his own van for delivering furniture to his customers while Mr Cai had a ute to deliver goods to his customers. The applicant denied that he used the van to make deliveries.

[25] In April 2008 the applicant signed a lease for a warehouse also in Willoughby. A copy of that lease is Exhibit Respondent 9. Mr Cai’s evidence is that the applicant used this property for his business and stored his own furniture there. However the evidence of both the applicant and Mr Branch is that the lease was taken out on behalf of Mr Branch who lives in Vietnam. The warehouse was used to store outdoor furniture belonging to Mr Branch which was to be sold through French Accent. The applicant’s evidence is that he did not store anything in the warehouse and consequently did not move any of his goods into the French Accent shop when the arrangement between Mr Cai and Mr Branch fell through.

[26] The applicant’s evidence is that he had the keys of the shop and was responsible for opening and closing the premises on each of the days that he worked, Tuesday to Saturday. His duties included arranging and selling the furniture in the shop. He also did the bookwork including completing the Daily Sales Ledger. One of these ledgers, for the period 23 May to 26 December 2010, is Exhibit Applicant 10. The applicant’s evidence is that Mr Cai then checked the books on Sunday. He also spoke to Mr Cai on the telephone each day, sometimes more than once a day.

[27] Mr Cai’s evidence is that he did not supervise the applicant or tell him what to do. His evidence is that he did not instruct the applicant on how to divide his time between his own business and French Accent. He did not tell him how to dress or how to speak to customers. Under cross-examination Mr Cai agreed that he spoke to the applicant on the telephone sometimes several times a day. He says that these calls related to pricing discounts for items of furniture which belonged to him or to French Accent.

[28] The applicant’s evidence is that he was never able to leave the shop for meal breaks as there was no-one else to look after it. Mr Cai’s evidence is that it was entirely up to the applicant as to whether and when he took such breaks.

[29] Mr Cai’s evidence is that between December 2007 and August 2008 he asked the applicant for his tax invoices but the applicant always had an excuse. His evidence is that, to assist the applicant, Mr Cai’s wife wrote out the tax invoices. The invoices in her handwriting date from 8 December 2007 to 15 August 2008 and are at pages 13 to 17, 18 to 21 and 23 of Attachment JSC-1 to Exhibit Respondent 1. From 29 August 2008 the applicant provided invoices in his own handwriting. Copies of these are at pages 24 to 45 of Attachment JSC-1 to Exhibit Respondent 1. The invoices are also contained in booklet form in Exhibits Respondent 11 and 12.

[30] Both sets of invoices contain references to the applicant’s ABN which presumably was provided by the applicant. An extract dated 28 January 2011 from the Australian Business Registrar which provides details of the applicant’s ABN is at page 48 of Attachment JSC-1 to Exhibit Respondent 1. The business entity type is identified as “Individual/Sole Trader”. The extract notes that the entity is not currently registered for GST. It also notes the ABN status as being active from 5 June 2000. From this it can be inferred that it was originally obtained for one of the applicant’s earlier ventures and was not taken out at the respondent’s request.

[31] The applicant denies that he was asked to provide invoices prior to the end of August 2008. He says that they were all prepared by Mr Cai’s wife who then asked him to sign each of them. The applicant’s evidence is that the documents were prepared solely for the purpose of supporting the respondent not giving him his entitlements as an employee. The applicant says that he was not asked to provide invoices until after Mr Cai tricked him into signing a sham contract in mid 2008.

[32] In July 2008 the applicant spoke to Mr Cai about the amount of money he was receiving. His evidence is that French Accent had become very successful and it was his view that he should be entitled to a substantial increase in salary. Mr Cai agreed to pay $900 per week.

[33] Mr Cai’s evidence is that, because of the applicant’s demands, he insisted on a written agreement. The document is at page 22 of Attachment JSC-1 to Exhibit Respondent 1 and is also Exhibit Applicant 3. It is titled “Contract Agreement” and provides that the applicant works at French Accent “as a contractor effective from 3 December 2007”. It provides that the weekly payment is “$850 inclusive”, of what, it does not elaborate. The agreement specifies that the working days are Tuesday to Saturday 10am to 5.30pm.

[34] The agreement states that it is between the “Contractor”, the applicant, and the “Business”, French Accent. Mr Cai is named as the business director. The agreement is signed by both the applicant and Mr Cai. The copy which is Exhibit Applicant 3 is dated 4 July 2008. The copy which is attached to Exhibit Respondent 1 is dated 4 August 2008 and has been amended to read July. Mr Cai was not sure whether the document had been signed in July or August. The applicant’s evidence is that it was in July.

[35] A note in the applicant’s handwriting appears at the bottom of the document. It reads “P.S. To be reviewed every 6 mths starting July 08 $900 pw”. The note is initialled by the applicant and signed by Mr Cai.

[36] Mr Cai’s evidence is that the written contract was merely a reflection of the earlier verbal agreement he had with the applicant. He denied that it had any connection with the pay increase. The applicant’s evidence is that he thought that if he did not sign the document he would be dismissed. He says that he believed it only confirmed his pay rise and did not appreciate that it sought to make him a contractor.

[37] The applicant’s evidence is that he signed the contract under duress as to do otherwise would have led to the loss of his employment. Mr Cai’s evidence is that he and the applicant were in positions of equal power and there was no duress.

[38] The applicant’s evidence is that the salary reviews did not take place. However I note that the money paid to the applicant increased from $1800 per fortnight in the invoice dated 5 June 2009 to $1900 per fortnight in the invoice dated 19 June 2009. It should be noted that this second invoice also contains an amount for the sale of a mirror. The invoices dated 15 January 2010 through to 3 December 2010 all show fortnightly payments of $2000. Mr Cai’s evidence at paragraph 66 of his statement supports that such increases were made although it appears that not all increases were at six monthly intervals.

[39] In December 2009 the applicant was paid an additional $1000 over and above the usual amount. He says that this was a Christmas bonus. Mr Cai disputed this. He agreed that he paid the money but said that he thought the applicant had sold a lot of things. In re-examination he agreed that it was a Chinese cultural practice to give money at that time of the year.

[40] Mr Cai’s evidence is that on an occasion in late November 2010 the applicant “appeared agitated, was screaming and appeared unstable”. As a result of this behaviour and the fact that the applicant threatened that he could be sent to jail, Mr Cai issued the applicant with a “Notice of Termination of Contract” dated 3 December 2010, p46 of Attachment JSC-1 to Exhibit Respondent 1.

[41] The applicant denies that he behaved in the manner suggested by Mr Cai. His evidence is that it was Mr Cai who became excited and upset during a telephone conversation on 3 December 2010. The applicant’s evidence is that, following discussions with his brother, he asked Mr Cai to provide him with his superannuation, annual leave and sick leave entitlements. Mr Cai refused.

[42] The applicant’s evidence is that, during the telephone conversation on 3 December, he informed Mr Cai that, because of his refusal, the applicant had reported him to the Australian Tax Office and to Fair Work Australia. The applicant says that it was in this context that he told Mr Cai he could be jailed. The applicant’s evidence is that Mr Cai then sacked him. I note in passing that the reference to Fair Work Australia in both the applicant’s and his brother’s evidence should probably be to the Fair Work Ombudsman.

[43] The applicant’s evidence is that he received no income between 3 December 2010 and early February 2011 when he opened up a furniture business in the same strip of shops as French Accent. He hopes it will be a success.

[44] During the period December 2007 to 3 December 2010 the applicant was absent from the Willoughby shop for only two of his usual work days. He was not paid for those days. He did not receive any annual leave or pay in lieu thereof. No superannuation contributions were made on the applicant’s behalf by either Mr Cai or French Accent. No income tax was deducted from the applicant’s remuneration. No group certificates or payment summaries were issued in respect of the applicant.

[45] Two further matters were dealt with at length during proceedings. The first concerns cheque butts for payments made by French Accent. The originals covering the period 30 October 2007 to 27 February 2011 are Exhibit Respondent 3. Schedules of those which relate to payments to Mr White and to the applicant are Exhibits Applicant 6 and 7 respectively. Some of those concerning the applicant contain the word “contractor”, others “manage the shop contractor” and others just “manage the shop”. Mr Cai’s evidence is that, at the beginning, he used to put “contractor” but this became too difficult so he changed to “managing the shop”. The cheque butts also note money paid to the applicant for any items of his furniture which had been sold.

[46] The second matter covered at length is the applicant’s taxation arrangements. His tax returns for 2008, 2009 and 2010 are Exhibits Respondent 6, 7 and 8 respectively. The returns were drawn up by Mr A Do Rozario upon instructions from the applicant. None shows any amounts for salary or wages. It is said that this is because the applicant did not receive any group certificates or payment summaries from the respondent. Instead the amounts received from the respondent are included as personal services income in each return. In the 2008 return an entrepreneur’s tax offset was claimed.

SUBMISSIONS ON BEHALF OF THE RESPONDENT

[47] Detailed written submissions were made on behalf of the respondent. These consisted of an outline provided prior to the proceedings, closing submissions and closing submissions in reply. The following is a brief summary of these submissions.

[48] The question to be decided is whether the applicant was a servant of the respondent or whether he carried on a business on his own behalf: Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215 @228 (Abdalla) and Hollis v Vabu Pty Ltd (2001) 207 CLR 21 (Hollis).

[49] The respondent submits that the applicant carried on a business on his own behalf. A number of factors support this submission. The applicant sold furniture for his own profit which was separate from that of the other dealers in the shop and he paid a rental commission to the respondent. The fact that his business was not especially lucrative is due to his failings as a businessman and does not detract from the existence of the business.

[50] It is submitted that part of the applicant’s business was the provision of sales services to other retailers such as Mr White. The payments from the respondent to the applicant were for these services and came from the rental commissions paid by the retailers. This collective approach is a normal part of the small retail furniture trade.

[51] The applicant was experienced in the furniture business, including running his own business, at one time through a partnership. He had attempted to wholesale Mr Cai’s furniture before the Willoughby shop was operating. The applicant had undertaken painting and cleaning work for a fee.

[52] It is submitted that, despite the evidence of the applicant and Mr Branch, the applicant did operate a warehouse for a period in 2008. He also employed Mr Alderson from time to time, in particular, to carry out cleaning duties. It is submitted that the payment of $900 in respect of this is clearly a payment to the applicant not to Mr Alderson. The applicant agreed that he then paid some of the amount to Mr Alderson.

[53] Although the cheque butts at Exhibit Applicant 1 noted the word “manager”, they were a group selected to support the applicant’s contention that he was an employee. A number of cheque butts had “contractor” written on them. The applicant’s reliance on the receipt of a Christmas bonus as showing he was an employee was misguided.

[54] The respondent submits that the terms of the contract between the parties are always important as is their conduct. The applicant cannot alter the true nature of the relationship by seeking to put a new label on it. The applicant’s contention that he is an employee is a recent invention on his part. The respondent submits that the applicant conducted himself as an independent contractor and, to that end, provided tax invoices with his ABN.

[55] The written contract states that the applicant is a contractor. It is of note that the parties agreed to these terms even though there was disagreement between them at the time about the level of payment. The applicant’s assertion that the contract was a sham, signed under duress, is without foundation. Mr Cai’s evidence that this was not the case should be accepted.

[56] The respondent submits that, where there are competing versions, FWA should consider contemporaneous documents and the parties conduct. These factors support the respondent’s position. Further, it submits that serious allegations such as duress cannot be established by inexact proofs: Briginshaw v Briginshaw (1938) 60 CLR 336 @ 362; Neat Holdings Pty Ltd v Karajan Holdings Pty Limited [1992] HCA 66; and Palmer v Dolman [2005] NSWCA 361.

[57] It is submitted that the applicant’s affairs were arranged in a manner reflective of his being an independent contractor. Relevant factors include: the use of his own signed invoices headed “Tax Invoice/Statement” and which included his own ABN; the Shop 7 book; the inclusion in the invoices of sale items, cleaning and sales services; the rent of the warehouse for Mr Branch and his request that the applicant be paid directly; the applicant’s business loan and investment properties.

[58] The applicant’s taxation arrangements also support the proposition that his business affairs reflected him being a contractor. No salary or wages were recorded in his returns; he received no group certificate or payment summary and did not question why tax was not deducted; he attributed his earnings from the respondent to Personal Services Income (PSI) in his returns; none of this PSI was attributed to employment; he detailed “business activity” in the returns; he claimed an entrepreneurs tax offset in 2009 and stated his business turnover to be $50,000.

[59] The respondent submits that the evidence of the applicant’s brother that the recording of the applicant’s earnings as PSI on the basis of his being an employee is not correct. Reference is made to various provisions of the Income Tax Assessment Act 1997 (the Tax Act). It is submitted that the PSI provisions are to ensure that contractors do not pay less tax than if they were employees. Such a distinction points to employees being dealt with under the assessable income regime and contractors under the PSI regime.

[60] The respondent submits that the evidence disclosed that the applicant had been unsuccessful in his business endeavours. Contrary to the applicant’s contention his perilous financial position did not point to him being an employee.

[61] The respondent submits that the evidence of Mr Branch and Mr A Do Rozario should not be accepted. Further, there is no basis to the suggestion that Mr Branch was providing evidence as an expert witness.

[62] The respondent made a number of submissions about the question of the indicia to be considered and their relative weight: Abdalla @ 228. The respondent submits that the absence of control over the applicant strongly indicates that he was an independent contractor whose work involved a material degree of skill and expertise derived from his experience in the furniture business: Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561 @571. Further, there was no lawful authority for the control alleged by the applicant: ASMOF v ACT Health [PR958666] @32 (ASMOF)

[63] The respondent submits that the applicant’s activities in the shop did not point to him being an employee. The telephone contact suggested reporting not control. The possession of the keys was not conclusive.

[64] The applicant worked for others, including Mr White and Mr Deplancke, as well as himself. He maintained his own stock and delivery van, he delegated and subcontracted work to others and employed labour. His work for the respondent was not to be done solely by him: Dede v AGC Services Pty Ltd [PR951895]. The respondent had no right to suspend or dismiss the applicant.

[65] The respondent submits that, in the context of the particular business operation, it could not be said that the applicant was an emanation of the respondent’s business. He did not wear a uniform.

[66] No income tax was deducted and neither did the applicant seek that it should be. This factor, in conjunction with the applicant’s own tax arrangements, points to an independent contractor relationship.

[67] The applicant’s remuneration was described as a weekly payment not a wage or salary. The respondent notes that the payments were periodic and not referable to the completion of tasks. It submits however that the payments are consistent with regular fees for sales services by the applicant to the respondent. Further, this indicia is of decreasing relevance: Abdalla @ 230.

[68] The applicant did not receive annual or sick leave and had not claimed to be entitled to them. Although the applicant did not carry out a profession, trade or calling, his work involved knowledge and experience obtained over a long time. The applicant created goodwill and saleable assets in the course of his work. The respondent submits it should be inferred that the applicant expended a portion of his remuneration on business expenses.

[69] The respondent submits that the indicia point to the applicant being an independent contractor. Even if they point both ways, the applicant’s case at its highest may only produce an ambiguous result. In such circumstances the written contract between the parties should be determinative: ASMOF @ 33. Further the High Court of Australia has placed emphasis on deciding such issues on the basis of an examination of the relationship the particular parties have chosen: Friend v Brooker (2009) 239 CLR 129.

[70] A number of submissions were made on behalf of the respondent in reply to the applicant’s contentions. They are not summarised but have been taken into account.

SUBMISSIONS ON BEHALF OF THE APPLICANT

[71] Detailed written submissions were made on behalf of the applicant. These consisted of an outline provided prior to the proceedings and closing submissions with two annexures. The following is a brief summary of these submissions.

[72] It is submitted that the evidence clearly shows that the applicant was the employee Manager of the Willoughby shop. He was not an independent contractor. At the time the applicant entered into the arrangement with the respondent he was in financial difficulties and consequently it was necessary that he find employment. Mr Cai offered him the position managing the shop and, it was only after the applicant commenced, that Mr Cai told him that he could sell his own items if he wished.

[73] The applicant contends that the respondent’s case relied on four assertions: the terms of the written agreement; the applicant ran his own business; the applicant didn’t manage the shop; and the applicant had a large amount of his own furniture stored at the premises. The applicant submits that the respondent’s evidence in relation to each of the assertions is false, fabricated by Mr Cai to justify his failure to provide the applicant with his entitlements as an employee.

[74] The applicant submits that the written contract agreement is a sham and was signed under duress. Mr Cai fabricated his evidence that the document was signed in August rather than July in order to overcome a damning inference which would flow if he was seen to be agreeing to pay more money to the applicant at the same time as the applicant signed away his rights as an employee. Mr Cai was deliberately vague and uncertain in his evidence on this issue in contrast with his evidence on other matters where he did not have anything to hide.

[75] The applicant also submits that the form of the agreement raises questions about it being a genuine contract. It is very short and does not spell out terms and conditions in the way in which contracts normally do. The document seeks to backdate the arrangement to the day the applicant began work. Further, the applicant’s additions to the document suggest that the agreement is more about fair and proper wages than anything else.

[76] The applicant submits that, at no time, did he conduct a business of his own in the Willoughby shop and evidence put forward by the respondent to support any assertion to the contrary is fabricated. It is submitted that Mr Cai concocted parts of the conversations in October and November 2007 and falsely reported incidents and situations to suit his allegations. These included the lease of the warehouse on behalf of Mr Branch as well as the situations concerning Mr Alderson’s activities and the applicant’s van. In this regard it is submitted that the evidence of Mr Branch should be accepted and that of Mr Cai rejected.

[77] The applicant also submits that the documentary evidence undermines the respondent’s assertion that the applicant had been running his own business. Mr Cai’s testimony about the level of sales of the applicant’s own items was either dishonest or lacked credibility. The amounts in respect of these items as disclosed in the invoices are consistent with the applicant’s evidence that the respondent allowed him to sell his own goods as a side income. The invoices show that the applicant did not sell any of his own items for 11½ weeks after he began to work at the shop. They also reveal that, for the whole three years, he sold relatively few of his own goods.

[78] The applicant’s evidence is that he was employed as the manager of the Willoughby shop. Other staff regarded him as being in that role and he was introduced as such including by Mr Cai. The applicant submits that it is of note that the respondent called no evidence to refute such an assertion. Mr Branch was firm and credible in his evidence that the applicant was an employee and not a contractor. His lengthy experience in the industry was especially relevant in this regard.

[79] The applicant also points to the evidence of Mr A Do Rozario as to his knowledge and belief that the applicant did not work as a contractor. The absence of any claim for a tax deduction in respect of daily travelling expenses is noteworthy.

[80] The applicant submits that the evidence from the cheque butts, including that which is set out in Annexure A to the written submissions, is significant. Fifty-nine of the butts describe the payments to the applicant as being for managing the shop. Of the nine butts which include the word “contractor”, three immediately follow the applicant’s commencement at the shop, five follow the signing of the sham contract and the ninth is dated the day of the applicant’s dismissal.

[81] The applicant submits that the respondent’s use of the word “contractor” in each of these instances is merely to support the scheme of falsely treating the applicant as an independent contractor. Mr Cai’s evidence to attempt to provide any other explanation was evasive and unconvincing. The applicant submits that Mr Cai knew that the applicant was managing the Willoughby shop and that was what he was being paid for. His claims that the payments to the applicant were for the provision of sales and other services to the respondent are without foundation.

[82] The applicant submits that he was in fact supervised by Mr Cai both by way of daily telephone conversations in which he received instructions in running the business and by Mr Cai checking the sales records.

[83] A number of submissions are made about the applicant’s tax returns. The applicant did not question Mr Cai about the absence of group certificates because of the likely consequence that he would lose his job. The term “employee” is not defined for the purposes of tax law. It is a question of fact to be determined by examining the particular relationship having regard to various indicators. The applicant submits that he would be classified as an employee in the judgement of the Australian Tax Office.

[84] It is submitted that the respondent has placed undue emphasis on the way in which the applicant completed his tax returns. This has drawn attention away from the real issue which is the relationship between the parties. In any event, the respondent’s reliance upon the applicant’s use of the PSI provisions of the Tax Act to characterise the applicant as an independent contractor is fundamentally flawed. The provisions are designed to preserve the integrity of the income tax base. They do not necessarily apply in respect of other laws or for other purposes. It is noted that the applicant could not include his earnings from the respondent in the salary and wages item of the returns. Further, he did not complete the business income and deductions section of the “Business and Professional Items Schedule” in his returns which is evidence that he did not consider himself to be carrying on a business.

[85] The applicant strongly disputes the respondent’s assertion that he had a large amount of his furniture for sale at the Willoughby shop. The documentary evidence in Exhibits Respondent 1 and Applicant 8 supports the applicant’s position in this regard. The cheque butts in Exhibit Respondent 3 and the only Daily Sales Summary Book in evidence, Exhibit Applicant 10, reinforces the applicant’s estimates of the percentage of goods at the shop rather than Mr Cai’s which are clearly false.

[86] It is submitted that the respondent’s suggestion that the applicant had a large amount of unsold furniture in the shop is untenable. The evidence shows that the applicant was very good at selling furniture and it could be inferred that if he had been running his own business from the premises it also would have been successful. The logical conclusion is that the applicant was not carrying on a business from the Willoughby shop.

[87] It is submitted that the evidence of the applicant and his two witnesses was credible and should be accepted. In contrast, Mr Cai’s evidence was uncorroborated, evasive, vague, unsatisfactory and at times, dishonest. The applicant was vulnerable and Mr Cai took advantage of his own strong bargaining position to drive a hard bargain. He “squeezed” the applicant even further by depriving him of his entitlements.

[88] The applicant submits that, on the basis of the principles and criteria in Abdalla, he was an employee not a contractor. He worked regular hours; was in charge of the shop; only contributed his labour; carried out his duties as directed by the respondent; worked exclusively for the respondent; received regular payments; was supervised by the respondent; did not conduct his own business, provide his own material or equipment and bore no financial risk; the applicant had no power to delegate; he was the manager and known as such; the contract and the invoices were shams.

CONCLUSIONS

[89] The issue to be determined is whether the applicant was an employee or an independent contractor. If he was an employee his application may proceed, however, if he was an independent contractor his claim must be dismissed. The parties agree that the Full Bench decision in Abdalla represents the relevant approach to be adopted in matters of this kind. In the circumstances there is no need to set out that decision in detail. I refer to the indicia in Abdalla in my conclusions below.

[90] Before turning to consider the various matters which are relevant to the characterisation of the relationship in this case, I need to make some comments about the evidence. I generally accept the evidence of Mr Branch where it relates to factual matters within his knowledge. His view about the nature of the relationship between the parties is however merely that, his view. Mr A Do Rozario’s evidence did him no credit. I appreciate that he probably feels strongly about his brother’s situation, however, given his professional position much of his evidence was just not believable. One example is his testimony about the online “tax pack” automatically generating figures and a claim for an entrepreneur’s tax offset.

[91] In my opinion the evidence of both the applicant and Mr Cai was in many respects self-serving and slanted towards supporting their respective positions. I do not suggest that either was necessarily being deliberately dishonest. Rather, each firmly believed in the correctness of his own view and the evidence was coloured accordingly.

[92] I now turn to consider the nature of the relationship between the applicant and the respondent. As noted in Abdalla it is the totality of the relationship which must be examined.

The Contract

[93] The contract between the parties was initially an oral one. I do not accept the applicant’s submission that, because of his financial difficulties, it was necessary that he be engaged as an employee. I accept that it was necessary that he find a position which provided some form of remuneration, however, there is nothing to establish that it had to be as an employee rather than a contractor. If employment of itself had been so crucial to him it might have been expected that he would have taken greater care to establish that this was the basis of the relationship.

[94] Nevertheless I accept that he may very well have believed, if he had considered it at all, that he was entering into an employment relationship with Mr Cai. On the other hand, Mr Cai’s evidence has been firm and consistent that it was a different type of relationship. The true situation may be that the parties had different views about the position from the beginning.

[95] Regardless of whether there was any mention of the need for tax invoices prior to the applicant’s commencement at the Willoughby shop, the evidence is that he initially signed the invoices which were prepared by Mr Cai’s wife and then later filled out the invoices himself. Each of the invoices contained the applicant’s ABN which he presumably provided. As noted earlier in this decision the applicant appears to have had his ABN for some time prior to December 2007. It was not obtained at the respondent’s direction.

[96] The parties then entered into a written contract. The contract is headed “Contract Agreement” and clearly states that the applicant works as a contractor. I accept that the date the contract was signed was 4 July 2008 rather than 4 August. Mr Cai conceded that this was possibly the case.

[97] However, I do not accept that the contract was a sham. There was no issue at that time about the applicant’s entitlements. On his own evidence he did not raise anything about this until November 2010. The relevant question between the parties when the contract was signed was the amount of money the applicant was being paid. Although the document is short that does not make it less of a contract. Neither do I accept that the contract was signed under duress because the applicant was fearful of losing his job. There is no contemporaneous evidence of that. Further, the applicant was clearly sufficiently emboldened to add the postscript that there were to be six-monthly reviews of the payment rate. This does not suggest someone frightened that they will lose their job.

[98] The material concerning the contract, both oral and written, points towards the applicant being an independent contractor.

The Nature of the Work and the Manner of its Performance

[99] The work undertaken by the applicant involved arranging and selling furniture items belonging to the respondent, other dealers and, occasionally himself. He also wrote up the sales records and generally looked after the Willoughby shop. The applicant was required to be at the shop Tuesday to Saturday 10am - 5.30pm. These hours were a term of the written contract. The applicant had the keys of the shop and was required to open and close the premises as stipulated. The question of whether he was permitted to leave the shop for meal breaks was the subject of difference in the evidence.

[100] All of these factors tend towards the applicant being an employee not a contractor.

[101] In my view nothing turns on whether he was the manager of the shop. A manager could be an employee or a contractor depending on the particular circumstances. As the respondent notes in its submissions in reply, a manager could also be a director, a partner or a principal.

Control

[102] The applicant worked with limited control or supervision from Mr Cai. There were regular phone calls about matters such as the level of discounts on items as well as weekly inspections of the books. It needs to be bourne in mind however that the applicant is very experienced in the furniture business and would require very little supervision, regardless of the nature of the relationship.

Was the applicant conducting a business of his own?

[103] The evidence about whether the applicant was conducting a business of his own is somewhat ambiguous. Factors that favour such a proposition include, the sale of his own items of furniture from the store, his taxation arrangements, his ABN and the provision of invoices. However I accept the evidence of the applicant and Mr Branch as to the lease and use of the warehouse and the evidence of the applicant as to the use of his own van and the situation with Mr Alderson. Those matters therefore are neutral.

[104] The respondent suggests that part of the applicant’s business was his work for the other dealers such as Mr White. However, there is no evidence that the applicant received any payment from them. All of the money he received came from the respondent which was receiving the rental commissions from those dealers.

Whether the applicant was remunerated by periodic wage or salary or by reference to completion of tasks?

[105] The applicant received regular payments from the respondent. Although the amounts increased over time the regularity did not vary. The written contract describes the arrangement as a weekly payment of “$850 inclusive”. The invoices and cheque butts indicate that payment was made fortnightly. The payments were not referable to the completion of particular tasks.

[106] Most of the invoices did not contain any description of the purpose for which the payments were to be made. They generally refer only to dates and amounts or, towards the latter part of the relationship, to amounts only. One invoice, dated 4 July 2008, refers to “cleaning shops etc”. Several invoices itemise goods sold. The cheque butts variously refer to “contractor”, different forms of “managing the shop” and “manage the shop contractor” or similar.

Whether the applicant works for others (or has a genuine or practical entitlement to do so)?

[107] As indicated in paragraph 104 above, the applicant did not work for the other dealers. There is no evidence that he worked or had any particular entitlement to work for anyone else. He was fully occupied five days a week in the Willoughby shop.

Whether the applicant had a separate place of work and/or advertised his services to the world at large?

[108] I have accepted the evidence of the applicant and Mr Branch as to the applicant’s involvement in the lease. There was nothing else to suggest that the applicant had a separate place of work. There was no evidence about him advertising his services in any way.

Whether the applicant provides and maintains significant tools or equipment?

[109] I accept the applicant’s evidence that his van was only used for personal travel purposes. I agree with the respondent’s submission that the applicant had his own invoice books however that could not be considered to be “significant tools or equipment”. On the other hand, the applicant provided and sold some furniture and other items of his own.

[110] On balance I do not consider that the applicant provided or maintained “significant” tools or equipment.

Whether the work can be delegated or subcontracted?

[111] As indicated earlier I have accepted the applicant’s evidence as to the situation with Mr Alderson.

[112] There was no evidence that the applicant could delegate his sales duties to anyone else.

Whether the respondent had the right to suspend or dismiss the applicant?

[113] There is no evidence that would assist in drawing a conclusion on this point. The applicant’s evidence is that he was dismissed. The respondent’s evidence, including the letter of 3 December 2010, is that it was terminating the contract.

Whether the applicant was presented to the world at large as an emanation of the business?

[114] The applicant did not wear a uniform. However, for five days a week, the applicant was French Accent.

Whether income tax was deducted from the remuneration paid to the applicant?

[115] The answer to this question is clearly no.

Whether the applicant was provided with paid holidays or sick leave?

[116] Again, on the evidence the answer is no. The applicant was absent for two days during the period of the relationship. He was not paid for those days.

Whether the applicant’s work involves a profession, trade or distinct calling?

[117] This is not the case. The applicant is very experienced in the furniture business and obviously has relevant skills, however, the role does not require any specific qualifications or training.

Whether the applicant created goodwill or saleable assets in the course of his work?

[118] The evidence indicates that any goodwill created by the applicant was for the benefit of French Accent.

Whether the applicant spends a significant proportion of his remuneration on business expenses?

[119] The applicant sold some items of furniture on his own behalf. Although he may have possessed some of these items prior to entering into the relationship with the respondent, it would appear that he purchased other items during his time at the Willoughby shop. However, there is insufficient material to suggest that such purchases amounted to a “significant proportion of his remuneration”.

[120] This case is one where the indicia point in different directions. The contract arrangements, the absence of income tax deductions and paid leave tend towards the independent contractor side of the line. Indicia which point to the employee side include: the nature of the work; the regularity of the payments and the fact that they were not referable to the completion of tasks; the absence of a separate place of work, ability to work for others and ability to delegate duties; the applicant’s appearance as an emanation of the respondent; the absence of a profession, trade or calling; the absence of the provision and maintenance of significant tools and equipment or significant expenditure on business expenses; and the fact that any goodwill created by the applicant was for the respondent’s benefit. The important indicia of control and whether the applicant was running his own business balance in the middle.

[121] Consequently it is necessary to consider whether, viewed as a practical matter, the applicant was or was not running his own business or enterprise with independence in the conduct of those operations as distinct from operating as a representative of French Accent with little or no independence in the conduct of his operations. (Abdalla @ para 49).

[122] Although finely balanced, in my view, the applicant falls into the second category. The proper characterisation of the relationship between the parties was that of employer and employee.

[123] The respondent’s jurisdictional objection is dismissed. The file will be reallocated for the hearing of the substantive application.

COMMISSIONER

Appearances:

C Briese, Barrister, for the applicant.

D Stewart of Counsel, with T McLoughlin of SBA Lawyers, for the respondent.

Telephone Conference details:

2011.

Sydney

March 2,

Hearing details:

Sydney

March, 29

April 7.

Printed by authority of the Commonwealth Government Printer

<Price code C, PR509546>