Mr Miodrag Sibic v Xmas Pty Limited T/A Barnetts Couriers

[2011] FWA 5211

[2011] FWA 5211

FAIR WORK AUSTRALIA

DECISION

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

Mr Miodrag Sibic
v
Xmas Pty Limited T/A Barnetts Couriers
(U2011/79)

COMMISSIONER CONNOR WOLLONGONG, 5 AUGUST 2011

Application for alleged unfair dismissal—question of jurisdiction—whether the contract under which work was performed was an employment contract or a franchise arangement

Introduction

[1] On Thursday, 20 January, 2011 Mr Midrag Sibic lodged an applications under s.394 of the federal Fair Work Act, 2009 (the FW Act). Mr Sibic asserts in that s.394 application that he was employed as a transport manager by Xmas Pty Limited, which is part of the Barnett Transport Group and which operates a transport business servicing the area from Queensland to Victoria. He claimed that he commenced that employment on Monday, 3 May, 2010 and his services were terminated (unfairly) on Thursday, 6 January, 2011. Mr Sibic recorded Xmas as his employer and, in fact, regular remuneration was received from Xmas. However, it is subsequently claimed that another corporation in the Barnett Group, Langmana Pty Limited, actually engaged Mr Sibic. In any event Mr Sibic was engaged in Someton in Victoria and performed the courier run for the Melbourne region for Xmas/Langmana.

[2] The matter was the subject of a telephone conference on Thursday, 10 February, 2011 but that conference was unsuccessful in resolving the issues in dispute. The matter was allocated to me for arbitration. I set the matter down for mention and programming on Friday, 4 March, 2011, Friday, 1 April, 2011 and Tuesday, 31 May, 2011. Those proceedings were conducted in the premises at 90 Crown Street, Wollongong which Fair Work Australia now shares with the Industrial Relations Commission of New South Wales and Mr Sibic's representative (Mr Boghossian) appeared by telephone.

[3] There was, in fact, an initial dispute between the parties over the appropriate venue for the arbitration of Mr Sibic's claim. Mr Sibic lived and worked in Melbourne. Mr Boghossian, who represents him in the proceedings is based in Sydney. Xmas/Langmana conducts its operations chiefly from the Illawarra region and is represented by Mr Potts, a solicitor located in Wollongong. Mr Boghossian has sought that this matter be heard in Melbourne. Mr Potts has nevertheless sought that the hearing of the matter be held in Wollongong. He indicated that Mr Robert Barnett, the director of Langmana who engaged Mr Sibic suffers from emphysema and he has received medical advise that he should avoid travel more than 50ks—and certainly not travel by air or car to Melbourne. Medical advice from Mr Barnett's attending medical practitioner was supplied to me to confirm the claim by Mr Potts, viz:

"...This is to advise that Mr Barnett has severe chronic airways disease and diabetes which requires 3 hourly use of a nebuliser. It is likely that his health would be compromised by undertaking travel by air or road to Melbourne. It is unlikely his condition will improve in the future..."

[4] The position therefore is that wherever this matter is heard, both parties will incur considerable expense and inconvenience.

[5] Furthermore, there is a fundamental jurisdictional issue to address with Mr Sibic's s.394 application. Mr Potts argued that Mr Sibic was engaged on the basis of a franchise arrangement. As such, it would fall outside my jurisdiction under the FW Act. Mr Boghossian claimed that Mr Sibic was engaged by Xmas as an employee, however, and that is an issue which will need to be addressed as a threshold issue.

[6] I had directed the parties to address me on that preliminary jurisdictional issue and in response the parties provided witness statements directed to that issue. For that preliminary hearing on jurisdiction, I suggested that, to avoid unnecessary cost, I may proceed to determine the matter on the basis of the witness statements alone but Mr Boghossian had indicated that he would require Mr Barnett for cross-examination.

[7] Customarily, it would be appropriate for the hearing of the matter to be conducted in the location where the applicant actually worked—in this case that would be Melbourne (although I note that Mr Sibic and Mr Barnett actually entered into the contractual relationship between them when Mr Sibic visited Mr Barnett in Wollongong). But I am anxious to ensure the least amount of inconvenience to both parties. It is for that reason that I proceeded in the premises of Fair Work Australia at 80 William Street, Sydney on Wednesday, 13 July, 2011 with Mr Sibic being present in Melbourne by way of a video link. Mr Boghossian called Mr Sibic to give evidence in the hearing by way of that video link. Mr Reitano, representing Langmana in the hearing called Mr Barnett and Mr Lindsay Johnston, an internal auditor for the companies in the Barnett Group.

[8] The Barnett Group, in fact, comprises a number of related companies—Xmas, Langmana, Barnetts Haymarket Pty Limited, Barnetts Edgeworth Pty Limited, Barnetts Fairy Meadow Pty Limited, Line Haul Pty Limited and Febtay Pty Limited—operated by Mr Barnett and/or members of his family. At this stage I see no reason to determine whether it was Xmas or Langmana with respect to which Mr Sibic was actually engaged: I believe it to be Langmana. I understand that Mr Barnett has no active involvement in Xmas but is a director and acts for Langmana. But the issue in dispute in these proceedings concerns the nature of the relationship between Mr Sibic and the Barnett Group and that remains substantially unchanged no matter which of the two related corporate entities—Xmas or Langmana—actually engaged Mr Sibic. The issue would no doubt become relevant for any ultimate order I am required to make if Mr Boghossian is successful in establishing that there actually was an employment relationship, and that the termination of that relationship was unfair. At that time the actual identity of the respondent would need to be established for the appropriate order to be made against it.

The Nature of the Engagement

[9] Mr Barnett indicated in one of the written statements which formed the basis of his evidence in this hearing that Mr Sibic was initially operating a franchise (for Langmana) out of Someton in Victoria and he performed the Melbourne city run from warehouse premises there. He is not sure when that franchise actually commenced but he is satisfied that the franchise was conducted over several years and he believes it started in the middle of 2008. Mr Sibic in his evidence indicated that the engagement extended from 2008 to 2009. Mr Sibic also indicated in his evidence that he believed that to have been an employment contract but he paid the cost of the franchise out of the deliveries he made and he provided an ABN number for his business.

[10] In the middle of 2010 Mr Sibic contacted Mr Barnett again saying words to the following effect:

"I've heard on the grapevine that you're looking for someone to run the shed in Melbourne."

[11] And Mr Barnett invited Mr Sibic to come to Wollongong to discuss with him the restoration of the Melbourne warehouse franchise. Mr Sibic subsequently met Mr Barnett in Wollongong to make the necessary arrangements. It is Mr Barnett's belief that Mr Sibic was merely seeking to restore the previous arrangement he had with Mr Sibic. Mr Barnett recalled Mr Sibic informing him that he had a team of eight drivers. He also indicated that either his brother or brother-in-law would be able to help him in the shed.

[12] It was, in fact, Mr Sibic's brother who apparently was frequently at the workplace. Mr Barnett claimed in his evidence that he often spoke to him on the telephone in place of Mr Sibic. It is Mr Sibic's claim that his brother attended to work to "help" him in running the business and also because he was close to his brother and wanted him to be close to him to assist him in returning to the community whilst on parole following a period of incarceration in prison. Mr Sibic claimed that his brother did not actually "work" in the business. For practical purposes, the distinction Mr Sibic makes between "help" and "work" in that context actually escapes me. But I am unclear whether he actually received any wages from Mr Sibic for his activities for the business. Mr Sibic also conceded that he had other members of his family who attended at the business premises, answering the telephone, making tea and providing meals etc. Whether he provided remuneration to them for that "help" is not established in the evidence.

[13] I do not accept that I should automatically regard the relationship between Mr Sibic, on the one hand, and his brother and other members of his family, on the other hand, as establishing any kind of employment relationship. As Macken J of the former New South Wales Industrial Commission commented in Bradley v. Bradley (1978) AR(NSW) 94 at p.97:

“…Work may be performed by one person for another for reasons which are fundamentally social, political, religious or out of filial duty or compassion… The law has long recognized the existence of such contracts or arrangements and has steadfastly set its face against intruding itself into such areas unless there is an intention between the parties entering into such arrangements to make a legally enforceable bargain. A son may clean the family car, or mow the lawn of the family house, for a remuneration paid by the parents… (But such an arrangement) lacks a fundamental dimension of any contract in that it is not entered into with the intention that a legally enforceable obligation should result from the formation of the arrangement…”

[14] But the relationship between Mr Barnett and Mr Sibic is another matter. Mr Barnett allegedly replied to Mr Sibic at the meeting he had in Wollongong:

"You can take over the franchise."

[15] That was to initially be for a trial arrangement and confirmed after the trial with a more permanent franchise arrangement.

[16] But Mr Sibic has a different version of that conversation. He claimed that the discussions he had with Mr Barnett centred around the remuneration he would be receiving as an employee, ie that he would be paid $1,800.00 per week Monday to Friday for a period of three months and $2,700.00 thereafter on the proviso that he was able to stabilise the Victorian operations.

[17] Mr Barnett denies that he engaged Mr Sibic as an employee or that he undertook to increase the regular payments he made to Mr Sibic after the trial period ended. Mr Barnett assumed that the former engagement he had, which he believed to be a franchise, was simply being extended to the new engagement and, to that extent, he relied on the existing ABN number Mr Sibic had formerly given him. At no time was tax deducted from the remuneration Mr Sibic received. Mr Sibic claimed in his evidence that he, in fact, believed that tax was being deducted.

[18] Mr Sibic started work on Monday, 3 May, 2010 either as a franchisee (according to Mr Barnett) or an employee (according to Mr Sibic). Mr Sibic outlined the nature of the arrangements under which he worked in a written statement, viz:

"...The respondent, which is part of the Barnetts Transport Group, has their head office in Wollongong. The Victorian customers would contract the head office to request a delivery and/or pick up. The head office would then despatch messages electronically to the Victorian drivers via their hand held devices or mobile modems regarding their deliveries and pickups. The drivers would then undertake their pickups and return to the Victorian depot when their daily workload was completed. Deliveries were outbound in the early mornings and delivered throughout the day.

Consequently, a lot of extra time was spent by me in the evenings, well after the line haul had left the depot, in order to administratively prepare for the following days work, particularly the outbound freight, better known as deliveries. Mr Barnett omitted telling me this on our initial meeting.

The respondent provided the drivers a roadworthy motor lorry and the drivers would pay for fuel and be paid a percentage of the delivery/pickup incomes. Mr Barnett marketed this scheme as a franchise system but this, in effect, was an employer/employee relationship and not your classic owner driver scenario where drivers would provide their own motor lorries. My personal belief is that Mr Barnett will continue with the problem of having such a vast turnaround and employing potential staff..."

[19] Mr Sibic claimed that his duties as transport manager was managing the Victorian transport and warehouse operations, managing owner drivers, the allocation of goods to them, analyzing logistical problems that may arise, general fleet maintenance, operating a forklift, office administration, general security, driving duties, human resources etc. As far as the operation of the forklift was concerned, the arrangement initially was that Mr Sibic would provide a forklift driver for the Melbourne operations himself but Mr Sibic claimed in his evidence that he actually performed that work.

[20] Mr Sibic claimed that he worked from Monday to Friday from 6.30am to 10.30am and from 2.00pm to 9.00pm or 10.00pm and on Saturdays from 8.00am to 1.00pm. Mr Barnett's evidence challenges Mr Sibic's claim that he worked regular hours. Mr Barnett asserts that Mr Sibic's working hours were at his own discretion and when from time to time he telephoned Mr Sibic during those working hours he invariably spoke to Mr Sibic's brother and Mr Sibic was not on the premises.

[21] According to Mr Barnett, all depots, including the one operated by Mr Sibic, were provided with office equipment, a computer and telephone. Mr Barnett claimed that Mr Sibic supplied a variety of other equipment, including software. He believes that Mr Sibic operates his own computer programme.

[22] Mr Barnett relied on the ABN number which Mr Sibic had formerly provided for the subsequent arrangements. Mr Barnett provided no group certificate for Mr Sibic. As I indicated earlier in this decision, he deducted no tax. Mr Barnett did not pay any wages to any other persons who he allegedly engaged in the Melbourne business from time to time — Mr Sibic's brother and other persons. That was arranged by Mr Sibic. The hours in which Mr Sibic worked were at his own discretion. He received no sick leave or annual leave, just a flat regular payment fortnightly, paid into his bank account.

[23] Shortly after Mr Sibic commenced working for the Barnett Group, Mr Barnett had directed Mr Lindsay Johnston, the internal auditor for the business to send Mr Sibic a franchise agreement to sign to confirm and regularise the relationship that had been established. Mr Johnston recalled doing so but Mr Sibic did not respond to Mr Johnston and did not sign the agreement provided to him. That agreement was clearly identified as a franchise agreement.

[24] In any event, by that time Mr Barnett had received a number of complaints from customers and formed the view that the arrangement with Mr Sibic was not working out. He formally terminated the arrangement on Thursday, 6 January, 2011. Mr Sibic lodged his s.394 application 14 days later—on Thursday, 20 January, 2011.

Jurisdiction

[25] It is trite to say that for a s.394 applicant to have a remedy under the FW Act, he must be an employee. It is fundamental that the remedies available by virtue of a s.394 application are confined to employees who are dismissed. For instance, s.386(1) provides in that respect:

"A person has been dismissed if:

(a) the person's employment with his or her employer has been terminated on the employer's initiative; or

(b) the person has resigned from his or her employment, but was forced to do so because of conduct, or a course of conduct, engaged in by his or her employer."

[26] The arrangement in place between the Barnett Group and Mr Sibic appears to me to be a fairly informal and casual one. Mr Sibic asserted in his evidence that Mr Barnett referred to himself as a "boss" and, according to Mr Sibic "...ruled with an iron fist by proxy...". But I do not believe that an employment relationship has been established between Mr Sibic and Mr Barnett's company and when Mr Barnett described himself as a "boss" he was not meaning an employer in any legal sense. And sub-contractual relationships or franchise arrangements, which are common in the transport industry (and which are regulated to some extent in New South Wales under Chapter 6, Public Vehicles and Carriers, of the New South Wales Industrial Relations Act 1996 (but not in Victoria) would not be covered by s.394 applications—K-Dan Pty Limited v. Downer EDI Works Pty Limited [2009] NSWIRComm 1020. The protection afforded under Chapter 6 of the State IR Act does extend to certain franchise arrangements [s.309(2)].

[27] Of course, simply calling an arrangement a franchise does not necessarily mean that one is created. Whether a contract under which work is performed establishes an employer/employee relationship is a mixed question of fact and law, chiefly dependent upon the rights conferred and the duties imposed in the particular relationship [Clarkson v Dent (1998) 84 IR 250 at pp.252 and 253]. In Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance (1968) 2 QB 497 the situation was explained (at p.515) by McKenna J as follows:

"…A contract of service exists if these three conditions are fulfilled: (i) the servant agrees that, in consideration of wage or other remuneration, he will provide his own work and skill in the performance of some service for his master; (ii) he agrees, expressly or impliedly, that in the performance of that service he will be subject to the other's control in a sufficient degree to make the other master; (iii) the other provisions of the contract are consistent with its being a contract of service…"

[28] The question of control is the important factor [Federal Commissioner of Taxation v J Walter Thompson (Australia) Pty Limited (1944) 69 CLR 227]. To establish an employer/employee relationship, the putative employer must reserve for himself the right of direction and control, whether or not he actually exercises it. What matters is lawful authority to command, so far as there is scope for it [Zuijs v Wirth Brothers Pty Limited (1955) 93 CLR 561 at p.571]. It appears to me that Mr Barnett had exercised very little, if any, in the nature of actual control over the Victorian operations which Mr Sibic managed. That was a matter left entirely to Mr Sibic, as I see the position.

[29] But the question of control is not the sole criterion of an employer/employee relationship. In the High Court decision of Stevens v Brodribb Sawmilling Company Pty Limited (1985) 160 CLR 16, Mason J spoke (at p.24) of other relevant factors as pointing to the existence of an employer/employee relationship, viz:

"…the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employer…"

[30] I also note in that respect the decision of the Court of Appeal of the State Supreme Court (Meagher, Sheller and Beazley JJ in judgment in Vabu v. Commissioner of Taxation (1996) 81 IR 150 and, in particular, the comments of Meagher JA (at pp.151 and 152) in the effect that:

"…there are several considerations which make me think that on balance the couriers are not employees. In the first place, they supply their own vehicles (be they bicycles, motorbikes, cars, utilities or vans). They have to bear the expense of providing for and maintaining these vehicles; they pay for running repairs, insurance and registration. The company provides…uniforms and signage. The couriers' expenses are very considerable. Again to quote McKenna J in Ready Mixed Concrete (South East) Limited v. Minister of Pensions and National Insurance (at p.526): …the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are his and not the company's…’ — a consideration which points to the couriers being independent contractors.

The taxation position of the couriers is also important. The couriers were taxed as independent contractors and not as employees. The gross payments to each carrier were subject to deduction of the 20% Prescribed Payment System tax, which does not apply to employees… Another indicium is that the couriers have to provide themselves with their own street directories, telephone books, trolley, ropes, blankets and tarpaulins. Another very important indicium is that the couriers receive no wage or salary. Normally if they were true employees one would expect them to be paid a certain sum each day, week or month. Their documents provide for no such thing. They are paid a prescribed rate for the number of successful deliveries they make. It is not, I think, fanciful to say that each courier conducts his own operation, permitting himself for his own economic advantage to be supervised by the company. If this were not so, why would the documents anticipate that the courier may use a business name or corporate name if he so wishes? A company does not usually have employee corporations…"

Conclusion

[31] There are actually three separate engagements to consider in this hearing: (i) the earlier engagement between Mr Sibic and Xmas/Langmana which ended in 2009; (ii) the trial arrangement which started in the middle of 2010 following the conversation between Mr Barnett and Mr Sibic in Wollongong and which continued until it was terminated by Mr Barnett; and (iii) the proposed franchise arrangement which did not get off the ground when Mr Sibic did not complete the franchise agreement sent to him to sign. It is essentially, the middle period at issue in this hearing.

[32] On balance, I believe Mr Reitano is correct in his submissions and that both of the engagements between Mr Sibic and the Barnett Group—the engagement from 2008 to 2009 and the subsequent engagement from the middle of 2010 to its termination in early 2011—were franchise arrangements. Certainly, I am satisfied that the original period of engagement from 2008 to 2009 was a franchise and it was natural for Mr Barnett to assume that the former arrangement was simply being carried over to the new arrangement which Mr Sibic had himself instigated by contacting Mr Barnett.

[33] As the authorities to which I referred earlier in this decision indicate, to establish an employment relationship requires an assessment of the different indicia, considered together. Some of the indicia, considered by themselves, may actually point to an employment relationship being established but when the relationship as a whole is examined, it may prove to be otherwise. Such is the case here, in my opinion.

[34] For the following reasons, I do not believe that at the time that the arrangement between Mr Sibic and Barnett Group came to an end, there was an employment relationship between them:

*Notwithstanding Mr Boghossian's submissions to the contrary, the element of control between Mr Barnett and Mr Sibic, which is so essential to establishing an actual employer/employee relationship, was missing and, as I see the evidence, Mr Sibic was very much in entire control of the Melbourne operations and ran them himself without any real involvement by Mr Barnett;

* Mr Sibic engaged other persons in his enterprise and I believe delegated work to them, albeit they appear to have been members of his family—an arrangement which Mr Barnett neither challenged, was required to approve nor to pay their wages;

* Whilst Mr Sibic received regular fortnightly payments (from Xmas) for the running of the business, I do not believe that it is correct to regard that as remuneration in the nature of wages or salary to Mr Sibic;

* Mr Sibic appears to have supplied much of the equipment required for the Melbourne operations;

* Whilst Mr Sibic may have actually driven the forklift in the warehouse himself, the arrangement he entered into with Mr Barnett was for him to supply a forklift driver for the Melbourne operations;

* I believe that the actual hours Mr Sibic's worked were his own concern;

* No taxation was deducted from the regular payments Mr Sibic received and no group certificate was supplied to him with respect to those payments—nor did Mr Sibic ever seek a group certificate, which supports Mr Reitano's submissions that he actually accepted his engagement was not as an employee; and

* Mr Sibic continued to operate under an ABN number which he had formerly provided to Mr Barnett.

[35] For those reasons I do not believe that an employment relationship was established between Mr Sibic and Mr Barnett's company. I therefore dismiss Mr Sibic's s.394 application as beyond jurisdiction.

COMMISSIONER

Appearances:

Jake Boghossian of Connect Legal for the applicant

Robert Reitano of counsel for the respondent with

David Potts of Kells The Lawyers

2011

Sydney

July 13

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