Mr Robert Schufft v Veterinary Manufacturers and Distributors Association Ltd T/A Vmda

[2013] FWC 75

[2013] FWC 75

FAIR WORK COMMISSION

DECISION

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

Mr Robert Schufft
v
Veterinary Manufacturers and Distributors Association Ltd T/A VMDA
(U2012/13182)

COMMISSIONER SPENCER BRISBANE, 5 AUGUST 2013

s.394 — unfair dismissal — jurisdictional objection — contract between Respondent and Applicant’s corporate entity — proper construction of the relationship.

Introduction

[1] This determination relates to an application made by Mr Robert Schufft (the Applicant) pursuant to s.394 of the Fair Work Act 2009 (Cth) (the Act) for an unfair dismissal remedy on the grounds that the termination of his employment from the Veterinary Manufacturers and Distributors Association Ltd T/A VMDA (the Respondent) was harsh, unjust and or unreasonable (the substantive application).

[2] The Respondent in this matter has raised a jurisdictional objection to the application claiming the Applicant was not an employee of the Respondent and hence was not covered by the unfair dismissal provisions of the Act as at 10 September 2012; the date the working relationship between the Applicant and the Respondent ended (the jurisdictional objection).

[3] This decision relates to the jurisdictional objection only.

[4] The matter was conciliated before a Fair Work Commission (the Commission) Conciliator, but the matter did not settle.

[5] Directions were set for the filing of submissions and evidence in relation to the jurisdictional objection. Several interlocutory applications were made in relation to Orders for production. The jurisdictional objection was before the Commission for hearing with the parties filing further written submissions following the close of evidence.

[6] Whilst all of the evidence and submissions in this matter are not referred to in this decision, all of such have been considered.

Background

[7] The working relationship between the Applicant and Respondent commenced in 2001 and continued until the Applicant’s dismissal on 10 September 2012. There is significant dispute between the parties as to the nature of this working relationship, the events which occurred during this relationship and even as to the parties to this relationship.

Relevant Provisions of the Legislation

[8] The Respondent’s jurisdictional objection contended that the Applicant was not an employee and hence not covered by the unfair dismissal provisions of the Act, arises from the wording of s.382 of the Act.

[9] Section 382 of the Act provides as follows:

382 When a person is protected from unfair dismissal

A person is protected from unfair dismissal at a time if, at that time:

(a) the person is an employee who has completed a period of employment with his or her employer of at least the minimum employment period; and

...

(emphasis added)

[10] For the purposes of Part 3-2 of the Act, relating to unfair dismissals, s.380 of the Act defines an employee and employer as:

In this Part, employee means a national system employee, and employer means a national system employer.

[11] It is accepted that the Respondent is a national system employer. The contention is that the Applicant was not an employee of the Respondent, for the majority of his term and also not at the time of the end of the working relationship between the parties. Therefore the Respondent submitted that the Applicant was not a national system employee and is not covered by Part 3-2 of the Act, which relates to unfair dismissals.

Summary of the Respondent’s submissions and evidence

[12] The Respondent’s primary submission was that, at the time the working relationship ended, there was no contractual relationship between the Applicant and the Respondent. The Respondent submitted that a contractual relationship existed between the Respondent and R&K Solutions Pty Ltd, a company established by the Applicant, through which he provided business services for the Respondent.

[13] The Respondent argued that as no contractual relationship existed between the Respondent and the Applicant, at the termination of the relationship, that the Applicant was neither an employee nor an independent contractor of or for the Respondent. The Respondent argued it had formed a contract with the Applicant business. Hence, on either ground, the Applicant was not a person, being an employee, within the meaning of s.382 of the Act and thus was not dismissed within the meaning of s.385 of the Act. 1

[14] The Respondent’s other submissions as to the nature of the relationship between the parties, can be categorised as those relating to the nature of the contracts entered into as between the Respondent and R&K Solutions Pty Ltd and associated elements such as; the taxation and superannuation situation as between the Respondent, Applicant and R&K Solutions Pty Ltd; the control exerted by the Respondent on the Applicant and/or R&K Solutions Pty Ltd; payments made by the Respondent to R&K Solutions Pty Ltd; and, other submissions in the alternative as to the elements establishing the relationship as being that of an independent contractor.

Respondent’s submissions and evidence about the contracts entered into between the Respondent and R&K Solutions Pty Ltd

[15] The Respondent contended that from 29 August 2002 onwards, a series of contracts were entered into between the Respondent and R&K Solutions Pty Ltd for the services of an executive director to the Respondent. The Respondent argued, this arrangement was initiated by the Applicant on behalf of R&K Solutions Pty Ltd. 2 The nature and terms of the subsequent contracts are substantially similar.

[16] The Respondent submitted that a number of cases referred to by the Applicant, relating to the indicia and determination of whether a person was an independent contractor, 3 are of no to little assistance in this matter, as there was no issue in those cases about whether a contract existed between the putative employer and the individual. The Respondent referred to ACE Insurance Limited v Trifunovski (ACE Insurance),4 to rely on the proposition that “contracts with corporations are prima facie not contracts of the necessary quality to be contracts of employment”.5

[17] The Respondent submitted that the starting point for the Commission to determine the nature of the relationship between the parties must be the contract between the Respondent and R&K Solutions Pty Ltd and that the contract must be construed objectively. 6

[18] The Respondent argued that the Respondent’s contract with R&K Solutions Pty Ltd was a contract with a corporation and hence was not a contract of the necessary quality to be an employment contract. 7 The Respondent went on to argue that this was not a matter of how the parties characterised their relationship, as a contract had been signed between two corporations.8 The Respondent referred to the following, extract from Ace Insurance in support of the contention that it was a contract between two corporations:

“Contracts of employment (contracts of service traditionally so-called) are contracts for personal service. Benefits and obligations of contracts of individual service of this kind are not unilaterally assignable by either party... The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment. Thus, contracts with corporations, contracts with partnerships, contracts permitting unlimited delegation and contracts which do not actually compel the performance of work but pay only on results, are each prima facie not contracts of the necessary quality...” 9

[19] The Respondent also referred to Australian Mutual Provident Society v Chaplin, 10 in regards to consideration of the indicia of whether a contract was one of employment or one of an agency arrangement, as follows:

... a contract of service is the right of the respondent to incorporate himself — see the latter part of cl 14 of Section I (as amended March 1970). It may not be impossible for a body corporate to be a servant but the concept is certainly unfamiliar... 11

[20] The Respondent submitted that there had been no contract between it and the Applicant since 29 August 2002 and that the contracts made with R&K Solutions Pty Ltd could not relevantly be said to be contracts of employment.

[21] The Respondent went on to focus on the contract between it and R&K Solutions Pty Ltd and made submissions as to the textual reading of the contract. The Respondent submitted that the contracts were signed by the Applicant on behalf of R&K Solutions Pty Ltd and referred to the 29 August 2002 copy of the contract which stated: 12

We have much pleasure of extending the contractual services of Executive Director to your company R&K Solutions Pty Ltd P/L (ABN...) under the following terms and conditions:

...

Your company will be paid $42,000 per annum.

...

I, Robert Schufft, on behalf of R&K Solutions P/L, acknowledge that I have examined this document and that I understand the terms and conditions and agree to supply services to VDMA on those terms and conditions.

[22] The Respondent submitted that these clauses show the contract is unambiguously itself a contract with the company and was signed by the Applicant on behalf of R&K Solutions Pty Ltd. 13

Respondent’s submissions and evidence about the taxation and superannuation situation as between the Applicant, Respondent and R&K Solutions

[23] The Respondent made submissions as to the taxation arrangements between the parties. The Respondent submitted that R&K Solutions Pty Ltd rendered a tax invoice for GST purposes on a monthly basis in relation to the provision of services pursuant to the contract. 14 In addition, there was never any arrangement for superannuation in practice.15

[24] The Respondent submitted it was the Applicant’s desire to have a contractual relationship in place between the Respondent and R&K Solutions Pty Ltd so as to minimise his tax liabilities. 16

[25] The Respondent referred to the Applicant’s evidence, given in cross-examination, where he stated: 17

... I established the company in order to minimise my taxes. It’s as simple as that. As far as you are concerned, it is a big issue because you’re denying that it was an employment contract that was negotiated back in 2001, not 2002 as you allege.

[26] The Respondent referred to a number of other instances where the Applicant stated the purpose of the company was to minimise taxes. 18 The Respondent also relied on this, as evidence that the Applicant intended to provide services through the company.

[27] The Respondent regarded that as R&K Solutions Pty Ltd was paying superannuation to the Applicant’s superannuation fund, that this also indicated the relationship was between the Respondent and R&K Solutions Pty Ltd, and not the Applicant. 19

Respondent’s submissions and evidence about the payments made by the Respondent to R&K Solutions Pty Ltd:

[28] The Respondent also submitted that the contracts provided for R&K Solutions Pty Ltd to be paid a certain amount per annum by the Respondent; and, for the Respondent to also pay R&K Solutions Pty Ltd for the cost of office administration, stationary, printing, postage, telephone rental, motor vehicle use, travel and accommodation expenses. 20 The Respondent further submitted that this is in fact what occurred and referred to the Applicant’s cross-examination, as evidence of this.21

Respondent’s submissions and evidence about the corporate structure of R&K Solutions Pty Ltd

[29] The Respondent made a number of submissions as to the corporate structure of R&K Solutions Pty Ltd and its interaction with the Applicant. The Respondent referred to R&K Solutions Pty Ltd’ tax returns in which the company is generally described as a “business management service” or something of a similar nature. 22 The Respondent argued this further indicated the Applicant intended for a contract to be executed between the Respondent and R&K Solutions Pty Ltd, not with the Applicant.

[30] The Respondent also submitted that Mrs Harman-Schufft, the Applicant’s wife, was a director of the company for some period, and a shareholder, and that she derived benefit from the company. 23 This indicates further the nature of the corporate structure and that the Applicant intended for it to be an entity separate from him personally.

Respondent’s submissions and evidence about the control exerted by the Respondent over the Applicant and/or R&K Solutions Pty Ltd directly

[31] The Respondent submitted that very few limitations were placed on how the Applicant, through R&K Solutions Pty Ltd, provided the contracted services to the Respondent. The Respondent argued it only required the Applicant to: provide the contracted services over 155 days each year in the initial contract dated 29 August 2002 (increasing to 186 days in a contract dated 14 November 2007); attend the Respondent’s monthly board meetings; and, present reports to the Respondent’s board.

[32] On a textual reading of the contract, the Respondent argued it contained no prohibition on R&K Solutions Pty Ltd or the Applicant from performing other work or as to delegations of the work; no prohibition on unilaterally assigning profits; and no requirement for R&K Solutions Pty Ltd or the Applicant to seek permission for periods of leave from the Respondent. 24

[33] The Respondent further argued that there was no requirement for the Applicant to seek leave from the Respondent of any type, be that sick, annual or compassionate leave. The Respondent referred to the following exchange in cross-examination with the Applicant: 25

Now, you agree with me there was no requirement in the contract between the VMDA and R&K Solutions for you to apply for sick leave, was there?---No

[34] The Respondent also noted the Applicant had taken various forms of leave without informing the Respondent. 26

[35] In regards to whether the Applicant or R&K Solutions Pty Ltd could perform other work or delegations, the Respondent referred to the following exchange in cross-examination with the Applicant: 27

There was no prohibition in the contract between R&K Solutions and the respondent on you performing work for other companies, was there?---No.

Respondent’s submissions and evidence as to other factors that, in the alternative, establish the relationship between the Applicant and Respondent as one of an independent contractor

[36] The Respondent submitted that the following elements of the contract and the relationship between the parties further established that the Respondent’s relationship with R&K Solutions Pty Ltd was one with an independent contractor:

1. Advertising and promoting services to the broader market place;

2. Negotiated its own fees for service;

3. Held its own insurances;

4. Provided its own office space;

5. Not supervised as to how or when services are provided;

6. No paid leave or other entitlements;

7. Registered for GST with an ABN;

8. The ability and the actual development of goodwill through name and reputation through contractual work undertaken;

9. The provision of services to different and varied customer base; and,

10. They contract through a corporate entity.

[37] Accordingly the Respondent submitted that all of these elements demonstrated that R&K Solutions Pty Ltd, as a corporate entity, was in a contractual relationship with the Respondent, or alternativey that R&K Solutions Pty Ltd was a contractor and there was no employment relationship with this company or the Applicant.

Summary of the Applicant’s submissions and evidence

[38] The Applicant’s primary contention is that he was an employee of the Respondent from 23 April 2001 until 10 September 2012. The Applicant framed the question the Commission should consider as “whether the contractual relationship between the Applicant and Respondent is, properly construed and understood, one of Principal/Independent Contractor or Employer/Employee”. 28

[39] The Applicant’s case is that of the indicia outlined in Abdalla v Viewdaze Pty Ltd (Abdalla), 29 in which a Full Bench of the Australian Industrial Relations Commission (AIRC) provided a summary of the principles applicable to the determination of whether a person is an independent contractor or an employee (and as outlined in Jiang Shen Cai t/a French Accent v Michael Anthony Do Rozario (French Accent)30), that the vast majority of those indicia point in favour of the Applicant’s contention, that he was an employee of the Respondent.

[40] The Applicant referred to the cases of French Accent and ACE Insurance as authorities in support of its case.

[41] The Applicant made the following observations about [30] of French Accent, outlining the general approach to distinguishing between employees and independent contractors:

a) If the indicia point one way or overwhelmingly one way and yield a clear result then that must be the result (of the case). The Commission’s enquiry ends at this point;

b) Quintessentially, what the FWC must do is stand back from the picture of the relationship between the protagonists which is painted by the evidence and make an informed, considered, and qualitative appreciation of the whole relationship;

c) If after, and only after, having made the assessment described in a) and b) above, the relationship remains ambiguous, then and only then, can the parties remove the ambiguity themselves by a term in the contract that declared the relationship to be whatever they asserted it was.  31

[42] The Applicant’s case, however, primarily relied upon the matters enunciated in the case of ACE Insurance. The Applicant quoted the following paragraphs from the decision, in support of concluding that the Applicant had been employed as an employee: 32

[9] There is no one single criterion that will necessarily be determinative of the issue. The issue will be decided by weighing all the relevant factors.

...

[17] In my opinion, the primary judge was right in concluding that, absent the respondents’ own belief that they were not employees and their structuring of their financial affairs to that effect, there were no other indicia to support the appellant’s contention that they were independent employees.

...

[25] ...The requirement for personal service has the effect that a contract which truly permits discharge in another fashion or by another person, is not a contract of employment.

...

[32] ...The parties may agree the terms of their contract, but any statement by them about the character of their relationship, or of their contract, has consistently been held not to be decisive of the true legal character of either.

...

[36] ...although conventionally some weight is given to how parties have represented their relationship, as I have already said, what they have stated is not conclusive. In many cases, a decision by the parties about how to characterise the relationship merely accords with what is thought to be the characterisation of greatest convenience to one party, or both.

[103] ...Of the indicia of employment it is clear that a right of control remains an important consideration in many cases. It may be found in a right of organisation and allocation of work, as much as in some theoretical right to say how actual work should be done.

[123] The trial judge accepted that the agents had each understood themselves to be independent contractors:

91 In this case, I accept that each of the sales representatives understood that he or she was an independent contractor at all material times. Their status as independent contractors was one of the attractions of the position. Indeed, none of them denied that understanding. It is hardly surprising in that circumstance that income tax was not deducted from their commissions or that they each obtained an ABN. Beyond throwing light on the parties’ understanding, however, I do not think this advances matters very far.

…

98 As I have said above, I accept that each of the agents at all times understood himself or herself to be an independent contractor.

[147] Whether the facts as found by the trial judge are tested against the analysis by the Privy Council in Chaplin, or the High Court in Hollis, or whether they are tested more generally against the jurisprudence which developed over a long period, in my respectful view the trial judge was correct to conclude that the agents in the present case lacked the independence to be regarded as not the employees of Combined. None of the indicia which would stand positively against a relationship of employment was truly established.

[148] The overwhelming impression from the evidence is that the agents at each of the three levels were specifically trained by Combined in particular techniques of selling which Combined had adopted as its own, and the training was constantly reinforced. They then worked under close direction, supervision and organisation with a view to selling insurance products in a way determined by Combined. They had no real independence of action or true independence of organisation. Once the mutual representation, that the agents were not employees, was set to one side there was no adequate foundation for a conclusion that the relationship was anything other than one of employment. The representation did not suffice to make it one.

[43] In regards to assessing the role of R&K Solutions Pty Ltd in the question of whether the Applicant was an employee of the Respondent, the Applicant referred to [150]-[153] of ACE Insurance per Buchanan J, relating to incorporation:

[150] It was argued that the trial judge should have found that Mr Trifunovski or Mr Peries were, at particular times, not employees of Combined whatever conclusions were reached about other agents. Both Mr Trifunovski and Mr Peries were sub-regional representatives. Each of them, it was contended, had at those particular times provided his services through a company of which he was a director – Heraclea in the case of Mr Trifunovski and Renham Pty Ltd in the case of Mr Peries.

[151] I have already referred to the contract which names Heraclea as a party as trustee. That contract was made in March 2004. In this agreement, in the execution clause, Mr Trifunovski personally was named as the sub-regional representative and signed in that apparent capacity. It is not clear, owing to the fact that this contract was signed by Mr Trifunovski personally as sub-regional representative, and that it was not executed under the seal of Heraclea, that Heraclea was in fact a party to any contract notwithstanding that it was named in the opening parts of the contract. Whatever view may be taken about that issue I do not think there can be any doubt that, notwithstanding the apparent existence of this contract, it was necessary for Mr Trifunovski to provide his services personally to Combined. The appellant accepted in written submissions that agents were not permitted to engage their own employees or contractors to sell Combined’s products.

[152] In any event, in my view, the trial judge was correct to conclude that the arrangements, whilst perhaps made to enable money to be channelled through Heraclea, did not represent an independent contract whereby Heraclea provided Mr Trifunovski’s services as its employee to Combined as the other party to the contract. The existence of this contract does not denote, therefore, that Mr Trifunovski was not an employee of Combined. In my view the trial judge correctly found that he was.

[153] In Mr Peries’ case a similar conclusion should be reached. There were four contracts purportedly made with Renham Pty Ltd between November 1990 and December 2001. The trial judge noted, and the appellant appeared to accept, that the contracts between the agents and Combined did not materially differ throughout the periods in question. Hence, I shall treat the contract purportedly made with Renham Pty Ltd dated 27 January 1992 as representative. The contract was stamped with the seal of Renham Pty Ltd. This document appears to me to have been merely a formality, or more correctly, formalism as Mr and Mrs Peries provided a personal indemnity to Combined to guarantee performance and as the contract was otherwise in the standard form for individuals. Although the execution clause for this contract was also stamped with the seal of Renham Pty Ltd it represented that the sub-regional representative was Mr Peries. He signed the contract personally. I would not conclude that this contract was in fact made with Renham Pty Ltd even though it was named in the recitals. In any event, it is undoubtedly the case that Mr Peries’ personal service was required. I think the findings of the trial judge that he was an employee of Combined, notwithstanding the existence of this and other similar contracts, are correct. Renham Pty Ltd could not discharge the duties imposed by these contracts. That could only be done by Mr Peries personally. The contracts with Renham Pty Ltd were, in my view, an apparent device to divert funds to a corporate vehicle.

[44] The Applicant submitted that the analysis and findings in ACE Insurance is congruent with the fact of the present case. 33 The Applicant argued that an assessment of the indicia pointed overwhelmingly to the Applicant being an employee. The Applicant submitted that of the 13 indicia identified in Abdalla and French Accent; it was submitted that at least 11 were in favour of concluding that the Applicant was an employee. The Applicant conceded that two factors, namely, in relation to the payment of income tax and in relation to accessing leave, do not weigh in favour of the Applicant’s case.34 The Applicant submitted that these two issues are not overwhelmingly determinative and that ACE Insurance, dispatches the taxation issue as being the least important of all 13 indicia.35

[45] The Applicant further addressed the indicia as discussed in Abdulla and French Accent as follows.

Control

[46] The Applicant submitted that the terms of the contract between the parties was the best evidence of the actual and theoretical control in the matter.

[47] The Applicant referred the Commission to the evidence of Mr Adams’, Company Director of the Respondent, that the performance of the Applicant (himself, rather than the Applicant’s company) was reviewed by the Respondent. 36 This review was in regard to the Applicant’s personal performance, productivity and his achievement of objectives. And further that Mr Adams’ evidence, was that the Board issued directions and instructions to the Applicant.37

[48] In addition the evidence of Mr Blackhall was that the Board had the power and ability to direct the Applicant to perform any of his responsibilities in a manner that it wished. 38

Work for others or has the right to work for others

[49] The Applicant submitted that he did not perform work for any other organisation or person during the time he was engaged with the Respondent. The Applicant further submitted that as time progressed and the role evolved he did not have the time or capacity in which to work for another.

[50] It was accepted by a Respondent witness, Mr Blackhall that the taxation records exhibited in this matter, reflected that the moneys paid, for the role of the Applicant were “more or less one and the same” 39 in terms of demonstrating no other remuneration was received.

[51] It was submitted by the Applicant, through counsel, that the “actual” operation of the contract between the parties is highly relevant to this determination.

Separate place of work and/or advertises to the world

[52] The Applicant submitted that while he undertook the role from home, the position was advertised as able to be “conducted from home” and the contracts provided that all equipment required to perform the role were to be provided by, or paid for in full by, the Respondent.

Significant tools and equipment

[53] The Applicant submitted that he was not required to maintain any significant tools or equipment. The Applicant referred to his submissions in relation to those matters discussed above (at [52]) and the reimbursement or payment for the running of the office by the Respondent in relation to the work of the Respondent.

[54] The Applicant also submitted that the requirement for him to use his vehicle for work purposes was extremely limited or ordinarily would only be required for travel to and from the airport for work related travel.

Can work be delegated or subcontracted

[55] The Applicant referred to the Commission to Annexure H to Exhibit 14, and the material regarding “freedom to act”. The Applicant submitted that by the terms of the contract he was able to act independently in an extremely limited scope. It was further submitted that he had no express right to delegate work.

[56] The Applicant submitted that the evidence of Mr Saunders, also a Company Director of the Respondent, Mr Adams and Mr Blackhall was that the Applicant did not in fact delegate any of his duties between 2001 and 2012. The Applicant further submitted that each of these witnesses conceded that he did not have the freedom to delegate.

[57] There was evidence of one time at which the Applicant’s wife did attend a meeting as a proxy. The Applicant submitted that this was a one-off event, in circumstances where he could not attend.

Right to suspend or dismiss

[58] The Applicant submitted that in the contract (including with each variation) the right to suspend or dismiss the Applicant was reserved to the Respondent.

Does the employer present the worker as an emanation of the business?

[59] The Applicant submitted that Mr Blackhall gave evidence under cross examination as to this matter. For example:

“Now, we have dot point which aren’t the most helpful form of punctuation. If you go to the second dot point, you see, that says, “Voice the VMDA position to government and other industry bodies”?

When Mr Schufft performed that role he was representing the VMDA, wasn’t he?---He was but that’s the same responsibility as with all directors.” 40

Income tax deducted

[60] The Applicant conceded that the fact that the Respondent did not deduct income tax weighed against the relationship being considered as that of employee and employer. 41

[61] However the Applicant submitted that Ace Insurance was authority for the proposition that this was the least important of all indicia. 42

Periodic wage or salary by reference to tasks

[62] The Applicant submitted that the payment pursuant to the contract was agreed on an annual basis. The salary was paid, through R & K Solutions Pty Ltd, on a monthly basis. The Applicant submitted that this periodic wage is indicative of an employment relationship.

Work of a professional, trade or distinct calling on the part of the person engaged

[63] The Applicant submitted that the work undertaken by him was not automatically in line with a contractor’s calling.

Paid holidays/sick leave

[64] The Applicant conceded that the fact that the Applicant was not entitled to a specific provision or payment for holidays or leave weighed against the relationship being considered as that of employee and employer. 43

[65] The Applicant countered this concession however pointing the Commission to the evidence that the “annual salary” was paid in 12 equal, monthly instalments. The Applicant submitted that the effect of this payment method was that the Applicant was paid for time that he was not at work.

Did the worker create goodwill or saleable assets?

[66] The Applicant submitted that he did not create goodwill or saleable assets.

Whether the worker spends a significant portion of his remuneration on business expenses?

[67] The Applicant linked this matter to those indicia involving tools and equipment. The Applicant submitted that the evidence is that the Applicant did not use any of the remuneration he earnt on business expenses.

Other factors

[68] The Applicant reiterated that the way that the Respondent described the relationship (in this context being as between two corporations) while this is taken into account, it is not determinative of the actual legal nature of the relationship. 44 The Applicant submitted that the parties’ expression of the relationship might be determinative in a situation, where the Court or Tribunal was of the view that all other indicia, were such that the matter could be determined either way.45

[69] The Applicant strongly stated however, that it is the overall “picture or impression” of the relationship which is determinative.

Conclusion

[70] In reviewing the material regarding the nature of the relationship the starting point is not the contract; it is an examination of whether or not the relationship between the parties was that of employee and employer. The contract is a matter to take into account but is not, on its own, determinative. This is well settled in the case law. 46 The contract is evidence that may support the contention and can be referred to, but the indicia need to be examined in the first instance. A textual analysis of the contract may also be required. That the contract may have been framed between two corporations, of itself isn’t determinative on its own, as set out in Ace Insurance.47

[71] All of the information related to each of the indicia has been separately considered to inform the overall view of the working relationship. The following conclusions in relation to each indicium are provided in relation to the overall reasoning. No single criterion is determinative of the outcome; all of the relevant factors must be weighed in assessing the overall relationship. The relationship has been considered against these following indicia: control, the right to work for others, place of work, arrangements as to tools and equipment and expenses, right as to delegation of subcontracting, right to suspend or dismiss, emanation of the business, taxation and related payment arrangements, leave arrangements, development of goodwill or assets, and other factors have all been assessed. The evidence and submissions of the parties on all of the elements have been taken into account.

[72] The ultimate question is whether the putative employee is acting for another or on their own behalf. 48 There was no evidence that the Applicant was working on his own behalf.

[73] The Respondent started from the point that a contract between corporations cannot be a contract of employment. However this argument has no persuasive foundation if the parties are simply artificially rebranding the relationship. 49

[74] The characterisation of the relationship by those parties to it, may simply be a product of ‘convenience’ or how one party views it. However the label put on the contract is of less influence than ‘the rights and obligations created by the contract’ 50.

[75] The approach set out in French Accent 51 is adopted; the consideration of the indicia is not a ‘mechanical exercise’52 but requires an appreciation of the whole of the relationship.

[76] In considering the overall picture of the relationship, before the Commission, in this matter, the Applicant was initially employed as an employee between April 2001 and about July or August 2001. There was then a variation of the contract as was originally between the Applicant and the Respondent, which subsequently became the contract between R&K Solutions Pty Ltd (a company formed by the Applicant; to which he and his wife were the Directors) and the Respondent. The Applicant argued that simply the change in the nature of the contract does not finish the matter, ‘the parties cannot simply deem the relations between them to be something it is not’. 53

[77] Accordingly the indicia are examined in light of the whole ‘picture’ of the relationship. That is, did the nature of the contract, control, work, supervision and payment matters change from the manner of the initial contract to its later form?

[78] Despite the introduction of the contract between the two corporations (rather than with the Applicant personally), the nature of the control exerted by the Respondent over the Applicant did not change.

[79] With regard to the issue of incorporation, it is relevant that in Ace Insurance, it was found that ‘notwithstanding the apparent existence of this contract’, it was necessary for Mr Trufinovski (the putative employee) to provide his services personally to Combined (the putative Employer):

“The existence of this contract does not denote, therefore, that Mr Trifunovski was not an employee of combined. In my view the trial judge correctly found that he was” 54

[80] The Applicant also pointed to the Applicant’s signing of the contract personally. It was submitted that this discounted that the contract was made with R&K Solutions Pty Ltd.

[81] Indicative of an employment relationship is the right of control, an employer may exert over an employee in terms of the discharge of work. There is a right of organisation and allocation of work. The duties required by the subsequent contracts predominantly required the same duties imposed on the employee by the earlier contract, as set out in the position description. A practical assessment of the discharge of those duties indicated that they arguably could only be done, by the Applicant personally.

[82] I accept the characterisation of the relationship provided on behalf of the Applicant (as follows); as indicative of an employment relationship:

“In the extracts above Mr Adams accepted that Mr Schufft reported to the presidents (from time to time) of the VMDA; Mr Adams candidly and properly accepted that the Board issued directions and instructions to Mr Schufft; Mr Blackhall accepted that the Board had the power to direct Mr Schufft to perform his duties and that the Board did exactly that from time to time; Mr Blackhall accepted that the Board directed Mr Schufft to carry out his duties in accordance with his position description; and finally, Mr Blackhall went even further than that and gave evidence that even when Bob Schufft, the Executive Director was performing work which fell within the duties described under the heading “freedom to act” in the position description that even those matters were subject to the prior approval of a direction by the Board.

The evidence with respect to control is quite unequivocal and unsurprisingly so. By any measure, the Applicant, the VMDA, was and is a small organisation performing important work for those persons operating in the industry. The organisation was and is run by a volunteer Board of seven persons with just one paid position namely, that of the Executive Director, the position which was filled by Bob Schufft (irrespective of what construction might be attempted to be put upon the contract and the variations of the contract). The very structure of the organisation itself makes it axiomatic that the person in the paid position worked under the close, direct and, as Mr Blackhall ultimately and implicitly accepted during cross-examination, complete control of the Board.” 55

[83] The following exchanges in cross-examination also give weight to a finding of an employment relationship rather than the conclusion that a contractor or other relationship existed. Mr Adams in cross-examination provided:

“MR HEALY: I’ll just reconsider the matter for a moment, if I might, Commissioner. Did Bob report to the presidents from time to time to the VMDA to your knowledge, Mr Adams?---Yes, he did.

He did his work based in Brisbane?---Yes, he did.

When performance and productivity and so forth was reviewed, it was Bob’s performance that was reviewed?---Yes, it was

All right, it was Bob’s productivity that was reviewed?---Yes.

Bob’s achievement of objectives that was reviewed?---Yes.

Can I ask you to turn over in that contract to the position description?---Yes.

Do you agree that the duties that are to be carried out pursuant to that position description are duties that are to be carried out by an individual?---Yes, they would. I can’t see how anyone else other than an individual could be the executive director.” 56

[84] And further in relation to the nature of control, and work, the evidence was commensurate with an employment relationship as reflected below:

“You accepted that was a board meeting in which effectively directions and instructions were issued by the board to Bob as to what he was to do for the VMDA?---Yes.” 57

[85] In cross-examination Mr Blackhall stated:

“If the board wished to direct Bob to perform any one of these responsibilities in the manner that it wished him to, it had the power and ability to do so, didn’t it?---Yes, I believe so.

Indeed, it did so from time to time?---That’s right.” 58

[86] And further:

“Mr Blackhall, the board in agreeing on 23 May 2001 that Bob explore the matter of a standalone website, that’s the board directing Bob Schufft to carry out the responsibilities that I’ve just referred you to, isn’t it?---Yes.” 59

[87] And:

“Mr Blackhall, you accept, don’t you, that they are the things that the executive director is free to do without board approval?---Most of those things would be approved by the board.

All right, they might also be approved by president, is that right?---Yes, yes, that’s right.

All right, but so far as there is any freedom in the contract for the executive director you would agree with me that it’s set out under that paragraph, “Freedom to Act”?---Yes, that would be the expectation of anyone fulfilling their contractual role.” 60

[88] The personal service of the Applicant was required, as evidenced by the following exchange in cross-examination of Mr Blackhall:

“All right, next dot point, “provide a newsletter on VMDA activities, reports and data to the members on a regular basis.” When he’s communicating with members in that tangible way he’s acting as a representative of the VMDA, isn’t he?---As with most of these points, this is what we expected of R & K Solutions, to provide us with somebody who could do that, yes.

So you couldn’t have cared less who turned up?---I didn’t say that.

No, I didn’t think so.” 61

[89] Just as determined in Ace Insurance 62it can be concluded that the contracts with R&K Solutions Pty Ltd ‘were, in my view, an apparent device to divert funds to a corporate vehicle’63. The plan for such a device is not laid at the feet of the Respondent. However the actual operation of the contract provides information of the nature of the relationship. The issue of taxation only one of the criteria for consideration. It is noted that the Applicant’s income reflects only the payments for the work done as the Executive Director between 2001 and 2011, and that no work was performed for anyone else.64

[90] It was agreed that the Applicant was originally engaged in a contract of employment. However the terms of the contract, the nature of the work and manner of its discharge don’t differ (apart from increases in the remuneration) when compared to the subsequent contracts formed between the corporations.

[91] The position was advertised as a part-time ‘job’ to be worked from home in accordance with the Position Description framed by the Respondent.

[92] The Respondent exercised control over the Applicant’s work, the Board deciding the nature and scope of work; “[T]he Applicant was an emanation of the Respondent’s business”. There was little ability for the Applicant to act independently or to delegate his duties. Despite the Applicant’s wife listing her Directorship on her card and “LinkedIn” account There was no definitive evidence that the Applicant’s wife derived benefit from the Applicant’s company. She played little informed part in the development of the company, or use of its resources. She, at times, undertook separate or no employment (during the period in question) and had the most minimum of contact or involvement with the business. The only instance of the wife’s involvement was of necessity for both parties, with Mrs Harman-Schufft providing a favour (to the Respondent), in attending a meeting, with the consent of the Respondent. This was accepted “as a one-off instance”.

[93] The Applicant submitted that he did not work for anyone else due to the increasing demands of his role with the Respondent, and that the income tax records supported that his work for the Respondent was his sole work.

[94] With regard to the further indicia, the Respondent provided all the tools and equipment in relation to the required work and met any associated expenses. The Respondent also had a legal right to terminate under the contract (further to the variations of the contract from 2002-2007) and did so in September 2012.

[95] Whilst it was conceded that the Applicant did not formally receive accruals of leave, the Applicant was paid an annual salary, divided into 12 components. The Applicant, as per his originating employment contract, was not contracted to work every day or at the Respondent’s business. Given that the circumstances of the Applicant’s work were that he worked a set number of days per year and worked from home, periods of annual and sick leave did not come into question between the parties.

[96] Further the work performed by the Applicant was set out in the position description and did not include a profession, trade or distinct calling; often axiomatic with a contractor. The Applicant in his duties created no goodwill and did not develop a saleable asset for R&K Solutions Pty Ltd, which is consistent with the Applicant being an employee.

[97] The Applicant provided a comparison of the indicia against the evidence, and submitted that 11 of the 13 indicia point in the Applicant’s favour; being that the relationship was that of an employer and employee. This summation is accepted. The issues of taxation and leave entitlements do not ultimately shift the balance of the considerations in this matter.

[98] In examining ‘the real substance of the relationship in question’ 65 none of the indicia, relevant to a finding that the relationship between the parties in this matter, was that of an independent contractor and principal, have been persuasively demonstrated.

[99] The true legal nature of the relationship, after an examination of the indicia, is an employment contract, requiring the personal service of the Applicant.

[100] For all of the foregoing reasons, and based upon the evidence in relation to the contract, the Applicant was an employee.

[101] Therefore, in accordance with s.382 of the Act, the Applicant is an employee and therefore protected by the unfair dismissal provisions. The jurisdictional objection is dismissed.

[102] I Order accordingly.

[103] The matter will be listed for conciliation in due course.

COMMISSIONER

 1   Transcript PN3153-3154; Supplementary Outline of Submissions for the Respondent (VMDA) [2]-[3].

 2   Transcript PN203; Respondent’s Submissions in Chief [4]-[5].

 3   Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561; Hollis v Vabu Pty Ltd (2001) 207 CLR 21; Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215; Sammartino v Mayne Nickless t/a Wards Skyroad (2000) 98 IR 168; Transport Workers Union of Australia v Glynburn Contractors Pty (Sailsbury) Ltd (1991) 37 IR 313.

 4 (2013) 295 ALR 407; [2013] FCAFC 3.

 5 Supplementary Outline of Submissions for the Respondent (VMDA) [7].

 6   Submissions in Reply for VMDA in Jurisdictional Objection at [4]-[7].

 7   Transcript PN3158-3169.

 8 Submissions in Reply for VMDA on Jurisdictional Objection at [11].

 9 (2013) 295 ALR 407; [2013] FCAFC 3, per Buchanan J at [25].

 10 (1978) 18 ALR 385.

 11   Ibid at 392.

 12   Transcript PN3181-3188; Contract between VMDA and R&K Solutions Pty Ltd dated 29 August 2002.

 13   Transcript PN3189.

 14 Respondent’s Submission in Chief [6].

 15   Transcript PN227.

 16   Transcript PN3191.

 17   Transcript PN2417.

 18   Transcript PN2533-PN2540.

 19   Transcript PN3324-3326.

 20   Transcript PN204.

 21   Transcript PN3246-3267.

 22   Tax Returns of R&K Solutions Pty Ltd for the tax years 2005 onwards.

 23   Transcript PN3323.

 24   Transcript PN226-228; Transcript PN3352-3361.

 25   Transcript PN2740-2741; Transcript PN2778.

 26   Transcript PN3358-3361.

 27   Transcript PN2778.

 28 Outline of the Submission on Behalf of the Applicant, Robert Schufft, to the Respondent’s Jurisdictional Objection at [5].

 29 (2003) 122 IR 215.

 30   [2011] FWAFB 8307.

 31 Closing Submissions on Behalf of the Applicant, (Respondent to the Jurisdictional Objection) Robert Schufft at [13].

 32 Closing Submissions on Behalf of the Applicant, (Respondent to the Jurisdictional Objection) Robert Schufft at [17].

 33 Closing Submissions on Behalf of the Applicant, (Respondent to the Jurisdictional Objection) Robert Schufft at [18].

 34 Closing Submissions on Behalf of the Applicant, (Respondent to the Jurisdictional Objection) Robert Schufft at [21].

 35   ACE Insurance Limited v Trifunovski (2013) 295 ALR 407; [2013] FCAFC 3, per Buchanan J at [37].

 36   PN431 to PN437.

 37   PN644.

 38   PN1210 to PN1211.

 39   PN1150.

 40   PN1575 - PN1576.

 41   Applicant closing submissions at paragraph 21.

 42   Applicant closing submissions at paragraph 21 referring to Ace Insurance at [37].

 43   Applicant closing submissions at paragraph 21.

 44   Applicant closing submissions at paragraphs 4-5.

 45   Ibid at 10 referring to Jiang Shen Cai trading as French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307 at [30],

 46   For example ACE Insurance Limited v Trifunovski (2013) 295 ALR 407; [2013] FCAFC 3.

 47 [2013] FCAFC 3 at [150]-[153] per Buchanan J.

 48   Stevens v Brodribb Sawmilling Pty Ltd (1986) 160 CLR 16, 37.

 49   Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215 at [34].

 50   French Accent v Michael Anthony Do Rozario [2011] FWAFB 8307 at [10]-[29]; TNT Worldwide Express (NZ) Ltd v Cunningham (1993) 3 NZLR 681 at 699.

 51   Ibid at [30](5).

 52   Ibid.

 53   Hollis v Vabu Pty Ltd (2011) 207 CLR 21 at [45].

 54   ACE Insurance Limited v Trifunovski (2013) 295 ALR 407; [2013] FCAFC 3 at [152].

 55   Applicant closing submissions at paragraphs 29 to 30.

 56   PN431 to PN437.

 57   PN644.

 58   PN1210 to PN1211.

 59   PN1252.

 60   PN1565 to PN1567.

 61   PN1610 to PN1612.

 62 Ibid at [153].

 63 Ibid at [153].

 64   PN1150 to PN 1151.

 65   On Call interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366 at [189].

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