O'Dwyer and Secretary, Attorney-General's Department
[2021] AATA 2346
•15 July 2021
O'Dwyer and Secretary, Attorney-General's Department [2021] AATA 2346 (15 July 2021)
Division:GENERAL DIVISION
File Number(s): 2020/3284
Re:Robert O'Dwyer
APPLICANT
AndSecretary, Attorney-General's Department
RESPONDENT
DECISION
Tribunal:Emeritus Professor P A Fairall, Senior Member
Date:15 July 2021
Place:Sydney
The reviewable decision dated 25 March 2020 is set aside and remitted to the Secretary with a finding that the Applicant is not an ‘excluded employee’ within subsection 556(2) of the Corporations Act 2001 (Cth).
..............................[SGD]..........................................
Emeritus Professor P A Fairall, Senior Member
CATCHWORDS
FAIR ENTITLEMENTS GUARANTEE – whether the applicant has a statutory entitlement to a FEG advance in respect of redundancy pay – whether excluded employee – whether relative or employee/director – multifactorial test of employment – whether carrying on a business - decision under review set aside and remitted
LEGISLATION
Administrative Appeals Tribunal Act 1975 (Cth)
Corporations Act 2012 (Cth) ss 9, 556, 589
Fair Entitlements Guarantee Act 2012 (Cth) ss 3, 11
Fair Work Act 2009 (Cth)
CASES
Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215
Ace Insurance Ltd v Trifunovski (2013) 209 FCR 146
El-Chahal and Secretary, Department of Employment [2015] AATA 512
Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats [2020] FWCFB 1698
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Marshall v Whittaker’s Building Supply Co [1963] HCA 26; (1963) 109 CLR 210, 217.
McBryde and Secretary, Department of Employment [2014] AATA 434
On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82
Roberts and Secretary, Department of Jobs and Small Business [2019] AATA 64
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Tabone v Secretary, Department of Jobs and Small Business [2018] AATA 2138
Taylor v Auto Loans Group Pty Ltd [2018] FWC 1950
Wilson v B.A.R.B Trading [2016] FWC 3841
SECONDARY MATERIALS
Bomball, Pauline, ‘Statutory Norms and Common Law Concepts in the Characterisation of Contracts for the Performance of Work’ (2019) 42(2) Melbourne University Law Review 370; Bomball, Pauline, ‘Vicarious Liability, Entrepreneurship and the Concept of Employment at Common Law’ (2021) 43(1) Sydney Law Review 83
REASONS FOR DECISION
Emeritus Professor P A Fairall, Senior Member
15 July 2021
INTRODUCTION
Ralan Group Pty Ltd (RGPL) was incorporated in 1988 as a project marketing company selling off-the-plan apartments for developers. Twenty years later, it expanded into property development.[1] RGPL was owned by Mr William O’Dwyer (the proprietor), who also served as Managing Director. Ralan Property Services (RPS) was incorporated in 1999 and operated RGPL’s ‘rent roll’ business in NSW.
[1] Respondent’s Statement of Facts, Issues and Contentions (‘RSFIC’) at [26].
Mr O’Dwyer’s three younger brothers, Allan, Bryan and Robert, worked in various roles for RGPL, RPS or its associated entities. Robert, the Applicant in these proceedings, was employed by RPS from around 2010, essentially as a handyman. He reported to Allan, who worked for one of RGPL’s associated companies. Bryan was engaged to perform various high-level functions by RPS. He had shares in RPS, and in early 2018, was appointed as a director.
RGPL was placed into administration in 2019. It was subsequently wound up, along with its associated entities.[2] The corporate collapse was one of the largest in recent history and left debts upwards of $300 million.[3]
[2] Section 37 Documents (‘T Docs’) at 295.
[3] Ibid at 323.
The Fair Entitlements Guarantee Act 2012 (Cth) (FEG Act) provides for the Commonwealth to pay advances on account of unpaid employment entitlements where a corporate employer is insolvent, the end of employment was connected to that insolvency, and the former employee cannot get payment of the entitlements from other sources.[4]
[4] FEG Act s 3.
The Applicant’s claim under the FEG Act was rejected on the basis that he had a personal connection with the company and was therefore not eligible to receive an advance.[5]
[5] Ibid s 11(1)(b).
The disqualifying personal connection was that of being the brother of an employee who was or is, within the relevant period, a director of the company.[6] The brother of an employee who is also a director falls within the definition of ‘excluded employee’, as defined for the purposes of the FEG Act. [7]
[6] The provision refers to ‘relative’, defined in the dictionary to include the brother of a person: Corporations Act 2001 (Cth) (‘Corporations Act’) s 9.
[7] Corporations Act s 556(2), definition of ‘excluded employee’.
It is not disputed that Bryan is Robert’s brother, or that Bryan served as a director of RPS for the 12 months ending on 30 July 2019, the relevant period prescribed under the FEG Act.[8] The disposition of Robert’s application depends on whether Bryan was also an employee during this period.
[8] See RSFIC at [50].
The application was heard by the Tribunal on 23 March 2021. The Applicant was unrepresented. He and his older brother, Bryan, gave evidence and were cross-examined by the Respondent. In light of their evidence, and the material before the Tribunal, I make the following findings.
Administrators were appointed to RPS on 30 July 2019, which is therefore the relevant date for present purposes.[9]
[9] The 'relevant date' is the 'day on which…the winding up is taken because of Division 1A of Part 5.6 to have begun': Corporations Act s 589(5)(a)(ii).
The Applicant was employed by RPS from 2 February 2010,[10] and his employment was terminated on 1 August 2019.[11] He is the younger brother of both the proprietor and Bryan.
[10] T Docs at 306.
[11] Ibid at 328.
I make the following factual findings with regard to Mr Bryan O’Dwyer:
(a)He is the younger brother of the proprietor;
(b)He held a single Class H (non-voting) share in RPS for which he paid $1.00[12] (The proprietor held an ordinary share and his wife, Mrs Joanne O’Dwyer, also held one Class H share);
[12] Transcript of Proceedings No. 2020/3284 (‘Transcript’) at 20.
(c)He also held shares in other companies in the Ralan Group, including RGPL;[13]
[13] Ibid at 21.
(d)Between 2003 and mid-2019, he provided personal services to RPS under an oral agreement with the proprietor in return for which he received regular fortnightly payments. He had no formal contract with RPS during this period;[14]
[14] Ibid at 43.
(e)Although there is some secondary evidence of a formal contract of employment with RPS between 1999 and 2003, there is insufficient evidence to support a finding that he was formally employed pursuant to a written agreement prior to 30 July 2019, when he signed an employment contract;[15]
[15] Ibid at 36-37.
(f)Throughout the 12 months ending on the relevant date and for some years prior to that, Bryan had the title of Commercial Property Manager and held a Class One real estate license. His business card identified him as a ‘Senior Associate’;[16]
[16] Ibid at 38.
(g)He engaged directly with landlords and tenants on behalf of the company. He attended to matters such as advertising and assisting tenants with fitouts. He managed the administrative staff who assisted in disbursements and charges;[17]
(h)On 24 July 2018, he was appointed a Director of RPS;
(i)The nature of the work he performed did not change after his appointment as Director;
(j)On 30 July 2019, he was formally employed by RPS on a fixed salary;
(k)The nature of the services provided did not change after his formal appointment as an employee;
(l)He regarded his status as that of an employee, including in the 12-month period prior to his formal appointment an employee;[18]
(m)On 5 December 2019, he was made redundant;[19]
(n)RGPL did not make provision for holiday leave, or make provision for PAYG income tax, or make any superannuation employer contributions;[20]
(o)RGPL treated the payments made to Bryan as a loan to be set off against future dividend entitlements; and[21]
(p)RGPL administrators have issued a demand for $270,750 from Bryan paid to him by way of dividends.[22]
[17] Ibid at 22.
[18] Ibid at 25.
[19] Ibid at 26.
[20] Ibid at 37.
[21] Ibid at 45.
[22] T Docs at 323.
ANALYSIS
The concept of ‘employee’ is not defined in the Corporations Act 2001 (Cth) (Corporations Act) or the FEG Act. It is therefore necessary to refer back to the common law to determine whether there is an employment relationship such that a particular individual is an employee.
Under section 556 of the Corporations Act, 'employee' means a person who has been or is an employee of the company, whether remunerated by salary, wages, commission or otherwise; and whose employment by the company commenced before the relevant date.
The 'relevant date' is the 'day on which…the winding up is taken because of Division 1A of Part 5.6 to have begun'.[23] Administrators were appointed to the RPS on 30 July 2019, which is therefore the relevant date.[24]
[23] Corporations Act s 589(5)(a)(ii).
[24] On 17 December 2019 liquidators were appointed.
Up until the mid-eighties it was generally assumed that the element of control was a necessary requirement for the existence of an employment contract. A contract for services in which the entity engaging another party to provide services could not determine how those services were to be provided could not be a contract of employment.[25]
[25] Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389, per Latham CJ at [4]; per Dixon J at [18].
In Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 (Stevens), the High Court relaxed this requirement in favour of a multifactorial approach, which takes into account a range of factors, of which control is but one important element. This approach was endorsed in a majority decision in Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 (Hollis).
Both Stevens and Hollis involved a claim for personal injury against a company which sought to invoke the rule that the person who caused the injury was an independent contractor for whose tortious acts the company was not vicariously responsible. In Stevens a logger engaged by a forestry company was injured while stacking logs; in Hollis a pedestrian was injured by a bicycle courier engaged by a courier service. It is widely accepted that the parameters of vicarious liability, that is, the liability of one party for the negligent acts or omissions of another, have shaped the development of the concept of employment.[26] An employer is vicariously responsible for the tortious acts of an employee committed within the scope of their employment, but not for those of an independent contractor, that is, someone carrying on business in their own right.
[26] See Bomball, Pauline, ‘Statutory Norms and Common Law Concepts in the Characterisation of Contracts for the Performance of Work’ (2019) 42(2) Melbourne University Law Review 370, 373.
The multifactorial approach approved by the High Court has been applied by the Tribunal in several employment related decisions. The Respondent referred to Tabone and Secretary, Department of Employment [2018] AATA 2138 where Deputy President F. D. O’Loughlin made a useful summary of the relevant factors:
(i) the terms of the relevant contract;
(ii) the mode of remuneration and in particular whether remuneration was to be paid for a completed job or hours worked;
(iii) deduction of amounts on account of income tax;
(iv) attendance to the basic steps usually associated with setting up a business such as obtaining an ABN and insurance;
(v) the putative employer's degree of control or right to exercise control over the work to be done, the organisation and allocation of work, the manner in which the work is to be performed, and the place and hours of work;
(vi) any entitlement or power to delegate work to others;
(vii) any actual work or entitlement to work for others;
(viii) advertising of services to others;
(ix) any exclusive service obligations;
(x) whether the worker is presented to the public as part of the putative employer's organisation or a representative of it;
(xi) rights to paid holidays, superannuation and sick leave;
(xii) whether the worker has a separate workplace;
(xiii) whether the worker provides and maintains significant resources or equipment; and
(xiv) whether the worker is required to bear all expenses and indemnify the putative employer against any losses…
It is regrettable that there is no statutory definition of employment to guide a decision-maker in a case like this, for the common law conceptions of employment contain a measure of uncertainty, as well illustrated by the recent decision of the Full Bench of the Fair Work Commission in Gupta v Portier Pacific Pty Ltd; Uber Australia Pty Ltd t/a Uber Eats [2020] FWCFB 1698. In finding that food delivery courier operating on the Uber Eats platform was not an employee, Ross J and Vice President Hatcher stated:
[55] As earlier stated, a multi-factorial test has been adopted in the common law to answer this question. The application of this test in borderline cases such as the one before us is not without difficulty, since it requires the making of an evaluative judgment involving the weighing of various relevant considerations and, as such, may not produce any single clear answer.
One important distinction between employment and independent contracting is that of carrying on a business on one’s own.
[T]he distinction between [an employee] and an independent contractor is ... “rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own”.[27]
[27] Marshall v Whittaker’s Building Supply Co [1963] HCA 26; (1963) 109 CLR 210, Windeyer J, at 217, cited with approval by the High Court in Hollis, at [40] (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ).
I proceed on the assumption that the question whether Bryan was carrying on a business for himself (as opposed to the company) is not a separate test but one of the factors that bears upon the question whether he was an employee.[28]
[28] Bomball, Pauline, ‘Vicarious Liability, Entrepreneurship and the Concept of Employment at Common Law’ (2021) 43(1) Sydney Law Review 83, 84.
The Respondent conceded that the records of RPS had not revealed any formal employment contract between the company and Bryan. At its highest, there is some internal correspondence in which Bryan is described as being ‘employed full-time’[29] and paid on a regular basis which was ‘allocated against a shareholder’s loan, then “sorted out with a dividend at years end”’.[30]
[29] RSFIC at [70].
[30] Ibid at [71].
A contract for the performance of personal services under which regular payments are made for those services is not necessarily an employment contract. A provider may be an agent, an independent contractor, an employee, or a person with an interest in the general advancement of the other party. The provision of personal services under a contract does not by itself indicate the legal relationship between the contracting parties.
There is no evidence to support the existence of any formal employment contract between Bryan and the company. Indeed, the evidence of any pre-existing contract between Bryan and RPS during the many years prior to his formal appointment is ephemeral. The existence of a contract between Bryan and RPS is said to be based on an oral agreement between Bryan and the proprietor, his older brother, William. Under cross-examination, Bryan said that there was an oral agreement, and I accept that there was such an agreement, although its terms are unclear.[31]
[31] Transcript at 23.
The Ralan Group of entities involved four brothers working in varying roles, from CEO and proprietor to administrator to maintenance man, in one corporate enterprise. The disparity of power and authority between the siblings was immense. This is apparent from the way in which the Applicant and Bryan were engaged by the company. The Applicant was employed on a standard employment contract specifying in considerable detail his entitlements such as a car or telephone allowance. The contract was entirely appropriate for his status within the company, and the nature of the work he was contracted to perform. By contrast, Bryan carried out a much more senior role; apparently, without any formal contract. The family element is a distinctive feature of this case.
William and Bryan were apparently both founding shareholders of RPS, but William was the CEO and proprietor. There is a dearth of evidence before the Tribunal as to the degree to which Bryan was supervised or controlled in his daily activities by the CEO.
The Respondent submitted that Bryan was responsible in an operational sense for certain core activities, including supervising the trust accounts and interacting with landlords. He had a business card which described him as a ‘Senior Associate’, and had an email address and an office. The Respondent noted that Bryan was paid a regular amount, which was strongly indicative of an employment relationship.
Bryan’s role was confined to running the rent roll business. Was he an employee or an equity owner advancing his own interests? Unfortunately, this case cannot be decided by whether he wore a uniform with a company logo (he did not). Although he had an office, his business card, marked simply ‘Senior Associate’, was somewhat anodyne. It did not clearly represent anything. He may have identified with the corporate group in general or RPS in particular, as fitting his role of brother of the proprietor, a shareholder, and later, a director.
Bryan gave evidence that he saw himself as an employee. But I note that there were no deductions for payroll tax, or provision for superannuation contributions or leave loadings. Brian did not receive holiday pay and no provision was made for sick leave. Bryan said that he had almost no superannuation, although he had been engaged with company activities since at least 1999.
For income tax purposes, Bryan declared his income as dividend payments. The materials before the Tribunal include his taxation estimates for 2014 and 2015. There is no reference to payment for wages or salary. His Taxable Income is listed as Interest and Dividends and he received substantial franking credits in each of those years.
A significant element in the present case is that the RPS liquidators are seeking to recover monies paid to Bryan, said now by the Respondent to be salary or in lieu of salary, as part of the winding up process. While Bryan regarded his contract with the company to be one of employment, clearly RPS did not. The extent to which a finding by the Tribunal that Bryan was an employee would cut across those recovery efforts is unclear.
Bryan’s assessment that he was an employee during the relevant period is perhaps not surprising, given the demand made by the liquidator to recover monies paid to him on the basis that he was not an employee. But the visible outward signs of an employment relationship are absent.
Bryan’s role did not change after his appointment as a director, or indeed, after his formal appointment as an employee. This fact is inconclusive. The Respondent says in effect, ‘He was an employee before those formal appointments, and remained so afterwards’. It is equally consistent with the characterisation of his role as that of an entrepreneur building the business, somewhat in the shadow of his old brother, the proprietor, who clearly held the reins of power within the entire group.
The present case sits on the borderline where the multifactorial approach does not produce any single clear answer.
This case seems to be more aligned with that of Jeremy Taylor v Auto Loans Group Pty Ltd T/A AutoCarLoans.com.au [2018] FWC 1950 (5 April 2018) where the Tribunal noted:
[54] In order to find that the Directors were employees of ALG, I would need to be satisfied that a contract of employment existed between them. Mr McPherson gave evidence that he is involved in high level strategic, marketing and technology matters and is responsible for hiring and firing employees for ALG, but is not involved in its day to day dealings. Neither he nor Mr Tushuizen have an employment agreement nor any specific roles or duties. He derives income from ALG through dividends as a shareholder in Odin Marketing and has no entitlement to wages or superannuation. He is not covered by ALG’s workers compensation policy. Mr Tushuizen’s evidence and submissions suggest a similar relationship with ALG, except that his shareholding and entitlement to dividends is derived from other associated entities of ALG. (footnotes omitted)
[55] No evidence put forward by Mr Taylor contradicted this evidence, and references to Mr Tushuizen’s role in Mr Taylor’s Employment Agreement is not evidence of a contract of employment between ALG and Mr Tushuizen.
[56] There is no other evidence to show that either of the Directors were employees of ALG. The evidence simply does not reach the requisite threshold. I am not satisfied that there was a contract of employment between ALG and either of the Directors.
I am not satisfied that the manner in which Bryan performed the duties of his office marked him as an employee, as well as a director and shareholder. He represented the company but that is consistent with his role as a shareholder powerfully connected with the proprietor.
On the basis of the evidence before the Tribunal, I find that Bryan provided his services under an oral agreement to take responsibility for certain operational matters. He was a shareholder who received regular dividend payments, which were declared for income tax purposes. He was essentially an equity partner. He was in it for the profit, and not just in anticipation of receiving a regular wage.
I find that Bryan was not employed by RPS during the 12 months prior to the relevant date. Therefore, neither he, nor the Applicant, is an ‘excluded employee’ under the FEG Act.
I therefore set aside the decision under review and remit the matter to the Department for further processing.
DECISION
The reviewable decision dated 25 March 2020 is set aside and remitted to the Secretary with a finding that the Applicant is not an ‘excluded employee’ within subsection 556(2) of the Corporations Act 2001 (Cth).
I certify that the preceding 40 (forty) paragraphs are a true copy of the reasons for the decision herein of Emeritus Professor P A Fairall, Senior Member
..............................[SGD]..........................................
Associate
Dated: 15 July 2021
Date(s) of hearing: 23 March 2021 Applicant: In person Solicitors for the Respondent: Ms K Cooke, HWL Ebsworth Lawyers
9
0