Pratt v Hismelt Corporation Pty Limited
[2008] WADC 133
•10 SEPTEMBER 2008
PRATT -v- HISMELT CORPORATION PTY LIMITED & ANOR [2008] WADC 133
| DISTRICT COURT OF WESTERN AUSTRALIA | Citation No: | [2008] WADC 133 | |
| Case No: | CIV:2884/2001 | 19-21 AUGUST 2008 | |
| Coram: | MAZZA DCJ | 10/09/08 | |
| PERTH | |||
| 28 | Judgment Part: | 1 of 1 | |
| Result: | Preliminary issues resolved in favour of first defendant | ||
| PDF Version |
| Parties: | DAVID ANTHONY PRATT HISMELT CORPORATION PTY LIMITED HITACHI POWER TOOLS AUSTRALIA PTY LTD |
Catchwords: | Workers' compensation Trial of preliminary issues Application of deemed employer provisions in Workers' Compensation and Rehabilitation Act 1981, s 175 Whether defendant deemed employer Meaning of "employed" Whether plaintiff employee or independent contractor |
Legislation: | Workers' Compensation and Rehabilitation Act 1981, s 5, s 175 |
Case References: | Omega Homes Pty Ltd v Koteski; Dispute Resolution Directorate of Western Australia; C11-2008 Foster v Chief Executive Officer of the Department of Agriculture [2006] WASCA 95 Hewitt v Benale Pty Ltd (2002) 27 WAR 91 Hollis v Vabu Pty Ltd (2001) 207 CLR 21 Jones v Wesfarmers Ltd [2003] WASCA 225 Marsden v Unimin Australia Limited [2004] WASCA 143 Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers [2004] WASCA 321 Royal v Alcoa of Australia Ltd [2004] WASCA 269 Stevens v Brodribb Sawmilling Co Pty Ltd (1988) 160 CLR 16 Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 |
JURISDICTION : DISTRICT COURT OF WESTERN AUSTRALIA
- IN CIVIL
- Plaintiff
AND
HISMELT CORPORATION PTY LIMITED
First Defendant
HITACHI POWER TOOLS AUSTRALIA PTY LTD
Second Defendant
Catchwords:
Workers' compensation - Trial of preliminary issues - Application of deemed employer provisions in Workers' Compensation and Rehabilitation Act 1981, s 175 - Whether defendant deemed employer - Meaning of "employed" - Whether plaintiff employee or independent contractor
Legislation:
Workers' Compensation and Rehabilitation Act 1981, s 5, s 175
(Page 2)
Result:
Preliminary issues resolved in favour of first defendant
Representation:
Counsel:
Plaintiff : Mr L Gandini
First Defendant : Ms F Davis
Second Defendant : No appearance
Solicitors:
Plaintiff : Chapmans
First Defendant : DLA Phillips Fox
Second Defendant : Not applicable
Case(s) referred to in judgment(s):
Foster v Chief Executive Officer of the Department of Agriculture [2006] WASCA 95
Hewitt v Benale Pty Ltd (2002) 27 WAR 91
Hollis v Vabu Pty Ltd (2001) 207 CLR 21
Jones v Wesfarmers Ltd [2003] WASCA 225
Marsden v Unimin Australia Ltd [2004] WASCA 143
Omega Homes Pty Ltd v Koteski; Dispute Resolution Directorate of Western Australia; C11-2008; 8 July 2008
Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers [2004] WASCA 312
Royal v Alcoa of Australia Ltd [2004] WASCA 269
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16
Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537
(Page 3)
- MAZZA DCJ:
Introduction
1 On 11 March 2008 Judge Stevenson ordered a trial of preliminary issues in this action. His Honour's order defined those issues as:
"1.1 Whether the first defendant is a 'principal' for the purpose of s 175 of the Workers' Compensation and Injury Management Act 1981 (formerly known as theWorkers' Compensation and Rehabilitation Act 1981 (Act);
1.2 Whether s 175 of the Act deems the first defendant to be the plaintiff's employer for the purposes of Part IV Division 2 of the Act;
1.3 If s 175 of the Act deems the first defendant to be the plaintiff's employer for the purposes of Part IV Division 2 of the Act, whether Part IV Division 2 applies to the awarding of damages against the first defendant in respect of the injuries the plaintiff allegedly received in the accident pleaded in paragraph 12 of the statement of claim;
1.4 If so, whether damages can be awarded against first defendant:
1.4.1 If it is found that the plaintiff has entered into an agreement with Kiam Corporation under s 67(1) of the Act and a memorandum of that agreement has been registered under s 76 of the Act;
1.4.2 Irrespective of whether it is found that the plaintiff has entered into an agreement with Kiam Corporation under s 67(1) of the Act."
3 The second-named defendant is no longer a party to these proceedings. The plaintiff's claim against the second defendant was dismissed by order of Registrar Wallace on 7 June 2005. Leave to appeal this decision out of time was refused by Judge Wager on 25 November 2005.
(Page 4)
4 In this judgment I will refer to the first named defendant as defendant.
Background
5 The plaintiff is a qualified boilermaker. The defendant was at all material times, a research and development company wholly owned by CRA (now Rio Tinto) and was engaged in developing a new technology for the smelting of iron ore. For this purpose, it built a pilot plant at Kwinana. The pilot plant would run for a period of time, referred to as a "campaign", and would then shut down so that the process could be evaluated and the plant modified and maintained.
6 The defendant retained Kiam Corporation Pty Ltd ("Kiam") to perform various maintenance and project works at the plant. Kiam describes itself on its letterhead as being maintenance engineers and engaged in project support. Kiam retained the plaintiff as part of its team of workers. The plaintiff pleads that he was an independent contractor. The defendant pleads that he was an employee of Kiam.
7 Between about early September 1997 and May 1998 the plaintiff worked at the defendant's plant performing various duties. He claims that while working at the defendant's plant he used several types of vibrating tools. He alleges that the defendant required him to work excessively long periods with these vibrating tools and as a result during the period between September 1997 and 15 January 1998 he suffered certain injuries which are commonly referred to as carpal tunnel syndrome. He alleges that the defendant owed him a duty of care and that its conduct towards him was negligent and/or in breach of a number of statutory duties. The plaintiff alleges that he is entitled to damages from the defendant for his injuries.
8 The defendant denies that it was negligent or in breach of any statutory duty. Further, and most relevantly for these proceedings, the defendant alleges that it was, along with Kiam, one of the plaintiff's deemed employers pursuant to s 175(1) of the Act.
9 If the defendant is the plaintiff's deemed employer, the plaintiff concedes that he will not be entitled to damages because the defendant will be entitled to the protection afforded by Part IV Div 2 of the Act: Hewitt v Benale Pty Ltd (2002) 27 WAR 91. In general terms, that part of the Act sets out a number of constraints on awards of common law damages. Pursuant to s 93E(3) and (4) of the Act the plaintiff is not entitled to be awarded damages if he fails to establish that his injuries
(Page 5)
- have resulted in a degree of disability of not less than 16 per cent. The question of the plaintiff's degree of disability was resolved in proceedings taken by the plaintiff against Kiam. A review officer of the Conciliation and Workplace Safety Directorate determined on 30 March 2001 that the plaintiff's degree of disability was less than 16 per cent.
10 In these circumstances, the plaintiff, acknowledges, that if the defendant is a deemed employer within the provisions of s 175(1) of the Act he cannot be awarded damages and his claim must be dismissed.
Section 175 of the Act
11 Section 175 of the Act was at all relevant times in the following terms:
"175. Principal contractor and sub-contractor deemed employers
(1) Where a person (in this section referred to as the principal) contracts with another person (in this section referred to as the contractor) for the execution of any work by or under the contractor and, in the execution of the work, a worker is employed by the contractor, both the principal and the contractor are, for the purposes of this Act, deemed to be employers of the worker so employed and are jointly and severally liable to pay any compensation which the contractor if he were the sole employer would be liable to pay under this Act.
(2) The principal is entitled to indemnity from the contractor for the principal's liability under this section.
(3) The principal is not liable under this section unless the work on which the worker is employed at the time of the occurrence of the disability is directly a part or process in the trade or business of the principal.
(4) Where the principal and the contractor are jointly and severally liable under this section, a judgment obtained against one is not a bar to proceedings
- against the other except to the extent that the judgment has been satisfied.
- (5) Where compensation is claimed from or proceedings are taken against the principal, in the application of this Act a reference to the employer shall be read as a reference to the principal except where, for the purpose of calculating the amount of compensation, a reference is made to the earnings of a worker, the reference shall be read as a reference to the earnings of the worker under the contractor.
(6) For the purposes of this section, where sub-contracts are made –
(a) 'principal' includes the original principal for whom the work is being done and each contractor who constitutes himself a principal with respect to a sub-contractor by contracting with him for the execution by him of the whole or any part of the work;
(b) 'contractor' includes the original contractor and each sub-contractor; and
(c) a principal's right to indemnity is a right against each contractor standing between the principal and the worker.
(7) Where the disability does not occur in respect of premises on which the principal has undertaken to execute the work or which are otherwise under his control or management, subsections (1) to (6) inclusive do not apply."
The onus of proof
12 The defendant, having alleged that it is a deemed employer, bears the onus of proving on the balance of probabilities that it comes within the ambit of s 175 of the Act.
13 The defendant has pleaded that it is a principal within the meaning of s 175 of the Act and thus a deemed employer of the plaintiff.
(Page 7)
What must the defendant prove?
14 It was common ground between the parties, following the opinion of Jenkins J in Royal v Alcoa of Australia Ltd [2004] WASCA 269 at [58], that for the defendant to establish that it was the plaintiff's deemed employer it must prove the following:
(a) that it contracted with Kiam for the execution of work by or under Kiam; and
(b) in the execution of the work, the plaintiff was employed by Kiam; and
(c) the work on which the plaintiff was employed at the time of the occurrence of the plaintiff's disability was directly a part or process in the trade or business of the defendant; and
(d) the plaintiff's disability occurred in respect of premises on which the defendant had undertaken to execute the work or which were under its control or management.
- Although the plaintiff put the defendant to proof of each of these facts, no specific argument was put by the plaintiff to the effect that the defendant had not proved (c) and (d).
The evidence
15 The oral evidence in this case was relatively brief spread out over three hearing days. I heard from an employee of the defendant, John Llewellyn, who was the supply superintendent at the plant during the relevant period. I also heard evidence from Ian Barker, the projects and maintenance engineer for the project, who was at all relevant times employed by Kvaerner Metals Pty Ltd ("Kvaerner"). Kvaerner was retained by the defendant to provide engineering and maintenance services at the plant. I also heard evidence from the plaintiff. A total of 16 documentary exhibits were also tendered. Exhibits 1 to 11 established the course of the plaintiff's workers compensation proceedings against Kiam and were uncontroversial. Exhibits 12A and B were books of documents which were tendered by consent and contain documents held by the defendant relating to its contractual arrangements with Kiam, duties undertaken by the plaintiff, the hours the plaintiff worked on those duties and payments made by the defendant to Kiam for, amongst other things, the plaintiff's work at the plant.
(Page 8)
16 All the witnesses who gave oral testimony did their best to recall events which occurred more than 10 years ago. I accept that all of the witnesses were honest and were reasonably accurate, if somewhat general, in their recollections. The documents which were tendered, particularly the contemporaneous documents in Exhibits 12A and 12B, were helpful in ascertaining the contractual arrangements between the defendant and Kiam and the work actually undertaken by the plaintiff.
John Eric Llewellyn
17 At all relevant times Mr Llewellyn was the defendant's supply superintendent.
18 He testified that between 1993 and 1999 the defendant, a wholly owned subsidiary of CRA (now Rio Tinto) built a pilot iron smelting plant in Kwinana. The defendant conducted research and development into a new iron smelting technology to process Hamersley iron fines without using a blast furnace. Instead, the process used what was called a smelt reduction vessel.
19 The plant was operated over a number of periods which were referred to as "campaigns". Those campaigns lasted from a few hours to up to 38 days. Once a campaign was completed the plant went into a shut-down phase during which time the process was evaluated and, where necessary, modifications and maintenance of the plant were undertaken.
20 Mr Llewellyn explained that the defendant retained a number of contractors during both the campaign and the shut-down periods. The project engineers at the plant were Kvaerner. Kvaerner built the plant and remained on site to supervise any major plant modifications and to oversee the plant's maintenance. Kiam were maintenance contractors. It worked in accordance with a number of minor service contracts entered into between it and the defendant.
21 Mr Llewellyn said, pursuant to these contracts, Kiam was given particular tasks to perform by the defendant. Kiam provided workers and supervisors for those workers. Kiam also provided some plant and equipment.
22 Mr Llewellyn said that a representative from the defendant liaised with the Kiam supervisor to ensure that the work was being done by Kiam in a timely and satisfactory manner.
(Page 9)
23 Mr Llewellyn said that during the period between September 1997 and mid-January 1998 the defendant entered into four miscellaneous contracts ("MSC") with Kiam. Of these the most relevant were miscellaneous service contracts 775, 825 and 849. MSC 775 was entered into on 25 July 1997. The scope of the contract was described in that document in the following terms:
"Provide fabrication and maintenance support for project and miscellaneous work as directed by (sic) Hismelt representative.
Rates as per your proposal dated 9 July 1997.
Hismelt work request (Job Number) to be quoted at all times. Daily time sheets to be authorised for all on-site work."
24 The value of each minor service contract was specified as being "up to $100,000".
25 Each of MSC 825 and 849 dated 25 September 1997 and 12 December 1997 respectively, were expressed to be continuations of MSC 775.
26 The reference to a proposal dated 9 July 1997 refers to a letter sent to the defendant by Kiam dated 9 July 1997 (exhibit 12A, pp 10 – 29). The letter contains Kiam's labour and equipment rates and conditions for the work which was to be performed on site. The site labour rates for various workers including supervisors and boilermakers are specified. Expressly included in those rates were:
"Workers compensation, public risk insurance, payroll tax, superannuation, long service leave, annual leave, sick leave, all hand tools under the value of $500 per item, overheads and profit."
27 Mr Llewellyn said that whenever the defendant wanted a particular job done, it raised a job request form which contained a job number. That form was given by a representative of the defendant to someone from Kiam. Kiam, he said, would then perform the requested work using its own workers.
28 Kiam recorded each day's work on a document called a daily site hours and equipment report. This report included the number of hours worked and the names of those who did the work. That report was signed
(Page 10)
- by representatives of the defendant and Kiam and a copy was given to the defendant while the original was retained by Kiam.
29 From the daily site hours and equipment reports Kiam prepared a payment claim and invoice addressed to the defendant. Each payment claim included a reference to the relevant daily site hours and equipment report or reports. Mr Llewellyn said that each payment claim was checked on behalf of the defendant and if it was in order it would be signed off for payment.
30 A bundle of daily site hours and equipment reports for the period between 4 September 1997 and 27 October 1997 was received into evidence as part of Exhibit 12A. I was told that the defendant was unable to find the daily site hours and equipment reports from 27 October 1997 through to 18 January 1998. However, the defendant was able to locate and produce spreadsheets which contain the information that would have appeared on the missing daily site hours and equipment report.
31 The defendant also tendered into evidence each payment claim and invoice made by Kiam for the period 25 September 1997 to 30 January 1998.
32 I was not provided with the defendant's job request forms but the various works that the defendant requested Kiam to perform were provided to me in the form of documents called total labour summaries for the period 24 July 1997 through to 24 September 1998. The work request numbers in those summaries correspond with the work request numbers in the daily site hours and equipment reports and the spreadsheets.
Mr Ian Barker
33 Mr Barker is an engineer by profession. He said that he was employed by Kvaerner in 1997 to work at the Hismelt plant. Whilst there, he worked as a project engineer and a maintenance engineer.
34 Mr Barker explained that Kvaerner were contracted by the defendant to provide engineering and project management expertise. He said that he was responsible for the execution of minor projects in relation to plant improvements, plant repairs and, for a period of time, plant maintenance. Mr Barker explained that Kiam performed work in relation to minor projects at the plant. He said that he was responsible for the execution of these projects in terms of their cost and quality but he said that he was not
(Page 11)
- responsible for the daily supervision of Kiam's workers. That task was performed by Kiam's own supervisors.
35 Mr Barker said that when the need for a particular job was identified he would consult with the Kiam supervisor and discuss the time that it would take to perform the task, as well as the workforce and equipment that was required to complete it. Subsequently, a job request form was filled out and given to Kiam to execute.
36 Mr Barker said that he signed Kiam's daily site hours and equipment report on behalf of the defendant and that he took the defendant's copy of that document and gave it to its purchasing department.
37 Mr Barker testified that Kiam provided a supervisor and usually no more than four or five workers for a particular project. He said that Kiam was left to sort out the hours its tradesmen worked.
38 Mr Barker agreed that he was engaged by the defendant to oversee the work of contractors such as Kiam and to ensure that the work was done pursuant to the minor services contract entered into by Kiam and the defendant.
39 Mr Barker was taken through Kiam's daily site hours and equipment reports and asked to explain the various jobs specified in those reports. Those jobs could fairly be described as minor fabrication works in or about the smelting plant.
Mr David Pratt
40 Mr Pratt said that he was a boiler maker by trade. He said that he was engaged to work by Kiam at Hismelt by way of what I take to be, an oral contract. In broad terms he described the work at Hismelt as: "Doing general boiler making and maintenance work." Later in his evidence he said that during a campaign he did some work on the cast-house floor. During shut down periods he worked on fabrication and maintenance projects.
41 He said he received an induction from Mr Llewellyn and then went to work on the plant floor.
42 Mr Pratt said that Kiam provided two supervisors, Russell Suratram who worked up until about the end of October 1997 and after that, John Walker.
(Page 12)
43 Mr Pratt said that he was told to perform work either by his supervisors, or from time to time, from a Hismelt employee named Don Deveson. He said that there were occasions when Mr Deveson would override Kiam's supervisor. As Mr Pratt put it at T184:
"He would actually physically take you off a job and get you to do something else during the process of doing another job. He would take you off that and put you on something that he wanted done specifically."
- As to how frequently this would happen, Mr Pratt was not precise. At T184 he used the word "often", at T199 he said about Mr Deveson:
"There were quite a few occasions where he would insist that he stayed extra hours to do thing he wanted done."
45 The plaintiff tendered his personal income tax returns for the years 1996/1997, 1997/1998. These showed that he conducted a boiler making services business under his own name. This business was conducted from his house. Each taxation return showed that his business income came from boilermaking activities and he had business expenses which were mostly related to the depreciation and running of a motor vehicle. There were small expenses associated with a home office and public liability insurance.
46 The plaintiff said that initially he provided Kiam with invoices for his work but in time he was paid a weekly amount after Kiam made deductions pursuant to the Prescribed Payment System (PPS).
47 Mr Pratt said that he was expected to be on site each day at 6 am regardless of the hours that he worked the day before. He said that in the period during which he allegedly sustained his injuries he worked for no one else apart from Kiam.
48 He said that all times he regarded himself as providing services as a sub-contracting tradesman to Kiam. He said that Kiam paid for his workers' compensation insurance and that during the relevant period he
(Page 13)
- had no employees. He said that he had no power to delegate to anybody else work that Kiam requested him to do. He agreed that he did not decide what hours he worked at Hismelt.
Findings of fact
49 There were, in truth, few disagreements on the facts. I make the following finds of fact which seem to me to be uncontroversial:
1. From the period 1993 to 1999 the defendant was engaged in the research and development of a new iron smelting technology to process Hamersley Iron fines without using a blast furnace at its pilot plant in Kwinana. The plant was operated over periods which were called campaigns. Once a campaign was completed the plant was shut down during which time the process was evaluated and, where necessary modifications of maintenance were undertaken.
2. The defendant contracted with a number of other companies to provide it with various services and workers. Amongst those that the defendant contracted with, were Kvaerner who were retained as the project engineers and Kiam who were maintenance contractors. The defendant and Kiam entered into a number of miscellaneous service contracts being, relevantly to this case, Nos 775, 825 and 849. The first of these was MSC775 dated 25 July 1997. Each of MSC825 and 849 dated 25 September 1997 and 12 December 1997 respectively were continuations of MSC775.
3. Pursuant to the terms of each of these MSCs, Kiam contracted to provide the defendant with the "fabrication and maintenance support for project and miscellaneous work as directed by Hismelt representatives".
4. The plaintiff was retained by Kiam in or about late August or very early September 1997 to work at the defendant's Kwinana premises.
5. In the period commencing on or about 4 September 1997 up to and about 15 January 1998 the plaintiff worked at the defendant's premises and nowhere else.
6. The plaintiff performed work usually along with another Kiam worker and very often with one of Kiam's supervisors, either Russell Suratnam or John Walker.
7. The defendant and Kiam put in place the following system:
- (a) in order for Kiam to perform work under the MSCs, the defendant would issue Kiam with a work request form;
(b) Kiam would then allocate a worker or workers to the job;
(c) Kiam Corporation would each day issue to the defendant a site hours and equipment report which specified the worker request form number, the task undertaken, the workers who performed the task and their hours of work. That report would be signed by representatives of both the defendant and Kiam and then retained by the respective parties; and
(d) based on the hours recorded on the site hours and equipment report, Kiam would issue a payment claim and invoice. Those documents would be sent to the defendant where they were checked and approved if they were in order.
- 8. The plaintiff performed the duties set out in the daily site hours and equipment reports in Exhibit 12A, pp 30 to 62 and the duties attributed to him in the spread sheets in Exhibit 12A, from page 63 to the first line on p 75. Those duties are summarised in the labour summaries Exhibit 12A, pp 81 to 84. All of these duties were performed pursuant to MCS775, 825 and 849.
9. During the period from early September 1997 to 15 January 1998:
(a) Kiam paid the plaintiff weekly and deducted from his income PPS payments;
(b) Kiam paid the plaintiff's workers' compensation insurance;
(c) the plaintiff was not free to dictate his own work hours nor could he delegate his work to anyone else;
(d) when working on the plant floor (as opposed to the cast house) he wore pants and a shirt provided to him by Kiam. When he wore overalls he provided his own;
(e) the plaintiff had an extensive tool kit. However, consumables and other tools of equipment were provided by Kiam.
10. If the plaintiff was injured between September 1997 and 15 January 1998 he was injured whilst working at the defendant's Kwinana premises. These were premises that were controlled and managed by the defendant.
(Page 15)
- 11. The various works that the plaintiff was engaged in at the defendant's premises at the time of his injury were directly a part or process of the defendant's trade or business. The defendant's purpose was to research and develop a new iron smelting process. Part and parcel of this purpose was to run the plant and then evaluate its performance in the shut down phase. That necessarily involved maintaining, repairing and improving the plant; see Jones v Wesfarmers Ltd [2003] WASCA 225 per Malcolm CJ at [47] – [50].
Issues in dispute
50 As a result of these findings of fact and returning to the four criteria referred to by Jenkins J in Royal v Alcoa of Australia Ltd (supra) referred to earlier, neither (c) nor (d) are controversial and have been established in my opinion by the defendant. At the heart of this dispute are criteria (a) and (b) and it is these criteria that I now turn:
Did the defendant contract with Kiam for the execution of work by or under Kiam?
51 It is not disputed that the defendant and Kiam entered into the MSCs. However, do these contractual arrangements amount to a contract for the execution of work? In Foster v Chief Executive Officer of the Department of Agriculture [2006] WASCA 95 Wheeler JA said at [11] and [12]:
"… It seems to me that there is a distinction to be drawn between a contract for the execution of work, which one would generally understand to be the execution of some particular task, even if broadly defined, and one for the temporary provision of workers for the purpose of assisting the principal to complete whatever tasks the principal has set itself. So far as the Act is concerned, the distinction appears to me to emerge when one compares the extended definition of 'employer' in s 5 with the terms of s 175. The definition of 'employer' is relevantly as follows:
' "employer" ... and, where the services of a worker are temporarily lent or let on hire to another person by the person with whom the worker has entered into a contract of employment the latter shall ... be deemed to continue to be the employer of the worker ...
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- The focus of that definition is on the provision of the services of a worker. The focus of s 175 is on the contract for the execution of work. It is, of course, possible to contemplate agreements which are agreements both for the provision of workers and for the execution of work; for example, where there is a contract for particular identified work and there is further an identification of the manner in which particular workers are to be made available to perform that task. However, the two concepts are distinct and very often an agreement will be able to be characterised as simply one or the other."
52 Wheeler JA acknowledged that this approach appears inconsistent with the decision in Marsden v Unimin Australia Ltd [2004] WASCA 143. However, she, and the other two members of the court were of the view that Marsden was "so plainly incorrect that it should not be followed": [15]. In these circumstances and given that Foster was decided after MarsdenI have decided thatFoster should be followed.
53 Under the terms of the MSCs, the defendant as the principal, contracted with Kiam as the contractor, for Kiam to "provide fabrication and maintenance support for project and miscellaneous work as directed by Hismelt representative".
54 The contracts are I think for the execution of work, albeit broadly defined. In my opinion this is plainly conveyed by the words "project and miscellaneous work as directed by Hismelt representative". In addition, in my opinion, the contracts are also contracts for the supply of workers. This is because the words "provide fabrication and maintenance support" refer to a supply of workers. This is reinforced by Kiam's letter of 9 July 1997 which speaks about the provision of supervisors and workers to perform the tasks specified in the contract.
55 I would categorise the MSCs as "dual" contracts both for the provision of workers and for the execution of work as contemplated by Wheeler JA in [12] of Foster v Chief Executive Officer of the Department of Agriculture.
56 I find that the MSCs entered into between the defendant and Kiam were contracts for the execution of work as provided for in s 175(1) of the Act.
(Page 17)
57 The next issue to decide is whether the contract between the defendant and Kiam is a contract for the execution of work "by or under" Kiam.
58 Wheeler JA in Foster v Chief Executive Officer of the Department of Agriculture considered the meaning of the words "by or under" at [18] she said:
"It seems to me that the words 'by or under' require some degree of control or supervision greater than that implicit in merely providing an employee for a task. If that were not the case, it is difficult to see what the words 'by or under' the contractor would add to the further requirement contained in s 175(1) that, in the execution of the work, the worker be employed by a contractor."
59 Pursuant to the terms of the MSCs, Kiam was required to perform work "as directed by Hismelt representative".
60 Those words need to be interpreted in light of the words which appear in MSC775 (bearing in mind that MSC825 and 849 are continuations of MSC775) "Hismelt work request (job number) to be quoted at all times. Daily time sheets to be authorised for all on-site work".
61 The system which was put in place between the defendant and Kiam required Kiam only to perform work having received a work request form. While that work request form specified the task to be undertaken by Kiam, it did not specify how that job was to be executed, that was left to Kiam. In my opinion Kiam did more than merely provide labour, it actually executed the contracted works.
62 Mr Gandini submitted that the contract between the defendant and Kiam was for the execution of work by or under the defendant, or Kvaerner. He pointed to the evidence of Mr Barker and submitted that Mr Barker was in reality the supervisor of the day to day work being conducted by Kiam and that he was acting either on behalf of the defendant or Kvaerner. Ms Davis submitted that the evidence plainly supported the contention that the plaintiff was performing work by or under Kiam.
63 With respect to Mr Gandini, his submission overlooks Mr Barker's evidence that he was acting as the defendant's representative in connection with the MSCs between the defendant and Kiam. There is nothing to
(Page 18)
- support the contention that the execution of any work was by or under Kvaerner.
64 Mr Barker in his evidence said that while it was his duty to ensure that Kiam performed its work in a timely and satisfactory manner, the day to day execution of that work was left to Kiam.
65 The plaintiff referred to Mr Deveson in his evidence. It would appear from the plaintiff's evidence that there were occasions in which Mr Deveson, the operations manager of the defendant, directed the plaintiff and perhaps others from Kiam to work extra hours and to perform tasks he wanted done.
66 The evidence with respect to Mr Deveson is vague. Mr Deveson did not give evidence because he has passed away. It is not clear to me whether Mr Deveson would on occasion allocate specific jobs to Kiam for Kiam to execute or whether he would actually supervise the works. Mr Deveson, as the defendant's operations manager, would have had the right to direct Kiam to perform certain tasks and perhaps for Kiam to stop performing one task and do another. But this does not convey to me that the contract between the defendant and Kiam was a contract for Kiam to execute work by or under the defendant. None of the daily site hours and equipment reports have been signed by Mr Deveson nor was any payment claimed for work issued by Kiam signed by him. Further, I do not know whether Mr Deveson acted under the MSCs relevant to this case or under other MSCs. Finally I do not know when Mr Deveson made his requests. While I accept that there were occasions when Mr Deveson requested Kiam to perform work that does not, in my opinion, mean that the contracts between the defendant and Kiam relevant to this case were contracts for the execution of work by or under the defendant.
67 Drawing all these strands together, I find that the defendant contracted with Kiam for the execution of work by or under Kiam.
Was the plaintiff employed by Kiam in the execution of work?
68 The defendant submitted that the plaintiff was employed by Kiam. In its submission the defendant submitted that the word "employed" is a synonym for the word "use". The defendant's submission is that the word "employed" was wide enough to embrace an employment relationship between the defendant and the plaintiff that was either one of master and servant or a contract for services where the plaintiff was an independent contractor.
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69 The plaintiff's submission was that the word "employed" refers only to a master and servant relationship and that the plaintiff was an independent contractor who contracted with Kiam for the provision of his services to it. Accordingly, the defendant has not demonstrated that the plaintiff "was employed" by Kiam in the execution of the work.
70 In order to resolve these competing submissions I must first decide what the word "employed" means in the phrase contained in s 175(1) "a worker is employed by that contractor". If I accept the defendant's submission, then it will not matter whether the plaintiff was in a master/servant relationship with Kiam or was an independent contractor, as either way the plaintiff was "used" by Kiam. However, if I accept the plaintiff's submission it will be necessary to analyse the employment relationship between the plaintiff and Kiam to see whether it was a master/servant relationship or one where the plaintiff worked for Kiam as an independent contractor.
71 There is little authority as to the meaning of "employed" in s 175(1) of the Act. However the matter is not completely free of judicial guidance. In Royal v Alcoa of Australia Limited (supra) McLure JA said at [13]:
"On a proper construction of s 175, in particular subs (1), (3) and (7), there must be a connection between the injury and the execution of the contractual works. As to the phrase 'in the execution of the work, a worker is employed by the contractor' in subs (1) of s 175, execution means the carrying out or performance of the work; work means work pursuant to the contract between the principal and contractor; and worker is employedmeans the contractor employs (uses) his worker in carrying out the work under the contract." (Emphasis added.)
72 McClure JA considered the word "employed" was synonymous with the word "uses". The word "uses" is wide in its scope and, in my opinion is wide enough to pick up both a master and servant relationship and where a worker is an independent contractor.
73 The word "employ" is not defined in the Act. However, the word "worker" is defined in s 5. The definition of the word "worker" is extensive, it includes a master and servant relationship but also covers an independent contractor:
"The term "worker" save as aforesaid, also includes:
- (a) …
(b) any person engaged by another person to work for the purpose of the other person's trade or business under a contract with him for service, the remuneration by whatever means of the person so working being in substance for his personal manual labour or services."
74 In my opinion it would be inconsistent with the definition of the word "worker" for the word "employed" to mean only a contract of service between master and servant.
75 Further, in s 175(3) the word "employed" appears again. That sub-section is in the following terms:
"The principal is not liable under this section unless the work on which the worker is employed at the time of the occurrence of the injury is directly a part or process in the trade or business of the principal."
76 There, the word "employed" is plainly synonymous with the word "used".
77 I can see no reason why the word "employed" in s 175(1) of the Act should be read in the restricted way urged upon me by Mr Gandini. In my opinion, the word "employed" means "uses" and accordingly covers both the master/servant relationship and the plaintiff's alleged subcontractual relationship.
78 However, if I am wrong in this interpretation and the word "employed" means only a master/servant relationship, I am of the view that the relationship between the plaintiff and Kiam was a master/servant relationship.
79 Meagher JA observed in Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 at 538 it is "almost never an easy task to decide whether a given person is an employee or an independent contractor."
80 The relevant legal principles were conveniently and accurately set out by Commissioner McCann in Omega Homes Pty Ltd v Koteski; Dispute Resolution Directorate of Western Australia; C11-2008; 8 July 2008. After referring to the leading cases in this area including Stevens
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- v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Hollis v Vabu Pty Ltd (2001) 207 CLR 21 and Personnel Contracting Pty Ltd t/as Tricord Personnel v The Construction Forestry Mining and Energy Union of Workers [2004] WASCA 312, he said at [10]: omitting citations,
"The modern approach to the characterisation of the employment relationship has regard to a variety of evidentiary criteria or 'indicia'. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances, no single one is conclusive and some overlap with each other. It is necessary to have regard to the totality of the relationship between the parties, and each case must be considered in its own circumstances. For completeness it is convenient to set out those which have been considered in the case law:
(i) the balance of control between the parties (as explained above);
(ii) the arrangements for the remuneration of the worker. A contract of service is not precluded by the fact that the worker's remuneration is directed to him through the hands or account of another person or entity pursuant to an administrative arrangement. In such cases the intermediary or third party is regarded as a mere conduit for the payment;
(iii) the arrangements for the payment of statutory superannuation and income-related taxes: The fact that the worker is responsible for payment of his own tax on a PAYG basis (formerly the prescribed payments system), as opposed to having the same deducted and remitted on his behalf on a PAYE basis by the employer, tends to favour an independent contractor relationship;
(iv) the worker's entitlements to long service, annual and/or sick leave and public holidays: Payment for these by the employer is indicative of a contract of service;
- (v) the arrangements for the payment of insurances, including public liability, property and workers' compensation or income replacement insurance: Payment by the employer is indicative of a contract of service; and
(vi) the nature of the worker's obligation in relation to the performance of the contract work including:
(a) whether the worker is required to do the work himself (prima facie, a servant) or may delegate it to others (prima facie, an independent contractor);
(b) the degree of discretion as to when the worker is required to do the work: Compliance with the employer's roster or timetable indicates a master and servant relationship; and
(c) the discretion available to the worker as to the manner of performing the work: A single, organised and repetitive task is indicative of a master and servant relationship, whereas a contract calling for professional skill or discretion, or other special qualifications which would enable the worker to pursue an independent career or generate goodwill tends to be independent in nature;
(vii) the worker's entitlement to perform work for others besides the employer during the period of the contract with the employer (ie, 'non-exclusivity') is indicative of an independent contractor relationship;
(vii) the extent to which the worker is identified with the employer's organisation during the period of the contract with the employer (ie, 'non-exclusivity') is indicative of an independent contractor relationship;
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- (viii) the extent to which the worker is identified with the employer's organisation, as opposed to presenting himself as a separate business entity. For example, the wearing, use or display of the employer's uniform signage or stationery is indicative of a contract of service; and
(ix) the nature of the worker's own business arrangements and entrepreneurship (ie, the chance of profit or the risk of loss) including:
(a) the amount of capital which he has invested in the assets used to perform the contract work;
(b) the extent to which such assets are specialised tools of trade (ie, the nature of the plant and equipment used and provided by the worker); and
(c) the business entity utilised by the worker (eg, a sole-trader, partnership, company or trust). The use of a partnership has been held to be strong evidence of a contract for services but it not necessarily inconsistent with a contract of services. The purpose of the partnership or other business entity is a relevant consideration (a sole purpose of tax minimisation tends to evidence a contract of service), as will the question whether the entity derives income from the sale or supply of goods and services other than those produced by the worker:
(d) whether there is any goodwill in the business;
(e) the provision by the worker of his own place of work;
(f) the creation by the worker of saleable assets in the course of his work;
- (g) the proportion of the worker's business expenses to his remuneration; and
(h) the retention by the worker of employees of his own;
- (x) the terms of the contract between the parties are important (and will usually address many of the criteria mentioned above). Provisions which may be particularly relevant include those relating to the worker's right to terminate the work or the engagement, or to refuse to undertake work which is offered. (The right to refuse work tends to indicate an independent relationship). The way in which the parties have described their relationship in the contract will be given weight (if it is not a sham), although it will not of itself be determinative.; the description will be most efficacious where there is ambiguity or uncertainty as regards the true relationship even after the other criteria have been addressed."
81 In light of these criteria I make these following findings of fact.
Control
82 According to the plaintiff, although there were instances where Mr Deveson directed them to perform certain tasks, overall, the right to exercise control rested with Kiam through its supervisor. It was clear from the plaintiff's evidence that it was Kiam who controlled what work he was given and, in most cases, that work was supervised by Kiam.
Arrangements for remuneration of the worker
83 The plaintiff said that although there was a brief period where he submitted invoices to Kiam, that arrangement did not last long. Instead, he was paid weekly without the need to render invoices to Kiam.
Arrangements for the payment of income tax
84 The plaintiff's evidence was that Kiam deducted and paid to the Australian Taxation Office income tax pursuant to the PPS.
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- The plaintiff's entitlement to longer service leave or sick leave and public holidays
85 The plaintiff gave no evidence about these matters. Kiam's letter to the defendant of 9 July 1997 suggests that these were paid and were the responsibility of Kiam.
The arrangements for the payments of insurances
86 The plaintiff's evidence was that he paid public liability insurance and that Kiam paid for workers' compensation insurance. It seems from Kiam's letter of 9 July 1997 it paid public liability insurance for the workers it provided.
The nature of the worker's obligations
87 The plaintiff said that he was required to perform the tasks given to him by Kiam and that he was not able to delegate those tasks to others. He said that he was required to carry out any task when requested by Kiam and not when he chose to do so. He said that he was required to commence work each day at 6 am regardless of when the previous work day had ended. He did not set his own work hours.
The plaintiff's entitlement to perform work for others
88 The plaintiff performed work for no other employer than Kiam for the period of September 1997 and 15 January 1998. Indeed, he continued to work for Kiam exclusively after that date.
The plaintiff's uniform
89 The plaintiff said that except for when he worked in the cast house, he wore pants and a shirt provided to him by Kiam with Kiam's marking on it. He did provide his own overalls.
The nature of the plaintiff's own business arrangements
90 The plaintiff provided some of his own tools and his own vehicle to get to and from work. However, Kiam provided other equipment and tools and paid for the plaintiff's consumables.
91 The plaintiff conducted his business as the sole proprietor. He worked from home and it would appear from his income tax returns that the proportion of his business expenses to his remuneration was low. There is no evidence that he created any saleable assets in the course of his work. Nor is there any evidence that the plaintiff during the period he worked at the defendant's premises retained any employees of his own.
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- The terms of the contract between plaintiff and Kiam
92 There is very little evidence about the terms of the contract between the plaintiff and Kiam. The plaintiff said that he was approached by Kiam to work at the defendant's plant and that he agreed to do so. Beyond this there is no evidence as to the arrangements between the plaintiff and Kiam save for the way in which the plaintiff was remunerated.
93 The particulars alleged by the plaintiff of his subcontract relationship as expressed in his re-amended statement of claim were scant. They were expressed as follows in par 2 of his re-amended statement of claim:
"At all material times the plaintiff was engaged by Kiam Corporation on a subcontract basis:
2.1 Prior to be engaged by Kiam Corporation, the plaintiff set himself up as a welding business.
2.2 Prior to be engaged by Kiam Corporation the plaintiff subcontracted to a number of organisations who performed welding work for those organisations.
2.3 The plaintiff was paid money by Kiam Corporation on a PPS basis."
95 I accept that Kiam Corporation deducted income tax on the PPS and not on the basis that the plaintiff was a PAYE tax payer. This provides some slight indication that the plaintiff was a subcontractor but this needs to be weighed against the other factors.
96 The factors in favour of a sub-contractor arrangement are:
(a) the plaintiff had set himself up as sole trader;
(b) he provided some of his own tools, overalls and his own motor vehicle;
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- (c) his income tax was deducted on the PPS and not as a PAYE tax payer; and
(d) he paid public liability insurance.
97 In favour of there being a contract of employment between the plaintiff and Kiam are the following:
(a) the degree of control exercised by Kiam over the plaintiff. In my opinion Kiam exercised a high degree of control over the plaintiff in that it both allocated the work he was to do and supervised it;
(b) the plaintiff was paid weekly without the need, save at the very start of his employment with Kiam, to render invoices. In my opinion the payment of weekly wages without the need to render invoices is a significant factor in favour of a contract of employment;
(c) Kiam paid workers' compensation insurance for the plaintiff;
(d) the plaintiff was required to do the work allocated to him by Kiam personally and was not in a position to delegate it to anyone else. His hours of work were dictated to him by Kiam and he was not in a position to absent himself from the work place without Kiam's permission. Any work that he was requested to do had to be done when he was directed by Kiam. During the period in which the plaintiff claims he was insured the plaintiff worked exclusively for Kiam;
(e) although he did not always wear a Kiam uniform, it appeared to me on the evidence that for the most part he did and that in this sense he identified himself with Kiam's organisation. As far as the plaintiff's business arrangements were concerned while he provided tools, so did Kiam.
(f) There was no goodwill in the plaintiff's business nor was he creating any saleable assets in the course of his work. Although the plaintiff had business expenses they were a small proportion of his overall remuneration. He did not retain any employees of his own.
98 Overall, it seems to me that having weighed all of the relevant factors, the relationship between Kiam and the plaintiff was much more
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- one of master and servant. Accordingly, even if the interpretation of the word "employee" urged upon me by Mr Gandini is correct, on the facts of this case the plaintiff was employed by Kiam as its servant and not as an independent contractor.
Conclusion
99 For the reasons set out in this judgment, I find that the defendant has proved on the balance of probabilities that:
(a) the defendant contracted with Kiam for the execution of work by or under Kiam;
(b) in the execution of the work, the plaintiff was employed by Kiam;
(c) the work in which the plaintiff was employed at the time of the occurrence of the plaintiff's disability was directly a part or process in the trade or business of the defendant; and
(d) the plaintiff's disability occurred in respect of the premises on which the defendant had undertaken to execute the work or which were under its control or management.
100 As a result, the defendant is the plaintiff's deemed employer within the meaning of s 175 of the Act.
Orders
101 I return to the preliminary issues which I have to determine. In my opinion the preliminary issues should be answered as follows:
1.1 The defendant is a principal for the purpose of the Act.
1.2 The defendant is the plaintiff's deemed employer.
102 Had the parties required me to, I would have held as to 1.3 that Part IV Div 2 of the Act applied to the awarding of damages and as to 1.4, that damages could not be awarded against the defendant.
103 I will hear from the parties further as to the future of the action and the issue of costs.
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