Re: Emergency Medical Systems Pty. Ltd

IN THE SUPREME COURT
OF QUEENSLAND No. 10493 of 1997
Brisbane
Before Mr Justice Ambrose
[Re: Emergency Medical Systems Pty. Ltd.]

IN THE MATTER OF THE CORPORATIONS LAW
- and -
IN THE MATTER OF EMERGENCY MEDICAL SYSTEMS PTY. LTD. (RECEIVER APPOINTED) (IN LIQUIDATION)

CATCHWORDS: CIVIL LAW - application by receiver pursuant to s. 424(1) of the Corporations Law - whether persons “employees” of one of two corporations for the purposes of s. 556(1)(c) of the Corporations Law - floating charges - priority of “employee” under s. 423(3)(c) of the Corporations Law.

Corporations Law

Counsel:Mr T. North for the applicant
Mr A. Whiting solicitor for the respondent

Solicitors:Minter Ellison for the Applicant
O’Shea Corser & Wadley for the respondent

Hearing Date: 7 August 1998

REASONS FOR JUDGMENT - AMBROSE J.

Delivered the 9th day of October 1998

This is an application pursuant to s. 424(1) of the Corporations Law by the Receiver of Emergency Medical Systems Pty. Ltd. (Receiver Appointed) (In Liquidation) (“EMS”) for directions as to whether a number of specified persons are for the purposes of s.556(1) of that Law “employees of” EMS.
Section 556 provides that certain debts and claims in a specified order must be paid in priority to all other unsecured debts and claims. Section 556(1)(e) provides:
“(1)(Ranking) subject to this division in the winding up of a company the following debts and claims must be paid in priority to all other unsecured debts and claims:
---
(e)Subject to sub-section 1(A) - next wages and superannuation payable by the company in respect of services rendered to the company by employees before the relevant date.”
The applicant was appointed Receiver by a bank which held a floating charge over the undertaking of EMS and under s.433(3)(c) an employee’s claims for wages must be paid in priority to any claim for principal and interest in respect of the debenture.
The applicant was appointed Receiver on 30 May 1996 which becomes “the relevant date” pursuant to s. 433(9) for the purpose of determining questions of priority under s. 556(1)(e). On the same day the applicant was also appointed Receiver of Asia Pacific Medical Corporation Pty. Ltd. (Receiver Appointed) (In Liquidation) (“APMC”) by the same bank.
It would be unhelpful to analyze the shareholding in the two companies. It suffices to say that Dr Robert John Cooke seems, from historical company extracts and from the material generally to have been a director of and to have played a very significant part in the formation and operation of each Corporation. Mr Bremner (an accountant) was secretary of each Corporation between June 1994 and September 1995.
Dr Cooke was Secretary of APMC from 22 March 1996. He replaced Mr Bremner who was Secretary from June 1994 to 9 September 1995. Dr Cooke was Secretary of EMS from 9 September 1995. He replaced Mr Bremner upon his retirement on 9 September 1995.
APMC was registered on 30 June 1988.
EMS was registered on 4 December 1992.
By the relevant date, both EMS and APMC were in default under debentures which had been given over their respective undertakings to secure bank advances. APMC had been formed to provide what was described as a “ Priority Emergency Centre” at the Mater Hospital in Brisbane. To provide the required services, it leased equipment and employed qualified people to provide emergency medical services. As part of its organization it obtained a license from the Mater Hospital which permitted it to use part of that hospital as its centre.
After the Priority Emergency Centre had been conducted at the Mater Hospital for a few years, EMS was registered. It seems that about this time it was decided by Dr Cooke and perhaps by other persons connected with APMC that it would be desirable to shift the Priority Emergency Centre from the Mater Hospital to St Andrews War Memorial Hospital. At this time plans had been made essentially by Dr Cooke. to extend the operations in which APMC had been involved to other institutions. At about this time Priority Emergency Centres were established at the New South Wales Masonic Hospital in Sydney and at Calvary Hospital in Cairns. EMS obtained licenses from both the New South Wales Masonic Hospital and Calvary Hospital and provided equipment and medical staff to operate a Priority Emergency Centre at each hospital.
However, with respect to the Priority Emergency Centre shifted from the Mater Hospital to St Andrews Hospital in Brisbane, although EMS obtained the requisite license of that hospital to provide the facility, it was decided, essentially I would infer by Dr Cooke, that EMS would provide the necessary services by having APMC simply continue to employ the staff previously employed at the Mater Hospital to provide the priority emergency services at St Andrews Hospital. A letter was written explaining the way that the staff would simply continue their employment with APMC except that they would work at St Andrews Hospital rather than at the Mater Hospital. In the course of this arrangement, the equipment which APMC had been leasing for use at the Mater Hospital or at least the interest that APMC had in that lease was sold to EMS which then in effect leased it back to APMC.
The whole exercise involving the employment of APMC staff in the provision of priority emergency services at St Andrews appears clearly to have resulted from a desire by Dr Cooke to obtain taxation advantages of some sort. It would be as unhelpful as it is unnecessary to attempt to determine what those advantages may have been.
It is clear from the material that from the time the three EMS priority emergency service facilities were established at the New South Wales Masonic Hospital in Sydney, Calvary Hospital in Cairns and St Andrews Hospital in Brisbane pursuant to licenses obtained from each hospital it was EMS, the controlling mind of which seems to have been that of Dr Cooke, which provided those services.
To the extent that medically trained people of various categories and administrative staff were used to provide those services the material indicates that it was the controlling officers of EMS and employees of EMS who directed at each of the three EMS priority emergency service facilities not merely what should be done but also how it should be done.
Some doctors clearly employed by EMS travelled to supervise and develop appropriate procedures at each of those three Priority Emergency Centres.
EMS provided services at St Andrews Hospital (and the other two hospitals as well) for nearly two years. It seems that the services were provided at St Andrews from 14 August 1994.
However by the time the Receiver was appointed, each company had ceased to be financially viable.
As the result however of the re-structuring that occurred at the time EMS commenced operations it was only EMS which had funds to which “employees” might have a priority claim for wages which they had earned but had not been paid. APMC had no funds whatever at the relevant date.
The Receiver therefore was faced with the situation that the people “employed” by APMC to provide priority emergency services at St Andrews had access to no available funds to which their priority claims for unpaid wages might attach whereas the people employed to provide the EMS services in both Sydney and Cairns did have funds - some of them it seems being attributable to the value of the interests of EMS in medical equipment which APMC had transferred to EMS and then leased back for the purpose of providing the emergency services at St Andrews as “manager and agent” for EMS.
Unsurprisingly, the employees who had been employed to provide the EMS services at St Andrews were dissatisfied with the provisional decision reached by the Receiver that because they had not been “employed” by EMS but rather by APMC they had no claim against the only funds produced upon the winding up of both companies which were those recovered in the receivership of EMS.
There are many affidavits that have been read in which persons employed to provide the priority emergency services at St Andrews said that they believed that they were being employed by EMS - albeit that on some occasions at least - they received group certificates specifying APMC as employer. They said that they did not understand why the group certificates were so drawn but didn’t bother raising any query. They did the work under the control of doctors who had cards showing that they were running the priority emergency services under the EMS banner, they took instructions from those persons. The only time they had ever heard of APMC after shifting to St Andrews apparently was when group certificates were given to them. Many of the records of salary payments gave no indication at all of the name of the employer.
Significantly however, they assert and it seems not to be in dispute that all directions, supervision and control of what they did and the way it was to be done were received from persons who were clearly directors and/or people in highly placed positions with EMS who were undoubtedly employed by EMS.
Although it was contended on behalf of the applicant that the trained medical staff providing the services for EMS at St Andrews Hospital had to be employed either by EMS or by APMC, that does not seem to me necessarily to be so. There are cases where circumstances have justified the inference that a person is employed by two persons to perform the task or tasks in respect of which it is necessary to determine by whom the employee was employed. A common example is where a person is employed by a partnership which must of course have at least two members. Cases which consider the identity of an employer in the context of vicarious liability for tortious conduct in my view are little if any assistance in cases of this kind.
Again the fact that within the first week or two of medical and administrative staff commencing to provide their services at St Andrews rather than at the Mater Hospital, they may then have been employed by APMC does not seem to me necessarily to lead to the conclusion that they necessarily continued to be employed solely by APMC indefinitely thereafter; much less would that conclusion be drawn with respect to those who perhaps had not ever been employed by APMC at the Mater Hospital. Even those who had initially been employed by APMC at the Priority Emergency Centre at the Mater Hospital, if eventually while working at St Andrews over the years accepted all their directions from officers of EMS and received their salary from EMS funds based upon records kept by EMS staff, the mere fact that at the end of the tax year they obtained a group certificate showing that in fact they had been paid by APMC would not of itself in my view necessarily lead to the conclusion that they had not been employed by EMS - whether or not in fact they had also been employed by APMC. After all, payment of wages although an important indication that the person paying the wage is an employer is not in my view conclusive evidence that that person is the only employer of a person providing defined services.
In this particular case, some of the doctors who worked at the St Andrews centre in fact negotiated contracts using or proposing to use their own service company. Obviously they thought there were taxation advantages in having their employment negotiated between their own service company and EMS. It is interesting to note that the contracts were negotiated between EMS and their service companies. While undoubtedly it is correct that those service companies could not properly be characterized as “employees” of the company for the purpose of priorities given under s. 556(1)(e), they do in my view, provide strong, original evidence that indeed the company negotiating contracts with those service companies was EMS and not APMC. I can find no basis upon which it could reasonably be held that APMC was employing individuals whereas EMS was contracting with service companies to obtain the service of individuals who for taxation purposes had negotiated a contract through their service companies.
It may well be that because some professional people tried to obtain perceived advantages by operating through a service company they lose the protection of s. 556(1)(e). However, they do so because their service companies cannot be categorized as “employees” within s. 556(1)(e) - not because APMC played any part in obtaining and maintaining the employment of people who were providing those services.
Undoubtedly however, the commercial arrangements made by Dr Cooke to incorporate APMC into the system whereunder EMS provided priority emergency services to St Andrews must be examined with care. The deeds and agreement etc. were varied over the years and an effort seems to have been made to establish or at least to support the proposition that APMC was indeed, “the employer” of the medical and administrative staff at St Andrews priority emergency centre for reasons I infer to be quite unconnected with the provision of the services at that centre. 28 I will turn now to examine those agreements.
The “Emergency Department Establishment Agreement” between St Andrews and EMS is dated 24 May 1994.
The recitals to that agreement summarize the arrangement made between St Andrews and EMS -
“A.St Andrews wishes to establish an Emergency Department at the St Andrews Hospitals premises;
B.In return for a licence to occupy and use the Emergency Department EMS has agreed to assist in the establishment of the Emergency Department and to provide staff, services, equipment, consultation, appropriate medical practitioners and certain other services during the term of this agreement;
C.In return for EMS’s assistance and services St Andrews has agreed to provide nursing staff, certain services and equipment and to pay EMS a patient subsidy in respect of patients admitted to the hospital to contribute to the costs of operating the Emergency Department.”
Clause 10 of the agreement provides:
“EMS undertakes to St Andrews that except to the extent that St Andrews otherwise consents EMS will do the following things at its own cost:”
(A)(Medical Staff) EMS will provide all medical staff required for the effective day to day operation of the Emergency Department. Without limitation this will include provision of registered medical practitioners whose duties will include the management, recruitment, co-ordination and rostering of such medical staff. One or more such medical practitioners will be on duty 24 hours a day, seven days a week. All medical staff shall be accredited to practice at the hospital by the Medical Advisory Committee of the hospital and St Andrews will ensure accreditation shall not be unreasonably withheld or withdrawn except in accordance with the By-laws of the hospital.
(B)(Other Staff) EMS will provide adequate administrative, clerical and reception staff and services required for the effective day to day operation of the Emergency Department ---”.
That agreement was executed by Dr Cooke and Mr Bremner under the company seal of EMS.
On 31 October 1994 there was executed a management agreement between EMS, APMC and Dr Cooke (“Consultant”).
After reciting that EMS had agreed with St Andrews to provide a Priority Emergency Centre for ten years in consideration for the payment of management fees and of patient subsidy, that Dr Cooke had provided loan funds to establish the EMS service provider and that he had provided and would continue to provide to EMS services in connection with the operation of the centre at St Andrews, it is stated:-
“EMS wishes to formally record the agreement to appoint APMC as from 13 August 1994 to carry out its obligations under the agreement and to conduct the business as agent of EMS.”
Clause 2 of the agreement then reads:-
“2.1In consideration of APMC agreeing to undertake the duties and obligations owed by EMS to St Andrews under the agreement EMS hereby appoints APMC as its manager and agent to conduct the business and carry out the duties and obligations to St Andrews under the agreement on and from 13 August 1994 (called the “changeover date”).
2.2On and from the changeover date APMC shall be entitled to and have the benefit of the licensed obligations owed to EMS under the agreement including entitlement to all income from the St Andrews Emergency Department subsidiaries or other fees and charges due and payable by St Andrews.
Clause 5 of the agreement provides inter alia:
“5.1During the term of this agreement APMC shall carry out all the duties and obligations owed to St Andrews to the best of its ability and shall comply with all lawful instructions and directions as may from time to time be given by St Andrews and shall give St Andrews all such explanations, information and assistance as it may require;
5.2APMC shall use its utmost endeavours to promote the interests of EMS as principal and shall at all times perform its obligations under this agreement so as to protect the interests of EMS;
5.3APMC shall employ and maintain sufficient qualified staff to meet the duties and obligations under the agreement.”
The “agreement” in Clause 5.3 obviously refers to the “agreement” between EMS and St Andrews referred to in Recital A. This management agreement also bears the relevant company seals. The EMS company seal is authenticated by Dr Cooke and Mr Bremner. The APMC company seal is authenticated by Mr Bremner and Mr Lister, a director between April 1992 and 9 September 1995 and significant shareholder, and Dr Cooke has signed - presumably as “Consultant”.
In Deed of Variation executed on 31 October 1995 between St Andrews Hospital and EMS it is recited that EMS was at that time experiencing financial difficulties and was attempting to procure further funds. St Andrews agreed upon the execution of the deed to make an advance of $60,000. It is interesting to note that in para. 3 of that deed it is provided:-
“3.The parties further agree and acknowledge that the payment made pursuant to paragraph 1 hereof has been made specifically for the purposes of EMS meeting its current wages liability for the staff employed by it or its subsidiaries or any other associated company in respect of the staff that occupy and operate the Emergency Department at St Andrews Hospital.” (my emphasis)
That deed was executed under the seal of EMS over the signature of Dr Cooke.
On 15 April 1996 yet another Deed of Variation of Agreement was executed - this time between St Andrews, EMS and APMC. It is interesting to note that Dr Cooke’s signature appears under the seal of each of EMS and APMC.
Under Clause 1 of that agreement, St Andrews agrees that for a period of twelve months it would make a minimum payment of $60,000 per calendar month in advance, the first payment being due on 1 March 1996.
Under Clause 2 of this latest variation agreement, Clause 10(a) of the original agreement was varied to read:
“10(a)(Medical Staff) EMS (whether by itself or through APMC) will provide all medical staff required for --- etc”
Under Clause 2(c) of this variation agreement, a new Clause 24A was inserted in the first
agreement so that it reads:
“24A --- In the event that EMS and/or APMC either:
(a)defaults in respect of the payment of wages to any of the contracted employees of the Emergency Department --- and such failure is not remedied to the satisfaction of St Andrews within seven days of notification of the occurrence of such failure;
(b)assigns or purports to assign to any other party any of the agreements held with the contracted employees which currently are held with the following -
Ian Brandon
Madeline Joy Martin
Lindsay McDowell (L.E. McDowell Pty. Ltd.)
Chris May
Paul T. Cole
Pauline Elizabeth Smith
David Mountain
Wayne MacDonald
Phillip Hall
Dr Jeyarajan (currently being negotiated)
(c)causes any employment agreement with any employee of the Emergency Department to be entered into at any time in the future with any employer other than EMS or APMC
Then any such event shall constitute an event of default and St Andrews may --- by notice in writing to EMS and APMC forthwith terminate the agreement --- Upon termination pursuant to this clause all the employment agreements (and the benefits accruing to the employer thereunder) between EMS and/or APMC and the employees of the Emergency Department --- shall immediately thereafter be deemed (subject to the consent of such employees to be assigned to St Andrews who shall thereafter in act in all respects as if it had been named therein as employer at the date of the signing thereof.”

A letter dated 10 August 1994 on the letterhead of APMC and signed by Dr Cooke was sent to various doctors up to that time employed at the Priority Emergency Centre at the Mater Hospital. There was a second letter of the same date in slightly different terms under the letter head of EMS concerning “terms of executive service agreement”. The letters simply record that the centre conducted at Mater Private Hospital would close on 13 August 1994 and re-open at St Andrews Hospital on 14 August 1994. APMC indicates that it -
“is proposing that your executive service agreement is to continue and extend the provision of services to this new accident and emergency centre at St Andrews.”
A pro forma letter written on the EMS letterhead (which uses the same symbol or logo as the APMC letter head) was also signed by Dr Cooke and addressed to doctors employed by APMC at the Mater Hospital centre.
In that letter, it is observed:
“Subject to you continuing to provide your services under your executive service agreement in respect of the new St Andrews Centre EMS agrees that it will fulfil the obligations of APMC under that agreement to the extent that APMC fails to do so. In return you agree that if APMC cannot meet its obligations for any reason you will if required by EMS enter into a fresh service agreement in respect of the St Andrews Centre with EMS on substantially the same terms and conditions as your present agreement except with such changes as are agreed by both you and EMS.”
In the course of his Receivership, the applicant received a letter from Dr Brandon who had been intimately involved in the establishment of EMS and the changeover of the priority emergency service centre in Brisbane from the Mater Hospital to St Andrews. In the course of that letter he referred to the two letters of 10 August 1994 to which I have referred and said:-
“Attached are copies of these letters. They were sent to all medical staff employed at Mater by APMC who agreed to transfer to St Andrews. The basis of the letters was that the staff agreed to continue to be employed by APMC and work at St Andrews as long as there was a legal document in place that guaranteed that EMS (as the operating company of St Andrews PEC) would pay all moneys and benefits due to the staff under contracts written or verbal in the event that APMC was unable. This was done in our clear understanding that APMC would essentially be a service company with little or no income and that our agreement not to pursue EMS contracts was to allow Dr Cooke to enjoy the taxation related commercial benefits of APMC acting as the employer of staff working at St Andrews PEC.”
He continued on:
“--- I also attach copies of documentation that shows APMC paid for operating expenses of St Andrews PEC.
My understanding is that APMC and EMS moneys were used for the payment of operating expenses of St Andrews PEC.”
Dr Brandon deposes to the fact that he held an executive service agreement with APMC dated 1 August 1989 pursuant to which he worked at the Mater Priority Emergency Centre. He said that in about 1994 Dr Cooke who was “the principal” of both APMC and EMS asked him to transfer his services to the St Andrews Hospital. He told Dr Brandon that the St Andrews Priority Emergency Centre “would be operated by his company EMS”. He said that he received a letter in terms similar to those to which I have already referred. It was sent out on 10 August 1994.
Dr Brandon was appointed the Director of Clinical Services for EMS in conjunction with Mr Bremner who was the Manager for operations of EMS. Dr Brandon was involved in the management of the St Andrews Priority Emergency Centre for EMS. He was also responsible for aspects of the establishment and running of Priority Emergency Centres at Calvary Hospital in Cairns and at the Masonic Hospital in Sydney. He said that he used to report directly to Dr Cooke in his capacity as controller of EMS and he received all his instructions concerning the operation of the various centres from Dr Cooke. The medical staff at all three Priority Emergency Centres reported directly to Dr Brandon. He was held out to persons dealing with EMS as its Director of Clinical Services. Cards were given to him by EMS showing his connection with EMS. At no time after leaving the Mater Hospital was Dr Brandon ever associated on any document or business card with APMC - with this exception: he had a written contract with APMC and not with EMS and his group certificates were prepared on the basis that he had been paid by APMC as its employee.
As I read Dr Brandon’s affidavit however, APMC had “no involvement whatsoever with the Priority Emergency Centres at the Calvary and Masonic Hospitals”. He further proceeded on the basis that the St Andrews Priority Emergency Centre was “an EMS facility”.
His work for EMS included the design, setup, staff recruitment, liaison with hospitals and procurement of equipment for EMS in all three Priority Emergency Centres. He gave day to day directions to all the medical staff at St Andrews Priority Emergency Centre and the other two Priority Emergency Centres as to what work they were to perform and how they were to perform it. He said that to his knowledge no person had been appointed as Director of Clinical Services of APMC at any of the three Priority Emergency Centres. Dr Brandon said that to the best of his recollection for the whole of the time he was at St Andrews, he did not perform any work at all for APMC. He regarded himself and apparently Dr Cooke regarded him as being an officer of EMS - and this in spite of the fact that the initial executive agreement executed before the change from Mater Hospital to St Andrews had not been re-negotiated and apparently also for reasons which he did not go into, any group certificate he received was made out with APMC specified as employer.
Dr May also worked at the Priority Emergency Centre at the Mater Hospital under a contract he held with APMC. He said that in about August 1994, Dr Cooke and Mr Bremner who were intimately connected with the running of the centre at the Mater Hospital asked him to go to work at a new Priority Emergency Centre which Dr Cooke was establishing at St Andrews Hospital.
Dr May recalls that Mr Bremner said that he would be paid by APMC but that his employer would be EMS as that was the company which would be operating the emergency centre at St Andrews. Dr May agreed to transfer his services to St Andrews Priority Medical Centre.
Dr May said that he took his directions and instructions at all time from Dr Brandon at the St Andrews facility. Dr Brandon was the Director for Clinical Services for EMS.
Dr May said that on two occasions he went to the Priority Emergency Centre at Cairns for a few weeks and this facility was operated by EMS. While working at the St Andrews facility Dr Cooke specifically requested Dr May to undertake medical work relating to air shows for EMS.
Dr May says that his group certificates were from APMC but that he did not attach any significance to that fact. He said that he believed or was clearly under the impression while working at St Andrews that it was EMS who was operating that facility and that he believed that EMS was his employer - in spite of the content of the group certificates.
Dr Smith was also employed under an executive service agreement with APMC to provide services at Mater Hospital. The date of the agreement with APMC was 22 December 1992.
She said that in August 1994 she was asked by Dr Cooke to take up employment at the new Priority Emergency Centre at St Andrews Hospital. Dr Cooke informed her that EMS would be operating that Priority Emergency Centre and she said that she later got from him a letter dated 10 August 1994 in terms to which I have already referred. She agreed to transfer her services to the St Andrews Centre.
She also said that while working at St Andrews she took her directions directly from Dr Brandon who was the Director of Clinical Services for EMS.
She said that over the period of time that she worked with other persons in the Priority Emergency Centre at St Andrews she and the other people with whom she worked believed that the centres were being operated by EMS; that she saw correspondence under the EMS letterhead signed by Dr Cooke concerning the running of that medical centre. She referred to that correspondence.
Dr Cooke introduced Allan Jackson to her as the new Chief Executive Officer of EMS. On 9 May 1996 she received from Allan Jackson a letter under the EMS heading thanking her for her “work and dedication over the last seven years”. Dr Smith also spent time at the Calvary Priority Emergency Centre in Cairns. She said that as far as she could recall no separate group certificates were received in respect of the work she did at the Calvary Priority Emergency Centre. All the certificates she received were in the name of APMC.
Dr Cole also had a contract of employment with APMC when he was medical officer at the Priority Emergency Centre at the Mater Hospital. He says that in about August 1994 Dr Brandon who was involved in the management of that centre spoke to him and asked him to work at the Priority Emergency Centre being established at St Andrews by Dr Cooke. He was given and signed a letter of 10 August 1994 in the form to which I have already referred. At that time Mr Bremner also told him that a new company of Dr Cooke would be operating the Priority Emergency Centre at St Andrews and that it would be EMS. Dr Cole did in fact transfer his services to the centre at St Andrews. While working there he had a number of discussions with Dr Cooke and said that the centre at St Andrews was operated by EMS. He assumed that he was employed by EMS. Apparently nobody made any mention of APMC during the performance of the work done at St Andrews. Dr Cole also visited the other EMS Emergency Centres at Sydney and Cairns and during the whole of that time there was nothing to suggest that all three facilities were not being operated by EMS along precisely the same guidelines and under the control of the same people. He said that at all times he reported to and took directions from Dr Brandon the Director of Clinical Services for EMS. While at St Andrews Dr Cole requested that Mr Bremner provide him with a new contract. Mr Bremner however apparently left the organisation shortly afterwards; eventually Dr Cole received a new form of contract from Allan Jackson who represented Dr Cooke. The new draft contract which he received showed EMS as the other party to the contract - i.e. the employer. Dr Cole says that the draft contract in blank with EMS handed to Dr Jeyarajan in April 1996 in fact shows the employee to be living at an address which was Dr Cole’s address at the time he received the new draft contract and he says that although he has been unable to locate that draft he thinks that that is a copy of the one given to him. He said that negotiations leading to the signing of the contract were not successful because EMS went into receivership and therefore the contract was never executed.
He said that to the best of his recollection any group certificate he received was in the name of APMC but that this did not matter to him. Even if he went to work at the Priority Emergency Centre at Cairns the salary he earned there still seemed to be reflected in the group certificate signed under the name of APMC - even though it seems clear enough that APMC on the arrangement implemented for tax purposes by Dr Cooke was to have no connection at all with the provision of services to either the Cairns or Sydney centre.
Dr Martin also held an employment contract with APMC when she worked at the Priority Emergency Centre at the Mater Hospital prior to August 1994.
She said that in about August 1994, Dr Cooke and Mr Bremner who were associated with the management of the Mater Hospital facility commenced a new emergency centre at St Andrews. She also received a letter of 10 August 1994 in the general terms to which I have referred. She said she was given “the distinct impression” from discussions with Dr Cooke and Mr Bremner that a new company EMS was involved in the operation of the St Andrews Priority Emergency Centre and
that that company EMS was to operate that facility. It was on the basis of the information she was given in the letter to which I have referred that she transferred her services to the Priority Emergency Centre at St Andrews. At that place she reported to and took directions from Dr Brandon who was the Director of Clinical Services for EMS. For about two weeks in April 1995 she worked at the Calvary Priority Emergency Centre in Cairns for which Dr Brandon was also responsible. She said that any group certificate she received was in the name of APMC. It also included the salary she earned while in Cairns. She never received any separate group certificate under the name of EMS.
Interestingly on 22 December 1994 Mr Bremner on behalf of EMS wrote a letter to the Medical Defence Society under EMS letterhead in the following terms:
“I confirm that our company provides professional indemnity insurance covering its employees including Dr Madeline Martin.
Our policy has been perused by your society and the policy amended to cover enhancement to its provisions suggested by your adviser.”
However the premium paid to the Medical Defence Society by cheque on 9 January 1995 which apparently accompanied that letter was drawn on the account of APMC. That cheque was signed by Dr Cooke.
According to Mr Keogh, during the whole of the time that the EMS Priority Emergency Centre was operated at St Andrews from 1994, he was that hospital’s Commercial Director. During the period of its operation in association with Dr Cooke, he said that each of the monthly payments made by that hospital in respect of the Priority Emergency Centre was made to EMS with which the hospital had made arrangements for the operation of the Emergency Centre. In my judgment the inferences to be drawn from the terms of the agreements between EMS and APMC must be determined keeping Mr Keogh’s evidence in mind. The only persons shown to have knowledge of the so called “management agreement” were its signatories on behalf of EMS and APMC - Dr Cooke, Mr Bremner and Mr Lister. There is no evidence that any other person connected with either of those corporations or St Andrews Hospital had any knowledge of its terms. Clause 9.2 required that the contents of the agreement be kept “confidential” and not be disclosed “to any other person without the written consent of the other parties”.
There is no evidence of what procedure was adopted by EMS upon receipt of money from St Andrews to enable payment of staff and other expenses involved in providing the priority emergency treatment at St Andrews. Perhaps it was transferred into an APMC account specifically for the purpose of enabling APMC funds to be used to make such payments. The adoption of such a system would be consistent with the proposition that APMC was merely the managing agent of EMS in operating the centre at St Andrews although inconsistent with Cl. 2.2 of the Management Agreement of 31 October 1994 to which I have referred.
Dr Jeyarajan took up his employment at St Andrews Priority Emergency Centre in June 1995 after discussing this possibility with Dr Brandon and Mr Bremner both of whom were associated with the management of that Priority Emergency Centre.
While at that centre he received at least two draft contracts. The first one he received from Mr Bremner. That was obviously a roneoed form that had been prepared in 1992. It was drawn with APMC as employer and it was designed to accommodate a doctor’s service company as contracting party. It was roneoed in blank. It was obviously designed when the service at the Mater Hospital was provided by APMC and its terms been altered in handwriting to accommodate the shift to St Andrews. At the time it was given to Dr Jeyarajan, EMS was substituted for APMC as “employer”.
The first draft contract was between EMS and Jeyarajan Medical Pty Ltd - Dr Jeyarajan’s service company. He swears that:
“at the time I received the first draft contract the remuneration and the terms of employment were as set out in that draft”.
The only inference to be drawn from this evidence is that when the draft was prepared it was not contemplated that Dr Jeyarajan would be employed by EMS but that presumably he would be employed by his own service company which would contract with EMS to provide his services to it; the legal consequence of such an arrangement would be that Dr Jeyarajan would not become an “employee” of EMS and so enjoy the protection given by s. 433(3)(c).
Subsequently, another roneoed agreement form (largely in blank but specifying EMS to be the employer) was provided to that doctor, it had been altered in significant respects from the form of the first roneoed draft. Apparently when prepared initially it was contemplated that Dr Cole who then lived at 13/144 Ryan Street, Hill End would become a party to it. This second draft was received by Dr Jeyarajan in about April 1996 from Allan Jackson who represented Dr Cooke. Dr Jeyarajan noted at the time that the address on the draft agreement provided to him was not his address but in fact was to his knowledge the address of Dr Cole. According to Dr Jeyarajan during the time that he spent at St Andrews he reported to and took directions from Dr Brandon who was the Director of the EMS facilities at St Andrews, Cairns and Sydney.
On the evidence there was never any written contract pursuant to which Dr Jeyarajan was employed at St Andrews. He obviously was employed at the EMS facility at that hospital on the assumption that eventually a written contract either with his service company or with him personally would be executed by EMS. There is no evidence that any payment of salary was made to his company rather than to him personally. In the absence of such evidence I infer that payment for the services he rendered personally was made to him personally. The applicant has discovered no record of any payment made to him by either EMS or APMC. I infer that the contract pursuant to which he rendered services to EMS at St Andrews was one between him and EMS rather than one between his service company and EMS which was contemplated in the first draft contract prepared but never executed.
Dr Keir entered into an employment contract with EMS on 3 October 1994. His written contract is at p. 36 of Exhibit DH1 to the affidavit of David Henderson filed 6 February 1998. He was employed as a senior medical officer at the Priority Emergency Centre at St Andrews. Pursuant to that employment contract he worked at St Andrews Priority Emergency Centre until about April or May 1995 when his services were transferred to the Priority Emergency Centre in Cairns where he worked until he resigned in early 1996. While working generally at St Andrews he had worked in Cairns for a period of a month or so in March or April 1995. He tendered his resignation to EMS on 15 November 1995 and this was accepted by EMS by letter signed by Dr Cooke on 15 February 1996. According to Dr Keir, during the whole of the period of his employment with EMS, he did not receive any group certificates or remittence advices from that company. All such group certificates and remittence advices came from APMC.
Dr Keir said that at all times while he was working at St Andrews and at Cairns, he regarded himself as an employee of EMS which operated both centres.
On 30 May 1997, Constance Devine (one of the persons named in Exhibit IRH 12) advised the applicant by letter that she had been informed by Dr Cooke prior to going to St Andrews that APMC “was no longer operating and that all our bookwork at St Andrews was to go into EMS and kept separate”. She said that as an office worker she was not given a written contract “under the umbrella of EMS” but only a verbal one. She advised that the contributions to her retirement fund with Sunsuper showed that it was paid from “Mater Private Hospital PEC”.

Similarly, Tammy O’Connell by letter dated 30 May 1997 advised that at no time did Dr Cooke or his staff inform her that she was employed by APMC when she went to St Andrews Hospital. In fact she said that she was informed that APMC was no longer operative and EMS was the new company which employed people at all three EMS centres in Brisbane, Sydney and Cairns.
Similar correspondence was received by the applicant from Sue Fritz who supported her claim with a reference given to her by EMS on 22 March 1995 which reads:
“This is to certify that Mrs Sue Fritz has been employed by this company for the past seven months ---.”
The letter was signed by Patricia Hardy, Administration Manager of EMS. A second reference in the same term was given to Miss Fritz by letter from EMS dated 4 December 1995.
Similarly a letter was written to the applicant by Lyn Newman on 30 May 1997 asserting that from the time she had been transferred to work at the EMS centre at St Andrews she had been employed by EMS. She said she had never signed an employment contract or had any payslips indicating that she was employed by APMC. It seems that Lyn Newman at the time of writing that letter was still working with St Andrews Priority Emergency Centre. At least her letter to the applicant bears the letter head of “St Andrews Priority Emergency Centre”. I infer although the matter has not been specifically dealt with that indeed, when EMS and APMC went into receivership, that hospital exercised the rights it had under Clause 24A of the Deed of Variation of Agreement executed on 15 April 1996 to which I have earlier referred.
There was tendered as part of Exhibit IRH 14 to the affidavit of the applicant filed 20 November 1997 an extract from a document which seems to have been prepared for the commencement of EMS Operations at St Andrews. It is headed “Management Structure” showing Mr Bremner and Dr Brandon as the “Corporate Management” with the Operations Management of all three centres - including St Andrews - each under a Medical Director. There seems nothing to indicate at this stage at least that there was any plan or intention to have the St Andrews facility “managed” by APMC. On the contrary, the EMS management structure indicates an unbroken line of authority through the Corporate Management comprising Mr Bremner and Dr Brandon. It is interesting to note the last paragraph appearing on the “Management Structure” document:-
“On a monthly basis, Senior Management of EMS including Dr Cooke, Mr Bremner, Dr Brandon and the respective Medical Directors will meet with Management of the host hospital in review performance and address any issues arising.”
Certainly when that document was prepared there seems to have been no provision made for APMC taking over the “management” of the St Andrews facility as “agent for” EMS.
On 15 February 1996, Dr Cooke under the letterhead of EMS thanked Dr Keir for his services “to Emergency Medical Systems in both Brisbane and Cairns.”
On 30 April 1996, under the letterhead “EMS” with its usual logo, Trish Hardy sent a memo to -
“All staff - St Andrews, Brisbane, Prio 1 Sydney, PEC - Cairns”, relating to
time sheets. The memo reads:
“Could you please ensure that a time sheet is faxed for each and every member of the staff full time and part time signed and authorised by the relevant staff member --”.
A carbon copy of that memorandum was sent to both Dr Cooke and Mr Allan Jackson.
An EMS “organisational chart” apparently reflecting its structure at 27 January 1995, shows that under the Board of Directors for EMS there is a Chief Executive Officer and under him, a Director of Clinical Services responsible for each of the Brisbane, Sydney and Cairns Priority Medical Centres. This structure to my mind seems inconsistent with the “structure” recorded in the Management Agreement between EMS and APMC in its October 1994 agreement.
EMS appears to have been used by Dr Cooke to expand the provision of emergency priority services beyond the Mater Hospital in Brisbane when APMC was falling into financial difficulties; its supporters by that time had declined to provide further moneys to keep it operational. At least this was the view of Mr Bremner in January 1997 - vide Document 40 in IRH 14.
It is interesting to note that on 18 February 1994 Dr Brandon as Director of Clinical Services observed in a letter under an EMS letter head:
“Emergency Medical Systems will be undertaking the setup and operation of a further two private emergency departments, one in Sydney and one in Cairns. These departments are due for opening in the third quarter of 1994.”
This correspondence is consistent with EMS indeed playing some part in the provision of the priority emergency services conducted at Mater Hospital until August 1994. See page 83 of Exhibit IRH 14.
On exhibit IRH 12 to the applicant’s affidavit, there are 23 persons listed as claiming to have performed services as an employee at St Andrews Hospital.
Eleven of those persons whose names appear on Exhibit 1 were represented by Mr Whiting who stated that they had reached an arrangement with the applicant, the terms of which are set out in Exhibit 19 to the affidavit of Monique Maria Hayes sworn on 28 July 1998. As I understood the submissions of counsel for the applicant and the solicitor for the 11 persons named in Exhibit 1 of the 23 persons named in Exhibit IRH 12 it was agreed ultimately that the 11 persons named on Exhibit 1 should be accepted as having been employees of EMS and therefore entitled to priority in respect of some of the wages they did not receive when EMS and APMC went into receivership. As I understood counsel for the applicant, he asked that I give a direction with respect to each of the persons named on Exhibit IRH 12 except those named on the list which is Exhibit 1. I am a little uncertain from what was done and said on the application whether all the persons on Exhibit 1 have been accepted or not. It may be that those persons on Exhibit 1 have simply indicated that they do not wish to run the risk of incurring costs by formally entering into the contest and will simply abide the order made upon this application. As I understood their solicitor, those who have filed affidavits, to some of which I have referred, and presumably those who have written letters to the applicant, do not resile from the stand they have taken.
It is now however, conceded expressly by counsel for the applicant that Dr Geoffrey Keir was indeed employed at material times by EMS, albeit he received group certificates from APMC as employer.
While undoubtedly the fact that group certificates were given to various people employed at St Andrews at the material time in the name of APMC is a circumstance to be taken into account, I feel that the weight to be given to it must be determined by the evidence given by the various persons who transferred their services from the Priority Emergency Service provided at the Mater Hospital by APMC to the similar service provided by EMS at St Andrews. It is clear that for reasons of taxation advantage and commercial expediency, Dr Cooke and perhaps one or more of the other persons involved in shifting Brisbane operations from the Mater Hospital to St Andrews decided that there should be at least a purported continuation of employment with APMC rather than a change to employment with EMS. For how long that attitude was maintained does not clearly emerge. It is clear beyond argument on some of the material that some of the persons who left the Mater Hospital Centre to continue employment at the St Andrews centre eventually were employed by EMS. Some of the administrative staff assert that they were expressly and unequivocally employed by EMS from the time they shifted to St Andrews.
The evidence is clear as to the identity of the employer of persons first employed after the shift to St Andrews. Certainly Dr Jeyarajan was offered employment only by EMS. It seems almost certain that employment was only offered to Dr Cole by EMS. Dr Keir was clearly employed by EMS.
The whole matter is complicated by the execution of the “Deed of Variation of Agreement” on 15 April 1996 - long after the EMS operations at St Andrews had been put in place. Strangely APMC was also a party to that “Variation Agreement”. At the time the agreement was made obviously EMS was having financial problems and indeed it was only about a month later that EMS and APMC were both put into receivership.
This is the first indication in any of the deeds etc. that were executed with St Andrews that EMS might perform its obligations to provide staff to the Priority Medical Centre under Clause 10A “through APMC”. In light of Cl. 9.2 of the Management Agreement of 31 October 1994, it may well have been the first occasion that St Andrews had any notion of APMC’s purported involvement with the supply of staff to the priority emergency centre at its hospital.
Although the applicant in arriving at the conclusion which he did obviously gave some weight to this so called Deed of Variation of Agreement, it seems to me that the circumstances of its execution only a month before the financial affairs of both EMS and APMC deteriorated to such an extent as to have them put into receivership reduces considerably the weight that might be given to its terms. One inference that can be drawn is that at least at the time of execution of that so called Deed of Variation, both EMS and APMC were employing persons working in the St Andrews centre. I suppose it could be said that one company may have been employing some employees and the other company employing other employees. If one ignores the “management agreement” which is not suggested to have been brought to the attention of St Andrews or any of the staff working at the EMS centre at the hospital, the fact that there is no paperwork (apart from the content of group certificates) to suggest that APMC played any part in the provision of services at all and that the people employed at St Andrews all seemed to think that they were employed by EMS would lead me to infer that to the extent that APMC did employ anybody at that facility the persons so employed were also employed by EMS. It is clear from the evidence of Mr Keogh that all the funds paid by St Andrews with respect to services provided by EMS were paid to EMS.
Having regard to the evidence given by various employees at St Andrews Hospital at the facility provided by EMS pursuant to its agreement with the hospital, I draw the inference that more probably than not, all persons employed in that Priority Medical Centre were employed by the one employer. In my view it would be most improbable that there was some sort of selection based upon criteria which was not even suggested in the contemporaneous material or in the material prepared for this application so that some employees would be employed by one company and others by the other. I think the likelihood is that they were all employed at the relevant date by the one company and that company was EMS. It was the one that had agreed with St Andrews to set up and maintain the facility. At the same time it was maintaining facilities in both Cairns and Sydney. There were clinical specialists employed by EMS supervising and working in each of those three centres during the same period of time.
I am driven to the conclusion that the whole scheme set in motion when the Priority Emergency Service in Brisbane was shifted from the Mater Hospital to St Andrews was designed for the purpose only of the commercial and taxation advantages which it was thought would ensue to Dr Cooke if the APMC company employees were recorded as being used to continue to provide services at St Andrews of the kind which they had to that time provided at the Mater Hospital. It seems to me that it was for that reason alone the stratagem recorded in the management agreement of 31 October 1994 was adopted and having been put in place was maintained by having APMC issue the group certificates for persons employed by EMS to provide the services at St Andrews which EMS was obliged to perform. That some of those persons were paid for work they did at the EMS facility in Cairns and received group certificates in respect of that payment from APMC suggests if anything a partnership between EMS and APMC with respect to the Cairns facility.
In fact of course it seems to have been Dr Cooke and perhaps a couple of professional associates who managed the EMS priority emergency centre at St Andrews at the relevant date. They were the governing minds and decision makers of both EMS and APMC whichever of them was involved in providing the staff and equipment necessary for that centre to function. While it may appear a little artificial for these reasons to characterise the relationship between those two corporations as involving a partnership in my judgment it would be even more artificial and indeed unjust to unpaid medical staff and administrative to characterise the relationship as one merely of principal and agent. It would be unjust because it would deprive the staff of the protection s.433(3)(c) was designed to give them. While some might arguably have a claim against EMS on the “guarantee” given in its letter of 10 August 1994, if in fact they were “employees” of APMC at the relevant date, the right to make such a claim not coming within s. 433(3)(c) and not being secured would prove illusory. The security given to the bank by Dr Cooke to support the debenture over the EMS undertaking while protecting the bank from any shortfall upon realisation of EMS assets is of no value to the claimants for their unpaid salaries. Their only protection is the right given to employees of EMS by s. 433(3)(c) if they fall within that category.
I therefore find it unnecessary to examine the claims of each of the persons listed on Exhibit IRH 12 individually although it is clear enough that two do not come within the category of “employees” of EMS.
I have regard to the evidence given and provided by all the doctors and employees which I have analyzed. I infer that indeed all persons employed by anybody at St Andrews at the relevant date to provide services to the Priority Emergency Centre were employed at least by EMS. To the extent that APMC played any part whatever in the provision of services at the St Andrews centre I think it was minimal and could most properly be characterized as in the nature of a partnership operation which it conducted with EMS, its sole contribution being the use of the APMC name on group certificates issued with respect to salaries paid for the work performed by employees of EMS (and perhaps the use of a bank account in its name to meet the various financial obligations incurred by EMS in its operations). For reasons which do not emerge, it seems that medical insurance premiums which were apparently paid in respect of EMS employees were paid by cheques drawn on an APMC bank account - and signed by Dr Cooke. In this respect I refer to the evidence of Dr Martin.
The content of the “Deed of Variation Agreement” executed by St Andrews, EMS and APMC on 15 April 1996 suggests or is consistent with EMS and APMC being at that time together involved in the conduct of the Priority Emergency Centre at St Andrews.
There is an absence of any assistance from Dr Cooke or any explanation as to the details of the taxation and commercial advantages which he might have achieved by adopting and implementing the stratagem to which I have referred. In the context of all the evidence given by persons employed by EMS who received group certificates from APMC I find that to the extent that APMC was engaged at all in providing any management services (to which reference is made in the “Management Agreement” of 31 October 1994), there is no credible evidence to suggest that any association between EMS and APMC involved any agency whatever. I am unpersuaded by the terms of the so called “Management Agreement” viewed in the context of all the evidence from staff providing the services at St Andrews that those persons were at the relevant date employed only by APMC. I think the proper inference to be drawn is that whether or not they might be described as being “employed by” APMC upon the evidence of group certificates given to them by that corporation, EMS was undoubtedly an employer of each of them.
In the absence of any evidence of the precise basis for the arrangement of August 1994 having regard to taxation implications for Dr Cooke, I find it impossible to do more than speculate as to the reason for adopting that course. I assume that 21 of the persons named on Exhibit IRH 12 who put in claims were in fact at the relevant date providing their professional and/or administrative services at the EMS facility at St Andrews and the only question to be considered is whether upon the evidence they were employees of EMS. On the whole of the material, making the assumption to which I have referred, it is clear in my view that indeed EMS was at the relevant date the “employer”of all persons working in the EMS facility at St Andrews Priority Emergency Centre - whatever part in the scheme of things APMC may have then played.
I direct that all persons listed in Exhibit IRH 12 to the applicant’s affidavit filed 20 November 1997 with the following exceptions:-
(i) L.D. McDowell Pty. Ltd.
(ii) The Chief Accountant (Mr Keogh) of St Andrews War Memorial Hospital
were employees of EMS within the meaning of s. 556(1)(e) of The Corporations Law.

[1998] QSC 213

9 October 1998