Redeemer Baptist School Ltd v Glossop

[2006] NSWSC 1201

CITATION:	Redeemer Baptist School Ltd v Graeme Francis Glossop & 5 ors; Redeemer Baptist School Ltd v Fairfax Community Newspapers Pty Ltd [2006] NSWSC 1201
HEARING DATE(S):	13.12.05, 02.05.06, 03.05.06: final written submissions 15.09.06
JUDGMENT DATE :	16 November 2006
JUDGMENT OF:	Nicholas J
DECISION:	Para 101
CATCHWORDS:	STATUTES – statutory construction – section 8A Defamation Act 1974 – meaning of “employs” and “persons” in subs (3)(a) – whether “persons” means only “employees at common law” – whether plaintiff has cause of action for defamation. CONTRACT OF EMPLOYMENT – whether plaintiff and its staff intended a contractual relationship – whether plaintiff employed its staff under contracts of employment at common law
LEGISLATION CITED:	Defamation Act 2005, s 9, s 46 Defamation Act 1974, s 8A Defamation Amendment Act 2002, Sch 1, s 8A Uniform Civil Procedure Rules 2005, r 28.2
CASES CITED:	Air Great Lakes Pty Ltd v K S Easter Holdings Pty Ltd (1985) 2 NSWLR 309 Babsari Pty Ltd v Douglas Chee Yin Wong & Ors [1999] QSC 326 Boylan Nominees Pty Limited v Sweeney [2005] NSWCA 8 Cameron v Hogan (1934) 51 CLR 358 CIC Insurance Limited v Bankstown Football Club Limited (1997) 187 CLR 384 Cameron v Hogan (1934) 51 CLR 358 Dietrich v Dare (1980) 54 ALJR 388 Ermogenous v Greek Orthodox Community (2002) 209 CLR 95 Fraser v Vancouver Board of Parks and Recreation (2001) 198 DLR (4th) 569 Hollis v Vabu Pry Ltd (2001) 207 CLR 21 Network Ten Pty Ltd v TCN Channel Nine (2004) 218 CLR 273 Placer Development Limited v The Commonwealth (1969) 121 CLR 353 Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 Teen Ranch Pty Ltd v Brown (1995) 87 IR 308 Vigolo v Bostin (2005) 221 CLR 191
PARTIES:	20074/05 Redeemer Baptist School - plaintiff Graeme Francis Glossop – first defendant Graham Merrick – second defendant Shirley May Gregory – third defendant Percy Kerrison – fourth defendant Andrew Thomas Frost – fifth defendant Dean Gregory – sixth defendant 20077/05 Redeemer Baptist School - plaintiff Fairfax Community Newspapers - defendant
FILE NUMBER(S):	SC 20074/05; 20077/05
COUNSEL:	20074/05 J P Phillips SC/M Lynch/T Dixon – plaintiff K Smark – defendants 20077/05 J P Phillips SC/M Lynch/T Dixon – plaintiff J N West QC/ R P L Lancaster - defendant
SOLICITORS:	20074/05 Glasheen & Quilty - plaintiff Champion Legal – defendants 20077/05 Glasheen & Quilty - plaintiff Freehills - defendant

IN THE SUPREME COURT
OF NEW SOUTH WALES
COMMON LAW DIVISION

Nicholas J

16 November 2006

20074/05 Redeemer Baptist School Ltd v Graeme Francis Glossop & 5 ors
20077/05 Redeemer Baptist School Ltd v Fairfax Community Newspapers Pty Ltd

JUDGMENT

1 His Honour: In proceedings no. 20074/05 the plaintiff claims damages against the defendants arising out of the publication on 18 March 2005 of copies of a press release under the heading “Redeemer Baptist School (watch the real story)”, and of copies of a newspaper article under the heading “Church Shock”. It is alleged that the matters complained of were distributed to various persons passing by the plaintiff’s campus at North Parramatta by the defendants, and conveyed defamatory imputations concerning the operation of its school.

2 In proceedings no. 20077/05 the plaintiff claims damages against the defendant arising out of the publication in the edition of the newspaper “Parramatta Sun” of 8 December 2004 of an article under the heading “Church Shock”, and of the publication in the edition of the newspaper “Hills News” of 14 December 2004 under the heading “Son spoke of abuse: father”. It is alleged that these publications were made in Parramatta and in the Hills district respectively, and conveyed defamatory imputations concerning the operation of the plaintiff’s school.

3 At the times of the publications the plaintiff was a corporation and operated the Redeemer Baptist School (the school) situated at North Parramatta and Castle Hill, New South Wales. Whether the plaintiff has causes of action in respect of the publication of the matters complained of turns on the proper construction of s 8A Defamation Act 1974 (the Act) which provides:

“8A Corporations do not have cause of action for defamation
(1) A corporation has no cause of action for defamation in respect of the publication of any matter by means of which a defamatory imputation about the corporation is made.
(2) Nothing in subsection (1) precludes an individual who is a member of a corporation from asserting or enforcing a cause of action in defamation in respect of the publication of any matter by means of which a defamatory imputation about the individual is made where that same publication also makes a defamatory imputation about the corporation.
(3) Despite subsection (1), a corporation may assert or enforce a cause of action in defamation in respect of the publication of any matter by means of which a defamatory imputation about the corporation is made if:
(a) the corporation employs fewer than 10 persons at the time of publication of the matter, and
(b) the corporation has no subsidiaries (within the meaning of the Corporations Act 2001 of the Commonwealth) at that time.
(4) In this section, corporation includes any corporation constituted by or under an Act or any other law (whether or not for a governmental or other public purpose)”.

4 The defendants challenge the plaintiff’s claims on the basis that s 8A(1) operates to deny it causes of action in defamation. The plaintiff, however, contends that it is entitled to pursue the claims as it is a corporation to which s 8A(3) applies in that it employed fewer than 10 persons, and had no subsidiaries, at the times the publications were made. The defendants did not dispute that the plaintiff had no subsidiaries and therefore met the requirement of subs (3)(b).

5 Pursuant to r 28.2, and by consent, there has been a separate trial of the questions raised by the defendants’ objection, the proceedings were heard together, and the evidence in one was taken as evidence in the other.

6 The questions for consideration are, firstly, the proper construction of s 8A, and secondly, whether on the evidence the plaintiff was at the relevant times the employer of fewer than 10 persons.

Construction of s 8A

7 Section 8A was enacted under the Defamation Amendment Act 2002 to give effect to the legislature’s intention to prevent a corporation from suing for defamation, and to confine the action to individuals.

8 The first question in these proceedings is the proper construction of subs (3)(a) which provides:

“(3) Despite subsection (1), a corporation may assert or enforce a cause of action in defamation in respect of the publication of any matter by means of which a defamatory imputation about the corporation is made if:
(a) the corporation employs fewer than 10 persons at the time of publication of the matter, …”

9 The plaintiff submitted that the verb “employs” in sub-para (a) should be understood to mean “uses the services of a person under a contract of employment at common law” and the word “persons” has the corresponding meaning of employees at common law.

10 It argued that there was sufficient ambiguity in the word “employs” in the provision to justify reference, as an aid to construction, to s 9 Defamation Act 2005 (the 2005 Act) which has a similar purpose to s 8A. Reliance was placed on the following provisions of s 9:

“(2) A corporation is an excluded corporation if:
(a) the objects for which it is formed do not include obtaining financial gain for its members or corporators, or
(b) it employs fewer than 10 persons and is not related to another corporation,
and the corporation is not a public body.
(3) In counting employees for the purposes of subsection (2) (b), part-time employees are to be taken into account as an appropriate fraction of a full-time equivalent.”

(The 2005 Act came into force on 1 January, 2006. By s 46 it repealed the Act).

11 The plaintiff argued that the use of the word “employees” in subs (3) of the 2005 Act evidences the legislature’s intention that the word “employs” in subs (2)(b) should be understood to mean “employs under a contract of employment” which, in turn, indicates that “employs” should be given a similar meaning in s 8A(3)(a) of the Act.

12 It was put that support for this construction is found in the following passage from the Second Reading Speech to the 2005 Act (NSW Legislative Assembly, Hansard, 13 September 2005):

“The Commonwealth's preferred position is that all corporations, regardless of size, power and wealth should have the right to sue. While the State and Territory Attorneys General found this proposition to be unacceptable, in a spirit of compromise we agreed to a small business exemption. Consequently, clause 9 provides that small businesses with fewer than 10 employees may sue for defamation. This is the current law in New South Wales. Clause 9 clarifies that small businesses related to other businesses in terms of section 50 of the Commonwealth Corporations Act 2001 are not able to sue. The Commonwealth definition of a related body corporate includes both a subsidiary and a holding company of another body corporate.”

13 The plaintiff also submitted that, in support of the construction for which it contended, reference should be made to other legislation in which the terms “employ”, “employment”, “employer”, and “employee” were used e.g.: Institute of Teachers Act 2004, s 3; Child Protection (Prohibited Employment) Act 1989, s 3; Workplace Relations Act 1996, s 5(1)(3), s 6.

14 The defendants submitted that the construction for which the plaintiff contended was unreasonably narrow. They pointed to the use of the word “persons” as indicative of the intention that the category of persons employed should not be restricted to those who are employees at common law. It was submitted that the exception under subs (3) was intended to be confined to a small corporation akin to one which operates a small family business consistently with the distinction made in the Second Reading Speech to the 2002 Amendment Act (NSW Legislative Assembly, Hansard, 15 November 2002, p 2) between corporations generally and small family companies. It was submitted that a relevant consideration is that the Act is not concerned with employment relationships and, accordingly, there is no justification for confining the meaning of the word “persons” in sub-para (a) to employees under a common law contract of employment with the corporation. It was put that “persons”, properly construed, refers to individuals engaged in the business of the corporation.

15 Unsurprisingly, the dictionaries show that the verb “employ” has a range of meanings. In Black’s Law Dictionary (7th edition, 1999) they include: “1 To make use of. 2 To Hire. 3 To use as an agent or substitute in transacting business”. In the Macquarie Dictionary (4th edition, 2005) the meanings include: “1 To use the services of (a person); have or keep in one’s service; keep busy or at work; 2 To make use of (an instrument, means, etc); use; apply. 3 To occupy or devote (time, energies, etc)”.

16 The Oxford English Dictionary (2nd edition, 1989) and the Oxford English Dictionary On-line provide meanings which are substantially the same.

17 On the other hand the noun “employee” is given a single meaning. In Black’s it is: “A person who works in the service of another person (the employer) under an express or implied contract of hire, under which the employer has the right to control the details of work performance”. In the Macquarie it is: “A person working for another person or a business firm for pay”, which is similar to the meaning found in the Oxfords.

18 In construing the legislation a construction promoting its purpose or object is to be preferred to a construction that would not promote that purpose or object (e.g. Vigolo v Bostin (2005) 221 CLR 191, para 53). This is the approach required by the Interpretation Act 1987, s 33. Context is also an important consideration. (CIC Insurance Limited v Bankstown Football Club Limited (1995-1997) 187 CLR 384, p 408). Ultimately, in every case, statutory construction is a text-based activity. (Network Ten Pty Ltd v TCN Channel Nine (2004) 218 CLR 273, paras 87, 89).

19 In my opinion there is no ambiguity in the language of sub-para (a) so it is unnecessary to have recourse to the wording of s 9 of the 2005 Act or to the related Second Reading Speech as aids to construction. For the same reason I derived no assistance from the other legislation to which the plaintiff referred which, in any event, requires consideration of terms such as “employ” and “employment” in contexts substantially different to subs (3).

20 The purpose of s 8A, read as a whole, is to restrict corporations entitled to assert a cause of action for defamation to those which meet the requirements of subs (3)(a) and (b). This is consistent with the Second Reading Speech to the 2002 Amendment Act in which corporations generally are distinguished from small family businesses or corporations. Entitlement to sue is confined to a corporation which employs fewer than ten persons at the time of publication, and has no subsidiaries. The enquiry to be made under sub-para (a), therefore, is as to the number of persons employed at the relevant time.

21 In my opinion there is no indication in s 8A that its words should not be given their natural and ordinary meaning. Absent qualification, the meaning of the word “persons” in sub-para (a) includes individuals who are employees and those who are not. There is no justification for confining its meaning to individuals under a contract of employment with the corporation. Had it been intended by the legislature that its meaning should be so construed it may be assumed that the word “employee” would have been used instead.

22 The construction of the verb “employs” should be approached in the same way. The use of the word “persons” indicates that it was not intended that “employs” be understood in an industrial sense referable to a relationship of master and servant under a contract of service. In my opinion, in the context of sub-para (a), the proper construction of “employs” is that it means “to use the services of (a person)” or “to make use of (a person)”. So understood it complements the ordinary meaning of “persons” in the provision, and is in harmony with it. (cf: Fraser v Vancouver Board of Parks and Recreation (2001) 198 DLR (4th) 569, p 574 paras 15, 16.)

23 It follows, in my opinion, that the nature of the arrangement or understanding under which a person provides services, and whether or not the arrangement or understanding is legally enforceable, and whether or not the person is paid for the services or is a volunteer, are irrelevant considerations. The only relevant issue is whether or not, as a matter of fact, the number of persons whose services the corporation used in its business at the time of publication is fewer than 10.

24 This conclusion accords with the underlying purpose of s 8A that only a small corporation is entitled to assert a cause of action for defamation. As the defendants submitted, if the narrow construction for which the plaintiff contended was correct it would be simple indeed for a corporation to so arrange the conduct of its operations as to avoid its application. This result could be achieved, for example, by engaging independent contractors or by outsourcing employment requirements by contracting work outside the corporation rather than employ in-house staff. Because such a construction would negate the statutory purpose it should be rejected.

25 Accordingly, the plaintiff’s submissions on the construction issue should not be accepted.

26 The undisputed evidence of Mr Russell John Bailey, the plaintiff’s bursar, was that at the times of the publications, the total number of its teaching staff was 47 which consisted of 38 full-time members and nine part-time members (T p 17). He described the teaching staff as a stable group who had full-time responsibilities for the delivery of the school curriculum.

27 The plaintiff submitted that its staff were volunteers who were ordained members of the Ministry Order of the Redeemer Baptist Church and were not employed by it under contracts of employment. It argued that, as its staff members were not employees, it was a corporation within subs (3)(a) and hence entitled to maintain its claims in each set of proceedings.

28 However, with regard to my finding as to the proper construction of subs (3)(a) the plaintiff’s submissions must be rejected. As the plaintiff has failed to prove that it employed fewer than 10 persons at the times of the publications, s 8A(1) operates to deny it a cause of action for defamation in each case and, accordingly, the statements of claim should be dismissed.

The contract of employment question

29 In the alternative to their case on the construction of s 8A and on the assumption that in subs 3(a) “persons” means “employees under common law contracts of employment”, the defendants contended that, at the times of the publications, the evidence established that the teaching and ancillary staff (the teachers) were employees of the plaintiff under such contracts and, as their number was greater than 10, the plaintiff was outside subs (3), with the result that s 8A(1) operates to deny it causes of action for defamation.

30 The plaintiff’s response was that at all relevant times it employed no one pursuant to a contract of employment in that neither the plaintiff nor the teachers intended the arrangement between them to have contractual effect. The plaintiff submitted that in the circumstances there was no contract under which the teachers performed work at the school, and they worked there as volunteers. Accordingly, it was put, the plaintiff was within subs (3) and thus entitled to assert or enforce the causes of action.

31 Determination of this question necessitates analysis of the relevant evidence of the plaintiff’s operations as a school, and the arrangements with its teachers by which teaching services were provided to its students. Most of these matters were described by Mr Bailey in his affidavit of 30 November 2005 and in his oral evidence. He has been the school’s bursar since 1986, and an elder of the Church since 1985. The evidence of these matters was undisputed and proved the following facts:

32 The plaintiff is a public company limited by guarantee. It was incorporated on 17 August 1984. Included in its Memorandum of Association are the following objects:

“2. The objects for which the company is established are:
(a) To establish and maintain in any suitable or convenient place or places in Australia a school or schools to be known as “Redeemer Baptist School” under the auspices of the unincorporated body or group meeting at Castle Hill as a church and presently known as “Redeemer Baptist Church”.
…
(j) To appoint, employ, remove or suspend such managers, clerks, secretaries, servants, workmen and other persons as may be necessary or convenient for the purposes of the Company”.

33 It is one of the ministries of the Redeemer Baptist Church (the Church). The Church is an unincorporated, not-for-profit religious association the membership of which is comprised of members of the Ministry Order. Other ministries include Redeemer Baptist Church Property Limited which is the trustee of the Church’s property used to provide the accommodation necessary to promote the Church’s religious and charitable ideals, and The Redeemer Community Aid Limited, the principal activity of which is the furtherance of the Church’s religious and charitable ideals through the provision of appropriate care to people in need. There are also ministries concerned with church music, the conservation of property, and the provision of care for needy children.

34 All members of the Ministry Order including those involved with the school, live in the Church community within a grouping of houses situated at Oatlands.

35 The elders of the Church were responsible for the Ministry Order which was signed by most members on 15 September 2001. It is in the following terms:

“The Redeemer Baptist Church Ministry Order is a Religious Order under the direction and supervision of Redeemer Baptist Church, Castle Hill NSW. It has as its goal the support of ministries operated by Redeemer Baptist Church and its associated organisations.
All members of the Order will be admitted into the Order and commissioned by the Church by the procedure of laying on of hands performed by the Elders of the Church, and agreement in writing to these conditions.
All members of the Order will have as their primary activity, the practice, study, teaching and propagation of religious beliefs. They will be required to participate in regular training given by the Elders of the Church, and be willing to undertake any duties as specified by the Elders of the Church.
All members of the Order will live within the community structure to enable them to pursue the religious life. Members will live in households as designated by the Elders of the Church and assist in the household caring ministry.
When individuals become members of the Order, they will renounce in principle any possession of property. Property shall be seen to be held in stewardship and will be available to the Church for use in any of the ministries operated by the Church.
Members of the Order will be willing to accept discipline or correction as determined by the Elders necessary to maintain the overall life and goals of the Church. The members of the Order will be willing to make any self-sacrifice to uphold the goals of the Order, even if this results in loss of material well-being of the member.
The Church may pay stipends to members of the Order as it determines to provide the support which allows the members to perform the ministry determined for them, and is appropriate to their personal needs. Members of the Religious Order may or may not receive a stipend to support them in performing their ministerial activities.
The Elders will have the responsibility to care for the well-being and support of the members of the Order.
While it is expected that members will make a life-time commitment to the Order, members would leave the Order at the discretion of the Elders or may leave by mutual consent between the Elders and the member concerned. On leaving the Order, members shall agree that the return of any property used by the Order is at the discretion of the Elders. Future ownership and usage will be determined by the Elders who would consider remuneration for such property. The Elders will, at the same time, assume an appropriate pastoral concern so that the departing member is treated with due care and Christian charity”.

36 The plaintiff is governed by a board of directors all of whom were elders of the Church and members of the Ministry Order. It conducts the school as an educational institution along ordinary lines. The school is registered under the Education Act 1990 and its teachers provide the curriculum required by the NSW Board of Studies. In September 2004 the enrolment was about 520 students. The present number is about 450.

37 It was Mr Bailey’s opinion that the plaintiff has had no employees since the inception of the school and that all who contribute to its teaching and administrative functions do so on a voluntary basis. All teachers are members of the Ministry Order. Annexure E to his affidavit contained the names of each member of the Church who contributed to the operation of the school as at December 2004. It included details of teaching experience and stipends paid by the Church.

38 The Staff Manual provides information to staff as to their duties and responsibilities. It contains details of the structure and operation of the school, and of its policies and procedures. It states that all staff, unless otherwise nominated, are members of the Ministry Order and are thus not employees of the plaintiff, and may receive stipends from the Church to support them in their ministry. In distinguishing between Ministry Order members and employees it includes the following (Ex 3, p 17):

“Ancillary staff who are not members of the Order are employed by Redeemer Baptist Services under the Awards pertaining to their employment. These details will be spelt out in their letter of appointment to the ancillary staff of Redeemer Baptist Services.
It should be noted that the stipends paid to the members of the Order are not based on the particular function performed by them, but are to meet the particular needs of the members of the Order”.

As earlier noted, at the times of publication, there were 38 full-time staff and nine part-time staff.

39 The school handbook is a guide to parents of the school’s underlying purposes, policies, structure, scope, and day-to-day operations relevant to students. The teaching body is referred to as “staff”. The handbook demonstrates that the school provides a comprehensive schooling for boys and girls from kindergarten to year 12 through its Preparatory School, Middle School, and Senior School.

40 For calendar year 2004 the plaintiff received $2,269,053.00 in grants from the Commonwealth and the New South Wales Governments, which represented about 40 per cent of total revenue of $5,675,964.00. For calendar year 2003 the plaintiff received $2,141,703.00 from these grants, which represented about 42 per cent of total revenue of $5,132,679.00.

41 On about 29 April 2005 the plaintiff submitted answers to a financial questionnaire from the Department of Education, Science and Training. It was completed by Mr Bailey. It discloses that items of recurrent expenditure included the sum of $1.8 million for salaries and allowances for “general teaching staff, lay and religious”; the sum of $246,440.00 for salaries for all other staff; and the sum of $154,919.00 for superannuation. These amounts total the sum of $2,201,359.00 which is the amount referred to as “Service charges” in the plaintiff’s financial report for year ending 31 December, 2004.

42 The response to the questionnaire also included, as part of the declaration section, the statement that:

“All teaching, administrative and clerical, building, and grounds staff are supplied by the Ministry Order of Redeemer Baptist Church. Redeemer Baptist School pays Redeemer Baptist Church for services rendered”.

43 The service charges represented payments mostly made to the Church, with a small amount to Redeemer Baptist Services Limited. Mr Bailey described the payment of service charges as a discretionary payment made out of general funds, which was dependent upon the plaintiff’s ability to pay in any given year. He said that the payments did not relate to the payment of stipends by the Church to members of the Ministry Order who may contribute their time to the school.

44 The plaintiff’s distribution journal report for 2004 recorded payments made to the Church on invoices rendered, usually monthly, for items described as “services rendered”. The services rendered were stated to be for the provision of various services including general teaching services, aides and assistants, and for administration and clerical matters. The report also shows that the total amount paid for these services was the sum of $2,201,359.00 which is the amount referred to as incurred for “Service charges” in the 2004 financial report.

45 On 29 November 2004 Mr Bailey completed a declaration of actual wages paid and an estimation of wages on behalf of the Church which he submitted to its workers’ compensation insurer, CGU Workers’ Compensation (NSW) Limited. The name of the employer was stated to be Redeemer Baptist Church. In the section referable to “direct employees” it was stated that for the year ending 26 November 2004 it paid a total of 91 employees total wages, including superannuation expenses, in the sum of $1,802,145.00. The type of work performed by the employees was described as “religious, including teaching, ministry, pastoral care, building, maintenance, IT”. Another category was clerical/general assistant’s work. The estimates for the year ending 26 November 2005 were that the average number of employees would be 85, and the total wages, including superannuation expenses, would be the sum of $1,975,080.00.

46 It appears that Mr Bailey paid the premium in the sum of $25,759.61 for renewal of the workers’ compensation insurance for the Church and was later reimbursed by the plaintiff.

47 A declaration in respect of the year ending 26 November 2003 was completed by Mr Bailey on 6 January 2004. It is in substantially similar terms to the 2004 return.

48 Mr Bailey’s evidence about the stipends paid to teachers at the school was to the following effect:

The teachers were members of the Ministry Order, and were paid stipends by the Church at the discretion of the elders according to the needs of the individual and the Church’s capacity to pay. The amount in each case was determined following consultation with the member. It was not calculated with regard either to the time spent in contributing to the school or to other ministries, or to the value of the member’s contribution. The stipend would continue to be paid whether or not the member was available to provide services to the school or other ministries. Stipends were generally paid on a regular basis and the amounts paid varied widely between individuals having regard to particular circumstances. Tax was deducted by the Church from payments made to many teachers.

49 He stated that the teachers were not paid a salary or wage, or for sick leave or statutory leave.

50 Mr Bailey received a stipend of $13,434.00 from the Church in 2004/2005. He also said (affidavit 30 November 2005, paras 80, 81):

“80 In my case, I spend approximately 50% of my time in the Church contributing to the School Ministry (as set out in annexure E to this affidavit). I am not employed by the School, the Church or any other entity within the Church or otherwise.
81 I have no, and have had no, intention to enter into any legal relations with the School or the Church. I contribute my time to the Church and the School on a voluntary basis in accordance with the terms of the Ministry Order document which is annexure F to this affidavit”.

51 Mrs Janet Florence Marsh gave evidence that she had been a member of the Ministry Order since about 1982, to which she provides her services on a voluntary basis and as a matter of personal choice. For many years until the 1990s she worked at the school for about three days per week as a teacher’s assistant in the teaching of home science, textile and design, and arts and crafts. At other times she undertook work for the ministry. At present, she assists the school to fit uniforms and in its catering for meals. She also assists the Church in various ways including hospital visits and home care. She neither received, nor receives, a stipend, and expects no payment for her work for the school or for the Church. She regards her work as voluntary, and in response to a call from God.

52 Miss Sharron Johnston’s evidence was that she had been a member of the Ministry Order for about 29 years. She has worked for the school full-time since about 1985 in various roles including administrative work, answering telephones, general typing, and catering for other members of the Ministry Order. She receives a stipend of about $30,000.00 per annum from the Church, which issues her with a group certificate for taxation purposes. She also makes hospital visits to students or their parents, and participates in the music ministry. She said (affidavit 6 December 2005, para 6):

“I do not have, nor have I ever regarded myself as having any sort of contractual relationship with the School or the Church. I carry out my roles in an entirely voluntarily capacity as part of my calling from God. It is the best means by which I can serve the calling of Jesus Christ”.

53 Miss Johnston said that in 1986 she became ill and was off work for six months, and then resumed on a temporary basis for another six months. Her stipend, unchanged, continued to be paid throughout. She said that her activities at school or visiting hospitals, whether or not outside school hours, are all part of her ministry. She explained that her life is a calling and she does not expect money for the work that she performs.

54 Mr Richard Townsend’s evidence was that he has been a member of the Ministry Order since 1986. He has been a teacher at the school since 1991, teaching commerce, mathematics, and business services to years 9, 11, and 12. In addition to teaching, he regularly undertakes other duties, sometimes for many hours each day, including working as a bus driver taking students to and from the school, and attending to the home ministry of the Church. Activities unrelated to teaching include ground maintenance and painting buildings. He receives a stipend of about $1,700.00 gross per month paid by the Church. It is received whether or not he works at the school. During 2005 whilst unable to work due to illness he continued to receive the stipend unchanged. In about 1995 he accepted a reduced stipend to assist in the purchase of the school.

55 He said (affidavit 6 December 2005, para 7):

“I have no contractual relationship with the School or the Church. I carry out my undertakings as part of the general Ministry of the Church. In doing so, I believe it is my way of properly fulfilling and following the teachings of Jesus Christ”.

56 By letter dated 28 June 2001 to the Commissioner, NSW Commission for Children & Young People, the plaintiff provided information concerning one Mr B A Jones whom it described as a former employee. It included the following statements:

“It is my understanding that employees can be paid or unpaid. It is our contention that Mr Jones was an employee from January 1 1993 up until his departure in April 2000. He was involved in a voluntarily capacity as part of the ministry of the Redeemer Baptist Church and Redeemer Baptist School”.

The letter was in reply to the letter from the Commissioner of 15 June 2001 in which a request was made for information as to whether Mr Jones was an employee of the school at the time of matters which led to disciplinary proceedings against him.

57 In its letter dated 3 November 2004 to parents and guardians of students the plaintiff advised of the departure of a number of members of staff. The letter included the statement: “They intend to relocate and seek alternative employment”.

58 In its newsletter dated 24 November 2004 to parents and guardians the plaintiff included the following information:

“The teachers who left were all vowed members of the Ministry Order of Redeemer Baptist Church. Members of the Order may devote time and/or resources to the various ministries of Redeemer Baptist Church, including Redeemer Baptist School. These gifts are voluntary, as is any association with the Order. Many of those who have been a part of the ministry for many years have given much – much more than any Industrial Award would enforce – to serve your families and your children. Those who remain continue to give of themselves and of their resources, cheerfully”.

The plaintiff’s submissions

59 For the plaintiff it was submitted that neither it nor those who worked at the school intended their relationship to be under a legally enforceable contract. It was put that each of the witnesses disclaimed any intention to have entered an enforceable contract with the plaintiff, and stated that their services were provided as volunteers in response to a calling to serve God.

60 It was argued that the Ministry Order, of which all who contributed to the school were members, evidenced an unenforceable arrangement whereby each undertook to support the various ministries operated by the Church of which the school was one. Commitment to the Ministry Order required members to have “… as their primary activity the practice, study, teaching and propagation of religious beliefs” and to be “… willing to undertake any duties as specified by the Elders of the Church”. It was said that it was evident from the contents of the document that the obligations arising from membership were moral and spiritual, and gave no indication that failure to comply would land the parties in court.

61 With regard to stipends, it was argued that they were no indication of a contract with the plaintiff in that they were not payment akin to wages in consideration for work done but were discretionary payments by the Church to provide support, and to enable performance of ministerial activities. The amounts were unrelated to the nature and extent of work performed. Moreover, the plaintiff made no payments for salary, wages, or for sick or statutory leave. Accordingly, it was put that the payment of stipends did not affect the voluntary status of recipients.

62 The plaintiff also submitted that absence of intention to contract was evidenced by statements in the staff manual and newsletters to the effect that staff were not employees but members of the order, which statements reinforced the denials by witnesses of intention to enter into a contractual relationship with the plaintiff.

63 In summary, it was put that the effect of the totality of the evidence contradicts the existence of an intention that the arrangements between the plaintiff and staff members would be legally enforceable contracts of employment. It was submitted that Mr Bailey’s evidence taken with that of the other witnesses founds the inference that all members of the Order provided their services to the ministries, of which the school is but one, in fulfilment of their religious calling, and not pursuant to some legally enforceable contract to do so.

64 It was submitted that the plaintiff had demonstrated that, in the circumstances, it had no employees under contracts of employment at the times of the publications, and therefore was within subs 3(a) of the Act and entitled to assert or enforce its causes of action.

The defendants’ submissions

65 The defendants submitted that an objective assessment of the conduct of the plaintiff and the teachers compels the conclusion that the teachers were each party to a contract of employment with the plaintiff. It was put that the intention of the plaintiff and the teachers to have a contractual relationship was established having regard to the overall circumstances in which their relationship operated.

66 The circumstances relied upon and the submissions in respect of them may be summarised as follows:

67 In accordance with its objects, the plaintiff is the proprietor and operator of the school, and derives part of its income from students’ fees and government grants. The structure is conventional, and the school is run as an educational institution in accordance with the requirements of the NSW Board of Studies.

68 The teachers, as part of the plaintiff’s establishment, were and are subject to supervision and control to a degree consistent with a relationship of employer and employee. Such a relationship was indicated by for example, the plaintiff’s use of the terms “employee” and “employment” in its letter of 28 June 2001 (para 56 above) and newsletter of 3 November 2004 (para 57 above). The school handbook refers to the teaching body as “staff” without suggesting that its members are not employees.

69 The information in answer to the questionnaire submitted to the Department of Education, Science and Training on 29 April 2005 in support of an application for a grant represented that the plaintiff was obliged to pay the amounts for salaries and allowances to teachers which it specified as recurrent expenditure. From its revenue, a substantial part of which was from government grants, the plaintiff paid the Church for its services in providing staff to the school, and thereby enabled the Church to pay each member’s stipend.

70 It was submitted that such arrangement was inconsistent with the contention of the plaintiff and the witnesses that work performed for the Church, and for the school as one of its ministries was on a voluntary basis and not under a contract of employment. It was put that, in reality, the plaintiff paid the teachers through the Church as an intermediary, and that the interposition of the Church as the supplier of teaching services was an artifice. It was argued that if, in truth, the teachers provided their services as volunteers, there was no justification for payments to be made to the Church for those services. Against this background the stipends, on which most members paid tax, were equivalent to wages or salaries, and hence the arrangement did not gainsay the existence of contracts of employment.

71 Furthermore, the plaintiff paid the premium for the workers’ compensation insurance which covered the teachers, although the Church was the insured under the policy.

72 The defendants submitted that the Ministry Order, to which the plaintiff was not a party, was irrelevant and without contractual significance. It was put that it should be understood as a declaration of faith, and that the fact that members performed work for the Church in accordance with its direction did not negate the proposition that the work performed by each for the plaintiff was under a contract of employment.

73 The defendants relied on the principles in cases such as Hollis v Vabu Pry Ltd (2001) 207 CLR 21, Boylan Nominees Pty Limited v Sweeney [2005] NSWCA 8 and Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 which guide a court in distinguishing between independent contractors and employees. It was put that with regard to a teacher’s role in the school structure and the obligations to students, a teacher lacked the independence or flexibility of action characteristic of an independent contractor, but was in a situation similar to that of an employee.

74 The essential submission of the defendants, as I understood it, was that an objective assessment of the whole of the circumstances leads to the conclusion that each teacher was an employee whose work for the school was paid for, at least indirectly, by the plaintiff, which was the result of their intention to create a legal relationship. The defendants argued that the absence of such intention had not been proved, there being no evidence that the plaintiff lacked such intention, and the evidence of the witnesses on this issue was subjective and not compelling. They asked the court to find that on the objective evidence a contractual intention was established, with the result that teachers were employees under contracts of employment. It followed that as their number exceeded 10, the plaintiff was outside subs 3(a) of the Act and s 8A therefore operated to deny the plaintiff the causes of action.

Principles

75 It is essential to a valid contract that the parties intended to create a relationship which gave rise to obligations enforceable by law. In Ermogenous v Greek Orthodox Community (2002) 209 CLR 95 the issue of intention to create contractual relations was considered in the following passage:

24. It is of the essence of contract, regarded as a class of obligations, that there is a voluntary assumption of a legally enforceable duty. "To be a legally enforceable duty there must, of course, be identifiable parties to the arrangement, the terms of the arrangement must be certain, and, unless recorded as a deed, there must generally be real consideration for the agreement. Yet "[t]he circumstances may show that [the parties] did not intend, or cannot be regarded as having intended, to subject their agreement to the adjudication of the courts".
25. Because the inquiry about this last aspect may take account of the subject-matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties”.

76 A contract of service is of its nature a bilateral contract (Dietrich v Dare (1980) 54 ALJR 388, p 390).

77 In Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, Handley, JA said (p 310):

“Family, social, and domestic arrangements do not normally give rise to binding contracts because the parties lack the necessary intention. See Balfour v Balfour [1919] 2 KB 571. There are other arrangements which attract the same principle. Thus in Cameron v Hogan (1934) 51 CLR 358 (which in some respects merits reconsideration by the High Court) the majority at 370-371 said of voluntary associations:
"They are for the most part bodies of persons who have combined to further some common end or interest which is social, sporting, ... religious ... or humanitarian in character, or otherwise stands apart from private gain and material advantage. Such associations are established upon a consensual basis, but, unless there were some clear positive indication that the members contemplated the creation of legal relations inter se, the rules adopted for their governance would not be treated as amounting to an enforceable contract."
These principles have retained their full force in relation to religious associations. See President of Methodist Conference v Parfitt [1984] QB 368 and Davies v Presbyterian Church of Wales [1986] 1 WLR 323 (HL). Mr Maconachie also relied upon Rogers v Booth [1937] 2 All ER 761, a case in which a Salvation Army officer failed in a claim for worker's compensation because she was not employed under a contract of service. The officer had signed a document containing provisions which negatived any such intention. However Sir Wilfred Greene MR at 754 held that independently of these provisions the character of the relationship demonstrated that the parties did not intend to enter into rights and obligations enforceable in a court of law”.

78 It is pointed out in Carter & Harland: Contract Law in Australia (4th edition, para 401) “… since a contract is a “legally binding agreement”, it would be paradoxical if an agreement could be held a contract in the face of the parties’ intention that it should not give rise to legal rights and obligations. Therefore, a common positive intention not to contract will be respected”.

79 In Air Great Lakes Pty Ltd v K S Easter Holdings Pty Ltd (1985) 2 NSWLR 309, Mahoney, JA said (p 331):

“ … The law would not, I think, impose the relationship of contract where, eg, A though he was play-acting and B knew of that fact. A's actual subjective intention would be effective to prevent the contract arising. A fortiori, if both A and B had the intention that no contract should result, and each knew of it, then none would be imposed. And, I think, this notwithstanding that a reasonable bystander would take from what they said and did that there was an exchange of congruent promises and a mutual purpose to contract. I put aside for this purpose special cases, of estoppel, third party rights, and the like.
The result is therefore that intention to contract, in the subjective sense, is relevant to but not determinative of the existence of a binding contract. It acts, in a sense, as a limiting factor, that is, as a reason for not giving to what on the face of it is an exchange of congruent promises, the legal consequences which would otherwise be given to it. And on this basis, it is, in principle, relevant to know what was the actual subjective intention of each party, in the example that I have given, in order to determine whether the legal relationship of contract is to be held to exist. More correctly, it is relevant to know the intention of the one party where it is the intention of or known to the other”.

80 The issue of intention arose in Babsari Pty Ltd v Douglas Chee Yin Wong & Ors [1999] QSC 326. The plaintiff claimed contribution from the fourth defendants (the Chows) and from the eighth defendant (Westpac) on the basis that they were all co-guarantors of another party’s (Asean) debt which the plaintiff had discharged. Chesterman, J found that in the circumstances there was no agreement between Westpac and the Chows by which the latter agreed to guarantee the debts of Asean, and thus the Chows were never co-sureties with the plaintiff, and the claim for contribution failed.

81 His Honour concluded a review of the principles with the following observations and findings:

“40 One further opinion should be noted. The authors of Halsbury's Laws of Australia , Volume 6, para [110-35] say:
"Element of subjective intention necessary. Subject to the doctrine of estoppel, an intention to create a legally enforceable contract is a necessary element in the formation of a contract. Thus, a contract cannot be inferred from a person's conduct where the other party entertained no belief that the first person intended to contract."
41. If it be the law that no contract comes into existence where the parties negotiating for it do not come to the point where their intentions coincide it would follow that the Chows did not guarantee Asean's indebtedness to Westpac. It may be accepted that the circumstances of this case are unusual but it is the fact that the intentions of the Chows and of Westpac did not coincide. They were very seriously at cross-purposes.
…
45 The rigorous application of the "objective theory" would represent in this case a resounding triumph of form over substance. There was every objective appearance of agreement. The Chows signed a document reciting the hypothecation of their land to secure their promise to pay the debts of Asean in consideration of Westpac's forbearance and/or making further loans. Even viewed from the bank's standpoint there is nothing to disturb the appearance of agreement. Westpac did not know of the Chows' actual intention because the first defendant assuredly did not pass on the real reason he was given possession of the certificates of title.
The reality is that neither party to the "contract" contends the Chows were bound to guarantee Asean's debt. The bank accepts that it would (or would probably) have accepted the guarantee and mortgage together with one from the Tsangs and substituted them for Mrs Wong's guarantee but it does not assert that the incomplete performance of the offer or acceptance to provide substitute security conferred upon it any rights pursuant to the Chow's mortgage. The Chows, of course, resist being made liable under the bill of mortgage.
46. It is to be observed that it is the plaintiff, not one of the parties to the "agreement", who insists that the objective phenomenon of agreement has resulted in an enforceable guarantee. The parties to that contract have a different view of it. It does not seem right that legal theory can impose on parties contractual obligations (or benefits) which both, without artifice, disavow. Where the parties accept neither of them intended to contract on the terms that the other intended to constitute the bargain, a stranger cannot insist that they are bound because the mistake is not obvious to outsiders. There is no inconvenience in not holding parties to an agreement that neither intended to make.
47. To hold that no contract comes into existence where both parties accept that neither intended to make the contract which the other had in mind, and neither seeks to enforce the contract on the basis that the other behaved in such a way as to induce the belief that a contract had been made on the terms it intended, is consistent with legal theory as expounded by Professor Treitel and the authors of Corbin . It is also supported by the authority of Paal Wilson and AirGreat Lakes , both of which insist that consensus between contracting parties remains a relevant factor when deciding whether a contract has been made. To so hold also appears within the exceptions to the objective theory of contract allowed by Williston and Taylor” .

Determination

82 For the plaintiff to come within subs (3) it is necessary for it to show that it employed fewer than 10 persons at the times of the publications. In this case it set out to show that the plaintiff and the members of staff had no intention to create legally enforceable contracts under which teaching and other services were provided for the school, and thus the plaintiff had no employees under contracts of employment. Its case was that the services were provided voluntarily in fulfilment of obligations to the Church according to the Ministry Order.

83 An intention to create a legally enforceable contract is a necessary element in the formation of a contract. The search for the intention to create contractual relations requires an objective assessment of the state of affairs between the parties having regard to what was said or done by them in light of all the circumstances of their relationship (Ermogenous para 25).

84 In most of the cases which deal with the ascertainment of contractual intention there is an issue between the parties about the existence of an enforceable contract of employment between them and/or the construction of such a contract. In these proceedings there is no such issue. Here the defendants, who are strangers to the relationship between the plaintiff and the teachers, have set out to prove the existence of contracts which are disavowed by those they claim were parties to them.

85 Mr Bailey, Mr Townsend, Mrs March, and Miss Johnston gave evidence to the effect that each had been a member of the Ministry Order for many years, provided their services on a voluntary basis to the Church and school, and had no intention to have any contractual relationship with either the Church or the school. All members of the school staff are members of the Ministry Order and are committed to serve the ministries of the Church, including the school. Mr Bailey listed particulars of members of the Church who contributed to the operation of the school as at December 2004. It included his estimate of the time spent by each as a percentage of the total time spent contributing to other ministries. In my opinion the evidence of the witnesses, which was undisputed, provides ample support for the finding, which I make, that each had the same relationship with the plaintiff for working at the school, which was also the same for all other teachers.

86 In my opinion, when considered from the viewpoint of the teachers, the evidence negates the conclusion that they intended that their arrangements with the plaintiff would place them under a legal obligation to provide services to the school. Rather, it demonstrates that their underlying arrangement with the plaintiff was with and through the Church, and that their intention was to effect a calling to serve God in accordance with the Ministry Order. Put another way, I find that their service to the school was provided in fulfilment of the intention to serve a ministry of the Church. I generally accept the plaintiff’s submissions on this issue.

87 The Ministry Order describes itself as a religious order under the direction and supervision of the Church, which has as its goal the support of ministries operated by the Church and its associated organisations. It records that the primary activity of all members is the practice, study, teaching, and propagation of religious beliefs. Members renounce in principle any possession of property, and are willing to make any self-sacrifice to uphold the goals of the Order, even if this results in loss of material well being of the member. It demonstrates the consensual basis upon which members have combined to serve the Church, and it was common ground that it has no contractual effect (cf: Teen Ranch Pty Ltd pp 310, 34; Cameron v Hogan (1934) 51 CLR 358, pp 370, 371).

88 There was no evidence that any member provided services to the plaintiff pursuant to any arrangement other than the Ministry Order, or that any member contemplated the creation of legal relations with the plaintiff under some different arrangement. For example there was no evidence of any communication between the plaintiff and a teacher on subjects which would be ordinarily regarded as requiring agreement such as duties, hours, wages, or leave. In fact, no payments for wages, salaries, or leave were paid by the plaintiff.

89 The evidence was that stipends were paid at the discretion of the elders according to the needs of the member and the Church’s capacity to pay. Accordingly, any obligation to pay was illusory in that it was unenforceable (Placer Development Limited v The Commonwealth (1969) 121 CLR 353, pp 357, 360, 367-368). Stipends were not calculated with regard to time spent working for the school or other ministries, or to the value of services provided. In my opinion, the evidence makes it very clear that the work of the teachers was not done in consideration of, or in return for, or in order to earn, a stipend (cf: Teen Ranch p 311). In the circumstances, the view of the witnesses that their work was done voluntarily is supported by the evidence.

90 Furthermore, in my opinion, the fact that many teachers were paid stipends by the Church in circumstances where the Church recovered the amounts thereof from the plaintiff as ”services rendered” when assessed with regard to the whole of the evidence does not assist the defendants’ case. Accepting, without deciding, that the plaintiff’s arrangement with the Church in respect of the funding of stipends was an artifice, the situation remained that there was no arrangement whereby the plaintiff in fact paid, or was contractually bound to pay, a member for services. Nor has it been shown that the Church was similarly bound to pay a member for teaching or other work performed for its ministries.

91 The evidence of the plaintiff’s position was given by Mr Bailey. Its position was that it has had no employees from its inception, and it regards all who contribute to its operations as doing so on a voluntary basis. This view was conveyed to the teachers in the staff manual (para 38 above) and to parents and guardians in the newsletter of 24 November 2004 (para 58 above). To conduct its operations on this basis is inconsistent with an intention that its employment relationship with teachers should be contractual. I conclude from this evidence that the plaintiff neither intended, nor regarded, the relationship to be legally enforceable.

92 I have taken into account the various circumstances which the defendants submitted were objective indications that it was the common intention of the plaintiff and teachers that their employment relationship should be under a legally enforceable contract. These circumstances included the plaintiff’s response to the questionnaire (noting that it stated that relevant services were supplied by the Church and the plaintiff paid the Church for them); the arrangement whereby the plaintiff effectively paid the stipends and workers’ compensation insurance premium; references in the school handbook to the teaching body as staff without suggesting that they were not employees, and to the plaintiff’s use of terms in correspondence which indicated it regarded teachers as employees. I have also taken into account that it may reasonably be supposed that the teachers were under the supervision and control of the plaintiff to a degree consistent with a relationship of employer and employee.

93 The circumstances relied upon by the defendants may well have led the reasonable bystander to conclude that there existed enforceable contracts of employment between the plaintiff and the teachers. However, it is a trite observation that appearances are often deceptive. The crucial question always remains, namely whether it has been shown that in the circumstances the parties intended to have a relationship which was legally enforceable. If the circumstances show that there was no such intention notwithstanding the conclusion of the reasonable bystander a contractual relationship will not be imposed (e.g. Air Great Lakes Pty Ltd, p331).

94 In the circumstances of this case the following passage from Babsari Pty Ltd is apt (para 46):

“46 It is to be observed that it is the plaintiff, not one of the parties to the "agreement", who insists that the objective phenomenon of agreement has resulted in an enforceable guarantee. The parties to that contract have a different view of it. It does not seem right that legal theory can impose on parties contractual obligations (or benefits) which both, without artifice, disavow. Where the parties accept neither of them intended to contract on the terms that the other intended to constitute the bargain, a stranger cannot insist that they are bound because the mistake is not obvious to outsiders. There is no inconvenience in not holding parties to an agreement that neither intended to make”.

Conclusion

95 For these reasons I find that, taken overall, the circumstances show that the plaintiff and the teachers did not intend, and cannot be regarded as having intended, that their relationship would be legally enforceable. That common intention must be respected. It follows that their relationship was not contractual and did not give rise to legal rights and obligations.

96 The defendants have failed to prove that, at the times of the publications, the teachers were employees of the plaintiff under common law contracts of employment. The plaintiff has demonstrated that it had no employees working for it under such contracts. It follows that if subs (3)(a) is to be understood to refer only to employees under such contracts it operates to enable the plaintiff to assert or enforce its causes of action.

97 However, I have already held that the effect of this provision is not so limited. The plaintiff’s success on the defendants’ alternative case does not affect the outcome of these proceedings.

98 I propose to order that both sets of proceedings be struck out.

99 The parties should have the opportunity to make submissions on the question of costs should there be no agreement as to the appropriate order to be made.

100 I direct the parties to apply to my associate by 4pm 24 November 2006 for the re-listing of the matter.

Orders

101 The court orders that proceedings no. 20074/05 and proceedings no. 20077/05 be dismissed.

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