Riverwood Legion & Community Club Ltd v Morse
[2007] NSWWCCPD 88
•4 April 2007
WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:Riverwood Legion & Community Club Ltd v Morse [2007] NSWWCCPD 88
APPELLANT: Riverwood Legion & Community Club Ltd
RESPONDENT: Suzanne Gail Morse
INSURER:Employers Mutual NSW Limited
FILE NUMBER: WCC10327-06
DATE OF ARBITRATOR’S DECISION: 10 October 2006
DATE OF APPEAL DECISION: 4 April 2007
SUBJECT MATTER OF DECISION: Whether a Director is a ‘worker’ within section 4 of the Workplace Injury Management and Workers Compensation Act 1998
PRESIDENTIAL MEMBER: Deputy President Bill Roche
HEARING:Oral
REPRESENTATION: Appellant: Mr Batten, of counsel, instructed by Edwards Michael Moroney Lawyers
Respondent: Mr Morgan, of counsel, instructed by Leitch Hasson Dent
ORDERS MADE ON APPEAL: The Arbitrator’s findings and orders dated 10 October 2006 are revoked and the following orders made in their place:
“1. Award for the Respondent.
2.No order as to costs.”
No order as to costs of the appeal.
BACKGROUND TO THE APPEAL
On 1 November 2006 Riverwood Legion & Community Club Ltd (‘the Appellant/the Club’) sought leave to bring an ‘Appeal Against Decision of Arbitrator’ in the Workers Compensation Commission (‘the Commission’) against a decision, dated 10 October 2006.
The Respondent to the Appeal is Suzanne Gail Morse (‘the Respondent/Ms Morse’).
Ms Morse was born on 5 March 1950 and as at April 2005 was employed full time with David Jones as a data entry operator. From about 1999 she had also been a director of the Appellant, having been elected to that position at the Club’s Annual General Meetings (‘AGM’). At the AGM on 10 April 2005 Ms Morse was re-elected unopposed as a director, but was unsuccessful when she sought re-election in 2006.
On 25 April 2005, Anzac Day, Ms Morse attended a dawn service at an associated club then arrived at the Club at approximately 11.45am to attend a luncheon, which took place between 12.30pm and 2.30pm. She stayed on after the luncheon to watch a concert with several of the Club’s directors and invited dignitaries. The concert ended at about 4.30pm. At 5.55pm Ms Morse and about 50 other people starting making their way to the flagpole, located at the front of the premises, to attend a lowering of the flag ceremony and the Ode as part of the Club’s Anzac Day activities. Ms Morse states that at the Ode she was to form part of the official party. As she was making her way down the stairs at the front of the Club she tripped and fell, fracturing her right ankle. Ms Morse was taken by ambulance to St George Hospital where she was admitted under the care of Dr Diwan, orthopaedic specialist.
As a result of the accident she was off work from David Jones for a period of seven weeks at which time she returned to work on full duties. She was forced to take sick leave and annual leave to cover the period she was unable to work.
On 13 May 2005 Ms Morse completed a ‘Claim Form – Personal Accident and Sickness’ on Chubb Insurance Company of Australia Limited (‘Chubb’). On 3 March 2006 a claim was made on the Club for compensation for hospital and medical expenses, whole person impairment and pain and suffering.
On 29 June 2006 the Club’s workers compensation insurer, Employers Mutual NSW Limited, denied liability on the ground that Ms Morse was not a ‘worker’ under the provisions of section 4 of the Workplace Injury Management and Workers Compensation Act 1998 (‘the 1998 Act’).
In her Application to Resolve a Dispute (‘the Application’) registered in the Commission on 7 July 2006 Ms Morse claimed section 60 expenses in the amount of $5,000, lump sum compensation of $15,500 in respect of 12% whole person impairment and $25,000.00 for pain and suffering.
In its Reply the Club raised several issues but its principal arguments before the Arbitrator were whether Ms Morse was a ‘worker’ within the meaning of the Act and whether she suffered an injury arising out of or in the course of employment.
The matter proceeded to an Arbitration hearing before a Commission Arbitrator on 5 October 2006. In an ex tempore decision the Arbitrator found in favour of Ms Morse on all issues and referred the assessment of whole person impairment to an Approved Medical Specialist.
The Club seeks leave to appeal that decision.
LEAVE TO APPEAL
Monetary Threshold
Before proceeding to deal with an appeal the Commission must determine whether the application meets the requirements of section 352 of the 1998 Act.
The quantum in issue on the appeal is in excess of $5,000.00 and therefore the threshold in section 352(2)(a) of the 1998 Act is satisfied. The whole of the compensation claimed is “at issue” on appeal and, therefore, the threshold in section 352(2)(b) is also satisfied.
Time
The appeal was lodged within 28 days of the Arbitrator’s decision in compliance with section 352(4) of the 1998 Act.
Interlocutory
Neither party suggests that the findings and orders made by the Arbitrator were preliminary or interlocutory in nature.
Leave to appeal is granted.
THE DECISION UNDER REVIEW
The ‘Certificate of Determination’, dated 10 October 2006, records the Arbitrator’s findings and orders as follows:
“Finding
1. The Applicant was at 25 April 2005 a worker employed by the Respondent.
2. On 25 April 2005 the Applicant suffered injury in the course of her employment with the Respondent being a fracture of the right ankle to which employment was a substantial contributing factor.
Orders
1.Respondent to pay s60 expenses.
2.I refer the assessment of WPI to an Approved Medical Specialist.
3.Respondent to pay the Applicant’s costs as agreed or assessed.”
ISSUES IN DISPUTE
The issues in dispute in the appeal are whether the Arbitrator erred in:
(a)finding that a contract existed between the Club and Ms Morse (‘no contract’);
(b)concluding that the contract which existed between the Club and Ms Morse was a contract of service (‘contract of service’), and
(c)concluding that Ms Morse had suffered an injury in the course of her employment (‘in the course of employment’).
REVIEW
The nature of a review and the role and function of a Presidential Member on appeal has been considered in many cases in the Commission. In The King Island Company Limited v Deery [2005] NSWWCCPD 1 it was held at [19]:
“19. A Presidential Member on appeal has a specific and limited role in the review of a decision of an Arbitrator. The review is not a rehearing. The Presidential member is not dealing with the matter de novo and is not arriving at a fresh decision based on all of the evidence available at a later time (Coal & Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; Builders Licensing Board v Sperway Constructions (Sydney) Pty Ltd (1976) 135 CLR 616). The powers of the Presidential Member to revoke the decision pursuant to section 352(7) of the 1998 Act and to substitute a new decision in its place, are exercisable only where it is demonstrated that the decision of the Arbitrator is affected by some legal, factual or discretionary error (Allesch v Maunz (2000) 203 CLR 172). Alternatively, the Presidential Member may remit the matter back to the Arbitrator concerned, or to another Arbitrator, for determination in accordance with any decision or directions made.”
Before an Arbitrator’s decision will be revoked on review it must by demonstrated that it contains or has resulted from an error of fact, law or discretion. The error must be such that, but for it, a different decision should have been made (see Snow Confectionary Pty Ltd v Askin [2004] NSWWCCPD 79; Section 294 of the 1998 Act; YG & GG v Minister for Community Services [2002] NSWCA 247; Absolon v NSW TAFE [1999] NSWCA 311).
I intend to apply the above principles in the matter before me.
SUBMISSIONS
The Appellant made the following submissions:
No Contract
a)the Arbitrator’s finding of a contractual relationship existing between the two parties is an error of law. For a contract to exist there must be an offer and an acceptance of that offer. There was no evidence of an offer by Ms Morse;
b)standing for election as a director of a company does not constitute an offer to enter into a contract with the Club. Ms Morse had stood for election each year for approximately six years before the accident. The Club did not determine whether or not Ms Morse would be appointed as a director;
c)to become a director of the Club it was necessary for Ms Morse to nominate for the position of a director and if the number of nominees exceeded the number of vacancies a ballot is held and the nominees with the most votes are elected. This does not constitute either an offer or acceptance;
d)if the number of nominees does not exceed the number of vacancies the nominees are automatically elected unopposed, this is what occurred at the AGM on 10 April 2005. The unopposed election of Ms Morse does not constitute an acceptance;
e)the Arbitrator stated that there was little evidence regarding Ms Morse becoming a director (T32.6). It was clear from the Minutes of the AGM on 10 April 2005 (‘the Minutes’) and what must have occurred during previous years, as to the manner in which Ms Morse became a director;
f)the Arbitrator concluded that Ms Morse stood for election as a director of the Club in the expectation of receiving the honorarium of $1,500 which is referred to in the Minutes (T32.39). There was no evidence that Ms Morse stood for election for that reason. An honorarium had been paid during previous years but it is clear from the Minutes that the payment of the honorarium had been suspended during the previous year because it had not been authorised at the 2004 AGM (page 3.1 of the Minutes);
g)the Arbitrator found that the Club held out that payment would be made for Ms Morse’s service and that this demonstrated the Club intended to enter into a legal relationship with Ms Morse (T32.48). There was no evidence of any such holding out by the Club;
h)the payment of the honorarium was to provide reimbursement to Ms Morse with regard to attendances at director’s meetings and reliance is placed upon the High Court decision in Dietrich v Dare (1980) 30 ALR 407 (‘Dare’) in support of the submission that there was no contract of any type between Ms Morse and the Club;
i)the Arbitrator referred to the Court of Appeal decision in Teen Ranch Pty Limited v Brown (1995) 11 NSWCCR 197 (‘Teen Ranch’). The facts in the present case are similar as Ms Morse “volunteered” her services as a director by standing for election and was obviously motivated not by the possibility of receiving a small honorarium but rather by providing service to the community and her fellow club members. In her evidence Ms Morse indicated that whilst she had been, along with other directors, requested to attend the Club luncheon on Anzac Day, she would have been there in any event because of her non-legal obligations. It is also noted that directors were also provided with other benefits by way of meals, refreshments and travelling expenses;
j)Ms Morse had various obligations as a director of the Club but these were confined to the obligations of all company directors with regard to attendance at meetings and generally acting in the best interest of shareholders (members) and complying with their fiduciary duty. This does not constitute a contract of any type between the Club and Ms Morse;
Contract of Service
k)in the event the above submissions are not accepted, there was no contract of service between Ms Morse and the Club. It is a matter of fundamental principle that a Director, as such, is not a worker employed by the company: see Moriarty v Regent’s Garage Company (1921) 1 KB 423 at 445 (‘Moriarty’). There was no agreement between Ms Morse and the Club for her to be an employee and it is clear from the evidence of Ms Morse and Mr Simon de Munck ( the Club’s operations manager) that all attendances at the Club’s premises were voluntary apart from attendances at the board meetings which Ms Morse was under a statutory duty to attend;
l)in Lee v Lee’s Air Farming (1961) AC 12 (‘Lee’) the applicant was found to be a ‘worker’ as a provision existed in the company’s Articles of Association for Mr Lee to be employed at a salary to perform work as a pilot. Ms Morse had no such agreement (to be employed as a director) with the Club;
m)an employment contract is not defined but the test requires a balancing of the indicia in favour of an employment contract with those not in favour of that relationship (Stevens v Brodribb Sawmilling Co Pty Limited (1986) 160 CLR 16 (‘Stevens’)). The first of the indicia normally taken into account is the right of control. The Club had no control over the activities of Ms Morse regarding its ‘business’. Ms Morse was under no contractual or legal obligation to attend the Club on 25 April 2005. A request had been made of all directors to attend that day (some of whom did not attend) however the Club did not have the right to ‘require’ Ms Morse to attend;
n)the indicia in relation to the right to delegate performance of the work does not arise in this matter;
o)in regard to the indicia in relation to continuous and exclusive service, Ms Morse was not required to attend at the Club’s premises or any other place during stated hours on usual working days of the week. The only attendances required were at Board meetings to perform the duty of a director but not as an employee. There were no fixed hours of work apart from attending the Board meetings on time and staying for the duration of them. Ms Morse may have attended the Club’s premises or other places from time to time but that was not on a continuous and exclusive basis;
p)the Club appears to hold a Personal Accident and Sickness policy with Chubb. The Club’s workers compensation insurer is Employers Mutual Limited. Ms Morse completed the Chubb claim form after her accident;
q)Ms Morse did not perform her duties as a director in accordance with the provisions of any industrial award and although she was given a uniform to wear, this was clearly voluntary;
r)in relation to the right of dismissal, the Club had no right to dismiss or suspend Ms Morse except to the extent that she failed to comply with her statutory obligations as one of the Club’s directors. The right of dismissal indicates a right of control over performance. It is submitted that the Club therefore had no right of control over the performance of Ms Morse;
s)in relation to the manner of computing Ms Morse’s remuneration it is clear that there was no remuneration as such. The payment of $1,500 was an honorarium and the basis of its payment is clearly set out in the minutes of the AGM of 10 April 2005. The honorarium was not calculated on the basis of the number of hours of Ms Morse’s activities and no tax was deducted. In addition, Ms Morse was not entitled to holidays or holiday pay, sick leave, long service leave or any other form of paid or unpaid leave;
t)the Arbitrator failed to properly and fairly balance the indicia which strongly favour a conclusion that Ms Morse did not have a contract of service with the Club. The Arbitrator incorrectly gave weight to the fact that the Club provided Ms Morse with a uniform and that Ms Morse would have had to pay income tax on the honorarium that she was paid;
In the course of employment
u)there was a period of time on 25 April 2005, subsequent to the end of the concert and before the lowering of the flag, when Ms Morse was ‘socialising’. Her activities are unknown but she agreed that she had consumed alcohol during that period. The Arbitrator erred in fact and law in concluding that Ms Morse’s activities at the Club on that day were an unbroken period of employment.
The Respondent made the following submissions:
No Contract
a)at the Club’s AGM held on 10 April 2005, a resolution, the second one of the meeting, was passed to “approve the payment of honorariums to the directors of the Club in the sum of $1,500 in respect of the director’s services on the board of directors of the Club”. The third and fourth resolutions related to the payment of directors’ expenses in attending official functions both within and external to the Club’s premises. The resolutions were carried and following this a declaration was made of the ballot for the directors’ positions at which time Ms Morse was elected unopposed;
b)the Club’s assertions, through the statement of Mr Simon de Munck, as to the motive behind the provision of the honorarium, that is, to defray expenses, were not credible and were appropriately dismissed by the Arbitrator;
c)the Club’s submissions refer to Teen Ranch. However, Ms Morse’s situation was not one where there was no contemplation of a bargain. The consideration was not an insubstantial amount of money, expenses were to be paid in addition and meals provided. Altruism could not be said to be Ms Morse’s motive when the increasingly critical examination of the role and obligations of directors of all commercial undertakings is considered;
d)the Arbitrator properly relied on Dare in exploring the intention to create a legal relationship and the mutuality of obligation. In nominating for a position Ms Morse expected to receive an amount of $1,500 on which she would pay income tax and, in addition, her costs in attending official functions would be met. In return the Club “expected a person of good fame and character, ready willing and able to attend and contribute to the viable and indeed legal operation of the employer’s commercial enterprise” (Respondent’s submissions 23 March 2007, page three);
e)reliance is placed on Stephan v Pacesetters Cleaning Services Pty Ltd (1995) 12 NSWCCR 19 (‘Stephan’). In that case two men operated a part time cleaning business in partnership. They ultimately incorporated and became the only directors and shareholders in the company. They performed the cleaning work required under the contracts held by the company. The company opened a bank account into which all income from the cleaning contracts was banked and from which part-time assistants were paid. Invoices were printed in the company’s name and it purchased the cleaning contracts from the partnership. Mr Stephan was injured on a journey to perform a cleaning contract. On appeal, the Court of Appeal held that Mr Stephan was a worker under the terms of the legislation. The basis for the decision was that the facts were sufficient to infer a contract of employment between the worker and the company. It was not necessary to consider the ‘indicia’ of employment because there was a coincidence of directorship and employment (per Rolfe A-JA at 27E).
Contract of Service
f)the Club refers extensively to Lee. To the extent that it is relevant, the facts in that case can be distinguished. A more relevant discussion is found in the decision of Neilson J in Harris v Cudgegong Soaring Pty Ltd (1995) 11 NSWCCR 678 (‘Harris’);
g)the Arbitrator correctly balanced the indicia and in particular made reference to the requirements and obligations imposed on the Directors by the Corporations Act 2001, the provision of a uniform, the provision of and requirement to sit at a director’s table during official functions and the attendance in uniform at the flag lowering ceremony;
h)a group certificate was provided to the directors for monies paid and the Arbitrator referred to an understanding that it was partly to reflect expenses incurred. Allowing 12 monthly meetings per annum, this would equate to $125 per meeting;
i)although the Arbitrator appears to accept the Club’s assertions, via Mr De Munck, that the honorarium was intended to defray expenses, the minutes of the AGM of 10 April 2005 would tend to suggest this was not the case. The monies paid represented valuable consideration for services provided;
j)reliance is placed on Connelly v Wells (1994) 10 NSWCCR 396 (‘Connelly’) where the Court of Appeal held that the relationship of employer and worker has to be determined by considering the whole of the circumstances of the relationship without adhering to any rigid criteria. That relationship has to be examined against the background of the changes in the nature of employment.
In the course of employment
k)Ms Morse was present at a luncheon held at the Club on 25 April 2005, Anzac Day, where she sat at the official table in her capacity as a director entertaining local dignitaries. The luncheon concluded at 2.00pm and Ms Morse’s oral evidence was: “…there were a couple of tables allocated to directors and their partners to sit, and we were invited to stay for the concert afterwards” (T3.18). The concert finished at about 4.30 or 5.00pm (T3.24);
l)the Club argues that it knew nothing of Ms Morse’s activities between the end of the concert and the injury. Sunset in late April in Sydney would occur before 5.30pm and Ms Morse explained her movements and that explanation was properly accepted by the Arbitrator;
m)the injury suffered by Ms Morse occurred on Anzac Day and as she was a director of the Club, which was a Legion or Returned Serviceman’s Club, her presence at the Club that day was expected as was her presence at the ceremony for the Ode of Remembrance. It was unreasonable to expect Ms Morse, who had been attending an official function and then concert for the members where local dignitaries were present, to be absent from the Club for half an hour then return for the Ode ceremony;
n)the injury sustained by Ms Morse was while she was making her way to the flag lowering ceremony and the recitation of the Ode; she was wearing a uniform provided by the Club and she was part of the official party for the ceremony (T7.8), and
o)it is submitted that once the Arbitrator established that there was a contract of service, the final determination as to the course of employment, properly followed.
DISCUSSION AND FINDINGS
No Contract
Before any applicant for compensation can succeed it is necessary that he or she establishes that a contract of service existed with the putative employer. The fundamental principles of contract law apply to the formation of a contract of employment just as they do to any other contract. In Cheshire & Fifoot’s Law of Contract, Eighth Australian Edition, N C Seddon & M P Ellinghaus, LexisNexis Butterworths, 2002, (Cheshire & Fifoot), the authors state at page 10 that to create a contract it is necessary that there be:
a)offer and acceptance;
b)consideration;
c)intention to create legal relations, and
d)certainty of terms.
They continue at 10 and 11:
“Offer, acceptance and consideration together define a process which, to make a contract, requires:
·at least two parties;
·a promise by at least one of them;
·an exchange between them, either promise-for-promise (bilateral contract) or promise-for-act (unilateral contract).
Exchange. There can be no offer, acceptance or consideration unless the parties intend to make an exchange. According to a classic formula, ‘the relation of a quid pro quo must subsist between’ the promises of each party (in a bilateral contract) or the promise of the one and the act of the other (in a unilateral contract).
Offer. To show that a party made an offer it is necessary to identify an express or implied promise by that party to perform a specified act in exchange for another party’s:·specified counter-promise; or
·specified act.”
They add at 11 and 12:
“There can be neither offer nor acceptance unless the parties intend to make an exchange. A promise qualifies as an offer only if it proposes an exchange. A promise or performance qualifies as an acceptance only if it is given in response to that proposal: if given coincidentally or inadvertently it cannot be an acceptance. (Nor can it be good consideration).” (emphasis added)
In respect of an ‘offer’ they state at 12:
“An offer is a promise to give a specified performance in exchange for another’s specified promise or performance.
An offer may be made by words or conduct. It may be addressed to a specified individual or entity, or a group, or to the world at large.
There is no offer unless there is a promise. Hence an offer must be distinguished from a mere statement of intention or other non-promissory conduct.” (emphasis added)
In the present case the minutes of the Club’s AGM on 10 April 2005 record the following under “Second Resolution”:
“That pursuant to Section 10(6)(b) of the Registered Clubs Act the Members hereby approve the payment of honorariums to the Directors of the Club in the sum of $1,500 in respect of each Director’s services on the Board of Directors of the Club until the Annual General Meeting of the Club in the year 2006.
The members hereby acknowledge that the benefits in this resolution are not available to Members generally but only to the Directors of the Club.
The members to approve the payment of honorarium to the Directors of the Club in the sum of $1500 in respect of each Directors services on the Board of Directors of the Club until the Annual General Meeting of the Club in the year 2006.
Ray Butler #16 stated his reasons for not accepting this motion.
Keith Platt #2150 stated that a resolution must be moved and seconded prior to the motion being raised.
Ken Douglass #572 stated his reason for not accepting this motion. Beginning [sic] of last year honorariums where [sic] entered and agreed. Half way through the year, voted [sic] to stop honorarium payments. No provision has been placed [sic] to not only reinstate honorariums but increase honorariums.
Ed Snelling [sic] correct that the board did not receive honorariums last year, as the honorariums were not voted for at the Annual General Meeting, which they must.Moved Gary McMoullough #3386, Seconded Norm McCluer #5683
68 voted for the motion. Motion carried.”
The Respondent’s undated statement provides little assistance on the circumstances of the formation of a contract with the Club but merely expresses the following conclusions:
“I am employed as part of an elected Board of Directors. My salary is [sic] this capacity is appropriately $1500.00 a year which constitutes director fees.”
For the Appellant, evidence was tendered in the form of a statement from its operations manager, Simon de Munck, dated 1 May 2006. His evidence can be summarised as follows:
a)the position of director is purely an honorary position and entirely voluntary (statement, paragraph five);
b)directors were paid an “honorarium of $1,500.00 for their services”. The intention of the payment was to cover out-of-pocket travelling expenses such as fuel in relation to attending the 12 general meetings through the year. It was never intended as a payment for “actual voluntary work performed in her role as a director and at no time has it ever been considered that payment to directors were in any way in relation to the voluntary work performed by them” (statement, paragraph five);
c)it was not compulsory for Ms Morse to attend Board meetings (statement, paragraph six);
d)there was no contract of directorship nor were there any set hours and she was not answerable or responsible to any one person in particular (statement paragraph seven);
e)Ms Morse was expected to attend Board meetings though attendance was not compulsory. Apologies were often received from directors unable to attend meetings (statement, paragraph nine);
f)it was never intended to create a master servant relationship between the Club and its directors (statement, paragraph 10);
g)the honorariums were paid as an electronic transfer every three months (statement, paragraph 11);
h)on 25 April 2005 the Club held a lunch for dignitaries and retired services personnel, as per its normal practice. Ms Morse was not paid to attend but “it was reasonably expected that she did attend, although not all directors attended” (statement paragraph 12);
i)Ms Morse had no official duties to perform at the lunch on 25 April 2005 (statement, paragraph 13), and
j)a service was held outside the Club at 6.00pm on 25 April 2005 involving the lowering of the flag. Ms Morse was not required to attend that service but she chose to do so (statement, paragraph 15).
The basis on which Mr de Munck asserted that it was never intended to create a master servant relationship between the Club and its Directors was never established. However, as the Club’s operations manager, Mr de Munck was entitled to express an opinion on the Club’s contractual arrangements, especially where those arrangements relate to the running of the Club and whether a person, either a director or any other person, was an employee (see Pitcher v Langford (1991) 23 NSWLR 142 at 160B). Similarly, Ms Morse was entitled to give her opinion about the nature of the relationship between herself and the Club. The question of the weight to be attached to those opinions is another matter.
The Arbitrator noted that the honorarium was “a payment for services to the board” (Reasons T31.55). He then stated that the payment could be ‘categorised’ as “exactly what it says ‘a payment for services’” (T31.57). He then asked whether there was any intention to enter a legal obligation (T32.1), or, was there any obligation on the Club to pay the $1,500.00 (T32.4).
After referring to the minutes of the AGM of 10 April 2005 (T32.24-35) the Arbitrator said at page 32.37:
“It would seem to me that when those matters are put together that the Directors when they stood in 2005 stood in, I would infer, a legitimate expectation that there would be some recompense were they to be elected as Directors and to perform the services of a Director even if, as Mr Batten has submitted to me, those services are limited to attending 12 board meetings and one AGM. The respondent has certainly at the time held itself out in such a way that such a payment would be forthcoming. Given the fact that it had been there in previous years and the way in which it was constructed at the time, I am satisfied that there was an intention to enter into a legal relationship whereby those people who became Directors would be paid to the extent of $1,500 per annum for their services to the board and, accordingly, I am satisfied that there was a contract between the applicant and the respondent.”
The Appellant challenges this conclusion on the grounds that there was no evidence of an offer by Ms Morse. I agree with this submission and would add that, not only was there no evidence of an offer from Ms Morse, but also there was no evidence of an offer of employment from the Club. In my view, none of the elements essential for the formation of a contract was present.
Whether the directors had a legitimate expectation that they would receive the honorarium is not to the point. First, it ignores the fact that there was no offer and acceptance by either the Club or Ms Morse. The Club’s members elected the directors. They were not appointed. There was no ‘offer’ made and no acceptance.
Second, it ignores the very nature of an honorarium. That term ‘honorary’ is defined in the Macquarie Dictionary, second edition, as:
“1.given for honour only, without the usual duties, privileges, emoluments, etc.: an honorary title.
2.holding a title or position conferred for honour only: an honorary president.
3.(of a position, job, etc.) unpaid: the honorary secretary of the committee.
4.(of an obligation) depending on one’s honour: an honorary for fulfilment.
5.given, made, or serving as a token of honour: an honorary gift.
6.conferring an honour.”
The term ‘honorarium’ is defined as:
“1.an honorary reward, as in recognition of professional services on which no price may be set.
2.a fee for services rendered by a professional person.”
Given the above definitions I doubt (without deciding) that the Club was under any obligation to pay the $1,500.00 to its directors.
Third, even if the directors did have a legitimate expectation that the $1,500.00 would be paid to them, there is no evidence that Ms Morse acted as a director in consideration of, or in return for, the payment to her of $1,500.00. The fact that the resolution for the payment of the honorarium was passed before Ms Morse stood for election to the Board does not establish, in the absence of other evidence, that the $1,500.00 was consideration offered in return for Ms Morse agreeing to be and perform the duties of a director. In 2004 there were no honorariums paid (see the AGM minutes at [28] above) yet Ms Morse was a director in that year. That would tend to indicate, and I believe the better view is, that she was not motivated by the payment of the honorarium.
Fourth, the honorarium was no more than a statement of honourable intentions. There is no evidence that it was an offer, which, if accepted, would form the basis of a contract.
Fifth, there was no evidence that Ms Morse was contractually bound to perform any work for the Club. Mutuality of obligation is an essential requirement for a contract of service. In Dare, Gibbs, Mason and Wilson JJ held at 409:
“It seems to us that the arrangement lacked the element of mutuality of obligation that is essential to the formation of such a contract. A contract of service is of its nature a bilateral contract. It may be conceded that merely to say that the parties had agreed upon a trial does not necessarily rule out its formation. The answer in that respect will depend upon the detail of the arrangement. In particular, the answer will be affected, among other things, by the discovery in the arrangement of the assumption by the ‘worker’ of an obligation to perform some work, it being the purpose of the trial to determine whether the work is performed in a satisfactory manner. But in the present case we cannot discover an obligation on the appellant to perform any work at all.”
In the present matter I am unable to discover any obligation on Ms Morse to perform any work for the Club. Attendance at Board meetings was not something that was a condition precedent to Ms Morse receiving the honorarium, though it may have been an obligation under relevant legislation. Counsel for Ms Morse submitted on appeal that she had obligations to perform duties in addition to attending Board meetings. Those obligations included an obligation to represent the Club in an official capacity on days such as Anzac day. I do not accept that Ms Morse was obliged to perform such functions under a contract, or at all. She attended because she felt it was part of her “responsibilities as a director” (T5.34). It was not compulsory for directors to attend and, without penalty or sanction, not all of them did attend.
The Arbitrator referred to principles discussed in Dare and said, “central to that [the mutuality of obligation] is the question of intention to create legal relations” (T31.29). That is only one of the matters to be determined. Before one looks at that question one must consider if there has been an offer and acceptance for valuable consideration. There is no evidence of an offer and acceptance in the present matter.
Counsel for Ms Morse argued that the absence of express evidence of offer and acceptance was not fatal in Stephan and is not fatal in the present matter, as one has to look at the totality of the arrangements. I accept that it is necessary to look to the totality of the arrangements, but I do not accept that those arrangements lead to the conclusion that a contract was made between Ms Morse and the Club. In Stephan, the worker performed the physical work involved in the execution of the cleaning contracts held by the company. There was a “coincidence of directorship and employment” (per Rolfe A-JA at 27C). In those circumstances the Court inferred the existence of a contract. In the present case Ms Morse was a director who performed none of the duties one would expect of an employee.
The evidence of Mr de Munck that the position of director was purely honorary and voluntary was consistent with the Minutes from the AGM and was clearly correct. It supports a conclusion that no contract was made between the Club and Ms Morse. His assertion that it was never intended to create a “master servant relationship” (see [30] (f) above) is not conclusive or even persuasive. Had the evidence otherwise supported a finding of a contract of service, that is the finding that would be made, regardless of Mr de Munck’s understanding of the parties’ intentions.
In these circumstances the Arbitrator was in error in finding that a contract existed between the Club and Ms Morse when there was no evidence of such a contract.
Contract of Service
The term ‘worker’ is defined in the 1998 Act in section 4(1) as follows:
“worker means a person who has entered into or works under a contract of service or a training contract with an employer (whether by way of manual labour, clerical work or otherwise, and whether the contract is expressed or implied, and whether the contract is oral or in writing).”
The general principle is that a director, as such, is not an employee (Hutton v West Cork Railway Co (1883) 23 Ch D 654 at 672; Normandy v Ind Coope & Co [1908] 1 Ch 84). In Moriarty the McCardie J said at 445-446:
“A director is not, I agree, a servant of the company in the ordinary sense, but he may be a servant under the terms of his agreement as director, so that he may be indicted for embezzlement as a ‘clerk or servant’, as was decided in Reg. v Smart. A director is in fact a director or controller of the company’s affairs. He is not a servant.”
The reason for this “fairly obvious” conclusion (Re Beeton & Co Ltd [1913] 2 Ch 279 at 285) is that it is the directors who control the company and “hence it cannot be said that the company is in a position to control the actions of the directors” (see C P Mills Workers Compensation (NSW), second edition, Butterworths, 1979, page 127).
In more recent authority, Campbell J (as he then was) considered the status of a member of the Barley Marketing Board in Attwood v Barley Marketing Board (NSW) [1982] WCR 94 (‘Attwood’). In that case Mr Attwood, an elected member of the respondent Board, died while returning home after attending a Board meeting. In addition to attending Board meetings, Mr Attwood also carried out various assignments, such as inspecting properties at the request of the Board. In doing so he incurred expenses for which he was reimbursed. Remuneration was paid for attendance at Board meetings, and members could be paid (with prior approval) the equivalent of a sitting fee on days when they were engaged on Board business, though no such payments were made to Mr Attwood. The Board had taken out a sickness and accident policy on Mr Attwood and his estate received a payment under that policy.
Counsel for the applicant widow argued that the provision for the payment of remuneration at the rate provided for by the appropriate orders and the course of conduct established in evidence, led to an inference that although there was no express contract of service between Mr Attwood and the Board, such a conduct of service should be implied. Campbell J disagree and stated at 96:
“I could discern in the material that was placed before me nothing which led to the conclusion that the Board had lawful authority to command Mr Attwood as far as there was scope for it and I refer to Zujis v Wirth Bros Pty Ltd (1955) 93 CLR 561 at 571.
Even though there might have been some isolated matters, such as the remuneration and such as the facts that Mr Attwood did do work which would not come necessarily within the duties of a Board member, as provided for in the Act, they, taken together with all the facts of the case, do not lead to the conclusion that he was carrying out those activities under a contact of service. He was doing them, on the probabilities, in the capacity of a volunteer carrying out on behalf of himself as a barley grower, barley growers generally and those that had elected him the actions which he thought it desirable should be done in order to advance the interests of those people.”
The decision by Judge Neilson in Harris, relied on by Ms Morse, does not advance her position. In that case it was held that there was an intention to enter legal relations and there was an agreement supported by valuable consideration. Those findings were held by the Court of Appeal (Cudgegong Soaring Pty Ltd v Harris (1996) 13 NSWCCR 92) to have been open on the evidence and were not disturbed. Mr Harris was not a director but was the respondent’s chief flying instructor and resident caretaker of its airfield.
For the following reasons, I do not believe the totality of the arrangements between the Club and Ms Morse established a contract of service:
a)Ms Morse performed no duties as a worker, as opposed to functions as a director;
b)the Club exercised no right of control over Ms Morse. This is confirmed by Ms Morse’s evidence at T5.1 when she was asked the following question by the Arbitrator:
“Q. I noticed when Mr Batten asked the question about whether you were instructed to attend you stopped for thought and said, ‘No, not instructed.’ Was there something else you wanted to say about that?
A.Yes. We weren’t instructed. Because we were directors, we couldn’t be told what to do. We were advised that it was part of our responsibility ‑ we were the hosts for the day ‑ and we should be in attendance on Anzac Day.” (emphasis added)
c)Ms Morse was under no contractual or legal obligation to attend the Club on 25 April 2005;
d)Ms Morse was not required to perform any duties for the Club and was not required to attend at the Club during stated hours on any particular days;
e)her only duty to attend the Club was a duty to attend Board meetings as a director. That duty did not arise from a contract of service but arose under the general corporations law;
f)the Club had no right to dismiss Ms Morse except to the extent that she failed to meet her obligations as a director;
g)the $1,500.00 was not based on work performed;
h)Ms Morse was not entitled to any holidays or holiday pay, sick leave, long service leave or any other paid or unpaid leave;
i)the wearing of the Club’s blazer was not sufficient to outweigh the factors mentioned above that strongly indicated that Ms Morse was not engaged under a contract of service, and
j)the authorities do not support a finding that a director, as such, is a worker under the terms of the relevant NSW workers’ compensation legislation.
The Arbitrator referred to the right of control as being an important factor (T33.15) but failed to acknowledge that the Club had no such right of control over Ms Morse because she was a director. No reason was offered by the Arbitrator, nor by Ms Morse on appeal, to support his conclusion expressed at T33.20 that “as a matter of law the respondent acquires the capacity to require the directors to meet their obligations” under the corporations law. Even if the Club did ‘acquire’ that capacity, it did not arise from any contract of service but from the general statute law controlling organisations such as the Club.
On the question of ‘calculation of payment’ (T33.29) the Arbitrator found that it was a “payment calculated by time of service” (T33.36) and was “more [in] the nature of a wage than a lump sum” (T33.39). The evidence did not support this finding and such a finding ignored the fact that there was no requirement for Ms Morse to do anything to receive the money.
The Arbitrator was wrong to equate the obligations Ms Morse had under the corporations’ law with an obligation to perform work under a contract of service. There was no evidence to support that finding.
The Arbitrator’s conclusion that “when one weighs up the totality of the relationship the contract can be categorised as a contract of service in respect of the duties of a director” (T34.13) was unsupported by the evidence and contrary to established authority that a director, as such, is not a worker within the terms of the 1998 Act.
Ms Morse’s claim must also fail on this ground.
In the Course of Employment
In view of the findings I have made above, it is not necessary for me to determine this issue.
DECISION
The Arbitrator’s findings and orders dated 10 October 2006 are revoked and the following orders made in their place:
“1.Award for the Respondent.
2.No order as to costs.”
COSTS
No order as to costs of the appeal.
Bill Roche
Deputy President
4 April 2007
I CERTIFY THAT THIS IS A TRUE AND ACCURATE RECORD OF THE REASONS FOR DECISION OF BILL ROCHE, DEPUTY PRESIDENT OF THE WORKERS COMPENSATION COMMISSION.
ASSOCIATE
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