Sarac v Itxcel Pty Ltd - [2015] NSWWCCPD 32

WORKERS COMPENSATION COMMISSION
DETERMINATION OF APPEAL AGAINST A DECISION OF THE COMMISSION CONSTITUTED BY AN ARBITRATOR
CITATION:	Sarac v Itxcel Pty Ltd [2015] NSWWCCPD 32
APPELLANT:	Kruno Sarac
RESPONDENT:	Itxcel Pty Ltd
INSURER:	QBE Workers Compensation (NSW) Ltd
FILE NUMBER:	A1-6530/14
ARBITRATOR:	Ms D Moore
DATE OF ARBITRATOR’S DECISION:	10 March 2015
DATE OF APPEAL HEARING:	28 May 2015
DATE OF APPEAL DECISION:	1 June 2015
SUBJECT MATTER OF DECISION:	Whether applicant a deemed worker; applicant a working director of own company; whether counsel submitted on lifting the corporate veil; if submission made, whether failure to record counsel’s submission was an error on the face of the record; relevance of alleged error on the face of the record in appeal from Arbitrator to Presidential member; whether Senior Arbitrator failed to deal with all submissions; obligation of counsel to clearly articulate submissions at arbitration; whether contract made between applicant and the respondent or between applicant’s company and the respondent; application of principles in Scerri v Cahill (1995) 14 NSWCCR 389; issues not argued at arbitration; lifting the corporate veil; relevance of indicia of employment in a deemed worker case; whether principles in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; 165 CLR 107 apply to a claim for workers’ compensation benefits; statutory policy of insurance; interpretation of beneficial legislation; s 352 and cl 2(1) of Sch 1 to the Workplace Injury Management and Workers Compensation Act 1998
PRESIDENTIAL MEMBER:	Deputy President Bill Roche
HEARING:	Oral
REPRESENTATION:	Appellant:	Ms M Dulhunty, instructed by Taylor & Scott Lawyers
Respondent:	Mr L Morgan, instructed by Moray & Agnew
ORDERS MADE ON APPEAL:	The Senior Arbitrator’s determination of 10 March 2015 is confirmed.

INTRODUCTION

The issue in this appeal is whether the Senior Arbitrator erred in finding that, because his own company employed him as a working director, the applicant was not a person who contracted to perform work for the respondent and was therefore not a deemed worker under the legislation. For the reasons explained below, the appeal is unsuccessful and the Senior Arbitrator’s determination is confirmed.
In the course of this decision, the following sub-issues are considered:
(a)     whether counsel submitted on lifting the corporate veil;
(b)     the need for counsel to properly articulate submissions at arbitrations;
(c)     whether, if counsel submitted on lifting the corporate veil, the Senior Arbitrator erred in not dealing with it;
(d)     the relevance, in appeal proceedings in the Commission, of an alleged error on the face of the record;
(e)     whether the circumstances justify lifting the corporate veil;
(f) the relevance of the indicia of employment in a claim under cl 2 of Sch 1 to the Workplace Injury Management and Workers Compensation Act 1998 (the 1998 Act), and
(g)     the relevance of the principles discussed in Trident General Insurance Co Ltd v McNiece Bros Pty Ltd [1988] HCA 44; 165 CLR 107 (McNiece) to proceedings in the Commission.

BACKGROUND

The appellant is Kruno Sarac. He is currently 66 years old. He has worked as a carpenter in the construction industry for most of his working life. Until his retirement on 21 November 2013, he was exposed to loud noise from drills, jackhammers, air compressors, concrete grinders, angle grinders and saws.
He alleged that, as a result of his exposure to loud noise, he has suffered a loss of hearing. On 10 June 2014, his solicitors claimed lump sum compensation in the sum of $17,050 in respect of binaural hearing loss of 27.2 per cent, which equals 12 per cent whole person impairment, together with the cost of hearing aids.
His solicitors claimed permanent impairment compensation from the respondent, Itxcel Pty Ltd (Itxcel), a company that does office fit-outs, on the basis that it was the last employer to employ Mr Sarac in employment to the nature of which his injury was due.
Itxcel’s workers’ compensation insurer, QBE Workers Compensation (NSW) Ltd (QBE), disputed liability on the grounds that, at all relevant times, Mr Sarac was a working director employed by his own company, K & B Ceilings Pty Ltd (K & B), and that, with respect to Itxcel, he was neither a worker nor a deemed worker within the terms of the 1998 Act.
It is not disputed that, at all relevant times, Mr Sarac was a working director employed by K & B. His evidence was that he formed K & B in 2000 to allow him to “work for employers who insisted that their employees work under an ABN”. He said that when he started to work for Itxcel on 21 November 2008 he was asked to “work under [an] ABN”. Mr Sarac said that he worked exclusively for Itxcel from 2008 until his retirement in November 2013. In the period up to August/September 2010, Mr Sarac submitted invoices under K & B’s name and Itxcel paid K & B. From August 2010, Mr Sarac submitted invoices under the name K & B Ceilings, but Itxcel continued to pay K & B.
QBE relied on evidence from Ivan Butjerevic, one of Itxcel’s two directors. He said that Itxcel has been in the business of office fit-outs since March 2008. He said that “Itxcel engaged K & B as a ceiling and wall installer for two or three years up until 2013”. Consistent with Mr Sarac’s evidence, Mr Butjerevic added that K & B was a “one man operation on all the jobs that [Mr Sarac] worked [on] for us”. He said, and it has not been disputed by Mr Sarac, that K & B invoiced Itxcel “whenever he worked for us with this company tax invoice” and “we paid by direct deposit into the K & B company account”.
At the arbitration, at which neither side sought leave to call any oral evidence, Ms Dulhunty of counsel appeared for Mr Sarac and Mr Morgan of counsel appeared for Itxcel. Ms Dulhunty submitted that Mr Sarac was a deemed worker contracted by Itxcel under cl 2(1) of Sch 1 of the 1998 Act (T5.21 and T15.27). While Ms Dulhunty did not allege that Mr Sarac was a worker employed by the respondent, the parties and the Senior Arbitrator, at different times during the hearing and the decision, wrongly referred to the issue as being whether Mr Sarac was a worker or a deemed worker. At the oral hearing of the appeal, Ms Dulhunty confirmed that her case was only that Mr Sarac was a deemed worker under cl 2 of Sch 1 and she did not allege that he was a worker.
So far as is relevant, cl 2(1) of Sch 1 provides:
“(1) Where a contract:
(a) to perform any work exceeding $10 in value (not being work incidental to a trade or business regularly carried on by the contractor in the contractor’s own name, or under a business or firm name), or
…
is made with the contractor, who neither sublets the contract nor employs any worker, the contractor is, for the purposes of this Act, taken to be a worker employed by the person who made the contract with the contractor.”
To rely on this provision, a claimant must establish, among other things, that he or she was a party to a contract with the respondent to perform work (Bainton AJA (Kirby ACJ and Rolfe AJA agreeing) in Scerri v Cahill (1995) 14 NSWCCR 389 (Scerri) at 399D). Though Scerri dealt with cl 2 of Sch 1 of the Workers Compensation Act 1987 (the 1987 Act), that provision was in substantially the same terms as cl 2 of Sch 1 to the 1998 Act. It has not been submitted that the principles in Scerri do not apply in the present case.
At the arbitration, Ms Dulhunty conceded that, initially, K & B submitted invoices to Itxcel. However, she contended that from August or September 2010 the relationship changed and Mr Sarac “was then an individual working under a business name and not under the corporate structure” (T15.20). Therefore, he was a deemed employee from at least August/September 2010. This submission was based on the fact that invoices submitted by Mr Sarac to Itxcel between August 2010 and 21 November 2013 were under the name “K B Ceilings” (alleged to be a business name) and not “K & B Ceilings Pty Ltd” (accepted, on the evidence, to be Mr Sarac’s company).
Mr Morgan submitted that K & B engaged with Itxcel on a job-by-job basis and that, based on tax records in evidence, money for work done was paid to K & B, not Mr Sarac. He relied on Mr Butjerevic’s evidence that Itxcel gave jobs to K & B and the fact that Mr Sarac was employed by K & B. Consequently, he submitted that Mr Sarac was not able to rely on the deemed worker provisions.
In an extempore decision delivered at the conclusion of submissions, the Senior Arbitrator referred to Mr Sarac’s evidence that he was a deemed worker and that K & B only existed to provide an ABN to allow him to work in the construction industry. She accepted that, since 2010, most invoices only referred to K & B Ceilings and that the earlier invoices had referred to K & B. She noted Ms Dulhunty’s submission that she should infer that, because of the change in the invoices, the relationship between Mr Sarac and Itxcel changed.
In rejecting the submission that Mr Sarac was a deemed worker, the Senior Arbitrator noted that K & B’s tax returns showed that income was paid to it (T30.32) and that Mr Sarac’s tax returns showed that he earned money from K & B (T31.1).
The Senior Arbitrator accepted that if Mr Sarac were “an individual and not a director of his company” that there was “significant evidence that he could well be regarded as a deemed worker” (T28.10). In particular, the Senior Arbitrator noted that, on occasions, Mr Sarac wore Itxcel’s uniform and that Mr Butjerevic conceded that Mr Sarac worked with Itxcel “pretty much full-time in those years” (T28.21). She also referred to Mr Sarac’s evidence that he did not conduct work for any other person (T29.7).
Dealing with Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21, and other cases relied on by Ms Dulhunty, the Senior Arbitrator said that the applicants in those cases were either individuals or working under a business name, as opposed to working for their own company. She found that as Mr Sarac was a working director employed by his own company, the deemed worker provisions did not cover his situation (T31.10). She added that there was no evidence that “the company structure changed” (T31.15), even though, at the end, the invoices might not have referred to and used the words “proprietary limited” (T31.17).
The Senior Arbitrator concluded that, in the circumstances, because of the “legal situation that Mr Sarac found him[self] in, as a working director of his own company”, (T31.23) she could not be satisfied that he was a deemed worker employed by Itxcel and his claim failed. The Commission issued a Certificate of Determination on 10 March 2015 making an award in favour of Itxcel.
Mr Sarac has appealed.

ISSUES IN DISPUTE

The principal issues in dispute in the appeal are whether Senior Arbitrator erred in:
(a)     failing to give due or any consideration to the evidence that the corporate entity of K & B existed only as a vehicle to gain an ABN (ABN);
(b)     failing to lift the corporate veil to allow Mr Sarac to bring his claim (failing to lift the corporate veil);
(c)     failing to give sufficient weight to the indicia of Mr Sarac’s employment with Itxcel to deem him an employee irrespective of K & B (indicia of employment);
(d)     failing to account for the fact that K & B did not perform the work (K & B did not perform the work);
(e)     taking into consideration irrelevant matters (irrelevant matters), and
(f)      failing to find that Mr Sarac had discharged the onus of proof that he was a deemed worker (whether Mr Sarac discharged the onus of proof).
In addition to the above matters, Ms Dulhunty submitted that the audio recording of the arbitration, which she said is in two parts, is incomplete and failed to record her submission that the corporate veil should be lifted. Ms Dulhunty contended that this omission constitutes an “error on the face of the record within the meaning of s 352(5)” of the 1998 Act. It is convenient to deal with this matter first.

ERROR ON THE FACE OF THE RECORD

Submissions

Ms Dulhunty said at the oral hearing of the appeal that she made the following submission to the Senior Arbitrator: “what about lifting the corporate veil?” As this submission, which Ms Dulhunty conceded was not “fully developed”, does not appear on the transcript, it was contended that there is an error on the face of the record. Other than making this bald assertion, Ms Dulhunty made no submissions in support of this ground of appeal and referred to no authorities in support of her position.

Discussion and findings

This ground of appeal is misconceived and is rejected.
It is not appropriate, in an appeal under s 352 of the 1998 Act, to assert that alleged errors and omissions in the recording of the submissions at the arbitration constitute an “error on the face of the record”. The terminology used by Ms Dulhunty seems to raise an issue that, if relevant at all, is relevant to the common law position relating to the prerogative writs of certiorari and prohibition. That position is that the prerogative writs will not issue for an error of law unless the error appears on the face of the record (Federal Administrative Law, Thomson Reuters, at 1-15388).
The authorities are clear that, at common law, “the record” does not include the transcript of the proceedings under challenge (Craig v South Australia [1995] HCA 58; 184 CLR 163 at 180–181; applied in Kirk v Industrial Court of New South Wales [2010] HCA 1 at [84]; 239 CLR 531 at 577 (Kirk)). As explained in Kirk (at [88]–[89]), different considerations apply to proceedings under s 69 of the Supreme Court Act 1970 (NSW).
Except as provided by the 1998 Act, a decision of the Commission under the Workers Compensation Acts “is final and binding on the parties and is not subject to appeal or review” (s 350(1) of the 1998 Act). Section 352(1) of the 1998 Act provides that a party to a dispute in connection with a claim for compensation may appeal to the Commission constituted by a Presidential member against a decision in respect of a dispute by the Commission constituted by an Arbitrator.
Section 352(5) of the 1998 Act defines the scope and nature of an appeal under s 352. It states:
“An appeal under this section is limited to a determination of whether the decision appealed against was or was not affected by any error of fact, law or discretion, and to the correction of any such error. The appeal is not a review or new hearing.”
It follows that it is not appropriate to challenge an Arbitrator’s decision by reference to the administrative law principle of error on the face of the record. Any challenge must come within the terms of the legislation, which expressly provides for a challenge if the decision appealed against is affected by any error of fact, law or discretion. I have therefore approached this ground of appeal on the basis that Mr Sarac must establish that the Senior Arbitrator’s decision is affected by a relevant error of fact, law or discretion and not on the basis of an alleged error on the face of the record.
In the appropriate case, error may be established if an Arbitrator has failed to deal with a relevant submission (Wrigley Co Pty Ltd v Holland [2002] NSWCA 109; 23 NSWCCR 463). That is because the failure “to respond to a substantial, clearly articulated argument relying upon established facts” is a failure to accord the relevant party natural justice (Dranichnikov v Minister for Immigration and Multicultural Affairs [2003] HCA 26; 197 ALR 389 per Gummow and Callinan JJ at [24]). It is not an error on the face of the record.
The point raised under this heading requires consideration of the proceedings before the Senior Arbitrator. At the start of the arbitration, the Senior Arbitrator sought clarification of “the argument [that Mr Morgan] [sought] to raise” (T4.4). Mr Morgan referred the Arbitrator to a series of invoices issued by K & B to Itxcel. He then took the Senior Arbitrator to Mr Sarac’s statement, where Mr Sarac conceded that he was a working director of K & B, a company he formed to allow him to “work for employers who insisted their employees work under [an] ABN” (T4.21).
The following exchange then took place between the Senior Arbitrator and Ms Dulhunty, starting at T4.24:
“ARBITRATOR: But that’s not the same, it’s - I mean, that’s what I’m getting at, Ms Dulhunty, that it’s different if you’re - if Mr Sarac was just Kruno Sarac ABN whatever, such as barristers and things that have ABNs.
MS DULHUNTY: No, but that’s - yes, but---
ARBITRATOR: But he’s got a company and he’s a working director of the company. I don’t know – I’m just trying to work out how he then becomes a worker or a deemed worker.
MS DULHUNTY: That’s not the only indicia though. There are about six to look at, things like control---
ARBITRATOR: No, no, you’re at cross-purposes. I know the indicia. What I’m getting at is if [Mr Sarac] didn’t work as an individual, then I’m just confused as to how his company, if he’s a working director of his company - maybe I’ve got it wrong. If he’s a working director of his company, how the company can be - the company can’t be a worker. Do you see what I’m getting at?
MS DULHUNTY: No, but the company is not bringing the claim, he’s bringing the claim---
ARBITRATOR: As a director of his own company.
MS DULHUNTY: No, as a deemed worker of---
ARBITRATOR: No, no, he’s a director of his own company.
MS DULHUNTY: Yes.
ARBITRATOR: So I’m just trying to get to that structure – I’ll just pause the recording for a minute.
SHORT ADJOURNMENT”
Exactly what occurred during the adjournment has not been properly explained (by seeking leave to file additional evidence on appeal) and is not recorded in detail in the transcript. However, on resumption, after the adjournment, the Senior Arbitrator said, at T5.32:
“ARBITRATOR: This is the resumption of matter 6530 of 2014 between Kruno Sarac v ITXCEL Pty Ltd. We had some preliminary discussions about the nature of the dispute and the essential dispute and probably the initial dispute that needs to be determined was whether or not Mr Sarac was a worker or a deemed worker. Now I indicated before the documents that I had, the ARD, the Reply and late documents from the applicant dated 9 March and from the respondent dated 5 March. And I think we confirmed, did we, there’s no other documents?”
After confirming that there were two Applications to Admit Late Documents, one from each of the parties, the contents of which were admitted into evidence without objection, the Senior Arbitrator asked Ms Dulhunty to address first “just bearing in mind the issue that we’re looking at” (T6.22). Ms Dulhunty then made lengthy submissions, recorded between T6 and T15. Nowhere in her submissions did she refer to lifting the corporate veil.
If lifting the corporate veil was mentioned during informal discussions during the short adjournment, it was Ms Dulhunty’s responsibility to ensure that that point, if it was relevant to her case, was articulated when the Senior Arbitrator invited her to make submissions. The transcript reveals that not only was that point not argued, but a quite different point was argued, namely, that because of the change in the invoices issued from August 2010, it (K & B) was “no longer the corporate structure and it is the individual trading under a trading name, a business name, of K & B Ceilings” (T8.16).
Thus, on this argument, there was no corporate veil to be lifted. The argument actually presented, if accepted, would have rendered an argument about lifting the corporate veil otiose. Nothing in the transcript suggests that Ms Dulhunty made her submissions in the alternative to any earlier submission, made when the sound recording was turned off, about lifting the corporate veil. Thus, Ms Dulhunty’s submissions, as recorded, strongly suggest that she made no submission about lifting the corporate veil.

The fact that Mr Morgan made no submission in response dealing with lifting the corporate veil, and the fact that the Senior Arbitrator did not refer to it in her reasons, strongly suggests that no such submission was made. This conclusion is reinforced when one notes that, at the conclusion of the Senior Arbitrator’s reasons, in which she did not refer to lifting the corporate veil, she asked (at T32.14) if Ms Dulhunty required any further reasons. Ms Dulhunty responded “no”.
In the circumstances, I do not accept that Ms Dulhunty made any relevant submission that the corporate veil should be lifted. Even if it is accepted that, during the break in the proceedings, Ms Dulhunty said “what about lifting the corporate veil”, that was not a “substantial, clearly articulated argument” that properly presented that issue as being one for determination by the Senior Arbitrator. It only posed a question that, as Ms Dulhunty conceded at the appeal hearing, she did not develop because “there was no response to it”. (Given that the point was raised during a short adjournment in the proceedings, at a time when the issues were being clarified, it is difficult to see why there would have been a response to it. It was for Ms Dulhunty to present her submissions, not for the Senior Arbitrator to do so for her.)
Submissions must be clearly articulated and, where appropriate, supported by evidence and appropriate authority. Merely posing a question, as Ms Dulhunty asserts she did, during informal discussions seeking to clarify the issues in dispute, does not amount to a formal submission that an Arbitrator has to deal with in his or her reasons for decision. If the submission was to be made, it had to be properly made on the resumption of the matter after the short adjournment. That was not done. It follows that I do not accept that the transcript is incomplete in any relevant sense. It further follows that the Arbitrator did not err in not referring to a point never properly articulated (Brambles Industries Ltd v Bell [2010] NSWCA 162; 8 DDCR 111).
In making the above comments, I acknowledge that, for a multitude of reasons, there will be occasions when submissions may be truncated or abbreviated and made without detailed reference to the evidence or authority. However, where that does occur, counsel has an obligation to state clearly the issue concerned and to confirm that the Arbitrator is required to deal with it. That did not happen in the present case.
In the event that I found that the point about lifting the corporate veil had not been argued at the arbitration, Ms Dulhunty sought leave to argue it on appeal. With considerable reluctance, noting Mr Morgan’s opposition, I will deal with the merits of that issue below, noting that there is no prejudice to the respondent.

ABN

Submissions

Ms Dulhunty submitted that the Senior Arbitrator erred in failing to give due, or any, consideration to the evidence that K & B existed only as a vehicle to gain an ABN, which was required of Mr Sarac by potential employers before he could gain employment in the construction industry. She said that further evidence of the fact that K & B only existed to provide an ABN is the fact that K & B did not hold a workers’ compensation policy.

Discussion and findings

The Senior Arbitrator acknowledged (at T27.9) Mr Sarac’s evidence that K & B only existed to provide an ABN to allow him to work in the construction industry. She also accepted that if the respondent had contracted with Mr Sarac, instead of with his company, then, given the nature of the relationship with the respondent, he could have been regarded as a deemed worker (T28.14).
The fact that K & B existed as a vehicle to get an ABN is irrelevant to the determination. It was to Mr Sarac’s advantage to form a company. He did so. In these circumstances, unless the company was a sham, and for the reasons explained below I have held that it was not, it was a valid legal entity entitled to contract on its own behalf and to employ its own workers, such as Mr Sarac. It did so. The fact that K & B did not have any workers compensation insurance is irrelevant to the issue in dispute.
This ground of appeal is rejected.

FAILING TO LIFT THE CORPORATE VEIL

Submissions

Ms Dulhunty submitted that the Senior Arbitrator erred in failing to lift the corporate veil to allow Mr Sarac to bring his claim in circumstances where:
(i)      the evidence supports a finding that K & B only existed to provide an ABN to allow Mr Sarac to work in the construction industry;
(ii)     the Senior Arbitrator acknowledged that the indicia of employment supported Mr Sarac being a deemed worker but for the existence of K & B;
(iii)   it was clear that the invoices issued from about August/September 2010 were not issued in K & B’s name but rather in a trading name (K & B Ceilings).
Ms Dulhunty contended that the circumstances of the matter “warrant the lifting of the corporate veil to deem [Mr Sarac] to be a deemed worker within the meaning” of Sch 1 of the 1998 Act.
She added that the 1987 Act and the 1998 Act are beneficial legislation (Articulate Restorations & Developments Pty Ltd v Crawford (1994) 10 NSWCCR 751; Ware v NSW Rural Fire Service [2014] NSWWCCPD 33).
Last, Ms Dulhunty said that the issue of any potential problem with there being a corporate entity involved was not raised at the teleconference.

Discussion and findings

I do not accept Ms Dulhunty’s submissions.
Assuming that a “company [is] not a sham” (Lee v Lee’s Air Farming Ltd [1961] AC 12 per Lord Morris at 26), it is not impossible for a person to be both a governing director in sole control of the company and servant of that company (Peate v Federal Commissioner of Taxation (1964) 111 CLR 443 per Windeyer J at 480; applied by the plurality (Gleeson CJ, McHugh, Gummow, Hayne and Heydon JJ) in Andar Transport Pty Ltd v Brambles Ltd [2004] HCA 28 at [45]; 217 CLR 424 at 444).
It has not been suggested that K & B was a sham, or a facade formed to conceal the true facts. How could it be? It was duly registered with the Australian Securities and Investment Commission. It had an Australian Company Number. It submitted tax returns in which it disclosed its income and expenses. Those expenses included, among other things, wages in the 2013 financial year of $66,982 (I note that, in the same financial year, Mr Sarac’s total income included $51,982 from a “payer” with an ABN the same as K & B’s ABN). It employed Mr Sarac. Whether it employed other workers is unclear but of no consequence. K & B was therefore “a legal person apart from the legal personality of the individual controller of the company” (R v Goodall (1975) 11 SASR 94 per Bray CJ at 101, applied by Mason CJ, Wilson and Toohey JJ in Hamilton v Whitehead (1988) 166 CLR 121 at 128).
It is not enough to justify departure from the separate entity doctrine to show that, in a particular case, it leads to unfairness (Ford’s Principles of Corporate Law, Lexis Nexis, at 4.250.9). In any event, I am not satisfied that there is any relevant unfairness in the present case. Mr Sarac formed a company (K & B), and became an employee of that company, to ensure that he would, through the company, secure work that he considered to be to his advantage. The company secured that work and paid Mr Sarac for the work he performed for it.
The following observation by Young J in Morgan v 45 Flers Avenue Pty Ltd (1986) 10 ACLR 692 at 694/5 is apt:
“So long as the law permits people to erect structures which have meaningful legal consequences then if a person elects to erect such a structure he must take the consequences of such erection for better for worse for richer or poorer in commercial sickness or commercial health.”
The fact that the Senior Arbitrator acknowledged that, but for the existence of K & B, the indicia of employment supported Mr Sarac being a deemed worker does not advance Mr Sarac’s position on appeal and does not establish any relevant error by the Senior Arbitrator (the relevance of the indicia of employment in a case restricted to cl 2 of Sch 1 is discussed below at [65]–[67]). She rightly noted that, as a working director of his own company, she could not be satisfied that he was a deemed worker engaged by the respondent (T31.24).
Though there may well be cases where the existence of a company may not be incompatible with the relationship of employment (or deemed employment) (see ACE Insurance Ltd v Trifunovski [2013] FCAFC 3), as the evidence was presented, the present case is not one of them. The evidence accepted by the Senior Arbitrator was that the contract to perform work was between the respondent and K & B. That precluded Mr Sarac being a deemed worker because he was not a party to a contract with the respondent. The contract was between the respondent and K & B.
The Senior Arbitrator acknowledged that the invoices issued from August/September 2010 were under the name of K & B Ceilings and not K & B. However, given the tax returns in evidence from K & B, which demonstrated that K & B continued to operate during the relevant period, she concluded that there was no evidence that the company structure had changed (T31.15). That finding was open on the evidence and disclosed no error. (On this point I note that Mr Sarac gave no evidence that the corporate structure had changed in the manner suggested by Ms Dulhunty.)
It follows that Ms Dulhunty has established no basis upon which the corporate veil should be lifted.
Ms Dulhunty’s submission that the Workers Compensation Acts are beneficial legislation was not developed with any reasoned argument and does not assist Mr Sarac. Two main points are relevant about the interpretation of beneficial legislation.
First, it is generally accepted that there is a rule of construction that beneficial and remedial legislation is to be given a “fair, large and liberal” interpretation (IW v City of Perth [1997] HCA 30; (1997) 191 CLR 1 at 12 per Brennan CJ and McHugh J, 39 per Gummow J; quoted and applied in AB v Western Australia [2011] HCA 42 at [24]).
Second, the principle that beneficial legislation should be given a construction that advances its purposes and that, where two constructions are possible, that which is favourable to the worker should be preferred (Wilson v Wilson’s Tile Works Pty Ltd [1960] HCA 63; (1960) 104 CLR 328 per Fullagar J at 335), usually, but not always, refers to the interpretation of the legislation where an ambiguity exists.
Neither of these points is relevant in the present matter. They do not mean that every provision or amendment to a provision in beneficial legislation has a beneficial purpose, or is to be construed beneficially (ADCO Constructions Pty Ltd v Goudappel [2014] HCA 18 at [29]). More importantly, a beneficial interpretation of legislation cannot be used to it fill gaps in the evidence or allow an extension of sympathy to a case that falls outside the legislation as interpreted (Kowalski v Repatriation Commission [2011] FCAFC 43 at [36]).
The present case does not involve the interpretation of cl 2 of Sch 1, the meaning of which is clear. It involves the Senior Arbitrator’s factual finding that, because his own company employed him, Mr Sarac had not contracted with the respondent. That finding was open on the evidence.
Ms Dulhunty’s last submission under this heading was that any potential problem with there being a corporate entity involved was not raised at the teleconference. Again, this point was not developed with any reasoned argument or submissions. This point was not an issue argued at the arbitration and, in any event, has ignored the history of the matter. QBE properly identified the issues in dispute in its s 74 notice, dated 20 August 2014. It disputed liability because, at all relevant times, Mr Sarac was a working director employed by his own company. Thus, the issue of a corporate entity being involved was clearly and properly identified as an issue in dispute well before the teleconference, which was held on 9 February 2015. It was an issue that was properly before the Senior Arbitrator and one she was entitled to determine.

INDICIA OF EMPLOYMENT

Submissions

Ms Dulhunty contended that the Senior Arbitrator erred in failing to give sufficient weight to the indicia of Mr Sarac’s employment with Itxcel to deem him an employee irrespective of K & B. Ms Dulhunty relied on the following, Mr Sarac:
(a)     was paid on an hourly basis;
(b)     was subject to Itxcel’s direction;
(c)     worked exclusively for Itxcel on a full-time basis;
(d)     could not delegate work;
(e)     could not choose jobs;
(f)      had an ongoing expectation of work from Itxcel;
(g)     wore clothing with Itxcel’s logo on it;
(h)     did not advertise for work;
(i)      did not have any logos for K & B, and
(j)      had some tools supplied (by Itxcel) but not all tools supplied.

Discussion and findings

Ms Dulhunty’s submissions have missed the point. The indicia referred to go to whether Mr Sarac was a worker, not whether he could establish that he was a deemed worker under cl 2 of Sch 1. Ms Dulhunty’s argument at the arbitration was that Mr Sarac was a deemed worker. Thus, she conceded that he was not a worker and was an independent contractor.
The Senior Arbitrator acknowledged that, but for Mr Sarac’s role as the director of K & B, the indicia would probably establish that he was a deemed worker (T28.24). That statement was not accurate. The Senior Arbitrator should have said that, but for Mr Sarac’s role as a working director of K & B, he may have been a worker. That is because the indicia of employment are relevant to establishing if a claimant is a worker, not if he or she is a deemed worker.
By only arguing that Mr Sarac was a deemed worker, Ms Dulhunty had effectively conceded that he was an independent contractor and therefore not a worker. To succeed, Mr Sarac had to be a deemed worker within the meaning of cl 2 of Sch 1. For Mr Sarac to be a deemed worker he had to establish the matters identified in Scerri. Because his own company employed him, and because that company contracted with the respondent, he was unable to establish that he was a party to a contract with the respondent to perform work and unable to rely on cl 2 of Sch 1.

K & B DID NOT PERFORM THE WORK

Submissions

Ms Dulhunty submitted that the Senior Arbitrator failed to account for the fact that K & B did not perform the work. The work was done by Mr Sarac, using his own personal labour. He was subjected personally to the noise causing damage to his hearing as a result of his personal labour performed for the benefit of and at the direction of Itxcel.

Discussion and findings

It is difficult to know the significance of this point. A company must act through its directors and employees. It is not disputed that Mr Sarac performed the services that K & B contracted to provide to the respondent. Ms Dulhunty did not explain how this demonstrated error by the Senior Arbitrator. This ground is rejected.

IRRELEVANT MATTERS

Submissions

Ms Dulhunty contended that by taking into account deductions made for depreciation and business expenses, the Senior Arbitrator took into consideration irrelevant matters. That was because they were not indicia of employment and such deductions could be made by sole traders and partnerships.

Discussion and findings

The relevance of this submission is also difficult to follow.
It seems to relate to the Senior Arbitrator’s statement (at T30.13) that Mr Morgan submitted that Mr Sarac had his own tools and equipment and that, through his company, Mr Sarac claimed “deductions and depreciation in respect of a lot of his business expenses” (T30.18).
Other than confirming that K & B was not a sham, which does not advance Mr Sarac’s position on appeal, the reference to deductions and depreciation was not critical to the determination. The Senior Arbitrator made no other reference to the deductions and depreciation, but said that Mr Sarac bore the onus of proof and that she could not be satisfied that the “nature of his relationship with … [K & B] changed in the absence of direct evidence to that effect” (T30.23). That finding was open on the evidence and disclosed no error.

WHETHER MR SARAC DISCHARGED THE ONUS OF PROOF

Submissions

Ms Dulhunty made no specific submissions on this ground. I have assumed that she relied on her submissions on the above grounds in support of her contention that the Senior Arbitrator erred.

Discussion and findings

For the reasons explained above, the Senior Arbitrator’s conclusion was open on the evidence and disclosed no error.

ALTERNATIVE APPROACH

Submissions

Ms Dulhunty submitted, in the alternative, that the principles in McNiece apply. She contended, relying on the judgment of Gaudron J, that Mr Sarac is in a similar position to the worker in McNiece and that he should be permitted to claim workers compensation benefits under the 1987 Act “via [Itxcel’s] workers compensation policy as he was working under and at [Itxcel’s] direction and for the benefit of [Itxcel]”.
Ms Dulhunty conceded that this point had not been argued at the arbitration. In seeking leave to raise it on appeal, Ms Dulhunty submitted that it was a legal issue and should be allowed as an exception to the general rule in Water Board v Moustakas (1988) 180 CLR 491. Mr Morgan opposed this issue being raised for the first time on appeal.

Discussion and findings

With considerable reluctance, though I very much doubt that it is in the interests of justice that the point be raised on appeal, even though it does not require the respondent to call additional evidence, I grant leave for this new point to be argued on appeal, noting that there is no prejudice to the respondent.
McNiece has no application whatsoever to the present case and Ms Dulhunty’s submissions are fundamentally misconceived. McNiece Bros Pty Ltd (McNiece Bros) was the principal contractor for construction work being carried out at the limestone crushing plant of Blue Circle Southern Cement Ltd (Blue Circle). Blue Circle had obtained public liability insurance with the appellant insurer, Trident General Insurance Co Ltd (Trident). That policy covered Blue Circle, its subsidiaries and contractors and sub-contractors at the limestone crushing plant.
The plaintiff, who was employed by Faro Constructions, was injured while driving a crane at the construction site under the direction of McNiece Bros’ site engineer. He sued McNiece Bros for common law damages and recovered a verdict. McNiece Bros sought indemnity from Trident. The High Court held that McNiece Bros was entitled to enforce the indemnity against its liability to pay the damages.
There are no statements of principal in McNiece that are in any way relevant to the present matter. It involved a claim for indemnity by a contractor against the public liability policy held by the principal. Mr Sarac is not a contractor claiming under a public liability policy. His unsuccessful claim was that, under cl 2 of Sch 1 of the 1998 Act, he was a deemed worker and therefore entitled to benefits under the 1987 Act. That is a completely different issue to the issues before the High Court in McNiece.
Ms Dulhunty relied on the statement by Gaudron J (at 173) that a promisor who has accepted an agreed consideration for a promise to benefit a third party comes under an obligation to the third party to fulfil that promise and the third party acquires a right to bring an action to secure the benefit of that promise. This statement has no application to Mr Sarac’s circumstances. Other than as required under the statutory policy, the respondent’s insurer did not accept an agreed consideration for a promise to benefit a third party.
The liability of the respondent’s insurer, if any, arises under a mandatory statutory policy of insurance that is in the terms set out in Sch 3 of the Workers Compensation Regulation 2010. Under that policy the insurer is liable to indemnify the respondent against compensation the respondent becomes liable to pay under the 1987 Act “to or in respect of any person who is a worker of the [respondent] (including any person to whom the [respondent] is liable under section 20 of the 1987 Act)”. As Mr Sarac is neither a worker nor a deemed worker under the legislation the respondent has no liability. It follows that no liability arises under the statutory policy.

Mr Sarac did not rely on s 20, which deals with the liability of a principal to pay compensation to workers employed by contractors in certain cases, and it is not necessary to consider that provision.
This ground of appeal is rejected.

CONCLUSION

This appeal was without merit and, in several fundamental respects, the submissions in support of it were completely misguided. It had no prospect of success. For the reasons explained above, the Senior Arbitrator’s determination was open on the evidence and disclosed no error.

DECISION

The Senior Arbitrator’s determination of 10 March 2015 is confirmed.

Bill Roche
Deputy President

1 June 2015

I, STEVEN HAMPSON, 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