Sterne v Tweed Health for Everyone Pty Ltd Trading as Tweed Health for Everyone Superclinic

[2019] FCCA 2540

FEDERAL CIRCUIT COURT OF AUSTRALIA

STERNE v TWEED HEALTH FOR EVERYONE PTY LTD TRADING AS TWEED HEALTH FOR EVERYONE SUPERCLINIC & ORS [2019] FCCA 2540

Catchwords:
INDUSTRIAL LAW – FAIR WORK – Adverse action – whether the Applicant was an independent contractor – tax returns illustrate a situation inconsistent with the claims of the Applicant – successful no case submission after close of the case for the Applicant – application dismissed.

Legislation:

Fair Work Act 2009 (Cth), s.304

Applicant: VICTORIA LOUISE STERNE

First Respondent:

Second Respondent:

Third Respondent:

TWEED HEALTH FOR EVERYONE PTY LTD TRADING AS TWEED HEALTH FOR EVERYONE SUPERCLINIC

JENNIFER SODEN

DIANE BLANCKENSEE

File Number: BRG 337 of 2018

Judgment of: Judge Vasta

Hearing dates: 21 and 22 August 2019

Date of Last Submission: 22 August 2019

Delivered at: Brisbane

Delivered on: 22 August 2019

REPRESENTATION

Applicant appearing in person

Counsel for the Respondent: Mr G. Radcliff

Solicitors for the Respondent: Noble Law

ORDERS

1. That the Applicant be granted leave to withdraw the subpoena to Alana Flohr.

2. That the Application filed 5 April 2018 is dismissed.

3. That by no later than 4.00pm on 3 September 2019, the Respondent provide the Applicant an itemised schedule of costs detailing:

   (a)Costs as per Schedule 1 of the Federal Circuit Court Rules 2001 from 5 April 2018 to 24 March 2019;

   (b)Costs on an indemnity basis from 24 March 2019 until today’s date

4. That by no later than 4.00pm on 16 September 2019, the Applicant file and serve written submissions and any further material she seeks to rely upon with respect to the issue of costs.

5. That the Respondent file and serve any submissions in reply by no later than 4.00pm on 20 September 2019.

6. That this matter be listed for hearing with respect to the issue of costs at 10.00am on 8 October 2019 in the Federal Circuit Court of Australia at Brisbane.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 337 of 2018

VICTORIA LOUISE STERNE

Applicant

And

TWEED HEALTH FOR EVERYONE PTY LTD TRADING AS TWEED HEALTH FOR EVERYONE SUPERCLINIC

First Respondent

JENNIFER SODEN

Second Respondent

DIANE BLANCKENSEE

Third Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. On 5 April 2018, Victoria Louise Sterne filed an originating application in this Court seeking declarations and compensation, as well as pecuniary penalties, for what was termed adverse action.  That original application was amended as an amended statement of claim and filed in this Court on 4 March 2019. 

2. That amended statement of claim sought declarations that the First Respondent contravened s.340 of the Fair Work Act 2009 (Cth) (FW Act) by taking unlawful adverse action against the Applicant, and that the Second and Third Respondents were involved accessorily with the breach by the First Respondent. The claim asked that there be compensation paid to the Applicant because of her loss of employment, financial loss, hurt, distress and humiliation, damage to professional reputation, psychological harm and loss of enjoyment of profession. It also sought that there be pecuniary penalties made against Respondents because of the contraventions; and that those pecuniary penalties be paid to the Applicant.

3. It is trite to say that this matter has a number of steps in it until the Applicant could be successful in the application.  They are, first, that she had to prove to the Court that she was an employee or independent contractor.  If she was able to prove the latter, she would then have to prove what the terms of the contract were and then, thirdly, she would have to prove that she was the subject of adverse action. 

4. Once all of those matters had been proved, because she was alleging that the adverse action occurred because of a prohibited reason, the Respondents would have to prove that the adverse action was taken because of a reason other than a prohibited one. 

5. When the matter came on for trial yesterday, I expressed to the Applicant, who was representing herself, that I was concerned that she was ill equipped to run her own case.  I ensured that she sought legal advice overnight, not only because of the nature of what it is that she was trying to prove, but also because of some other matters that may have arisen in the course of this trial that I will talk of soon.

6. She came back today and gave me the name of the legal practitioner that she had spoken to.  I had toyed with the idea of issuing a stay of the trial until the Applicant was legally represented, but came to the view that I had no such power to do that.  The Applicant is entitled to represent herself, she had been given legal advice, and still wished to pursue the matter and so I simply allowed the trial to proceed.

7. She has now presented all of her material and it has been tested. 

8. Somewhat unusually in a matter such as this, I have allowed the Respondents to make what is colloquially known as a “no case submission”; that is, that, having regard to the evidence that the Applicant has now adduced, it cannot be proved that the Applicant was an employee, and that the Application itself, is doomed to fail and that the Court should step in now and put an end to the proceedings.  I have decided to entertain such an application.

9. The background to this matter, in short compass, is this.  Tweed Health For Everyone Pty Ltd (THE), trading as Tweed Health For Everyone Superclinic & Ors, is a company that provides health services within a clinic setting at a premises at Tweed Heads.  The structure of the entity is revealed in a document that is annexure JMS5 to the affidavit filed 4 May 2018 of the Second Respondent, Ms Jennifer Soden.

10. To put it as simply as I can, doctors Austin Sterne, Jennifer Soden and Diane Blanckensee formed the company, THE, and set up the clinic.  What they did was that they formed one company to run the clinic and another company that would own the land and building.  That company that owned the land and building was made up of, in effect, the superannuation companies of the three doctors involved. 

11. The company that ran the clinic, that is THE, was also, in part, made up of three companies that were in effect the alter egos of the three doctors.  The company that I am concerned with in this matter is Sterne Medical & Legal Pty Ltd, which is Trustee for the Sterne Medical Trust.

12. That company is, in effect, an owner of one-third of the shares of Tweed Health For Everyone Pty Ltd.  The directors of Sterne Medical & Legal Pty Ltd are Dr Austin Sterne and his wife, Victoria Louise Sterne who is the Applicant.

13. The Applicant said that, when the clinic was being setup, she was interviewed for a position as the dietician in the clinic.  She said that it was proposed that as the dietician in the clinic she would see patients.  The doctors of the clinic, if they needed the services of the dietician, would refer patients to her and that she would be provided with a room and support – administrative support. 

14. The affidavits of the Applicant do not disclose the terms of the oral contract.  There is no evidence from anyone other than, it would seem, Dr Sterne as to anything being said as to the terms of the contract.  All Dr Sterne says is that, to the best of his memory, the Applicant asked for a particular software program and the practice, THE, said that it would purchase that for her.

15. The Applicant says that she was told that she would start off on certain hours and that this would slowly build up.  She says that in the four to five years that she was there. she did have problems with Dr Blanckensee (the Third Respondent) and with other staff.  I will leave it at that.  This caused her to complain about bullying from staff and that she eventually took some action.

16. She claimed that she billed her patients but that the patients paid for her services, not to her but to THE.  She said that THE would then deduct some of that money, a sum of 30 percent as a medical service fee and that she would keep the 70 percent.  She says that this arrangement showed that she was an independent contractor.  She points to the invoices which she has annexed to her affidavit of 4 October 2018.  Those invoices are generated by THE, but they were for the Applicant herself. 

17. Most of the invoices are directed to Victoria Sterne.  There is a space for an ABN number, but the ABN number is blank.  Some of the invoices have Victoria Sterne with an address which seems to be her residential address, but still leaves the ABN blank.  Some of the invoices are addressed to “The Nutrition Clinic” which is a business name under which the Applicant said that she worked.  Again, any invoice to the Nutrition Clinic left the ABN blank, except for the last invoice. 

18. It should be noted that the Nutrition Clinic does have an ABN but that ABN is registered not to the Applicant, but to Sterne Medical & Legal Pty Ltd. 

19. The Respondents have claimed that the arrangement is an arrangement between Sterne Medical & Legal Pty Ltd and THE.  The Respondents have, in effect, said that Sterne Medical & Legal Pty Ltd is the entity that runs the dietician service in the clinic.  The Applicant is simply the person who actually performs the dietician work for Sterne Medical & Legal Pty Ltd.  If that is the proper construct, then the Applicant is not an employee nor is she an independent contractor of Tweed Health For Everyone Pty Ltd. 

20. As I have said before there is no evidence as to what the terms of the agreement were.  No person gives any evidence as to what was said at the particular meeting that the Applicant describes as a job interview.

21. In the absence of clear terms as to the contract, the Court must look at all of the circumstances to see in what way the parties acted so as one could then infer what the terms of the contract are. 

22. The Applicant points to these matters to show that she was an employee. 

23. She points to the fact that the invoices, as I have said, are to her as an individual, or to the Nutrition Clinic. 

24. She makes the submission, and I will talk about this soon, that there was no tenancy agreement in writing between her and THE, which she says should have been done if the arrangement was one where she was a tenant. 

25. She said that she was paid weekly. 

26. She said that at the time that she made her bullying complaint, the respondent company agreed that she was a contractor. 

27. She said that her own family trust employed her as an administrator. 

28. She said that she was given a performance review on 10 September 2014. 

29. She said that THE made her move rooms. 

30. She said that, at times, for disciplinary reasons or for other reasons, the practice – THE, refused her access or remote access to her patient notes. 

31. She said that she was put under surveillance after making a complaint.

32. Finally, she says that her employment was terminated. 

33. She says that those are things that point to her being an employee. 

34. In her submissions in the no-case application, she also said that the practice, THE, put her on special leave and this was something that they would not do if she were not an independent contractor.  Again, special leave or any form of leave is usually reserved for employees, but there are occasions where contractors can get some form of leave.

35. In any event, she produced invoices that do show that she was given special leave, in that the practice, THE, looked at her average weekly billings for the year before and simply paid her an average of those weekly billings.  It is significant to note that those invoices that are at pages 4, 5, 6, 7 and 8 of her affidavit of 4 October 2018, do not have a medical service fee to them, but are calculated on the billings without the 30 per cent taken out.

36. In any event, those are the aspects to which the Applicant points. 

37. The Respondents point to the fact that there is not the indicia of the Applicant being an employee of THE; rather that she is working for her family company, that is, Sterne Medical & Legal Pty Ltd and that company is the one that is providing the service. 

38. The invoices themselves are very instructive.  When one looks at the invoice, there is a total for “billings”.  That is, in the particular week having regard to all the patients that the Applicant saw, what were the total fees paid for the dietitian services physically performed by the Applicant.  That money was paid to THE.  On the invoice, THE has then charged a medical service fee, 30 percent of net billings. 

39. Again, very instructively, the accountant, who seems to be the accountant not only for the practice, but also for the Applicant, said that this was a fee for the use of rooms, the use of utilities, the administrative support, computers, software, internet, emails and all of the other aspects of the administrative part of any practice. 

40. Because that is a service that has been provided by THE, THE must charge goods and services tax (GST) on that service fee, being 10 percent of the medical practice service fee.  Each of the invoices shows that there has been a 10 percent charge for the provision of this medical service fee. 

41. The observation is then made that, if the Applicant is an independent contractor, it is she who should be charging GST to THE rather than the other way around.  If she is to be accepted, then her provision of dietician services is a service that she has provided to THE and therefore, she should then be claiming money from THE for the provision of those services and charging GST. But that has not occurred at all. 

42. The indicia, therefore, straightaway bespeaks not of an independent contractor/employer relationship but something totally different. 

43. What is then instructive, is to go to the tax returns of the Applicant herself and the company, Sterne Medical Trust.  What can be seen is that the tax returns of the Applicant do not list her occupation as dietician.  Her occupation is administration assistant which is a tax code 53111. 

44. The money that was paid, due to the invoices that were rendered, was paid into the bank account of Sterne Medical & Legal Pty Ltd as trustee for the Sterne Medical Trust.  What it shows is that the Applicant has not received any money for the dietician services that she has rendered. 

45. If she were an independent contractor, her tax returns would be such that she would declare, as income, the net proceeds of the money that she had been paid by THE, but that is not what her tax returns reveal. 

46. Going from her tax return from 30 June 2013, she received, it would seem, $49.00 from the Queensland Department of Health and $20,000 from the Sterne Medical Trust.  There is no income recorded in her tax returns from THE. 

47. The tax returns ending 30 June 2014 show that her income was $19,000 from the Sterne Medical Trust, and that is assumed that that is for her position as administration assistant plus $60,000 as a trust distribution. 

48. For the financial year ending 30 June 2015, again, the income of $19,000 from the trust for her administration assistant duties and $115,113.00 as a trust distribution. 

49. From 30 June 2016, her income was $5,000 as an administration assistant and $50,000 as trust distribution.

50. For the year ending 30 June 2017, her income was $5,000 as an administration assistant and $37,154.00 as trust distribution. 

51. There has been no income ever disclosed to the Australian Tax Office in relation to any agreement between the Applicant and THE.  There has not been any money ever declared by the Applicant as having been earned from the agreement that she says exists between herself and THE.  She has never claimed GST for those services. 

52. But when one then goes to the returns of the Sterne Medical Trust, it shows that the Sterne Medical Trust treated, as income, the whole of the billings that the Applicant charged, and has claimed, as expenses, the amount that was charged by THE as the medical practice service fee. 

53. That occurred in the years ending 30 June 2014, 2015 and 2016 and 2017. 

54. The accountant, Mr Matthew Perry, indicated that, for the purposes of the return of the trust entity, it was perfectly proper for him, as the accountant, to gross up the amount of money that was earned by the trust for the dietician work, and to claim the 30 percent as expenses so that the money, that came into the trust from THE, did equal that gross amount, take away the 30 percent.  Of course, there would be three percent out from that because of the imposition of the GST, but it is a proper accounting exercise to do that. 

55. So that this means that the Sterne Medical Trust treated as income for itself, the amounts that were charged by the Applicant, or by the Nutrition Clinic, as being income of the trust and not of the Applicant.  The Applicant is the administration assistant for that trust and it is upon her instructions, as well as those of the husband, that the tax returns are prepared. 

56. If it were that the situation is as the Applicant now claims, the tax returns could not have been prepared in the manner in which they have.  When one looks at what the Applicant says is all of the matters that would point to her being an employee or an independent contractor with THE being the employer, none of those matters ends up being able to substantiate that claim. 

57. The invoices to her as an individual or to the Nutrition Clinic mean nothing because those invoices charge GST.  So whilst the Applicant says that one can look at the invoices and look at the name which would show that she is an employee, the fact that it charges her GST on the services that it provides really shows that it did not consider her an employee, but rather as someone to whom THE provided services. 

58. The Applicant said that there was no tenancy fee and no tenancy agreement, and yet the accountant said that the 30 percent medical practice fee was partly for the tenancy and the administrative services.

59. The fact that she was paid weekly does not go to show anything as to her being an employee or independent contractor. 

60. The fact that the practice made her move rooms, refused her access to her remote patient notes and put her under surveillance is something that they may have done, for whatever reason that they felt that they should do, but that is part of the services that they supply.  If the Applicant did not want to do that, then as she did not need to pay the 30 per cent or she could have withheld the 30 per cent.  She did not do those things. 

61. Even though now she says she did not know that that is what she could do, that does not alter what her status is.  And whilst she made complaints, that is nothing that is decisive of her status. 

62. Whilst that may be an excuse or a reason as to why she did not do something, it does not alter what the legal relationship was between Sterne Medical & Legal Pty Ltd and THE, and her position within Sterne Medical & Legal Pty Ltd.  As to the point that she makes as to the special leave, there is nothing in her affidavit or any of her material that explains why the special leave payment was made, who authorised it and for how long it was going to continue to be paid. 

63. What is at play in the background of all of this, was that there was a somewhat bitter dispute between Dr Austin Sterne and Dr Soden and Dr Blanckensee.  This dispute amongst them resulted in Supreme Court action. 

64. The Supreme Court action ended up being resolved in this way; that the share of THE, which was owned by Sterne Medical & Legal Pty Ltd, was bought by the entities that were controlled by Dr Soden and Dr Blanckensee.  The other company that owned the land and the buildings had the units owned by the Sterne Superannuation Fund, purchased by the superannuation entities controlled by Dr Soden and Dr Blanckensee.  The total payment for the “Sterne share” was approximately $1.6 million. 

65. A deed of settlement was entered into by the parties including Sterne Medical & Legal Pty Ltd.  The directors of that company are Dr Sterne and the Applicant, Victoria Sterne.  Upon the signing and settling of that deed, on 22 December 2017, all arrangements between THE and Sterne Medical & Legal Pty Ltd were now at an end. 

1. This meant that the arrangement, according to the Respondents, between THE and the dietician services provided by the Applicant were, consequently, also at an end.  The Applicant describes this as her being “terminated”, whereas, on the evidence before me, it is simply the consequence of the deed being signed. 

2. There was no termination.  There was a mutual decision signed by the directors of Sterne Medical & Legal Pty Ltd to end all of the arrangements that they had with THE.  That meant that the arrangement with the Applicant was now at an end as well. 

3. It seems to me then that there is certainly no way in which this Court could ever have come to the conclusion that the Applicant was an independent contractor. 

4. There being no evidence as to that matter I accede to the application of the Respondents and I dismiss this application. 

I certify that the preceding sixty-nine (69) paragraphs are a true copy of the reasons for judgment of Judge Vasta

Date:  10 September 2019