Toowoomba Regional Council v Lawrance

[2014] ICQ 25

INDUSTRIAL COURT OF QUEENSLAND

CITATION:

Toowoomba Regional Council v Lawrance [2014] ICQ 025

PARTIES:

TOOWOOMBA REGIONAL COUNCIL
(appellant)
v
CLYNTON LAWRANCE
(respondent)

CASE NO/S:

C/2013/50

PROCEEDING:

Appeal

DELIVERED ON:

5 August 2014

HEARING DATE:

3 March 2014

MEMBER:

Martin J, President

ORDER/S:

1.   Appeal allowed in part.

2.   Orders (b), (c) and (d) of the orders made by the Deputy President are set aside.

3. The matter is remitted to the Commission for consideration, in the light of these reasons, of what payment, if any, should be ordered under s 276(5).

CATCHWORDS:

INDUSTRIAL LAW – QUEENSLAND – INDUSTRIAL TRIBUNALS – INDUSTRIAL RELATIONS COMMISSION – POWERS WITH RESPECT TO UNFAIR CONTRACTS – where a predecessor of the appellant had entered into a contract for services with the respondent – where the respondent suffers from significant intellectual impairment – whether the contract was an unfair contract for the purposes of s 276 of the Industrial Relations Act 1999 – whether the Commission applied correct principles in ordering that the appellant pay the respondent the sum of $215,000 under s 276(5) of the Industrial Relations Act 1999

Industrial Relations Act 1999, s 276

CASES:

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447; [1983] HCA 14, referred to
House v The King (1936) 55 CLR 499; [1936] HCA 40, applied

APPEARANCES:

W Sofronoff QC and K Watson instructed by Clifford Gouldson for the appellant

D Kent QC and R Reed instructed by Aden Lawyers for the respondent

Background

1. In November 1993 Clynton Lawrance started work at two refuse tips controlled by the Rosalie Shire Council (“the RSC”). That Council is the predecessor of the appellant, the Toowoomba Regional Council (“the TRC”). Mr Lawrance sought orders under s 276 of the Industrial Relations Act 1999 on the basis that the contracts he had with the RSC and the TSC were unfair contracts within the meaning of that section.

1. Mr Lawrance first entered into a contract for services with the RSC in 1993. Under that contract he was not an employee of the RSC. The respondent was required under the contract to attend to the collection and disposal of rubbish along the approach roads to the dump as well as collection and disposal of rubbish in the general vicinity of the dump. He had to direct the public to deposit rubbish in the specified areas when he was working at the tip and he had to comply with all lawful requests from time to time by RSC staff in regard to dump maintenance. He was not paid anything for this work. He was given scavenging rights for all refuse and unwanted material deposited at the dump sites by the public. He would then sell this material and was entitled to all the proceeds. He retained this right in subsequent contracts.

1. In April 1995 the contract was varied and the respondent was required from then to work only at one of the two tips.

1. In January 1998 a new contract was entered into between the respondent and the RSC. The tip at which the respondent was working was to be opened for specified hours on 5 days per week and while the respondent’s duties remained the same he was paid an amount of $20 a day “for responsibilities associated with his contract, which include the opening and closing of the Waste Disposal Site at the times on the nominated days”.

1. A third contract was entered into in March 2002. The parties this time were the respondent and his wife and the RSC. Under this contract additional duties were imposed on the respondent and his wife. They included the collection of payments for disposal of waste by certain persons, the keeping of records of non-shire residents who used the facility, the keeping of records and quantities of recyclables and providing those records to the RSC on a regular basis, and keeping records of the number of vehicles entering and the quantities of waste being deposited. Mrs Lawrance was injured in 2003 with the result that, from February 2003, the respondent was the sole provider of services under the contract.

1. A minor variation to the hours worked was made to the contract in March 2008 and, at about the same time, the RSC merged into the newly created Toowoomba Regional Council. The contract that the respondent had with the RSC was taken over by the TRC.

1. In his application, the respondent sought:

(a)        a declaration that the TRC contract was an unfair contract for the purposes of that section,

(b)        a declaration that the contract was void ab initio,

(c)        an order amending the contract to provide for payment of remuneration in accordance with the relevant industrial instrument, and

(d)        an order that the respondent pay the applicant the sum of $215,000.

1. The Deputy President found in favour of the respondent and made the following declarations and orders:

“(a)The Commission declares that the contract for services between the Applicant and the Respondent in force between 15 March 2008 and 30 September 2012 (the TRC contract) was an unfair contract for the purposes of s.276 of the Act;

(b)The Commission declares that the TRC Contract is void ab initio in so far as it provided for a total remuneration to the Applicant less than that which a person performing the work under the TRC Contract as an employee would have received under the Toowoomba Regional Council No 2 Employees' Certified Agreement and/or the Toowoomba Regional Council No 1 Employees' Certified Agreement and/or the Local Government Employees (excluding Brisbane City Council) Award – State 2003 together, the relevant industrial instruments, as applicable from time to time;

(c)The Commission orders the amendment of the TRC Contract to provide for payment of remuneration to the Applicant in accordance with the remuneration payable to a corresponding employee under the relevant industrial instrument;

(d)The Commission orders that the Respondent pay the Applicant the sum of $215,000.”

1. An important factor in the resolution of the application and this appeal is the respondent’s intellectual standing. He suffers from an intellectual impairment. In 1997 he was assessed by Ms Weightman, a Centrelink psychologist, as having a full scale IQ of 67. She noted that: “…cognitive disabilities with attending, learning, remembering and linguistic tasks have been present since early childhood and appear functionally based in a pervasive developmental disorder”.

1. The respondent is, effectively, functionally illiterate and almost completely innumerate. A report in March 2013 by Dr Duke, a psychiatrist, stated that the respondent’s “intellectual functioning appears to be impaired to a level where I believe that he would struggle to be able to read or understand any form of written document. His ability to understand complex concepts appears to be limited…”

The legislation

1. Section 276 of the Act relevantly provides:

“(1) On application, the commission may amend or declare void (wholly or partly) a contract if it considers—

(a) the contract is—

(i) a contract of service that is not covered by an industrial instrument; or

(ii) a contract for services; and

(b) the contract is an unfair contract.

…
(2) In deciding whether to amend or declare void a contract, or part of a contract, the commission may consider—

(a) the relative bargaining power of the parties to the contract and, if applicable, anyone acting for the parties;

or

(b) whether any undue influence or pressure was exerted on, or any unfair tactics were used against, a party to the contract; or

(c) an industrial instrument or this Act; or

(d) the Queensland minimum wage; or

(e) anything else the commission considers relevant.

(3) An application may be made by—

(a) a party to the contract; or

(b) an inspector, for the party required under the contract to provide services; or
(c) an organisation of employees or employers of which a party is, or has applied to become, a member, if it is acting with the party’s written consent.

(4) The commission may consider a contract to be an unfair contract if it considers the contract—

(a) was an unfair contract when it was entered into; or

(b) became an unfair contract after it was entered into because of the conduct of the parties, or a variation to the contract or for any other reason it considers sufficient.

(5) The commission may make an order it considers appropriate about payment of an amount for a contract amended or declared void.
(6) A person can not make an application under this section if—

(a) an application has been made under section 74 for the same matter; or

(b) the person—

(i) is not a public service officer employed on tenure under the Public Service Act 2008; and
(ii) has an annual wage of more than $68000 or a greater amount stated in, or worked out in a way prescribed under a regulation.

(7) In this section—
accident pay provision means a provision for accident pay, or other payment, on account of a worker sustaining an injury.
contract includes—

(a) an arrangement or understanding; and
(b) a collateral contract relating to a contract.

industrial instrument includes a federal industrial instrument.
injury means an injury under the Workers’ Compensation and Rehabilitation Act 2003.
unfair contract means a contract that—

(a) is harsh, unconscionable or unfair; or
(b) is against the public interest; or
(c) provides, or has provided, a total remuneration less than that which a person performing the work as an employee would receive under an industrial instrument or this Act; or
(d) is designed to, or does, avoid the provisions of an industrial instrument.

worker means a worker under the Workers’ Compensation and Rehabilitation Act 2003

The Commission’s reasoning

1. The Deputy President concluded that the contracts between the parties were unfair after taking into account:

(a)        the applicant’s illiteracy,

(b)        his disadvantage in the labour market,

(c)        his limited numeracy and other cognitive limitations, and

(d)        his significantly diminished bargaining power.[1]

[1]Commission reasons at [91]

1. Those matters would not, of themselves, make a contract unfair. That was recognised by the Deputy President who went on to say this about the contract:

“[92]      It was unfair to the extent that TRC required the Applicant to perform a wide range of duties, be in attendance at the tip 52 weeks of the year, and open and shut the tip without any consideration given to the Applicant's inability to understand the monetary value of the work being required of him by TRC. TRC held this information to itself and arbitrarily determined an amount that it would pay to the Applicant without any recognition of the Applicant's inability to negotiate fair terms with them.”

1. The unfairness referred to appears to have arisen, in the view of the Deputy President, as a result of the contract requiring the respondent to: perform a wide range of duties, be in attendance at the tip 52 weeks of the year, and open and shut the tip, in circumstances where he did not understand the monetary value of that work. None of those particular duties is inherently unfair.

1. There are two bases for the Deputy President’s finding. First, she found that the contract was unconscionable. In arriving at that conclusion, the Deputy President referred to the statement by Mason J in Commercial Bank of Australia Ltd v Amadio[2] where he said[3]:

“…relief on the ground of ‘unconscionable conduct’ is usually taken to refer to the class of case in which a party makes unconscientious use of his superior position or bargaining power to the detriment of a party who suffers from some special disability or is placed in some special situation of disadvantage, e.g., a catching bargain with an expectant heir or an unfair contract made by taking advantage of a person who is seriously affected by intoxicating drink. Although unconscionable conduct in this narrow sense bears some resemblance to the doctrine of undue influence, there is a difference between the two. In the latter the will of the innocent party is not independent and voluntary because it is overborne. In the former the will of the innocent party, even if independent and voluntary, is the result of the disadvantageous position in which he is placed and of the other party unconscientiously taking advantage of that position.” (emphasis added)

[2](1983) 151 CLR 447

[3]Ibid at 461

1. The definition in s 276 of an unfair contract includes a contract that is harsh, unconscionable or unfair. The discussion by Mason J in Amadio is about conduct rather than the product of that conduct. Nevertheless, while it is not explicitly set out, it is a reasonable construction of the Deputy President’s reasons that she came to the view that the contract was unfair because its terms reflected the difference in “bargaining power” and the “special disability’ of the respondent.

1. Secondly, although it is not stated at this stage of the Deputy President’s reasons, it can reasonably be inferred that another basis for the finding of unfairness is that the respondent was not properly compensated for the work performed. In other words, it is not the nature of the work which led to a finding of unfairness but the remuneration received for it. Not being appropriately remunerated, in circumstances where the worker may be unable to understand that he is not being paid a reasonable amount, can support a finding of unfairness.

1. The issue that then arises is: what is the measure which should be used to determine whether the remuneration was appropriate? The Deputy President referred to the Toowoomba Regional Council No 2 Employees’ Certified Agreement, the Toowoomba Regional Council No 1 Employees’ Certified Agreement, and the Local Government Employees (Excluding Brisbane City Council) Award – State 2003. Her Honour used those instruments as the basis for awarding a payment of $215,000.

The appellant’s case

1. The appellant has based its argument on the proposition that the principal basis for the finding of unfairness was the contract for services “provides, or has provided, a total remuneration less than that which a person performing the work as an employee would receive under an industrial instrument.” It then argues that the conclusion is legally flawed because:

(a)        The contract under which the appellant engaged the respondent provided for the respondent trading in the appellant’s property for his own benefit. There is no industrial instrument, says the appellant, that would provide for profit-seeking trading in the appellant’s property; and

(b)        The respondent’s total profits were not placed in evidence.

1. So far as the respondent’s total profits from his scavenging are concerned, it appears reasonably clear that, while some of the income from that activity was banked, other amounts were received in cash and “hidden” by him for use at some later time.[4]

   [4]T 2-20 l 16 – T2-25 l  40, T2-27

1. While there was no industrial instrument referred to which did contain a provision for trading in an “employer’s” property, that, of itself, does not pose any difficulty. It is open to the Commission to examine the income received, in any way, under a contract for services with the notional income which would have been received had the worker been engaged under the terms of an industrial instrument.

1. The appellant submits that a number of errors of law invalidate the decision of the Deputy President. I shall deal with these in turn.

Failure to consider the effect of the Supported Wage Award – State 2002 and the Supported Wage Award – State 2012.

1. The applicability or relevance of those awards was argued before the Commission. The Deputy President dealt with the question in these terms:

“[107]    Submitting that the minimum payment of not less than $56 per week (as adjusted) should have applied to the Applicant under the Supported Wage Award - State 2002 based upon an assessment of his incapacity, is not a reasonable submission for the Respondent to make as it was never an award contemplated by either party.”

1. That approach to consideration of the relevance of a particular Award is, with respect, incorrect. Whether the parties to a contract have contemplated a particular award is irrelevant. The question to be asked is whether or not an award, properly construed, could have applied to the working relationship. It follows, then, that consideration should have been given, in light of the submissions made, to the applicability or inapplicability of the Supported Wage Awards.

1. The two Awards specifically deal with persons who are receiving Disability Support Pensions. The Award coverage clause in each of the Awards is, for these purposes, the same, namely:

“This Award applies to employees who:

(a) are unable to perform the range of duties to the level of competence required within the class of work for which the employee is engaged under this Award because of the effects of a disability on their productive capacity; and

(b) who meet the impairment criteria for receipt of a Disability Support Pension (as defined).”

1. The evidence supports a finding that the respondent was in receipt of a Disability Support Pension as defined under those Awards and that this was afforded him because he had been assessed as having an estimated incapacity of 85 per cent. Regrettably, because the Deputy President did not give consideration to the effect of the Supported Wage Awards, no consideration was given to the issue of his capacity to perform the range of duties to the level of competence required within the class of work for which he might be engaged under the Award.

1. It was contended by the respondent that the question of ability to perform the range of duties etc. was answered by the evidence that the respondent had performed a wide range of tasks at the waste facilities and that his work had been satisfactory. He had received written commendations during his time with the RSC and his work was, essentially, unsupervised. The operation of the Supported Wage Awards requires an assessment of the productive capacity of the employee in accordance with the supported wage system as set out in the Award. There was, of course, no such assessment made because the parties did not seek to have the relationship between them governed by that Award. Nevertheless, in the unusual circumstances of the respondent, they are Awards to which the Commission should have directed its attention. The failure to take them into account constitutes an error in that relevant material has been ignored and, as a result, the decision made with respect to whether total remuneration would have been less than received under an industrial instrument was not properly addressed.

Failure to consider relevant circumstances – s 276(2)(e) – effect of the Social Security Act 1991 (Cth)

1. The appellant argues that pursuant to s 94 of the Social Security 1991 (Cth) the respondent, if he had been employed as an employee, would have been restricted to performing work of 15 hours or less per week. The appellant argues that by failing to take that into account the Commission fell into error because it treated the respondent as an unimpaired person without the restrictions set out in s 94.

1. The respondent argues that s 94 does not operate as a limitation on the number of hours that an employee may work, rather, it sets a qualification for receipt of the Disability Support Pension. I agree. The reference to the number of hours that an employee might work is a reference in s 94 to one of the qualifying factors for receipt of the pension. A reading of s 94(1)(c)(i) and the definition of “work” in s 94(5) leads to the conclusion that it is a requirement for the provision of a pension that the person has a continuing inability to work for at least 15 hours per week on wages that are at or above the relevant minimum wage. The section does not purport to restrict the recipient of such a pension to working for less than 15 hours a week. If a recipient was to work more than 15 hours a week then that might have some effect on the continuing eligibility for a pension but it does not mean that a person receiving such a pension is restricted by that receipt to a certain number of hours work a week.

1. This is a matter which will need further consideration in light of the orders which will be made.

Failure to take into account the effect of the receipt of the Disability Support Pension

1. The appellant argues that the Commission erred in not taking into account the Disability Support Pension that the respondent had been receiving. In other words, the Commission, by making the order it did, afforded a windfall gain to the respondent because the order for compensation taken together with the receipt of the pension meant that he would achieve a better financial outcome than he would have received had he been an employee.

1. I have already dealt with the issue of the Supported Wage Awards and do not need to consider it under this heading again.

1. Section 276(5) does not provide any guidance to the Commission for the making of an order about appropriate payment.

1. The calculation of the amount the subject of the order for payment was based upon the Awards which the Deputy President regarded as being relevant. The receipt of such a sum would, of course, be contrary to the basis upon which the Disability Support Pension had been paid to the respondent. There are provisions under the Social Security Act 1991 (Cth) for the recovery of benefits paid when compensation has been awarded to a recipient. Section 1223 of that Act provides:

“Subject to this section, if:
(a)         a social security payment is made; and

(b) a person who obtains the benefit of the payment was not entitled for any reason to obtain that benefit;

the amount of the payment is a debt due to the Commonwealth by the person and the debt is taken to arise when the person obtains the benefit of the payment.”

1. The payment ordered by the Deputy President was, effectively, an order for the payment of lost wages together with interest. The respondent argues that a debt arises upon the payment of the amount ordered. Section 1223 speaks of a person who “was not entitled for any reason to obtain that benefit” which strongly suggests that entitlement is to be assessed at the time of receipt of the social security payment. I was not referred to any other parts of the Social Security Act[5] which support a conclusion that the payment made under the Social Security Act would be able to be recovered by the Commonwealth as a debt. It is more likely that a debt arises at the time the payment was made under the Social Security Act if that payment was not one to which the recipient was entitled by reason of a breach of the entitlement conditions. Unfortunately, this was not explored in any great depth by either party. In any event, I am not satisfied that it has been demonstrated that, in these circumstances, the Deputy President erred by not making an allowance for the Social Security Act payments.

Failure to have regard to all of the Local Government Employees (Excluding Brisbane City Council) Award – State 2003

[5]Save for those which relate to the receipt of an award of damages for personal injury and the like.

1. The sum ordered to be paid by the Commission was arrived at on the basis of allowing additional payments for working on Saturday and Sunday. The appellant argues that, had the Local Government Employees (Excluding Brisbane City Council) Award – State 2003 applied, then the appellant could have entered into an agreement with the respondent so that work on Saturday and Sunday would have been paid at ordinary rates rather than as overtime.

1. That submission assumes that there would have been an agreement of that type. I do not accept that it follows that because an agreement could have been entered into, it would have been entered into. There was, though, a chance that that might have occurred and that should have been taken into account by the Deputy President when assessing the amount paid. To that extent, there was an error in failing to take that possibility into account.

Misapplication of s 276(2) of the Act

1. The Deputy President ordered that the contract between the parties be amended to provide for remuneration that “a corresponding employee” would receive. The appellant says that if such an order was to be made then it should have been an order for remuneration that the respondent, in his specific circumstances, would have received.

1. The respondent argues that the Deputy President correctly applied the definition of unfair contract where there is a reference to provision of “total remuneration less than that which a person performing the work as an employee would receive”.

1. This is a matter which should have been taken into account in the making of an order for payment. Section 276(5) speaks of making an order that the Commission “considers appropriate”. Ordinarily, one would, when considering what was “appropriate”, take into account any specific circumstances that apply to the applicant. Thus, any medical or intellectual restriction should be taken into account. For example, a person who, for medical reasons, cannot work more than a limited number of hours a day, would not be an appropriate person to receive an order for payment which would apply to a person who could work the usual number of hours in a day.

1. The Deputy President erred in not taking that into account.

Failure to achieve an outcome equivalent to that under the relevant industrial instrument

1. The appellant relies upon the terms of the agreement it had with the respondent which allowed him to scavenge and to keep the profits. The appellant says that that capacity should have been taken into account when attempting to determine what was an equivalent situation under an Award. This is a continuation of the argument made earlier by the appellant about the nature of the contract that the appellant had with the respondent. The correct approach in circumstances such as this is to assess what an applicant would have received under the appropriate industrial instrument and then to subtract from that the net profit made from the exercise of the rights under the contract which could not be reflected in an Award. This was not done by the Deputy President. It was a matter which should have been taken into account and the failure to do so constituted an error.

Conclusion

1. The finding that the contract was unfair was based on two factors. The first, that the contract was unconscionable because of the circumstances of advantage and disadvantage, has not been shown to have been affected by appealable error. The second basis, though, was based on the incorrect method, advanced by the respondent, of comparing the respondent’s income with a notional income earned under the Toowoomba Regional Council No 2 Employees' Certified Agreement and/or the Toowoomba Regional Council No 1 Employees' Certified Agreement and/or the Local Government Employees (excluding Brisbane City Council) Award – State 2003.

1. The appellant has demonstrated that a number of relevant considerations were not taken into account[6] in the determination of the payment which was ordered. That means that that part of the decision must be set aside. It follows, then, that there will need to be a reconsideration of the calculation of the payment.

   [6]In the sense used in House v R (1936) 55 CLR 499 at 504-5.

Orders

1. The appeal is allowed in part. Orders (b), (c) and (d) of the orders made by the Deputy President are set aside.

1. The matter is remitted to the Commission for consideration, in the light of these reasons, of what payment, if any, should be ordered under s 276(5).