Translock Industries Pty Ltd v GIO Workers Compensation (NSW) Ltd

[2006] NSWSC 177

Reported Decision: 151 IR 54

New South Wales

Supreme Court

CITATION:	Translock Industries Pty Ltd v GIO Workers Compensation (NSW) Ltd [2006] NSWSC 177
HEARING DATE(S):	27 & 28 February, 1 & 14 March 2006
JUDGMENT DATE :	22 March 2006
JURISDICTION:	Equity
JUDGMENT OF:	Hamilton J
DECISION:	The second defendant was in the employ of the plaintiff when injured.
CATCHWORDS:	WORKERS’ COMPENSATION [14], [230] – Entitlement to compensation – Persons entitled to compensation – Who is a “worker” or “employee” – Generally – Whether contract of employment with one employer terminated – Whether contract of employment entered into with new employer – Whether worker temporarily lent or let on hire – Whether lending established – Necessity for privity between lender and borrower.
CASES CITED:	Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 Byrne v Australian Airlines Limited (1995) 185 CLR 410 Fogarty v Dowerin Road Board (1935) 53 CLR 510 Mondy v Newman-Underwood Tile Co Pty Ltd [1963] WCR 82
PARTIES:	Translock Industries Pty Ltd (P) GIO Workers Compensation (NSW) Ltd (1D) Alan Peter Cook (2D)
FILE NUMBER(S):	SC 4987/04
COUNSEL:	J Guihot (P) D T Miller (1D) B G McManamey (2D)
SOLICITORS:	Golotta Law Practise (P) Moray & Agnew (1D) Maurice Blackburn Cashman (2D)

IN THE SUPREME COURT
OF NEW SOUTH WALES
EQUITY DIVISION

HAMILTON J

WEDNESDAY, 22 MARCH 2006

4987/04 TRANSLOCK INDUSTRIES PTY LIMITED v GIO WORKERS’ COMPENSATION (NSW) LIMITED & ANOR

JUDGMENT

1 HIS HONOUR: The plaintiff Translock Industries Pty Ltd claims to be indemnified under a workers’ compensation policy issued by the first defendant GIO Workers’ Compensation (NSW) Limited against liability for a claim for damages in the District Court at Sydney brought by the second defendant, Alan Cook, against it in respect of an injury suffered by him in the plaintiff’s employ on 20 November 2000. After an arbitrator had given an award for the second defendant for the sum of $500,000, the first defendant, which had until then conducted the proceedings on the plaintiff’s behalf, declined liability under the policy on the ground that the second defendant was not employed by the plaintiff at the time of the accident.

2 The issues which arise in these proceedings are as follows:

1 Whether the second defendant was employed by the plaintiff on 20 November 2000.
2 Whether the first defendant is estopped from denying that the second defendant was employed by the plaintiff on 20 November 2000.

FACTS RELATING TO EMPLOYMENT

3 In 2000 Mario Mariani (“Mariani”) was the controller of three companies in a Group. The first two were the plaintiff and Mariani Enterprises Pty Ltd (“ME”). The third company, e-Motion Research Pty Ltd (“e-Motion”), was formed on 2 July 2000 by Mariani and the second defendant to develop a computer system known as Sport++. The second defendant was a shareholder and director, as well as Mariani. Mariani’s son, Michael Mariani, was also a director.

4 On 3 July 2000 e-Motion and the second defendant entered into a written employment agreement. Under that agreement the second defendant was employed by e-Motion to act in the capacity of general manager/technical director at a salary of $56,700 per annum gross. It was stipulated under the heading “Position and Responsibilities” that he would perform his duties and exercise his powers:

“(c) on behalf of any of the companies in the Group as if they were duties to be performed on behalf of the Company, as required by the Company CEO or MD, without further remuneration.”

Under the heading “Termination” e-Motion was given the right to terminate the second defendant’s employment without notice or payment in lieu if:

“In the opinion of [e-Motion] he engaged in gross misconduct ... or wilfully neglected to perform or carry out [his] duties in a satisfactory manner.”

5 Sport++ did not progress well. In late September 2000 Mariani sent Bob Harris and Michael Mariani to Adelaide, where the second defendant was based, to deal with him. Bob Harris was then the general manager of the companies in the Group. Although he was not a director, he was older than Michael Mariani and was in charge of the expedition. Although a director, Michael Mariani’s role was essentially technical, to evaluate the progress of the work. There was a meeting on 28 September 2000 at the Adelaide Novotel. Undoubtedly present were the second defendant, Bob Harris and Michael Mariani. Some witnesses said Mariani was also present. Also undoubtedly present for at least part of the meeting were Alex Khrustal and a man named in the evidence only as Pavel, who were e-Motion’s other employees. No one kept any minutes or notes of the meeting.

6 Evidence as to the meeting was given by four participants, Bob Harris, Michael Mariani, the second defendant and Khrustal. As to their credit, Bob Harris gave forthright and clear evidence and appeared to have good recall of the events. He does not now work for Mariani and has not done so since 2002, so is an independent witness. Michael Mariani also gave clear evidence and was apparently seeking to give the Court an accurate account of events. The second defendant was not as clear as those witnesses in his recollection of events, but was apparently a frank witness.

7 The affidavit evidence of Bob Harris as to that meeting included the following:

“4 On the 28th September 2000 I attended a meeting at the Novotel Hotel with Michael Mariani, Alan Cook and two employees named Pavel and Alex.

5 The meeting had been arranged for a demonstration to be given to Michael and I of the Sports ++ to enable us to fix a date to show the product to potential investors and to determine the future direction for the project based on the success or otherwise of the demonstration. I had been instructed by Mario Mariani to inform Alan Cook that his contract was terminated if the demonstration was not good enough.

……………

14 I then said to Alan

‘Alan the last opportunity that currently exists with the group is the weighmate project. We need you to come to Sydney to work for Translock because Emotion cannot continue any further and your employment with it is terminated and we desperately need to get the weighmate going’.
He said

‘Can’t I do that from here?’

I said
‘That would not be acceptable due to the fact that the stage that the weighmate project is at requires you to be on site working side by side with Mario.’”

8 Michael Mariani’s affidavit evidence was as follows:

“3 In late September 2000 I was instructed by Mario Mariani to go to Adelaide to have a meeting with Alan Cook to determine if the Sports++ project was ready to be demonstrated to potential investors and to decide the future course of action for the project due to the fact that funding had run out and finding an investor was essential to its continuation. Part of my instructions were to inform Mr Cook that his employment with Emotion [sic] was terminated if the demonstration was not satisfactory.”

Michael Mariani gave evidence that at one stage he left Bob Harris and the second defendant alone together for a few minutes. His evidence continued:

“9 When I returned I heard Alan saying

‘I want to help Mario out for all the money he has put into the project. Of course I will work for him on the other projects in Sydney.'

I said

‘That’s good to hear because your employment with E-Motion [sic] has to end from now because we can’t put any more money into it until such time as we can get an investor.’

He said

‘That’s okay but I want to continue working on the Sports ++ on my own time to try to get it ready to show investors.’

Bob said

‘You can do that provided it does not interfere with the work you will be doing in Sydney for the other projects.’”

9 The second defendant gave only a very attenuated account in his affidavit of what occurred at the meeting. In oral evidence he said:

“Q After that meeting could you tell us what happened with the work you were carrying out and where it was being carried out?

A Basically E-Motion got shut down at that meeting. I was told categorically, ‘don’t do any work on this. Don’t touch it again in our time. From now on you work exclusively on Weigh Mate. You do as you’re told, when you’re told.’”

10 The second defendant said that he had a conversation with Mariani the following week in Sydney in which it was confirmed that he would not be paid out of e-Motion, because “that would be like using my money”.

11 There is also a record of what the second defendant told his solicitors in the District Court proceedings when he was first asked about the events of 28 September 2000 in a letter which those solicitors, Maurice Blackburn Cashman, wrote to Rankin & Nathan, solicitors, on 18 March 2004:

“We confirm we have been instructed that the Plaintiff was employed by E-Motion [sic] Research Pty Limited until 28 September 2000, on which date our client, and others attended a meeting at the Novotel Hotel in Adelaide, with Mr Mariani, at which time Mr Mariani advised the Plaintiff that his employment with E-Motion Research Pty Limited was to cease as at that date, and that he was thereafter to work on the Trans Lock Industries Industrial Waste Bin, Weighing Arm Project. It is the Plaintiff's instructions that it was his clear understanding from that date forward that he was employed by Mr Mariani to work for Trans Lock Industries Pty Limited on Trans Lock Industries projects.”

Significantly, this was before there was any suggestion that the first defendant was going to decline liability under the workers’ compensation policy.

12 Khrustal did not give oral evidence. He believed Mariani was present at the Adelaide meeting, but spoke only about his own dismissal or suspension of employment, not the second defendant’s.

13 I find on all the evidence that Mariani was not present at the Adelaide meeting despite the evidence of the second defendant and Khrustal. Bob Harris and Michael Mariani were better witnesses. They were also people who travelled from Sydney especially to attend the meeting and who were more likely to recall who was in their party.

14 After the meeting of 28 September 2000 the second defendant ceased to work at Sport++. He was working on Weighmate, a project of the plaintiff, at the plaintiff's Sydney headquarters when the accident happened on 20 November 2000.

15 On this evidence the plaintiff submits that the second defendant’s employment with e-Motion was terminated and the further work, which was done by him on the Weighmate project, was done in the employ of the plaintiff. The first defendant submits that the Sport++ project was terminated, but the second defendant remained in the employ of e-Motion and was “lent” to the plaintiff to do its work on Weighmate. The plaintiff had a current workers’ compensation policy (with the first defendant). e-Motion had no workers’ compensation policy.

16 The documentary evidence available concerning relevant matters is equivocal. Important items support the plaintiff, though they have their own difficulties. There are three principal categories of items, which support the plaintiff's contention:

(1) The claim forms forwarded to the first defendant show the second defendant was working for the plaintiff at the time of the accident, although the plaintiff’s form says that the second defendant was doing the work as a contractor rather than as an employee.
(2) Payment records in the form of cheque butts show payment of the second defendant by e-Motion up to 6 October 2000 (which was the first pay day after 28 September 2000). Thereafter, there was payment of wages by ME. Then there was payment of the second defendant by the plaintiff of wages on 1 December and 15 December 2000. The plaintiff contends that, as the payment of wages was fortnightly in arrears, this covered the day of the accident. The form which the relevant payments by the plaintiff took was that the cheque for wages was cashed and the wages were paid in cash to different employees.
(3) The wages ledgers of the three companies show the same thing as is shown by the cheque butts.

17 There are qualifications as to those records:

(1) As I have noted, the plaintiff’s claim form describes the second defendant as a contractor rather than an employee.
(2) On the plaintiff’s cheque butts next to the relevant amount for wages appear the initials “EMR” in handwriting. The first defendant says that this indicates that the money was expended on behalf of e-Motion. Mr Mariani said that the handwriting was that of his personal assistant, Leanne Inzitari.
(3) The wages ledger supports the proposition that the relevant wages were paid by the plaintiff, not by e-Motion. However, those documents were not contemporaneous, but were re-constructed later after the theft of a computer.

18 On the other hand there is a body of documents, which suggest continued employment of the second defendant by e-Motion. These documents largely emanate from the fact that undoubtedly, from late December 2000, the second defendant was paid wages by e-Motion, as shown both by cheque butts and the relevant wages ledger. By that stage the second defendant was carrying out no work for anyone, because of his injuries. He never did any work for the Mariani Group again. Workers’ compensation was paid by the first defendant to the plaintiff but routed to the second defendant through the e-Motion account.

19 Mariani’s evidence in cross examination concerning this was as follows:

“HIS HONOUR: Q Why was that done?

A Your Honour, I felt bad about what happened. I was the bloke who let the jack down and he's anyway how it's not good to see.

Q I understand, and I am not suggesting it's unworthy that you feel that the payments should be made, but the question is why was it routed through E Motion when you say he had been dismissed from E Motion and was working for Translock at the time the very unfortunate accident happened?

A I thought there may have been some benefits taxation wise because Cook, he wasn't working for it. I was just paying him. I thought there may have been some benefits taxation wise and Cook owned half of that company, so maybe half of it I wouldn't have been accountable for per se. That's the main reason why I transferred it over. I paid it up until the end, until I couldn't afford it any more, basically.”

Cross examined by counsel concerning the perceived benefit, Mr Mariani did not give any explanation that made much sense. From those wages payments by e-Motion flowed later documentation to the same effect. Group certificates originally showed payment of wages to the second defendant by e-Motion in the 2001 and 2002 tax years. It was said that these group certificates were corrected as to the employer by the plaintiff much later. Although the original group certificates were relied on heavily by the first defendant, it was natural that they should have been issued in the first instance in the form in which they were, because of what stood in the wages records. Their significance does not rise above those records.

20 The first defendant also relies on tardiness by the plaintiff in producing employment records when these were sought, including the written agreement. There was lengthy correspondence concerning this leading up to the District Court arbitration in April 2002. It was in the course of this correspondence that there was recorded the second defendant’s account of his dismissal by e-Motion set out in [11] above. The written agreement became available to the first defendant only during the arbitration hearing. Mariani said that he did not produce it because he did not believe it relevant, since the employment with e-Motion had been terminated and the plaintiff was the second defendant's employer at the relevant time. This answer is consistent with a belief that the employment with e-Motion was terminated on 28 September 2000.

21 In June 2002 the first defendant, in response to the arbitrator’s award, lodged a re-hearing application in the District Court, then declined indemnity under the policy.

DECISION RE EMPLOYMENT

22 The first defendant submitted that Mariani represented that the plaintiff was the employer, and not e-Motion, because only the plaintiff had a workers’ compensation policy. It did not actually suggest a conspiracy between the plaintiff and the second defendant to this effect - such an allegation was not put to the second defendant. It did not deny that there was a conversation concerning the second defendant’s employment in Adelaide on 28 September 2000, but submitted that its terms were that only the Sport++ project and not the second defendant’s employment by e-Motion was terminated and that the second defendant was directed to work for the plaintiff under the written agreement, not as an employee of the plaintiff. That is, the suggestion was, as it has been put in submissions, that the second defendant or his services were “lent” by e-Motion to the plaintiff. It was further submitted that written records should prevail over imperfect recollections of a conversation first recorded some years later. The lack of reliance on the termination provision in the written agreement or any misconduct or neglect in the terms of the relevant clause in the conversation of 28 September 2000 tended against an intention to dismiss. The second defendant did not immediately resign as a director of e-Motion. The prevarication in the production of records should be construed as an effort to conceal the true situation.

23 I have already expressed my views on Bob Harris, Michael Mariani and the second defendant as witnesses. That leaves Mariani. Although experienced and apparently successful in business, he appeared to me unsophisticated in company and taxation affairs, with a rather happy-go-lucky approach to such matters. It is apparent from the evidence that the three companies were conducted by him as a personal fiefdom in which his word was law. He was firm and consistent in cross examination to the effect that he believed at all times that the second defendant’s employment with e-Motion and the written agreement had been wholly terminated as of 28 September 2000 and that the resumption of payments through e-Motion late in December was a device to give the second defendant benefits in his injured state (which Mariani particularly regretted because of his personal participation in the accident), though the form of the device was muddle-headedly explained. Whilst, because of his interest, his evidence must be approached with some caution, I generally regard him as a witness attempting to give the Court a correct version of events and to have a reasonable recollection of important matters.

24 More often than not in litigation, contemporaneous writings prevail over the recollections of conversations by witnesses. However, a number of features of this case are out of the ordinary. First, Bob Harris and Michael Mariani were sent on an unusual mission to Adelaide. They went on Mariani's specific instructions to dismiss a “partner” in the Sport++ venture, which was the e-Motion enterprise. The task was not a pleasant, nor a common one. It is likely to have stuck in their memories. Further, it must be remembered that it is not the fact, but the detailed terms of the conversation, which the first defendant denies. There are differences in the accounts of the conversation, which led to some uncertainty as to their terms, but the differences bespeak honest attempts to recollect the facts, rather than agreed or concocted versions. The most impressive witnesses were Bob Harris and Michael Mariani. Even between them there were differences, for example, as to precisely when the words of termination were spoken and by whom. But their accounts are generally consistent. The second defendant's accounts are less satisfactory, but he ended the interview certain he had been dismissed from the employment of e-Motion, not just that Sport++ had been terminated or suspended, and he persisted in that certainty. I accept that after the 28 September 2000 meeting the second defendant believed his employment with e-Motion was terminated.

25 It is clear that after the end of the then current pay period on 6 October 2000 the cash which the second defendant was paid came first from ME, then at the relevant time from the plaintiff. The cheque records as to this are contemporaneous. All the cheque records show that wages were paid fortnightly in arrears. I reject the suggestion by the first defendant that the wages were paid in advance (which would in any event be a very unusual arrangement). The only doubt as to whether they were paid on behalf of the plaintiff or e-Motion arises from the handwritten initials that I have noted, but they are equivocal and Mariani denies that they were put there at his direction and that he ever believed that the second defendant was employed by e-Motion at that time, which denials I am not prepared to discount.

26 Whatever the reason for the switch back to payment by e-Motion in late December 2000, it is quite inconsistent with someone attempting to represent to the world, contrary to the fact, that the second defendant was employed by the plaintiff, which had a workers' compensation policy, as opposed to e-Motion, which did not. I do not accept that Mariani made this change because he believed that the second defendant's employment by e-Motion continued after 28 September 2000.

27 As to the suggestion that the second defendant’s services were “lent” to the plaintiff by e-Motion, there is not a word to that effect in any account of the conversations of 28 September 2000. The Court is asked to infer from the suggestion that all that was said was that the Sport++ project was ended and the presence of subcl (c) under the heading “Position and Responsibilities” in the written agreement that any direction to work for the other companies must have been under that clause. One would expect such an unusual arrangement as the “lending” of an employee’s services to be more clearly proved than that - one would expect evidence showing “an arrangement or some measure of privity” between the lender and the borrower at the time the lending was arranged: see Mondy v Newman-Underwood Tile Co Pty Ltd [1963] WCR 82 at 84 per Conybeare J. In the absence of the mention of any such arrangement among the participants in the conversation of 28 September 2000 and the general belief afterwards of the participants and of Mariani that there was no ongoing arrangement involving e-Motion, there is no evidence or no sufficient evidence that there was a “lending” of the second defendant’s services by e-Motion: cf Fogarty v Dowerin Road Board (1935) 53 CLR 510.

28 As to the submission that lack of any allegation of misconduct or neglect suggests that there was no dismissal, a dismissal from employment is effective, albeit in breach of contract, as this one very likely was: Automatic Fire Sprinklers Pty Ltd v Watson (1946) 72 CLR 435 per Latham CJ at 454, Dixon J at 469; Byrne v Australian Airlines Limited (1995) 185 CLR 410 per Brennan CJ, Dawson and Toohey JJ at 427. The lack of the second defendant’s immediate resignation as a director of e-Motion is readily explained by the possibility of the revival of the Sport++ project, which was partly his, if a new source of funding were found.

29 The decision is not an entirely easy one. But on all the evidence and with particular reference to the matters set out above:

(1) I have concluded on the balance of probabilities that I should accept that words of termination of employment and a direction that work on Weighmate was to be done as an employee of the plaintiff were used in the conversation of 28 September 2000. That conversation itself actually operated to terminate the second defendant’s employment with e-Motion and to constitute the employment of the second defendant by the plaintiff in relation to the work to be done on Weighmate.
(2) Once that is accepted, despite anything that appears in the written records, I find that the second defendant was employed by the plaintiff on 20 November 2000, when the accident happened.

ESTOPPEL CLAIM

30 In view of my conclusion as to employment, I do not propose to determine the claim based on estoppel.

31 Short minutes should be brought in to give effect to my decision. Questions of costs may be raised at that time.

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