Victorian WorkCover Authority v Divadeus Pty Ltd (in Liquidation)

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S APCI 2015 0012

VICTORIAN WORKCOVER AUTHORITY	Applicant
v
DIVADEUS PTY LTD (IN LIQUIDATION)	Respondent

---

JUDGES:	FERGUSON and McLEISH JJA, and GINNANE AJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	5 November 2015
DATE OF JUDGMENT:	28 April 2016
MEDIUM NEUTRAL CITATION:	[2016] VSCA 81
JUDGMENT APPEALED FROM:	[2014] VSC 578 (McMillan J)

---

ACCIDENT COMPENSATION – WorkCover insurance – Premiums calculated by reference to WorkCover industry classification – Supply of labour in respect of security services – Whether labour hire – Whether supply of labour in connection with the performance of a task or the discharge of a specified function – Accident Compensation (WorkCover Insurance) Act 1993 – WorkCover Insurance Premiums Order (No 20) 2012/13 cl 4, schs 1, 4.

ACCIDENT COMPENSATION – WorkCover insurance – Appeal against determination of authority – Onus of proof – Accident Compensation (WorkCover Insurance) Act 1993 s 36J.

COURTS AND JUDGES – Procedural fairness – Indication as to Judge’s view on issues – Ruling that party could not cross-examine or lead evidence contrary to that view – Whether errors in rulings – Judge adopting a different view in judgment – Whether denial of procedural fairness.

---

APPEARANCES:	Counsel	Solicitors
For the Applicant	Ms K L Walker QC with Ms G F Gray	Corrs Chambers Westgarth
For the Respondent	Mr S W Stuckey	Moores

FERGUSON JA
McLEISH JA
GINNANE AJA:

Divadeus Pty Ltd (‘Divadeus’) carried on business under the name MakeSafe Security Solutions.[1] Divadeus provided security staff to clients, including tertiary education institutions, and the managers of apartment blocks. In the 2012–2013 year, it employed approximately 160 security staff. It conducted and operated its business activities from an office in Kilsyth. Mr David McNamara was its sole director and shareholder. Divadeus had three principal full time employees.
[1]Divadeus was incorporated in September 2011 for the purpose of acquiring a security business that had been conducted by MakeSafe Security Solutions Pty Ltd. Divadeus trades under the name ‘MakeSafe Security Solutions’ which is a registered business name.

The Kilsyth office included a retail show room, five offices, an equipment room, a kitchen and toilet. One of the offices was used as a control room and housed computer equipment that was used for incident reporting and rostering purposes for all client sites and to log incident reports from client sites.

Divadeus earned nearly all of its income[2] by providing security personnel to clients. Its principal clients were Deakin University and Swinburne University of Technology, who accounted for half of its income.
[2]The trial judge found that the figure was ‘over 94%’.

The principal issue in this litigation and on this application for leave to appeal is Divadeus’ WorkCover classification or, to use the statutory term, WorkCover Industry Classification (‘WIC’) for the 2012/13 policy period. The classification determines the WorkCover premium payable by Divadeus for the WorkCover insurance that it was required to obtain under the AccidentCompensation (WorkCover Insurance) Act 1993 (‘the Act’).

The history of the proceeding

The applicant in this proceeding, the Victorian WorkCover Authority (‘VWA’), determined[3] that Divadeus’ WIC in accordance with the Act and WorkCover Insurance Premiums Order (No 20) 2012/2013 (‘the Premiums Order’) was ‘O77120 Investigation and Security Services’. The determination, dated 27 August 2013, stated:

The Employer purchased MakeSafe on 11 November 2011 from MakeSafe Security Solutions Pty Ltd (MakeSafe Predecessor) which held the WIC of O77120 Investigation and Security Services. As it was determined that MakeSafe was a new entity and there was no relationship of control between MakeSafe and MakeSafe Predecessor succession was not applicable.
On 8 January 2013 approximately 14 months after MakeSafe began trading the Employer submitted a request for review of their classification to CGU.
On 7 March 2013 CGU notified the Employer [that] the current WIC O77120 Investigation and Security Services was applicable to the predominant activity carried on at the workplace.
Further correspondence occurred between the Employer and CGU through to June 2013, with the ultimate decision being to maintain the current WIC O77120 Investigation and Security Services on the basis that MakeSafe does not meet the definition of labour hire as it is contained in the Accident Compensation (WorkCover Insurance) Act 1993 Premiums Order (No 20) 2012/13 in that labour is provided to perform a service or specific task.

[3]In a written determination dated 27 August 2013.

Divadeus requested a review of the determination, submitting that the WIC applicable to the MakeSafe workplace was N72120 Labour Hire Services as all MakeSafe staff (with the exception of administration support staff), were on-hired and supervised by the clients and not MakeSafe. The review rejected that submission and determined that ‘given MakeSafe is providing a service and specified task not solely labour, the WIC of N72120 Labour Hire Services is not appropriate’.

Divadeus contended that the VWA determination was erroneous and that the most appropriate WIC was:

(a) for its Kilsyth office ‘N72120 Labour hire’; and
(b)for the imputed workplaces at the sites occupied by its clients, the predominant activity of the client at each site.

Imputed workplaces are the clients’ workplaces where labour hire employees work.

Divadeus’ appeal, which was an appeal de novo under s 36J of the Act,[4] was heard by a judge of the Trial Division, who allowed the appeal.
[4]United Petroleum Pty Ltd v Victorian WorkCover Authority [2011] VSC 570.

The judge found that Divadeus provided labour pursuant to a labour hire arrangement and that the imputed workplace of those staff members was the workplace of the particular client to which they had been supplied, for example, at Deakin and Swinburne Universities.

The judge concluded that Divadeus was supplying the labour of its workers to its clients and that Divadeus’ supply of labour did not fall within any of the exclusions contained in the definitions of ‘labour hire’.

The judge ordered that:

…
2.The Court declares that the premiums payable by [Divadeus] in relation to the 2012/2013 premium year in respect of employees who work at imputed workplaces occupied by [Divadeus’] clients, are to be assessed on the basis that the industry classification applicable to each of those imputed workplaces is that which most closely corresponds to the predominant activity of the particular client;
3.The question of the correct workplace industry classification of each of [Divadeus’] imputed workplaces pursuant to Order 2 … is remitted to [the VWA] for determination.
4.The Court declares that workplace industry classification of each of [Divadeus’] predominant activity at Unit 11/114 Canterbury Road, Kilsyth in the 2012/2013 premium period was “O77120 Investigations and Security Services”.
…

The VWA seeks leave to appeal against the judge’s decision.

VWA’s proposed appeal grounds

The VWA relied on three proposed appeal grounds.[5] First, that the judge erred in the interpretation and application of the term ‘labour hire’ in the Premiums Order and in finding that the security services provided by Divadeus to clients constituted ‘labour hire’ within the definition of that term. Secondly, that the judge erred in accepting and relying on the oral evidence of Mr McNamara, who had been the sole director and shareholder of the business of MakeSafe Security Solutions for five years prior to its acquisition by Divadeus, as to the operation and manner in which Divadeus provided services to its clients, and in circumstances where Mr McNamara’s evidence was inconsistent, unsupported and outweighed by other evidence. Thirdly, that the judge denied the VWA procedural fairness by preventing the tender of statements in pre-contractual tender documents in connection with the Holmesglen TAFE and Deakin University contracts, together with material from Divadeus’ website, and cross-examination of Mr McNamara about those matters.
[5]Proposed grounds one, two and four. The original proposed third ground of appeal was not pursued.

The Premiums Order and the classification system

In the 2012/2013 year, Premiums Order (No 20) 2012/13 made under the Act applied to Victorian workplaces.

A WIC contained in the Premiums Order was assigned to a workplace based on the predominant activity carried on at that particular workplace.[6] A determination was made under schedule 4 to identify the WIC with which that predominant activity corresponded or most closely corresponded. Item 7 of schedule 1 provided:
[6]In accordance with item 3 of Schedule 1.

(1)The industry classification of a workplace is the WorkCover industry classification ... to which the predominant activity at that workplace corresponds or most closely corresponds.
(2)For the purposes of determining the industry classification in accordance with sub-item (1):
(a)regard must be had to the introduction to, and all relevant elements of, schedule 4;
(b)consideration must be given to the industrial characteristics of the predominant activity without regard to the risk of injury associated with the predominant activity or with any of the occupations of or functions performed by workers engaged in operations at the workplace; and
(c)the predominant activity at a workplace does not correspond or most closely correspond to a WorkCover industry classification if workplaces predominantly engaged in that activity are expressly excluded from that classification in any of the elements of schedule 4.

Premiums are assessed in respect of each workplace of the employer. Item 2(1) of Schedule 1 of the Premiums Order defined a ‘workplace’ in relation to an employer to mean:

(a)an area … of land in Victoria occupied by the employer where workers employed by the employer work … (actual workplace); and
(b)… an area … of land in Victoria occupied by a labour hire client of the employer where workers employed by the employer work … (imputed workplace).

The effect of Item 2 of Schedule 1 is that both actual workplaces and imputed workplaces could be workplaces in relation to Divadeus. If a labour hire arrangement existed, the workplaces occupied by labour hire clients were deemed to be the workplaces of Divadeus for the purpose of calculating the premium.

Predominant activity was defined in item 3(1) as follows:

(a)Predominant activity, in relation to a period of coverage at an actual workplace of an employer, means the activity of the employer which during that period contributes, or is likely to contribute, more than any other activity of the employer to the value of goods and/or services produced or provided by operations carried on in that workplace.
(b)Predominant activity, in relation to a period of coverage at an imputed workplace, means the activity of the labour hire client which during that period contributes, or is likely to contribute, more than any other activity of the client to the value of goods and/or services produced or provided by operations carried on in that workplace.

The VWA determination of 27 August 2013 followed four steps in order to determine the predominant activity of the workers’ workplace.[7] First, the identification of the goods and services produced or provided by operations in a workplace. Secondly, the identification of the value of those goods and services. Thirdly, the identification of a causal link between the activities of the employer and the value of the goods and services. Fourthly, the identification of which of those activities contributed, or was likely to contribute, more than any other activity to the value of the goods or services.
[7]The four steps were taken from the judgment in Emu (Aus) Pty Ltd v Victorian WorkCover Authority [2012] VSC 610.

The VWA contends that Divadeus’ predominant activities at the workplaces where its employees worked corresponded with the WIC ‘Investigation and Security Services’ while Divadeus contended that the WIC was ‘Labour Hire Services’.

The provisions of the Premiums Order that deal with labour hire commenced with the following definitions contained in cl 4(2):

labour hire, in relation to an employer, means the supply, whether directly or indirectly, of the labour of one or more workers employed by the employer, not being a supply of labour determined by the Authority to be a supply of labour in connection with:
(a)       the performance by the employer of a specified task;
(b)       the discharge by the employer of a specified function; or
(c)       the achievement by the employer of a specified outcome;
labour hire arrangement, in relation to an employer, means an arrangement, whether oral or in writing and whether formal or informal, for labour hire;
labour hire client, in relation to an employer, means a person at whose workplace (or, if the person is not an employer, a place that would be a workplace of the person if the person was an employer) a worker provided by the employer under a labour hire arrangement works, whether or not the person is a party to a labour hire arrangement with the employer;

Schedule 4 of the Premiums Order contained industry classifications, which were organised into divisions, subdivisions and specific titles. Two of those classifications are relevant to this application. First, the industry classification N72120 Labour Hire Services, which was contained in ‘Division N: Administrative and Support Services’. The introduction to that Division provided:

1.The Administrative and Support Services Division includes workplaces predominantly engaged in performing routine support activities for the day-to-day operations of arm’s length entities and for domestic (or personal) use on a contract or fee basis.
2.Workplaces providing administrative services are predominantly engaged in activities such as:
a)        office administration;
b)        hiring and placing personnel;
c)        preparing documents;
d)        taking orders for clients by telephone;
e)        providing credit reporting or collecting services; and
f)        arranging travel and travel tours.

The introduction to that Division contained the following statement:

Classification Issue: Labour hire services
Issue
Some employers are predominantly engaged in labour hire, that is supplying workers to labour hire clients. A labour hire client (and labour hire) in relation to an employer are defined in Part 1, clause 4 of the Premiums Order. Employers predominantly engaged in supplying labour hire will generally have an actual workplace (pursuant to item 2(1)(a) of schedule 1) from which the labour hire business is administered and imputed workplaces (pursuant to item 2(1)(b) of schedule 1) that are classified according to the predominant activity of the place where workers of the employer work. This raises the question of the correct classification of these workplaces.
Rule
The employer’s actual workplace, that is predominantly engaged in administering the labour hire business, will be classified in this Division.
The employer’s imputed workplaces, where the workers of the employer work, will be classified according to the predominant activity at the imputed workplace.

The other relevant industry classification was O77120 Investigation and Security Services as contained within ‘Division O: Public Safety and Administration’. The introduction to that Division provided:

1.The Public Administration and Safety Division includes workplaces predominantly engaged in ... providing physical, social, economic and general public safety and security services …
2....
3.Physical, social, economic and general public safety and security services, and enforcement activities, include:
a)        police services;
b)        investigation and security services;
c)        fire protection and other emergency services;
d)        correctional and detention services;
e)        regulatory services;
f)        border control; and
g)        other public order and safety services.

O77120 Investigation and Security Services was within ‘Subdivision 77 — Public Order, Safety and Regulatory Services’ (within Division O) and is defined as follows:

This class consists of workplaces predominantly engaged in investigation (except police or insurance investigation) and security services (except police).
Activities
Alarm monitoring service  Locksmith service
Armoured car service  Night watchman service
Body guard service  Protection service
Burglary protection service  Security alarm monitoring or
response service

Detective agency service Security guard service
Enquiry agency service
Investigation service (except police or
insurance investigation)

Trial judge’s reasons

The judge made the following findings of fact that were not disputed on appeal. Divadeus employed a pool of around 160 security officers who were supplied to clients. In any given week about 120–130 employees were so employed. They were paid an hourly rate and submitted their timesheets to Divadeus. It also employed supervisors, who oversaw the work of the security officers at workplaces where more than five of Divadeus’ security officers, including the supervisor, worked. The supervisors employed by Divadeus were subject in turn to direction by the respective clients.

The judge concluded that the staff members provided by Divadeus were supplied pursuant to a labour hire arrangement and that their imputed workplace was the particular client’s workplace.

The judge stated that when an employer outsourced its need for employees to an external contractor, it would be expected that the insurance premium payable would be calculated by reference to the activities of the outsourcing employer. This was because the premiums order could not ‘be intended to operate entirely divorced from the reality of the particular workplaces’.[8]
[8]Divadeus Pty Ltd v Victorian WorkCover Authority [2014] VSC 578 [131] (‘Reasons’).

The judge considered that the three subparagraphs of exclusions contained in the definition of ‘labour hire’ should ‘be generally read together’.[9] The definition’s purpose was to distinguish the supply of labour in a general sense from labour hire, the defined term.[10] The judge noted that the term ‘labour hire’ was defined broadly.[11]
[9]Ibid [133].
[10]Ibid [134].
[11]Ibid [129].

The judge said of the purpose of the exclusions from the definition of labour hire:

In my view, the purpose of excluding labour supplied for ‘specified’ tasks, functions and outcomes is to exclude labour supply relationships that are in truth transactions between businesses. Businesses will always seek specified tasks, functions or outcomes from employees. The relevant question is whether they do so by seeking [that] another company achieve it, or they do so by seeking, in effect, employees who they then direct to complete those tasks, functions or outcomes. Where one business (‘the first business’) seeks to complete that task by obtaining the service of another business (‘the second business’), who in turn supplies that service by supplying the labour of the second business’ employees to provide that service, and the second business directs the conduct of the employees in order to supply that service, the parties are not in a labour hire relationship. On the other hand, where the first business seeks to complete that task by obtaining labour from the second business, which in turn merely supplies that labour by supplying employees, and the first business directs the conduct of the employees, the parties are in a labour hire relationship.[12]

[12]Ibid [132].

The judge therefore placed considerable importance on the source of the directions given to the Divadeus employees at the clients’ workplaces. The judge said that:

The effect of that arrangement is that the labour supplied by Divadeus, being the security guards and supervisors, work under the direction and control of the particular clients, not of Divadeus. To use a practical example, if a client wishes for a security guard to be posted to a particular site at a particular time — say, to deal with unrest in the university library — the client does not contract with Divadeus to provide a security guard to deal with that particular issue. Rather, the client, which has already contracted for the labour of a trained, qualified security guard, simply directs the security guard to attend the library and resolve the issue. That the particular direction happens through the intermediary of a Divadeus‑supplied supervisor does not change the characterisation.[13]

[13]Ibid [135].

The judge stated that Divadeus’ supply of security services, such as the provision of a control room, to particular clients was not relevant to whether security guards were provided pursuant to a labour hire arrangement, but was relevant to the determination of Divadeus’ predominant activities.[14]
[14]Ibid [137].

The judge expressed ‘some difficulty’ with the VWA’s predominant reliance on Divadeus’ contracts with its clients for the purpose of challenging Mr McNamara’s evidence of the relationship between Divadeus and its clients. The judge described Mr McNamara as a reliable witness.[15] Her Honour stated:

The question, in determining whether the labour supplied falls into the relevant exclusions, concerns the labour actually supplied pursuant to an arrangement ‘whether oral or in writing and whether formal or informal’. The terms of the contract may assist the evidence, but the better evidence is what Mr McNamara says occurs, and if they had been called, what the security staff and the clients would have said occurred. If a party agrees to supply labour in one fashion, but actually supplies it in another, it is the arrangement under which it is actually supplied that will determine whether the labour supplied constitutes labour hire.[16]

[15]Ibid [140].

[16]Ibid [138].

The judge returned to the question of who directed Divadeus’ staff at clients’ workplaces in the following passage:

In that context, I consider it would be artificial to characterise the labour supplied by Divadeus within any of the three exceptions to the definition. To the extent that the security guards and supervisors are required to perform specific tasks, they do so at the direction of the clients and not at the direction of Divadeus.
…
While it is true to say that the security guards are supplied, in a general sense, for the specified purpose of providing security services, the ‘who, where, when, why and how’ of the practical operation of those security services on a day‑to‑day basis are not specified in the sense intended by the exclusions to the definition.[17]

[17]Ibid [142].

The judge referred to terms of particular client contracts which gave the client the final say as to the allocation of tasks for the Divadeus security staff.[18]
[18]Ibid [140].

The judge considered the evidence of the direction and control at Divadeus’ clients’ workplaces collectively, rather than individually:

because Mr McNamara’s evidence was broadly the same in relation to the direction and control exercised by Divadeus over security guards supplied to each client, and no relevant differences were elicited in cross-examination or extracted in submissions. The only security staff for which it was unclear whether they had been supplied to perform specified tasks were the MICM Property staff.[19]

[19]Ibid [145].

The judge reached a different conclusion with respect to the Kilsyth workplace and determined that its predominant activity was the activities of Divadeus’ security staff and that the Investigation and Security Services WIC most closely corresponded to the activities undertaken by the security staff working at those premises. The VWA does not seek to disturb that conclusion.

The Divadeus client contracts

To consider the first and second proposed grounds of appeal, the important provisions of Divadeus’ contracts with its clients must be described.

Deakin University contract

The Divadeus-Deakin University contract contained the following recital:

Deakin University requires Security Services in and about its premises on the Melbourne Campus at Burwood (including Elgar Road), Geelong Campus at Waurn Ponds, Geelong Waterfront Campus and Warrnambool Campus and has requested the Contractor to perform the work. And whereas the Contractor has agreed to perform the work in accordance with the terms and conditions of this agreement. The scope of works is set out in Schedules attached and form part of this agreement.

The term ‘Security Services’ was defined as:

The provision of Security Officers for University properties and services as described in Schedule 1.

Under the contract, Divadeus supplied a Security Client Services Manager, who was to ensure that security services were provided in accordance with the specifications of the contract. Divadeus also supplied a security supervisor, senior security officers and security officers.

Deakin University employed a Securities Manager and a Contracts Manager, who were part of its Facilities Management Services Division.

Clause 2 of the Deakin University contract was headed ‘Hours, Frequencies and Standards of Security’. Clause 2.1 was headed, ‘All Facilities’, and stated:

The Contractor shall provide 24‑hour Security Services 365 days per year at all campuses according to Schedule 1.

Schedule 1 was headed, ‘Scope of work’ and its cl 1 was headed, ‘General Obligations’. Clause 1.1 stated:

The Contractor and its staff shall be responsible for the following duties.

Twenty‑seven duties were listed. They included: the protection of life and the preservation of good order; first response emergency and after hours maintenance contact; investigation of fire alarms; investigation and reporting of security incidents or unlawful activity on campus within the agreed time frame; foot patrols of the campus buildings and grounds in accordance with documented procedures and the SOPs;[20] securing and unlocking of buildings; liaising with police and other emergency services and responding to emergency situations, assisting emergency personnel as directed; crowd control duties as required; traffic control duties that included the issuing of parking infringement notices; issuing and distributing keys and access cards; and complying with the university’s instructions and procedures to the satisfaction of the Security Manager.
[20]The acronym ‘SOPs’ meant the Standard Operating Procedures.

Clause 7 of the contract was headed ‘Contractor’s Engaged Employee(s)’ and relevantly provided:

The Contracts Manager, Facilities Management Services Division retains complete discretion over persons who may enter the premises at any time. If any person engaged by the Contractor, who in the reasonable opinion of the Contracts Manager, Facilities Management Services Division, may be guilty of misconduct on or in the vicinity of the premises and/or is deemed to be unsuitable either to carry out the contract or because that person represents an unacceptable risk to staff and students on the premises, then the Contracts Manager, Facilities Management Services Division, may:
7.1.1Require the Contractor forthwith to cease to engage such person in connection with the contract by providing written notice to the Contractor;
7.1.2Direct the Contractor to remove that person from the premises, and
7.1.3If necessary, remove or cause such person to be removed from the premises, and
…
7.4 The Contractor shall be responsible for the good and proper conduct of the persons engaged by the Contractor whilst carrying out security services. When the Contractor’s Manager/Supervisor is not personally in charge of the Security Services of the University, the Contractor shall ensure that a responsible representative is at all times supervising the Security Services on all campuses.

‘Security Supervisor’ meant the person engaged by the Contractor to supervise all day to day Security Services on all campuses on a full time basis. Clause 4 of Schedule 1 was headed ‘Supervision’ and relevantly provided:

4.1 Security Supervisor
4.2The Contractor shall employ a full‑time (minimum 38 hour week) Security Supervisor for the duration of this Contract.
4.3Typical duties of the Security Supervisor are as follows:
4.3.1Supervising the day‑to‑day Security Services on each campus to ensure continued customer and client satisfaction.

There was a range of other duties listed, including:

4.3.20The Security Supervisor is not limited to the above duties and may be required to perform other duties when requested by the Security Manager, Facilities Management Services Division.

The Schedule contained statements of duties for the senior security officers and the security officers. Clause 2 of the Schedule stated:

The Contractor must ensure that the Contractor’s personnel comply with the Deakin University Security Standards and Services. These standards and services are a directory of the works to be undertaken and shall be used as a guide for the contractor’s staff to follow when performing their duties. The Standards are a living document and may change to reflect current practices. Any changes will be notified in writing by the Security Manager.

The Deakin University Security Services and Standards dealt with many matters of University security procedures, including the operation of security alarms and procedures for hazardous or sensitive areas. They contained a number of ‘running sheets’ for security staff working at particular University premises. These listed the duties of Security Officers who worked at various locations. For example, the ‘Burwood [Security] Officer’ who worked on the day shift between 0630 and 1830 Monday to Friday had detailed tasks to perform. The Officer would sign on and read and sign memos and diaries and check for ‘isolations’. The Officer would then check emails and room bookings and raise the flag at sunrise. The Officer would unlock doors in 10 buildings and check that all common area zones were disarmed and ensure that all passage lights were switched on in buildings for staff convenience and check ‘FIP panels’ to see if any de‑isolations had been overlooked. Another officer at the Burwood campus had duties to perform in the car parks.

Swinburne University

The Swinburne University of Technology contract recited that Divadeus had agreed to provide ‘the Services’ in accordance with the terms and conditions of the Agreement. The contract applied to five sites. The Services were listed in a Specification in a Schedule to the contract. The Specification obliged Divadeus to comply with the terms and conditions of the Agreement, including the Specifications. The Scope of Works was stated in the contract in the following terms:

The Contractor and its Security Officers, together with the University staff, will provide a high quality comprehensive security service for University premises, staff, students, visitors and common areas under the control of the University. The service will primarily comprise, but is not limited to, an onsite security presence providing continuous patrols during campus operating times as stated herein, together with mobile (vehicle) patrol security service able to respond to any alarm/assistance required calls occurring outside campus operating hours and where no security staff are on duty at the site. Security will be the primary management point for emergency situations in accordance with relevant emergency management policies and procedures. Security may also be required with general duties to ensure the efficient operation of the University.

The Specifications listed 39 categories of ‘core duties’ for Security Officers, covering everything from conducting random foot and vehicular patrol of University premises, to rendering first aid and maintaining the lost property register.

Swinburne maintained information manuals for security officers working at particular campuses. For example, the manual for the Lilydale campus contained a three‑page, 29‑paragraph list of the doors that the day shifts were to unlock commencing at 0630 hours, and also a list of ‘lock up’ duties for the afternoon and night shifts.

Divadeus was obliged to provide a Security Supervisor, who supervised the day‑to‑day work of all officers on all Swinburne campuses. However, security officers were obliged to comply with the University’s Instructions and procedures to the satisfaction of the Swinburne Responsible Officer. Divadeus was to provide a dedicated Client Contract Manager who was to liaise with the Swinburne Responsible Officer.

Divadeus was to provide a control room that operated 24 hours per day, 7 days per week and which could communicate with the Security Officers on all Swinburne University campuses at all times.

Divadeus and Swinburne prepared standard operating procedures for the work of Divadeus’ security officers at Swinburne University. They set out the actions the security officers were to take and the procedures that they were to follow in particular circumstances, for example, if a building had to be evacuated. They provided for the logging of incident reports and listed other requirements, for example, that staff carry identification cards and licences.

MICM Property contract

Divadeus provided security services under contract to about 25 residential apartment buildings managed by Melbourne Inner City Management (trading as MICM Property). An unexecuted contract between MICM and Divadeus was in evidence. Under the title ’Background’, it stated:

b.MICM and the Contractor agree that the Contractor will be responsible for providing Security Services for the Owners Corporation covered under the Agreement managed by MICM for the period of 2 years subject to the terms and conditions of this Agreement.

Clause 3.5 of the contract provided:

Communication
Where possible, the Contractor will liaise with the Building Managers, Concierge and Caretakers of each site prior to entry to the premises. The Contractor shall appoint a competent person to be responsible for the day to day performance of the Services and who will liaise with the Manager on all matters including Performance Measure reporting as specified herein.

The contract contained Service Delivery Specifications which commenced with the words:

The following describes the services to be provided for the buildings that are the subject of this specification.

Divadeus’ staff were to be ‘an on‑going security presence and [provide] regular external and internal patrols of MICM Buildings or Complexes’. Static duties were to be outlined for each site and included ‘maintaining an obvious uniformed presence at predetermined positions’. Divadeus agreed to supply regular external mobile patrols during the evening to owner corporation premises, respond to security alarm events and implement and maintain an After Hours Security and Maintenance response centre. These services were to be provided by static guards and site patrols, mobile patrols and by staff responding to alarms.

Mr McNamara in an affidavit[21] listed many services required of Divadeus’ employees allocated to MICM Properties. An example of the employees performing static duty was maintaining ‘an obvious uniform presence at predetermined positions’. An example of the duties of mobile patrols at a remote site was ‘check[ing] podium facilities and car park areas for good order and conduct.’ These duties were often combined with general ‘concierge’ duties, with Divadeus’ employees staffing enquiry desks, which were often located in the foyer of the building.
[21]Affidavit of David McNamara, dated 10 October 2014, [11].

Box Hill Institute contract

Under the Box Hill Institute contract, Divadeus was obliged to provide services being the provision of security guards. The schedule set out the guards’ obligations and Divadeus’ obligation to provide a motor vehicle for the guards to use and to respond to alarms.

Holmesglen TAFE contract

Divadeus’ contract with Holmesglen TAFE was 53 pages in length and referred to definitions contained in ‘Section C (Part A) Standard Conditions of Contract’. The standard conditions of the contract required Divadeus to provide sufficient staff to carry out its contractual obligations. All Divadeus staff were required to receive training from the Holmesglen TAFE security officer at Divadeus’ expense.

Divadeus was obliged to appoint a Contract Manager, to conduct monthly inspections of sites, meet with Holmesglen TAFE representatives on a monthly basis to monitor the performance of the contract and discuss any issues pertaining to the contract and to consult with Holmesglen TAFE to ensure the contract and efficient provision of the work in accordance with the contract. The contract required Divadeus to enter into a performance bond in favour of Holmesglen TAFE on which it could draw if it terminated or purported to terminate the contract to meet any costs incurred directly or indirectly as a result of the termination.

Freshwater Place Residential Apartments contract

Under the terms of the Freshwater Place contract, Divadeus was required to provide two guards between 11:00 pm to 7:00 am, 7 days a week including public holidays at the Freshwater Place residential apartments. There were two concierge desks that were required to be staffed. The guards were considered ‘part of the concierge team and therefore expected to carry out similar duties and have the same responsibilities’ and report to the Concierge Supervisor.

John Holland Pty Ltd contract

The John Holland contract required the provision of security staff for the John Holland project offices and sites at the Mitcham Rail Project. The contract listed the sites requiring services, which included the provision of security officers on nightshifts. The contract required Divadeus to ensure that security personnel ‘comply with [the] MRRA representative directions when they are on site’.

Mr McNamara’s evidence

In the first of his three affidavits, Mr McNamara stated that the duties performed by the Divadeus staff and the manner in which they ‘conduct those duties are as determined by the third party itself’.[22] He stated in his second affidavit that Divadeus did not supervise the day to day work of the security officers or the supervisors and that the client through the client’s security manager supervised this work.[23] He stated that Divadeus’ security officers reported directly to its supervisor on site except in the case of some very small clients where there was no security supervisor on site. The security supervisor in turn reported to the client’s security manager.[24] Most clients prepared and provided Standard Operating Procedures. The security officers supplied by Divadeus were required to follow those procedures.[25]
[22]Affidavit of David McNamara, dated 21 October 2013, [7].
[23]Affidavit of David McNamara, dated 20 December 2013, [46].
[24]Affidavit of David McNamara, dated 20 December 2013, [49].
[25]Ibid [51].

The effect of Mr McNamara’s evidence in cross-examination was that the security services provided by Divadeus were not provided in accordance with the exact terms of the contracts with clients.[26] He said that there was no day-to-day supervision of the staff by Divadeus and they received their ‘daily tasking from the client’.[27] For instance, he described his role under the Deakin University contract as ‘administrative control’ of the Divadeus employees for such matters as leave, sick leave, ongoing employment and rostering, while the client had ‘functional control’ for the ‘daily tasks of the guards on the ground’.[28] He said that the only time that the contract was referred to was in the case of a dispute with a client.[29]
[26]Transcript of Proceedings, Divadeus Pty Ltd v Victorian WorkCover Authority (Supreme Court, S CI 2013 05521, McMillan J, 10 November 2014) 62.
[27]Ibid 61–2.
[28]Ibid 65.
[29]Ibid 72.

Onus of proof

During the hearing of the application, the Court raised issues concerning the onus of proof of the matters in subparagraphs (a), (b) and (c) of the definition of ‘labour hire’. Pursuant to leave, the parties made written submissions about that issue and the issue of where the onus of proof lay in an appeal de novo under s 36J of the Act. These issues were not argued before the judge and understandably the judge’s reasons do not refer to them. We will first consider the question of where the onus of proof lay in respect of the appeal before the judge. We will deal with the issue of the onus of proof in respect of subparagraphs (a)–(c) when dealing with the first proposed ground of appeal.

The VWA submitted that on an appeal brought pursuant to s 36J of the Act, an insured who objected to the determination of an industry classification bore the onus of establishing that another activity and classification contributed or was likely to contribute more than the assigned classification to the value of goods or services provided or produced by the insured from the operations carried on in the workplace.

Divadeus submitted that because the appeal was de novo, the Court had to consider for itself, against the objections raised by the VWA, whether, on the materials before the Court, the decision appealed from was ‘the correct or preferable one’.[30]
[30]McDonald v Guardianship and Administration Board [1993] 1 VR 521, 533.

Sections 36J and 36K of the Act relevantly state:

36J Appeals
(1)Despite anything to the contrary in section 39(1) of the Accident Compensation Act 1985, if an employer—

(a) is not satisfied with a determination made by the Authority under section 36F (including a deemed determination under section 36I); or

(b) has received notice that the Authority has decided not to conduct a review under section 36B—

the employer may appeal against that determination or decision to the Supreme Court.

...
36K Hearing of appeal by Supreme Court
(1)On the hearing of an appeal by the Supreme Court, the Court may make any order it thinks fit and may by order confirm, reduce, increase or vary the premium.
(2)The costs of an appeal are in the discretion of the Supreme Court.

Existing authority suggests that s 36J provides an appeal de novo.[31] Generally, in an appeal de novo, the Court hearing the appeal starts afresh.[32] All issues must be retried and the party succeeding below enjoys no advantage, and must, if it can, win the case a second time.[33] However, the onus of proof in an appeal de novo may depend upon the issue for determination by the Court. In Phillips v The Commonwealth, which concerned an appeal to the County Court from a determination of the Commissioner for Commonwealth Employees’ Compensation, Kitto, Taylor and Owen JJ stated:

The appeal to the County Court was brought pursuant to s. 20 (1) of the Act which provides that: "Any person affected by any determination or action of the Commissioner under this Act may appeal to a County Court against the determination or action and the Court shall have jurisdiction to hear and determine the appeal, and such appeal may be in the nature of a re-hearing". The use of the word ”may” in the concluding words of the sub-section is somewhat curious but it is clear enough that the form of proceeding for which the sub-section provides is not an appeal in the strict sense at all. What the section does is to provide for the judicial review of administrative decisions of a particular character and upon any such review it is, we think, for the Court to pronounce anew upon the rights of the parties as disclosed by the evidence before it. That being so the application of the ordinary principles relating to the determination of disputed questions of fact by judicial tribunals requires the conclusion that if a claim for compensation be rejected by the Commissioner or his delegate the onus of proving the necessary facts to entitle the applicant to what is virtually an award of compensation will be upon the claimant in later proceedings before the County Court. Likewise, the application of the same principles may well mean that in some cases the onus of proving critical facts may rest upon the Commonwealth. Such a case would be where the Commissioner has purported to terminate an employee’s right to compensation under an antecedently existing determination by reason of a material change of circumstances.[34]

[31]United Petroleum Pty Ltd v Victorian WorkCover Authority [2011] VSC 570.

[32]See, eg, Quick v Creanor [2015] VSCA 273, [19]–[20] regarding appeals against convictions and sentences from the Magistrates’ Court to the County Court; Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616, 621.

[33]Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281, 297–8.

[34](1964) 110 CLR 347, 350. Cf Traut v Faustmann Bros Pty Ltd (1983) 77 FLR 98.

The VWA submitted that it had been decided by this Court in Victorian WorkCover Authority v IR Cootes Pty Ltd[35] that, where an insured objects to an industry classification, the onus in an appeal under s 36J lies on that insured to establish that a different classification should apply. That authority was cited for such a proposition in Emu (Aus) Pty Ltd v Victorian WorkCover Authority.[36] However, as Divadeus submitted, the decision in IR Cootes concerned an appeal from a County Court judgment on a claim for moneys had and received after the payment of premium under protest. Section 36J was not introduced into the Act until 2010. Moreover, the passage cited in the judgment of Charles JA concerned the onus of proof in a review, for which the relevant premiums order provided, by the VWA of a determination made by an authorised insurer. The case is therefore not authority for the proposition that an insured bears the onus in an appeal under s 36J of proving that the determination under appeal was in error.
[35][2001] VSCA 85 [81] (‘IR Cootes’).
[36][2012] VSC 610 [16].

In our view, as explained in the extract from the judgment in Phillips set out above, the Court in an appeal under s 36J is required to ‘pronounce anew’ upon the question of the proper determination ‘as disclosed by the evidence before it’. In doing so, the onus of proving the necessary facts to establish that an insured falls within a particular industry classification will lie on the party seeking to establish that the classification in question is the correct one for that insured.

We next consider, in turn, each of the proposed grounds of appeal.

The first proposed ground of appeal — the judge’s finding that the security services provided by Divadeus to clients constituted ‘labour hire’ as defined

The VWA’s submissions

The VWA submitted that Divadeus provided security services to its clients, not labour hire services and that its security guards did not work at imputed workplaces, being the clients’ premises, rather, their workplace was to be taken to be the Kilsyth premises.

The VWA relied on the exclusions contained in subparagraphs (a) and (b), but not (c) of the definition of ‘labour hire’.

The VWA contended that the judge erred by reading the three exclusions to the definition of ‘labour hire’ collectively, whereas each exclusion was, by the use of the word ‘or’ between exclusion (b) and (c), to be considered separately. On this interpretation, the judge should have concluded that Divadeus’ supply of labour to clients was ‘in connection with’ the performance of a specified task, being the carrying out of security services or the discharge of a specified function, being the function of providing security services at the clients’ premises.

Secondly, the VWA contended that the judge erred by applying the definition of labour hire to workers, whereas the terms of the Premiums Order required that it be applied to the employer.

Thirdly, the judge erred by failing to give proper consideration and weight to the words ‘in connection with’ that form part of the definition of labour hire and are words of wide connotation.[37] The judge separated and examined in isolation one activity, the provision of labour, from a suite of activities that together were supplied to Divadeus’ clients pursuant to a contract for the provision of services.
[37]Our Town FM Pty Ltd v Australian Broadcasting Tribunal (1987) 16 FCR 465, 479.

Fourthly, the judge erred by stating that the term ‘specified’, that formed part of the definition of ‘labour hire’, incorporated a requirement that services be specified on a ‘day‑to‑day basis’, or be specified for a ‘particular site at a particular time’. Alternatively, the judge erred by concluding that the arrangements between the parties did not specify the task or function with the degree of specificity required by the exclusions from the definition of ‘labour hire’.

Fifthly, the judge erred by construing the definition of ‘labour hire’ in a context of assumptions or expectations about the work performed which lacked a factual basis. These assumptions or expectations included the risks faced by workers at the clients’ workplaces and how WorkCover insurance premiums ought to be calculated, for example, on the basis of the host’s workplace activity.

Sixthly, the judge erred by using the issue of who ‘directed’ or ‘controlled’ the workers’ activities in determining whether Divadeus’ provision of security guards to its clients was labour hire. That approach was contrary to the requirements of the statutory test for ‘labour hire’.

The VWA’s eight points

The VWA referred to a number of features of the Divadeus-Deakin University contract to support its contention that the workers’ labour was not provided under a labour hire arrangement. The VWA contended that these eight features demonstrated an arrangement under which Divadeus agreed to supply labour in connection with its performance of a specified task, or its discharge of a specified function.

The first feature was that Divadeus’ security workers worked under the direction of a Divadeus supervisor, although the supervisor may have received instructions from the client’s Security Manager. The contract provided for Divadeus, itself, to provide a supervisor to supervise the day-to-day work of the security officers. The VWA contended that this factor was relevant, but not determinative of whether the supply of labour was ‘labour hire’. It was not clear cut, but tended towards a non‑labour hire arrangement.

Secondly, Divadeus, as well as providing workers, provided plant, equipment and other work‑related materials. It provided uniforms, vehicles, offices and equipment to be carried by the security guards. The cost of the equipment and the vehicles was factored into the price of the contract. The contracts did not just provide a price for labour, the price was for the performance of a specified function. Again this factor was relevant, although not determinative, but indicated a non-labour hire arrangement.

Thirdly, Divadeus provided systems of work, management systems and other non‑labour related services. For instance, Divadeus provided a control room and training to security officers at the clients’ workplaces. This was a relevant factor and supported the VWA’s case. Divadeus was doing more than just providing labour.

Fourthly, Mr McNamara prepared staff rosters for Divadeus’ employees, who were working at clients’ workplaces. This was indicative of a non-labour hire arrangement.

Fifthly, the clients could require Divadeus to provide additional security workers. If the client retained a discretion as to the number of workers that were to be supplied based on its own assessment of the number of workers that it might need, then it was more likely to be a labour hire arrangement. If the employer determined the number of workers required, it was more likely that the employer was performing a specified function. Here, the client, for example Deakin University, did retain a discretion to require additional services by way of additional officers. This factor was indicative of a labour hire arrangement.

Sixthly, if the contract did not include terms by which the employer’s fee was contingent upon the completion of work or the delivery of a result, the arrangement was more likely to be labour hire. Divadeus had agreed to discharge a specified function and if it did not discharge that function, its fee would be affected.

Seventhly, Divadeus indemnified the client for loss or damage arising out of any act or omission of its workers. In that situation, it was more likely that the employer had agreed to perform a specified task or function and that was indicative of a non-labour hire arrangement.

Eighthly, the hours of the security workers varied. If additional hours to those used to calculate the contract price were required, the client had to pay additional sums. This factor did not support either side’s position on whether a labour hire arrangement existed.

The VWA submitted that Divadeus bore the onus of proving that it came within the definition of ‘labour hire’ in circumstances where the VWA had determined that it did not. Subparagraphs (a), (b) or (c) of the definition were not exceptions, but provisions that narrowed the terms and application of the definition of ‘labour hire’. Even if the subparagraphs were exceptions to the operation of the definition, that definition amounted ‘to a statement of the complete factual situation that must be found to exist before anybody obtain[ed] a right or incur[red] a liability under the provision’ rather than a provision that laid ‘down some general principle of liability which it means to apply generally’ and then provided ‘for some special grounds of excuse, justification or exculpation depending upon new or additional facts’.[38] Consequently, Divadeus bore the onus of proving that the subparagraphs did not apply.
[38]Vines v Djordjevitch (1955) 91 CLR 512, 519.

Divadeus’ submissions

Divadeus submitted that it provided the labour of a specified number of security personnel to operate on a full‑time basis at its clients’ workplaces. The clients, and not Divadeus, directed the personnel in the performance of their work.

The judge correctly rejected the VWA’s argument that a contractual obligation for the ‘supply of security services’ was sufficient to characterise the work of providing those services as a ‘specified task’, or ‘specified function’, or ‘specified outcomes’ within the exclusions in the definition of ‘labour hire’. As the judge noted, this argument eviscerated the content of the definition of ‘labour hire’. Some specificity in the details of the work to be performed by the Divadeus staff supplied to clients was required in order to give the definition of ‘labour hire’ work to do. The judge did not wrongly apply assumptions or expectations about the risks faced by workers at the clients’ workplaces. Rather, the judge observed that the definition ‘cannot be intended to operate entirely divorced from the reality of the particular workplaces’.

Divadeus contended that the judge did not err in her reading of the three exclusions to the definition of ‘labour hire’ and had correctly concluded that they gained colour from each other.

But, in support of its notice of contention, Divadeus submitted that, if the judge’s construction was in error and each of the exclusions was to be considered separately, the same result would be achieved.

Divadeus disputed the VWA’s submission that the judge adopted a narrow construction of the word ‘specified’ in the definition of ‘labour hire’ and had applied the definition of ‘labour hire’ to the workers instead of to their employer. It disputed that the judge had failed to give weight and proper consideration to the words ‘in connection with’ which are contained in the definition of ‘labour hire’. Neither the Deakin University contract, nor other evidence, established that Divadeus was required to provide a ‘suite of security services’ to clients. Divadeus supplied no services other than the labour of the security officers and matters incidental to the supply of that labour.

Divadeus submitted that the Deakin University contract gave the University the day‑to‑day direction of the work performed by the Divadeus employees. The University provided systems of work management and had the final say about rostering, about the particular Divadeus employees that it would accept and the number of employees that it required. The University’s legal obligation to pay Divadeus was not a contingent obligation, save that Divadeus was obliged to perform work in accordance with the contract.

The VWA’s reliance on the eight features of the Divadeus supply of labour had the effect of substituting its own test for the definition of ‘labour hire’ contained in the Premiums Order. Divadeus submitted that, in any event, many of the features were of marginal significance because the overwhelming expenditure of Divadeus was directed to the payment of employees’ wages. What mattered most was that the clients had day-to-day power to direct those employees as to their work, including as to their rosters and hours of work.

The judge correctly identified the question to be answered in order to determine whether a labour hire arrangement existed. That question was whether the clients sought performance of a particular task by engaging Divadeus to achieve it, or sought the supply of labour from Divadeus to enable the client to achieve the task itself. The identification of who ‘directed’ or ‘controlled’ the workers’ activities was relevant in answering that question. If the employer had no day‑to‑day control over the employees, it could not be said that their labour was supplied in connection with an activity of the employer that was different from the supply of their labour.

Divadeus submitted that the VWA bore the onus of proof of establishing that the exclusions in (a) or (b) of the definition of ‘labour hire’ applied. The definition of ‘labour hire’ contained a primary class, being the direct or indirect supply of labour of one or more workers employed by the employer in question. The exceptions contained in subparagraphs (a), (b) and (c) defined the relevant activities of an employer that took the situation out of the primary class. Each of the exceptions constituted a new element which was quite separate from the primary class and required different circumstances to be established from those contained within the term ‘supply of labour’. It would be unusual to impose on a party the burden of proving a negative, particularly when the exceptions were ‘highly generally described’.

Consideration of submissions

The question which the appeal presents may be reduced to whether Divadeus supplied its employees’ labour in connection with an activity of Divadeus other than the supply of labour, being the performance of a specified task or the discharge of a specified function by Divadeus. In approaching that question, the word ‘or’ in the definition of labour hire shows that a supply of labour falls outside the definition if it is in connection with any one or more of the matters set out in paragraphs (a) to (c) of the definition.

The starting point is to consider what constitutes the ‘arrangement’ for the relevant supply of labour. It will be recalled that the definition of ‘labour hire arrangement’ provides that the ‘arrangement’ may be oral or in writing, formal or informal. We have concentrated on the arrangements between Divadeus and each of Deakin University and Swinburne University.[39] The arrangements between Divadeus and its clients are encapsulated in the formal written contracts. They govern the legal relationship between the parties and set out the obligations of Divadeus.
[39]Neither party suggested that materially different arrangements applied in respect of other Divadeus clients.

Once the arrangement for the supply of labour is identified, the question becomes whether that supply of labour is in connection with any of the matters in paragraphs (a) to (c) of the definition of ‘labour hire’.

There is nothing in the definition of ‘labour hire’ that demands that the obligation undertaken by Divadeus, beyond the supply of labour, be capable of description to a higher level of particularity than that contained in the contracts. In fact, less particularity may well suffice. The obligation need only be to perform a ‘specified’ task or to discharge a ‘specified’ function. The word ‘specified’ refers to something named or definitely mentioned or stated in detail.[40] The noun ‘task’ refers to a definite piece or pieces of work.[41] A ‘function’ is an activity proper or natural to a person, the purpose or intended role of a person; an office, duty, employment or calling.[42] Here, the requisite specification is set out in the contractual arrangements pursuant to which the labour was supplied. In the case of the Deakin University contract, clause 1.1 provided that Divadeus and its staff should be responsible for 27 listed duties, being security tasks or functions associated with security. The Swinburne University contract in a ‘Specification’ listed a ‘Scope of Works’, detailing a range of security services that Divadeus was obliged to provide.
[40]Susan Butler (ed), Macquarie Dictionary (6^th ed 2013), 1407, first meaning.
[41]Ibid 1503, first meaning.
[42]Shorter Oxford English Dictionary (Oxford University Press 6^th ed 2007) vol 1, 1056, first meaning.

It is evident that the obligations of Divadeus to its clients extended beyond the mere provision of suitable labour. Divadeus was obliged to provide security services as extensively provided for in the contracts. In requiring Divadeus to provide security services, and not merely to provide suitable labour to enable the client to have security-related work performed, the contracts specified tasks or functions within the meaning of paragraphs (a) and (b) of the definition of ‘labour hire’. And, as the definition requires, the contracts stipulated that the tasks or functions were to be performed or discharged by Divadeus.

Further, it was ‘in connection with’ that performance of tasks or discharge of functions that the labour in question was supplied. In that regard, the words ‘in connection with’ are words of wide import,[43] and depending on their context and purpose, can cover a wide variety of relationships.[44]
[43]Burswood Management Limited v Attorney-General (Cth) (1990) 23 FCR 144; Collector of Customs v Pozzolanic Enterprises Pty Ltd (1993) 43 FCR 280, 288–9.
[44]R v Khazaal (2012) 246 CLR 601, 613 [31].

As previously stated, the judge considered that the question to be determined was whether Divadeus’ clients sought to perform a particular task by engaging Divadeus to achieve it, or requested Divadeus to supply the labour and thereby allow the clients to perform the tasks or achieve them themselves. The judge also described other tests of general application. For instance, the judge, in the passage that we have previously set out, considered that where a business seeks to complete a task by obtaining labour from another business, which in turn merely supplies that labour by supplying employees, and the first business directs the conduct of the employees, the parties are in a labour hire relationship.[45] In some circumstances, for example where there is no formalised arrangement, that may be so. But, as we have said, the starting point is to ask what constitutes the arrangement for supply and here it was the contractual arrangements existing between Divadeus and its clients.
[45]Reasons [132].

In our view, how the contract is performed is not critical. In this regard, and with respect, we do not attach the same importance as the judge did to whether or not the security guards and supervisors were required to perform specific tasks at the direction of the clients or at the direction of Divadeus. That distinction is not determinative of the applicability of subparagraphs (a) and (b) of the definition of ‘labour hire’. We acknowledge that the Swinburne University contract stated that the ‘high quality comprehensive security service’ would be provided by ‘[Divadeus] and its Security Officers’, ‘together with University staff’. However, the joining of Divadeus and University staff in the provision of security services does not alter the fact that Divadeus’ staff were being supplied in connection with the performance of tasks or the discharge of functions by Divadeus.

The fact that its employees were subject to direction or control by the clients in undertaking the performance of the contracted services, and that such direction or control was regularly exercised by clients, does not detract from the existence of the obligation of Divadeus. It remained contractually bound to provide the services and could be sued for any failure to do so. It is not remarkable that the client would provide directions to staff supplied to perform tasks that their employer had agreed to perform or functions that their employer had agreed to discharge, particularly when Divadeus’ workers were located at the clients’ premises. In this regard, the tasks or functions of a Divadeus security officer were likely to vary depending upon the location of the work performed and the time of day or night when it was performed. A worker may perform a task or discharge a function of their employer even when those actions are subject to direction by someone other than their employer. In truth, the giving of directions to the Divadeus staff took place within a contractual framework under which Divadeus was at all times performing tasks or discharging functions for its clients.

We have not found it necessary to examine the matter by reference to the eight circumstances relied on by the VWA as a guide to the application of the definition of ‘labour hire’. It is therefore not necessary to express a concluded view as to the utility or correctness of such an approach. Care must however be taken, in having regard to any such set of indicators, that sight is not lost of the controlling definition. The eight circumstances relied on by the VWA are matters that might be relied on in determining whether a worker was an employee or an independent contractor.[46] They could not, of course, provide a substitute for the application of the definition of ‘labour hire’.
[46]See, eg, Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Hollis v Vabu Pty Ltd (2007) 207 CLR 21.

When the definition of labour hire is applied, it is clear that Divadeus supplied labour in connection with its performance of tasks and its discharge of functions for its clients. Therefore, the supply of that labour was not ‘labour hire’. It follows that the appropriate WIC for Divadeus was ‘Investigation and Security Services’ as the VWA contends.

For the reasons advanced by the VWA, we do not consider that subparagraphs (a), (b) and (c) contained in the definition of ‘labour hire’ are truly exceptions which the VWA must prove apply to Divadeus’ supply of labour. Rather, they form part of the description of ‘labour hire’. Divadeus bore the onus of establishing the facts necessary to show that its supply of labour to clients came within that definition.

If contrary to our view the VWA bore an onus of proof on the matters we have discussed, our conclusions on the outcome of this application would not alter. In our opinion, the evidence of the contracts and of Mr McNamara can only lead to the conclusion that Divadeus supplied the security guards and supervisors for the performance of a specified task — namely, in connection with the provision of security services at the clients’ premises. In addition, Divadeus supplied the security officers and supervisors in connection with the discharge of specified functions — again, the maintenance of security at their premises. We consider that a proper application of that evidence to subparagraphs (a) and (b) of the definition of ‘labour hire’ leads to the conclusion that Divadeus and its clients were not involved in a labour hire arrangement.

Proposed ground two — Mr McNamara’s evidence of an arrangement as to the operation and manner in which Divadeus provided services to its clients

VWA submissions

The VWA submitted that the trial judge erred by accepting and relying on the oral evidence of Mr McNamara as to the manner in which Divadeus provided services to its clients as the basis for concluding that Divadeus had ‘labour hire arrangements’ with clients. It submitted that Mr McNamara’s evidence was outweighed by other evidence that the services were provided by Divadeus pursuant to the terms of formal written contracts with its clients. At best, Mr McNamara’s testimony was evidence of breaches of contracts, not evidence of alternative, informal arrangements.

Divadeus’ submissions

Mr McNamara provided the only direct evidence of how Divadeus supplied security officers to its clients. His evidence was accordingly uncontradicted and the judge found him to be a reliable witness. Mr McNamara’s evidence described how the actual practices adopted at clients’ workplaces departed from the letter of the contracts. It was not inherently improbable that parties would perform their contract in a manner convenient to themselves, but which departed from the terms of the contract. The definition of ‘labour hire arrangement’ included arrangements which were not legally enforceable.

Consideration of proposed ground two

Once ground one is upheld, the argument in ground two as to the weight to be given to Mr McNamara’s evidence adds nothing further. However, the grounds are related and each should be upheld. The misapplication of the definition of ‘labour hire’ by the primary judge involved a failure to have proper regard to the obligations of Divadeus under the relevant contracts. There was no evidence that the parties had varied these contracts or replaced them with other informal arrangements. In those circumstances, Mr McNamara’s evidence as to the manner in which the contracts were in fact performed by the parties did not displace the requirements under the written contracts that Divadeus perform specified tasks and discharge specified functions.

We consider that ground two is established. The judge considered that Mr McNamara’s evidence of the manner in which the Divadeus staff carried out their work at the clients’ premises was better than evidence of the terms of the contracts. With respect, we do not agree with that conclusion. The judge said during argument at trial that the contracts contained the best evidence of what the Divadeus staff did at client workplaces. Mr McNamara’s evidence suggested that despite the contractual terms, the clients carried out the day to day supervision of staff. As we have stated in dealing with proposed ground one, we do not consider that that circumstance was determinative of whether Divadeus’ supply of the labour was ‘labour hire’ as defined. We consider that the terms of the contracts were critical in determining whether Divadeus supplied labour in connection with the performance by the employer of a specified task or tasks or the discharge by the employer of a specified function or functions. We are persuaded that Divadeus’ supply of labour did not fall within the definition of ‘labour hire’.

Proposed ground four — denial of procedural fairness

It is not strictly necessary to consider this ground because we consider that the VWA’s case succeeds on the first two proposed grounds. However, as it was argued in detail, we will state our conclusions in respect of it.

VWA submissions

The VWA contended that it was denied procedural fairness because the trial judge:

(a)denied it the opportunity to put certain pre‑contractual matters and other representations made by Divadeus to clients to Mr McNamara in cross‑examination in circumstances where he disputed the operation of the contracts according to their terms;
(b)denied it the opportunity to tender certain documents relating to pre‑contractual and other representations made by Divadeus as to the services it offered; and
(c)said during the cross‑examination of Mr McNamara that the contracts spoke for themselves as to the services Divadeus provided to clients; curtailed questioning of Mr McNamara on that basis; but departed from that position in her judgment.

The VWA’s case to the judge was that, as Mr McNamara’s evidence raised an issue about who directed and controlled the activities of the security guards on a day‑to-day basis, it wished to tender extra‑contractual material, and to cross‑examine Mr McNamara about that material and whether it was consistent with what he had to say. The VWA submitted that the extra-contractual material could have had a bearing on the assessment of Mr McNamara’s credibility when the effect of his evidence was that ‘we went outside the contract’. Mr McNamara had been involved in preparing the tender documents.

The VWA’s case is that the judge did not permit its counsel to ask Mr McNamara questions about Divadeus’ tender documents for the Deakin University and Holmesglen TAFE contracts. Counsel said that those documents contained a statement as to what outcomes and services Divadeus offered to clients.[47] The VWA’s counsel stated at the appeal hearing that its counsel at trial had been intending to question Mr McNamara about a section of the tender documents that dealt with security services, which stated that MakeSafe Security Solutions could offer the complete security chain of services and set out a variety of services, including, but not limited to, the provision of security personnel.
[47]Transcript of Proceedings, Divadeus Pty Ltd v Victorian WorkCover Authority (Supreme Court, S CI 2013 05521, McMillan J, 10 November 2014) 165.

In the course of argument, the judge had stated that ‘the contract speaks for itself as to what services it provided’[48] and that:

The contract’s the guiding document. That’s the document that’s signed. That sets out the obligations between the parties.[49]

[48]Ibid 84.

[49]Ibid 146.

The judge stated that the existence of a tender document did not necessarily mean that it formed the basis of the contract. The signed contract was what was important.[50] Her Honour stated that she would not allow the tender documents to be tendered because they were not relevant. Her Honour stated:

Well, my view is that the contract that’s signed by … in this case the appellant and the relevant institution is the document that guides the determination of this issue. That provides for what services will be provided in each incidence.[51]

[50]Ibid.

[51]Ibid 147.

Counsel for the VWA also sought to cross-examine Mr McNamara about a document that was part of the Holmesglen TAFE tender because it was a statement as to the outcomes and services Divadeus offered to clients. The judge asked counsel for the VWA whether there was a contract for the Holmesglen TAFE work and counsel informed her that there was. The following exchange then occurred between the judge and counsel for the VWA:

HER HONOUR:       Yes. I’ve already ruled on that so you’re pressing again on the same issue. I’ve ruled that the tender documents are not relevant if there’s a contract on foot.
COUNSEL:So your Honour wouldn’t permit to put a paragraph in from the tender document to the witness?
HER HONOUR:       It’s not relevant if there’s a contract on foot.
COUNSEL:But, your Honour, once again, and I know you’ll say that I’m repeating myself, but I will. The contract follows on from the tender application.
HER HONOUR:       You’re repeating yourself. I want to wind this up today. I’ve curtailed myself about the repetitive nature of the cross-examination and the wide ranging nature and I’ve ruled on this point about the tender documents and there’s no point in keeping on making the same application when I’ve made that ruling.[52]

[52]Ibid 166.

However, in the judgment the judge stated:

The question, in determining whether the labour supplied falls into the relevant exclusions, concerns the labour actually supplied pursuant to an arrangement ‘whether oral or in writing and whether formal or informal’. The terms of the contract may assist the evidence, but the better evidence is what Mr McNamara says occurs, and if they had been called, what the security staff and the clients would have said occurred. If a party agrees to supply labour in one fashion, but actually supplies it in another, it is the arrangement under which it is actually supplied that will determine whether the labour supplied constitutes labour hire.[53]

[53]Reasons [138].

The VWA submitted that the judge’s rulings prevented the VWA from receiving a fair hearing. It contended that it was not permitted to cross‑examine Mr McNamara and tender additional documentary evidence so as to attempt to persuade the judge that there was no ‘arrangement’ other than that contained in the written contracts, or, alternatively that any such ‘arrangement’ was not one for labour hire.

The judge also refused to permit the tender of pages of Divadeus’ website, which were said to be inconsistent with Mr McNamara’s evidence and yet were statements that reflected the way in which Divadeus held itself out to clients and prospective clients. Her Honour stated:

The evidence is that it’s a website under construction in July 2013 and that’s providing the best in security. It doesn’t add anything to the proposition that the appellant provides security services. The best evidence you’ve got are the contracts that you’ve put forward. That tells me what sort of services they provide to their client.[54]

[54]Transcript of Proceedings, Divadeus Pty Ltd v Victorian WorkCover Authority (Supreme Court, S CI 2013 05521, McMillan J, 10 November 2014) 171.

However, the judge permitted the VWA’s counsel to tender a company profile.

Divadeus’ submissions on proposed ground four

Divadeus submitted that the judge did not refuse to allow the VWA to lead evidence contradicting Mr McNamara’s evidence. Rather, the judge disallowed questions asked in cross-examination because of their width and lack of relevance. The VWA extensively cross-examined Mr McNamara.

Divadeus submitted that the judge was correct in stating that the tender documents did not add anything relevant. If the contracts were insufficient to persuade the judge to reject Mr McNamara’s evidence, the tender documents would not have added anything. Divadeus argued that there was no doubt that the parties formalised the arrangement into a contract. It was difficult to see how the tender documents could rationally affect the outcome of whether Mr McNamara’s evidence should be accepted.

Counsel for the VWA was permitted to cross‑examine Mr McNamara about his evidence of the day‑to‑day activities at the clients’ sites. The tender documents could not have assisted on that subject. The fact that Mr McNamara had previously offered in the tender documents to do what Divadeus ultimately contractually agreed to do could not assist. There was no force in the contention that the extra material could have made a difference as to how Mr McNamara’s credibility was perceived.

Consideration of proposed ground four

A denial of procedural fairness does not occur merely because a judge expresses one view on a material issue during argument and then reaches a different conclusion in the judgment. Statements made by a judge during argument are provisional and often stated to test arguments or raise matters for discussion, unless the judge makes clear that a final view is being expressed.

Here, the matter went further than the expression of a view by the judge. The VWA was not permitted to ask questions and tender evidence that might have affected Mr McNamara’s credibility, on the basis that the judge ruled that the contract was the best evidence. Had that position prevailed in the final reasons for judgment, no objection could have been taken to the rulings the judge made. But the judge ultimately decided the matter differently, and inconsistently with the reasoning that underlay her refusal to permit the questions and tendering of evidence sought by the VWA.

Whether this sequence of events is properly characterised as a denial of procedural fairness or as the making of errors in rulings as to evidence in the course of the trial may not matter and does not need to be determined. In either event, it cannot be said that the VWA’s cross-examination of Mr McNamara about the documents that it sought to rely on would have made no difference to the conclusions reached by the judge, when she ultimately relied on the evidence of Mr McNamara rather than on the terms of the contract.

In all the circumstances, the fourth proposed ground is in substance made out. However, because we have concluded that grounds one and two are also made out, and the judge’s reliance on the evidence of Mr McNamara in preference to the terms of the contract was in error in any event, it is unnecessary to consider what orders would have been appropriate to give effect to our conclusion in respect of ground four.

Additional matters

In view of the conclusions we have reached, each of the grounds argued satisfies the criteria for the grant of leave to appeal.[55] Divadeus submitted that leave to appeal should be refused because none of the grounds raised issues of general application to the operations of the VWA and that the first proposed ground was unlikely to produce a decision of general application, because its approach to the construction of the term ‘labour hire’ had not been consistent. But given our conclusions as to the merits of the proposed appeal, this is not an appropriate case in which to exercise the Court’s residual discretion to refuse leave.[56]
[55]Supreme Court Act 1986 s 14C.
[56]Kennedy v Shire of Campaspe [2015] VSCA 47 [5], [14].

Conclusion

Leave to appeal will be granted and the appeal allowed. The orders of the judge will be set aside and in their place it will be ordered that the respondent’s appeal against the applicant’s determination dated 27 August 2013 be dismissed.

- - -

Actions

Download as PDF Download as Word Document

Citations

Victorian WorkCover Authority v Divadeus Pty Ltd (in Liquidation) [2016] VSCA 81

Most Recent Citation

Watts Eagle Services Pty Ltd v Passon [2018] VSC 682

Cases Citing This Decision

2

Applications by the Mining and Energy Union re: Goonyella Riverside Mine, Peak Downs Mine and Saraji Mine [2025] FWCFB 134

Watts Eagle Services Pty Ltd v Passon [2018] VSC 682

Cases Cited

15

Statutory Material Cited

0

United Petroleum Pty Ltd v Victorian WorkCover Authority [2011] VSC 570

Emu (AUS) Pty Ltd v Victorian WorkCover Authority [2012] VSC 610

Divadeus Pty Ltd v Victorian WorkCover Authority [2014] VSC 578

[2016] VSCA 81

28 April 2016