Wawer v Lindale Insurances Pty Ltd
[1996] IRCA 412
•12 August 1996
DECISION NO: 412/96
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1244 of 1996
B E T W E E N :
EUGENE WAWER
Applicant
AND
LINDALE INSURANCES PTY LTD
Respondent
Before: Judicial Registrar Murphy
Place: Melbourne
Date: 12 August 1996.
EX-TEMPORE REASONS FOR JUDGMENT
In this application the Court is required to determine a preliminary issue; namely, whether the applicant was an employee of the respondent. The applicant at all relevant times held a practising certificate as a solicitor and was and is a certified practising accountant. In June 1995 his firm was known as Eugene Wawer and Co.
At that time he was determined to wind down his practice and move to employment. He responded to an advertisement for a position as an accountant that had been lodged by the respondent. He had an interview with Mr McDonald. Mr McDonald is also a certified practising accountant who practises under the name of R.G. McDonald and Co. He also utilises a corporate vehicle Lindale Insurances Pty Limited.
Mr McDonald is a registered tax agent, as is the applicant. A major part of Mr McDonald's practice is the filing of returns to the Australian Taxation Office and various other statutory authorities. The applicant gave evidence that he came to an agreement with Mr McDonald that he would be employed by him as an accountant with a salary of $50,000 per annum. He said he was to work 40 hours per week and he would be provided with annual leave and sick leave.
He said that Mr McDonald at this stage produced an agreement and asked Mr Wawer whether he would be prepared to enter into a contract on the basis that this would save Mr McDonald WorkCover and superannuation. Mr Waver said he had no objection. He told Mr McDonald that he would have the agreement with his own family trust for tax purposes. The applicant's family trust is a corporate vehicle Process Management Pty Limited (“Process”). The applicant gave evidence that it was agreed that for all practical purposes he was to be an employee and that the document:
“Wasn't supposed to reflect the full agreement between the parties.”
The applicant maintained that he told Mr McDonald at that stage that the document would not be enforceable in the event of a dispute. Mr McDonald disputed this. He said that the only basis on which he was proposing to engage Mr Wawer was as a contractor. He said the first mention that the agreement was a sham was in January 1996 when, pursuant to the agreement, Mr McDonald sought to terminate it.
After the discussion on about 18 June 1995, on 21 June Mr McDonald wrote to the applicant (Exhibit A6) confirming that Process :
“arrange to carry out accounting services at your earliest convenience for Lindale Insurances Pty Limited for an annual fee of $50,000. As agreed, full details are being documented and we will arrange notification for an early start date of no later than 1 July 1995.”
In a letter signed by the applicant under the letterhead of Process of the same date (Exhibit R1), the applicant acknowledged the letter:
“(C)onfirming our discussion regarding the arrangement of accounting services to Lindale Insurances Pty Limited for an amount of $50,000.”
The applicant on 23 June 1995 wrote (Exhibit A4) to Mr McDonald suggesting that the letter of invitation to clients makes reference to Mr Wawer's services as a solicitor and CPA and noting that he may be able to review existing business and tax-financial planning arrangements for the clients and stating:
“(H)e is also available to help and advise you and your family and friends directly with legal problems. You may wish to make an appointment to review your will, or when you are buying or selling a property or a business, or when entering into a lease.”
Mr McDonald gave evidence that some of the matters referred to in the letter were referred to in the circular sent out to his clients. The applicant gave evidence that he did produce a will and also a couple of partnership agreements.
The applicant commenced engagement on 1 July 1995 and the agreement (Exhibit A5), referred to in the letter of Mr McDonald of 21 June was executed later in July. Mr McDonald's evidence was that he gave a draft of that agreement to the applicant who then suggested some amendments and it was re-engrossed and presented for signature. The document is executed under the common seal of the respondent and Process.
The agreement declares that Process is an independent contractor. It also states that the respondent does not guarantee Process any work, nor that Process is bound to accept any work. It commits Process to providing services to the respondent and the payment of one-twelfth of $50,000 per annum, after invoice, per month.
After the applicant commenced with the respondent, Process invoiced the respondent on a monthly basis and was paid. In one month, the invoice, less than usual by $1,000.00, and a separate account for legal services, was rendered by Eugene Wawer and Co, and was also paid. The applicant also said that in the course of his duties with the respondent, he signed as an auditor some taxation returns for superannuation trust funds that were the clients of the respondent.
The applicant said that the agreement did not reflect the true relationship between the parties. He said he was required to complete detailed time sheets and attend during office hours to see clients that had been organised by the respondent. His work was checked by Mr McDonald and he was required to account for absences. Mr McDonald disputed much of this evidence and maintained that his communications with the applicant after engagement were related to ensuring that sufficient work was done by the applicant to ensure that taxation returns within his practice were completed on time.
What was the contract between the parties?
This case is somewhat exceptional in that at issue is whether there was a relationship of employment between the applicant and the respondent or whether there was, in contrast, a relationship between Process and the respondent.
On the authorities it is necessary to consider in a case where the parties have reduced their agreement to writing, what was the true agreement between them: Connolly v Wells (1994) 55 IR 73. In that sense post-contractual evidence is of no assistance unless, as confirmed in Narich Pty Limited v Commissioner of Payroll Tax (1983) 2 NSWLR 597 and Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385, the original agreement was modified after it was made.
Here, Process and the respondent bound themselves to the provision of services for a monthly payment. I do not accept that the contract was not to govern the relationship between them. To the extent that it is relevant, the parties acted as if it did bind their relationship by the provision of invoices (Exhibit R2) that are referable only to the contract.
This case is similar to Polkowski v Corporate Associates Pty Ltd (26 April 1996, Murphy JR, unreported) and the principles discussed therein. Also the comments of Wilcox CJ referred to in the decision Purvis v Chieftan Management Pty Ltd (t/a Brookes Maintenance Services) (Marshall J, 6 May 1996, unreported) are also apposite. They support the proposition that the contract was intended to be given effect to.
Under pressure in cross-examination, the applicant agreed that the contractual arrangement was of benefit to him because it gave him flexibility in his taxation arrangements. This is not a case where the parties were in an unequal bargaining position and agreed in an informal oral contract to label their agreement as one of independent contractor and principal. This is a considered written agreement entered into by two companies, the principals of which were accountants with the applicant being, in addition, a solicitor.
It is a heavy matter for the Court to find that this was a sham. I decline to do so. I am satisfied that the agreement between Lindale Insurances Pty Limited and Process Management Pty Limited does reflect the agreement between the parties and their intention. On that basis I find that there was no contract of employment between the applicant and the respondent.
The decision Kenney v P M Loveland (Ritter JR, 30 July 1996, unreported) referred to by Mr Wawer is distinguishable because in that case the agreement between the parties was of an informal nature, whereas in this case there was a formal agreement between the parties.
It follows that the Court has no jurisdiction to deal further with this matter and I propose to dismiss the application.
Costs
The respondent in this matter has sought costs on the basis that the application was instituted vexatiously or without reasonable cause. In Kanan v Australian Postal and Communications Union (1992) 43 IR 257, Wilcox J said that one way to test whether an application has been brought without reasonable cause is to look at the facts known to the applicant at the time the matter was instituted.
I am satisfied that in this case the applicant, being a practitioner and certified practising accountant, must be taken to have known when he instituted these proceedings that the relationship between him and Lindale Insurances was governed by a contract signed by him as the secretary of Process Management Pty Limited and therefore he could not have had reasonable cause to issue these proceedings alleging that he was, in fact, an employee of Lindale Insurances Pty Limited.
In this case I propose to order that the applicant pay the respondent's costs of the proceeding to be taxed, in default of agreement, by the District Registrar.
MINUTES OF ORDERS
THE COURT ORDERS THAT:
The application is dismissed.
The applicant pay the respondent’s costs of the proceeding to be taxed, in default of agreement, by the District Registrar.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
I certify that this and the preceding six (6) pages are a true copy of the reasons for judgment of Judicial Registrar Murphy.
Associate:
Dated: 12 August 1996
The Applicant was unrepresented.
The Applicant appeared in person.
Solicitors for the Respondent: Aitken Walker & Strachan
Counsel for the Respondent: Mr B Shaw
Date of hearing: 12 August 1996
Date of judgment: 12 August 1996
C A T C H W O R D S
INDUSTRIAL LAW - TERMINATION OF EMPLOYMENT - whether independent contractor - whether agreement a sham - agreement between two companies whose principals were accountants - COSTS - whether proceeding instituted without reasonable cause.
Industrial Relations Act 1988 ss170 EA, 347
CASES:Connolly v Wells (1994) 55 IR 73
Narich Pty Limited v Commissioner of Payroll Tax (1983) 2 NSWLR 597
Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385
Polkowski v Corporate Associates Pty Ltd (Murphy JR, 26 April 1996, unreported)
Purvis v Chieftan Management Pty Ltd (t/a Brookes Maintenance Services) (Marshall J, 6 May 1996, unreported);
Kanan v Australian Postal and Communications Union (1992) 43 IR 257
Kenney v P M Loveland (Ritter JR, 30 July 1996, unreported).
EUGENE WAWER -v- LINDALE INSURANCES PTY LTD
No. VI 1244 of 1996
Before: Judicial Registrar Murphy
Place: Melbourne
Date: 12 August 1996
INDUSTRIAL RELATIONS COURT
OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VI 1244 of 1996
B E T W E E N :
EUGENE WAWER
Applicant
AND
LINDALE INSURANCES PTY LTD
Respondent
MINUTES OF ORDERS
Judicial Registrar Murphy 12 August 1996
THE COURT ORDERS THAT:
The application is dismissed.
The applicant pay the respondent’s costs of the proceeding to be taxed, in default of agreement, by the District Registrar.
NOTE: Settlement and entry of orders is dealt with by Order 36 of the Industrial Relations Court Rules.
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