Williamson v. Suncorp Metway Insurance Ltd & Anor
[2008] QSC 244
•9 October 2008
SUPREME COURT OF QUEENSLAND
CITATION:
Williamson v Suncorp Metway Insurance Ltd & Anor [2008] QSC 244
PARTIES:
ARTHUR ERNEST WILLIAMSON
(plaintiff)
v
SUNCORP METWAY INSURANCE LIMITED (ACN 075 695 966)
(first defendant)
WORKCOVER QUEENSLAND
(second defendant)FILE NO:
BS11558 of 2007
DIVISION:
Trial Division
PROCEEDING:
Application
DELIVERED ON:
9 October 2008
DELIVERED AT:
Brisbane
HEARING DATE:
28 August 2008
JUDGE:
Mullins J
ORDER:
The questions referred for hearing are answered as follows:
1. (a) The plaintiff was not employed by Kerredan No 28 Pty Ltd trading as Aunty Daph’s Confectionery in terms of the policy when he sustained the alleged injuries.
(b) The plaintiff was not a “worker” pursuant to the Workers’ Compensation and Rehabilitation Act 2003 when he sustained the alleged injuries.2. It is unnecessary to answer question 2.
3. It is unnecessary to answer question 3.
CATCHWORDS:
CONTRACTS – GENERAL CONTRACTUAL PRINCIPLES – OFFER AND ACCEPTANCE – MATTERS NOT GIVING RISE TO BINDING CONTRACT – AGREEMENTS NOT INTENDED TO CREATE LEGAL RELATIONS – where plaintiff injured whilst undertaking work for business conducted by company controlled by his son – where plaintiff made a claim for damages for injuries against the company’s public liability insurer – where policy excluded liability for personal injury to a worker – whether plaintiff engaged by the company under a contract of service – whether the plaintiff and his son intended to create legal relations in making the arrangement for the plaintiff to work in the company’s business and in the manner in which the plaintiff did work in the business
Workers’ Compensation and Rehabilitation Act 2003, s11
Dietrich v Dare (1980) 30 ALR 407, considered
Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, considered
Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, consideredCOUNSEL:
JJ Wiltshire for the plaintiff
RD Green for the first defendant
RJ Douglas SC for the second defendantSOLICITORS:
Shannon Donaldson for the plaintiff
Cleary & Lee for the first defendant
McInnes Wilson Lawyers for the second defendant
MULLINS J: On 17 December 2003 the plaintiff was assisting in the removal of an awning attached to the roof of the premises from which Kerredan No 28 Pty Ltd (Kerredan) conducted its business at Cambooya. The plaintiff who was on the roof stepped on some plastic roof sheeting, fell through the sheeting approximately three metres to the ground and was injured.
Kerredan was the corporate entity through which the plaintiff’s son, Mr John Williamson (John), carried on a confectionary manufacturing, wholesale and retail business. Kerredan ceased trading in about May 2004.
Kerredan had a public liability insurance policy with the first defendant. The plaintiff lodged a notice of claim pursuant to the Personal Injuries Proceedings Act 2002 with the first defendant on 19 August 2004. The first defendant engaged Special Intelligence Services (SIS) to conduct an investigation of the claim. The report of the investigator dated 24 November 2004 was provided to the first defendant. The investigator obtained statements from Mr John Williamson and two employees of Kerredan, Ms Carolyn Bruhl and Mr Brett Williamson. On 31 December 2004 the first defendant notified Kerredan that it would indemnify Kerredan in respect of the plaintiff’s claim under the policy on the basis of the facts and circumstances then known to the first defendant. The first defendant by letter dated 25 February 2005 to the plaintiff’s solicitors denied liability for the plaintiff’s accident on behalf of Kerredan as the occupier of the land.
Kerredan was deregistered on 18 December 2005.
The plaintiff consulted his current solicitors on 26 October 2006 and they requested that the first defendant extend the limitation period by six months to 17 June 2007. That request was granted.
The first defendant instructed its current solicitors on 17 May 2007. They offered the plaintiff’s solicitors a further extension of the limitation period until 17 December 2007.
By letter dated 25 July 2007 to Kerredan, the first defendant denied indemnity for the plaintiff’s accident on the basis that the plaintiff was an employee of Kerredan at the date of the accident. In August 2007 the first defendant advised the plaintiff’s solicitors that the first defendant had reconsidered the indemnity issue and decided that it would not be extending indemnity in relation to the claim.
This proceeding was commenced on 17 December 2007. The plaintiff claims damages for negligence against the first defendant on the basis that Kerredan was the occupier of the premises on which the plaintiff was injured, the first defendant was the insurer of Kerredan pursuant to a policy of public liability insurance and the plaintiff is entitled to proceed against the first defendant pursuant to s 601AG of the Corporations Act 2001 (Cth). In the alternative, the plaintiff claims damages for negligence and/or breach of contract and/or breach of statutory duty against the second defendant on the basis that Kerredan was the employer of the plaintiff within the meaning of that term, as defined in the Workers’ Compensation and Rehabilitation Act 2003 (WCRA) and the Workplace Health and Safety Act 1995, the plaintiff was a “worker” within the meaning of that term as defined in those Acts and the proceeding is brought against the second defendant pursuant to s 601AG of the Corporation Act 2001 (Cth) and/or pursuant to s 300 of the WCRA.
List of questions
As a result of the plaintiff applying for the determination of preliminary issues arising out of the plaintiff’s status and right to sue the first and second defendants, the following list of questions was referred for hearing:
1.Whether the first defendant’s policy of insurance excludes indemnity for the liability of Kerredan No 28 Pty Ltd trading as Aunty Daph’s Confectionary ("Kerredan") for the plaintiff’s personal injuries sustained on 17 December 2003; that question involving two sub-questions:
a. Was the plaintiff “employed” by Kerredan in terms of the policy when he sustained the alleged injuries?
b. Was the plaintiff a “worker” pursuant to the Workers’ Compensation and Rehabilitation Act 2003 when he sustained the alleged injuries?
2.If the answer to question (1) is in the affirmative, whether agreements to “extend” the limitation period between the plaintiff and the first defendant are applicable with respect to the proceedings commenced by the plaintiff against the second defendant?
3.If the answer to question (2) is in the negative, whether the plaintiff is entitled to an extension of the limitation period for his proceedings commenced against the second defendant pursuant to s 31 of the Limitation of Actions Act 1974.
In addition to the affidavits filed by all parties for the purpose of the hearing, the plaintiff, his wife Mrs Daphne Williamson, and John gave evidence at the hearing.
Public liability policy
Under Kerredan’s public liability policy an exclusion applies for claims in respect of the liability of Kerredan as an employer. The exclusion is in the following terms:
“1. It is agreed and declared that Exclusion 7 of this Section is deleted and replaced by the following:
7. Employer’s Liability
(a) Personal Injury to any Worker.
PROVIDED that if You are:
(i)required by law to insure or otherwise fund, whether through self insurance, statutory fund or other statutory scheme, all or part of any common law liability (whether limited or not) for such Personal Injury; or
(ii)not required to so insure or otherwise fund such liability by reason only that the Personal Injury is to a person who is not a "worker" or "employee" within the meaning of the relevant Workers’ Compensation Law or the Personal Injury is not an injury which is subject to such Law;
then this Policy will respond to the extent that Your liability would not be covered under any such fund, scheme, policy of insurance or self insurance arrangement had
You complied with Your obligations pursuant to such Law.
(b) liability imposed by:
(i) any Workers’ Compensation Law;
(ii) the provisions of any industrial award or agreement or determination or any contract of employment or workplace agreement where such liability would not have been imposed in the absence of such industrial award or agreement or determination;
(iii) any law relating to Employment Practices.
PROVIDED that this Exclusion 7 does not apply to claims for loss of consortium by the spouse of any of Your Workers.
2.It is agreed and declared that Definitions in this Section are extended to include the following:
Worker - any person:
(a) employed by You; or
(b)deemed to be employed by You pursuant to any Workers’ Compensation Law.
Workers’ Compensation Law - any law relating to compensation for injury to workers or employees.
Employment Practices - any wrongful or unfair dismissal, denial of natural justice, defamation, misleading representation or advertising, sexual harassment or discrimination in respect of employment by You.3.It is agreed and declared that this Section includes the following additional Condition:
3. Indemnity Prohibited by Law
Where this Policy provides any indemnity to You which is prohibited by law, this Policy shall be varied by operation of this Condition so that this Policy does not respond to the extent that the indemnity is prohibited by law.”
Evidence relevant to the nature of the relationship between the plaintiff and Kerredan on the date of the accident
On 5 November 2001 the plaintiff and Mrs Williamson gave a guarantee and indemnity to Australia & New Zealand Banking Group Limited (ANZ Bank) limited to $100,000 in respect of Kerredan. By August 2003 the plaintiff and Mrs Williamson had set aside $100,000 in a term deposit with ANZ Bank and authorised the ANZ Bank to set off that term deposit against their obligations under the guarantee.
According to the 2003 tax return lodged by Kerredan, the business made a loss of $139,844.
In the notice of claim the plaintiff lodged with the first defendant on 19 August 2004, the plaintiff described what he was doing at the time of the accident in the following terms:
“The injured person was removing iron from the roof of the premises with the owner’s consent.”
In the statement that John made on 3 November 2004 for SIS, he explained that he had erected the awning between the business premises of Kerredan and the residence at which he and his wife lived which was next door to the business premises. He and his wife separated in late 2003. He was therefore going to sell the residence. He had to remove the awning, before the sale of the residence, as it crossed the boundary between the business premises and the residence. He stated:
“13. On Wednesday 17th December 2003 I had some people come and assist in removing the awning for me. My father, Arthur came to help. Also, Brett Williamson who is my nephew. Brett was 17 at the time. Also Caroline Bruhl was there that day and she has told me that she saw the entire thing, when Dad fell through the roof. Caroline and Brett were both part of the employee structure at the shop. There were other workers there but they were my staff working inside the business. I employed about 13 staff in the shop.”
It was implicit from John’s statement where he described Ms Bruhl and Mr Brett Williamson as employees that he was not suggesting that his father was an employee of the business.
On 10 June 2005 the plaintiff delivered part 2 of the notice of claim to the first defendant. The plaintiff described his employment situation before the accident as “self-employed”. In response to the question whether he was employed at the date of the accident, the plaintiff answered “no”. He listed Mr and Mrs Ridgeway as his employer before the accident for whom he did general farm work. He stated that he had lost wages as an employee because of the accident and that was $500 per week from Mr and Mrs Ridgeway.
The first defendant sought further information in proof of the economic loss component of the plaintiff’s claim. On 19 January 2007, after being advised that the plaintiff did not have any outstanding tax returns as he had not earned enough money to exceed the tax free threshold, the plaintiff’s solicitors provided to the first defendant’s solicitors by way of evidence of the plaintiff’s earnings a signed statement from John dated 17 April 2007 which stated:
“I, John Arthur Williamson owned and operated Aunty Daph's Confectionery at Cambooya for four years. During this time Arthur Williamson was an investor in the business and also worked as a confectionery maker especially in the sugar Easter egg section. He was paid a modest wage of $400/week, received all his fuel which amounted to $60 and was provided with his keep whilst working for me. I estimate that the ‘package’ was worth about $500per week.”
The first defendant’s solicitors by letter dated 19 June 2007 made a request that the plaintiff provide answers to specific questions related to his claim for economic loss and the incomplete employment history provided in the notice of claim. The plaintiff made a statutory declaration on 28 June 2007 for the purpose of providing the further information requested relating to his employment history prior to and at the time of the accident. In this declaration the plaintiff explained that he had been working for Mr Ridgeway for about five years prior to approximately September 2002, when he had ceased working to look after his wife who had a laminectomy. The plaintiff set out in the statutory declaration the following information in relation to the work carried out by him at Aunty Daph’s Confectionery, each paragraph of which responded to a specific question of the first defendant’s solicitors:
“A.I first commenced working with my son shortly after he started the business in approximately 2001. I would help out on weekends and Sundays for no pay to assist him to get the business up and running. It wasn't until around September 2003 when I started working with my son full-time.
B.At the store, I helped by building trolleys, stands and a conveyor belt for the Easter Eggs. I have always been good with my hands and have done a lot of welding and therefore, I was helping out with making any of the equipment I could for my son. I also helped with manufacturing sugar Easter eggs.
C.At first, I only worked on weekends and Sundays at the store and continued to work on a casual basis only when needed, up until I commenced full-time employment from approximately September 2003. I would then be working approximately eight (8) hours a day at the store.
D.When my son first started the business, I was not receiving any payment for my services. My son would however pay for my fuel for travelling from Cambooya to Southbrook to work at the store. Once I started full-time in about September 2003, I was paid $400.00 per week plus fuel plus meals. I do not recall whether tax was deducted from this payment.
E.I did not have any financial interest or investment in the business other than that my wife Daphne and I went guarantor to a maximum of $100,000.00 for my son to start the business. From about the middle of 2003, my son was having difficulties with his marriage and his wife left him in September 2003. It was at this stage that I started full-time work at the business and my wife and I sold the units we owned (as an investment) and invested an amount of $100,000.00 to protect ourselves should the bank call in the guarantee.
F.By the time I commenced full-time employment with my son in his business, Julian Ridgeway had sold his farm and I would not have been able to return to that employment. At that stage, I was concerned to assist my son in his business to keep it afloat.”
Although the first defendant focuses on the description of “full-time employment” used by the plaintiff in this statutory declaration to describe his work with Kerredan from September 2003, it is relevant that the statutory declaration was being provided to expand on the claim made by the plaintiff for economic loss and not for the purpose of addressing the nature of the relationship between the plaintiff and Kerredan.
John provided a statement dated 18 July 2007 to investigators engaged by the first defendant’s solicitors in which he described his father’s role in the business in the following terms:
“4.He was listed in the company’s books as an employee of Kerredan No28 Pty Ltd and he drew a set wage each week when he worked in the business. I think that his wage was $400.00-$500.00 per week and he also booked up fuel for his car on our company’s fuel account with the service station. The company deducted whatever tax was due from his weekly wage. I had 13 staff employed in the business around this time.
5.We did not have rosters for the staff as they had set hours each day Monday to Friday for a 38 ½ hours per week. I think it was 8.00am to 4.30pm (30 minute lunch break & 20 minute morning tea break) and there was no overtime.
6.My father did not work to any set start or finish times and any set days. He could work a few days each week in the business or seven days, it just depended on what needed doing and what he was up to at the time. On some occasions, I would help him out with work if he needed assistance with anything. Either way, he would be paid the same wage by my company - it was a family thing. My nephew, Brett Williamson, was also an employee at the time and he worked the normal set hours like the other staff, but he would work outside these hours without any extra pay to help out - again because of the family relationship.
7.My father was a "jack of all trades" and would handle any type of job that I needed doing for the business. Whether it was welding, grinding, mowing or working with the other staff in the production area, he could do the lot. When my wife and I separated shortly before my father’s accident,
I was carrying extra workload and he spent even more time in the business to help me out. We had large orders to fill with Darrell Lea and we all had to pitch in to handle the work.”
The investigators engaged by the first defendant’s solicitors also obtained a statement dated 31 July 2007 from Mr Brett Williamson who is the grandson of the plaintiff and the nephew of John and was an employee of Kerredan at the date of the accident:
“3.I wouldn’t have a clue about any of the rostering arrangements between John Williamson, my uncle who owned Aunty Daph’s Confectionary shop business, and his father, Arthur Williamson. I worked the normal working hours for the other staff in the business which was 8.00am to 4.30pm, Monday to Friday, but I often worked outside these hours and on some Saturdays, It just depended on what worked needed to be done to help my uncle out. I was employed by this business for a couple of years until it closed down in 2004.
4.My grandfather lived at Southbrook at the time and also worked in the business during the time I worked there. He did not work any set hours like the other staff, but he was normally working down the back of the factory doing all sorts of odd maintenance jobs and he also helped out in the production area. He did not serve in the shop though. The maintenance work he did was both inside and outside the factory, including maintenance of the factory machinery, welding etc. He was a farmer so he could handle all types of maintenance jobs.
My grandfather would also work outside the normal factory hours and on weekends, it just depended on what work needed doing at the time. I don’t recall ever seeing a roster as all the staff worked the same hours each day. I don’t know what wages were paid to him by the business. I presume that the work my grandfather was doing at the time of his accident would have been in the course of his employment with the business. The awning between the shop and the house had to be taken down as my uncle was selling the house and this work had been discussed between my uncle and my grandfather before it eventually happened.”
To the extent that Mr Brett Williamson presumed that the plaintiff was employed in the business, his statement does not assist.
The plaintiff’s description of his involvement in Kerredan’s business was set out in his affidavit filed on 4 February 2008:
“7.Shortly after starting the business, I would help my son out on weekends and Sundays for no pay to help him get the business up and running.
8.I helped by building trolleys, stands and a conveyor belt for Easter Eggs and would help out with the making of any equipment I could. I also assisted with manufacturing sugar Easter Eggs when required. My son would pay my fuel for travelling from Cambooya to Southbrook to assist at the shop.
9.In about September 2003, I started working at the business almost on a fulltime basis and my son continued to pay me fuel for travelling as well as providing meals at work and approximately $400.00 per week.
10.I was not obliged to go into the business every day and could take time off whenever I wished. When I attended at the business I would undertake work which my son told me needed to be done.
11.On a number of occasions, I would identify tasks that needed to be done and talked this over with my son, before commencing work. I provided all my own tools for any maintenance tasks which had to be done around the business.
11.The money my son paid to me I saw as a way of saying thank you for helping out at the business which I saw as a family affair, especially given our guarantee for the business.”
When the plaintiff was cross-examined at the hearing of this application, he said that there had been some discussions between John and him about what would happen when he started working almost fulltime in September 2003. He said that John agreed to pay him the amount of $400 per week, but that he was only paid that money when John had it. He said that most times it was less than $400 per week that he received, but in addition, he would fill up his car with petrol on Kerredan’s account. He said that at least on one occasion he was not paid any money at the end of the week by John. With respect to meals, the employees of the business brought their own meals, but the plaintiff and his wife were provided meals by John and his wife. The tools that the plaintiff used for the work he carried out were mostly his tools, but he did use some of John’s tools.
Ms Barber, a solicitor employed by the second defendant’s solicitors, spoke to John on 5 March 2008 and has deposed to being told by him that the plaintiff was noted as an employee in the books of the business.
John’s affidavit filed on 16 July 2008 was prepared by the plaintiff’s solicitors. His description of the payments made to his father and the nature of his father’s role in the business in that affidavit was as follows:
“4.He was not paid a regular wage, but when there was cash at hand in the business, he would be paid an amount from whatever money was available, be it $200, $120 or $400. The business also paid for his fuel. He did not receive a pay slip, didn’t sign the pay book and I can’t recall ever taking tax instalments out of any money paid to him.
5.I did not treat my father as one of the regular employees, and he did not have to work if he didn’t want to. He simply came to the business when he could to help out and worked doing things which he thought needed doing. He would bring his own tools and also use some I had on site - whatever was needed to get the job done.
6.My father was part of the family business and was treated as such and not an employee.”
John referred in paragraph 7 of that affidavit to being contacted by an investigator for the first defendant about 8:30pm about three and one-half years after the plaintiff’s accident. John stated that he answered the questions that the investigator asked as best as he could, but he did not have any information or documentation available to ensure the accuracy of his answers.
John’s affidavit filed on 11 August 2008 was prepared by the first defendant’s solicitors. The terms of the arrangement for payment of the plaintiff were described by John in this affidavit as:
“4.We agreed to pay him $400.00 per week cash plus pay his fuel and give him lunch, if there was cash there. We had agreed on this amount because it was about the same as he was getting paid doing contract work with the farmers which was $100.00 per day.
5.Although we agreed to pay him $400.00 per week plus fuel, plus lunch, we were not always able to pay him the full amount. We only paid him what cash we had on site. Sometimes it was $200.00, sometimes it was $400.00. Sometimes we paid him more but we always tried to keep it averaged at $400.00 per week.
6.Sometimes if Dad only worked minimal hours in the business, he would tell me not to pay him the full $400.00.”
In this second affidavit John also confirmed as correct both the statement he signed on 17 April 2007 and the statement he signed on 18 July 2007, despite the differences between those statements and the contents of the affidavit filed on 11 August 2008.
In his oral evidence John clarified that the “agreement” that he reached with his father to pay him $400 per week was reached in a discussion at a barbecue or sitting around having a cup of tea, but it was in the context that the sum of $400 was what the plaintiff would be paid, if there were cash available in the business to give that amount to the plaintiff. John said that the plaintiff might have got $400 per week two or three times and that it was probably most times $200, $220 or $150. John said that as far as he knew the payments to the plaintiff were not recorded in the business in any way and that the plaintiff did not sign for the money that he received in a wages book. He conceded that there may have been one or two occasions when the plaintiff was paid more than $400 per week.
Mrs Daphne Williamson in an affidavit filed on 18 July 2008 set out her observations of the plaintiff’s involvement in Kerredan’s business from September 2003. She was also cross-examined. She explained that although the plaintiff was involved in working in the business on a more regular basis from September 2003, he would still work on weekends to assist John, but that he had flexibility to take any time off that he wanted to, such as for taking Mrs Williamson to the doctor. Although she had said in paragraph 14 of her affidavit that the plaintiff was paid $400 per week when John could afford it, she said in oral evidence that the plaintiff was not getting $400 per week.
The plaintiff’s solicitors have ascertained from the Australian Taxation Office that no taxation instalments have ever been remitted by Kerredan to the Australian Taxation Office on behalf of the plaintiff.
Kerredan did not lodge a 2004 tax return. Kerredan had left the computers it rented from Flexirent Capital Pty Ltd at the business premises together with all other business records at the time that it ceased trading. According to John, agents for the ANZ Bank took possession of the business premises and John has never been able to obtain access to either electronic or hard copy business records for the 2004 tax year. Kerredan’s accountants have no records for the financial affairs of Kerredan for the year ended 30 June 2004. Inquiries made of the ANZ Bank and Flexirent Capital Pty Ltd for the purpose of this application have been unsuccessful in obtaining any 2004 tax year records for Kerredan.
Findings on relevant factual matters
Because of the conflicting statements made prior to this proceeding by the plaintiff and John about the terms and circumstances of the work undertaken by the plaintiff for Kerredan from September 2003, it is necessary to set out my findings on factual matters where there were such differences or discrepancies.
The arrangement between John (on behalf of Kerredan) and the plaintiff relating to his greater involvement in daily tasks for the business from September 2003 was that the plaintiff would be paid $400 cash per week from the business, the business would pay for the plaintiff’s fuel for his vehicle and the plaintiff would continue to have the flexibility in work hours that he required for personal matters. Despite John’s assertion that the term of the arrangement was that the cash would be paid, if there were available funds, it is not clear (and therefore I am not prepared to find) that that was a term which was discussed or agreed at the outset. The reality of the financial position of the business was, however, that there were not funds available each week for the plaintiff to be paid $400 in cash. The arrangement, as implemented, was that the plaintiff was paid $400 per week or such other amount (usually less than $400) that was available to be paid over by John from the cash funds of the business.
Although reference was made by both the plaintiff and John to a term of the arrangement about the provision of the plaintiff’s lunch, the description given of the circumstances in which lunch was provided to the plaintiff and Mrs Williamson suggests that it was done as a practical matter by John and, possibly, his wife (but not on behalf of Kerredan), because the plaintiff and Mrs Williamson were at the premises at lunchtime and were family members.
The intention of John and the plaintiff from the commencement of the greater involvement of the plaintiff in the business in September 2003 was that the plaintiff would attend each week day, but that was subject to other demands on the plaintiff’s time, such as the need to take Mrs Williamson for medical appointments. The weekend work of the plaintiff that was undertaken to assist John prior to September 2003 and continued after September 2003 was not a factor that affected the amount of cash given each week by John to the plaintiff.
John has given conflicting versions about whether or not the plaintiff was treated as an employee in the books of Kerredan and the books of Kerredan cannot be checked. It is a matter of looking at the circumstances in which each version was given and considering all the evidence that was relevant to the issue of whether the plaintiff was treated by Kerredan as an employee. The payment of the weekly amount to the plaintiff in cash that was dependent on the quantum of cash available for that purpose, but was not dependent on the number of hours worked by the plaintiff, that no taxation instalments were deducted from what was paid by John to the plaintiff and that this arrangement varied from that which applied to the employees of Kerredan who were recorded as employees in the wages book for the business, justify the conclusion that it is probable the plaintiff was not treated in the records of the business as an employee.
The arrangement between John and the plaintiff, as implemented from the time of the plaintiff’s greater involvement in the business from September 2003, does not reflect well on John with respect to compliance by Kerredan with taxation obligations or its obligations to creditors of the business. The failure to record the withdrawals of cash from the business at a time when the business was struggling financially is a matter of concern. These negative aspects of John’s conduct must not, however, prevent a proper consideration of the characterisation of the plaintiff’s relationship with Kerredan at the time of the accident.
Whether there was an intention to create legal relations
The definition of “worker” in s 11 of the WCRA or the extended definition incorporated by that provision depends on there being a contract of service between the employer and worker or like contract. The threshold issue for determining whether there is an employment relationship is therefore whether the parties entered into a contract intending it to be legally binding. An employment relationship only exists if the employee has entered into a contract of service with the employer with the mutual intention of creating legal relations: Dietrich v Dare (1980) 30 ALR 407, 411 (Dietrich). Most of the authorities on determining whether a person is an employee or an independent contractor do not involve the issue of whether a contract exists, because the focus is on the nature of the contract between the parties. Where there is a family or social or volunteer arrangement involved in the undertaking of tasks in a work environment, it may suggest that there was not an intention to create legal relations. See Teen Ranch Pty Ltd v Brown (1995) 87 IR 308, 310 per Handley JA. In light of the evidence about the familial relationship between John and the plaintiff and the circumstances in which the plaintiff worked in the business, the first issue to be addressed is whether at the date of the accident the plaintiff was working in the business under a contract intended by both John (on behalf of Kerredan) and the plaintiff to be legally binding.
As was explained in Ermogenous v Greek Orthodox Community of SA Inc (2002) 209 CLR 95, 105-106 [25] the test of intention is objective:
“Because the search for the ‘intention to create contractual relations’ requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word ‘intention’ is used in this context, it is used in the same sense as it is use in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties.”
(footnotes omitted)
An example of the discernment of an objective intention not to create legal relations is Dietrich which concerned an arrangement between the respondent who looked for opportunities to help people who were unemployed and the appellant who was unemployed, had an alcohol problem and a noticeable physical disability. They agreed on the appellant participating in a trial of painting the respondent’s house for $2 per hour to ascertain the appellant’s capacity to do this type of work in a satisfactory manner. The appellant climbed a ladder to commence the task, fell and was injured badly. It was held by the majority of the High Court that the trial of the work did not place the appellant under any legal obligation to do the work nor give the respondent any assurance of benefit for the payment of the money that he was prepared to give the appellant for undertaking the trial. It was held that the arrangement lacked the element of mutuality of obligation that was essential to the formation of a contract: Dietrich at 411.
The plaintiff’s farm work for third parties had ceased in about September 2002. The increase in the plaintiff’s participation in Kerredan’s business from September 2003 coincided with the recuperation of Mrs Williamson from her laminectomy and the separation of John from his wife. It also occurred at a time when the business had generated a significant loss for the year ended 30 June 2003 and the plaintiff as a guarantor of the bank debts of the business had sold real property and set aside funds in a term deposit in anticipation of the guarantee being called on by the ANZ Bank.
I have considered whether there is any significance in the negotiation of an amount for payment to the plaintiff by reference to the rate he was paid for the work he was doing for Mr Ridgeway. As the paid work for Mr Ridgeway had ceased about one year prior to September 2003, it was not a situation of the plaintiff negotiating for a substitute income. The significance of the choice of $400 per week plus fuel by reference to the plaintiff’s previous earnings was reduced when that was a starting point for what might be paid, but the actual amount paid was affected by other factors. The making of an arrangement for payment of a weekly amount of $400 does not amount to an agreement to pay remuneration at that rate for work done when the amount paid was not dependent on whether the plaintiff worked each week day, was not affected by whether the plaintiff actually worked on weekends and was not paid each week as a matter of course. Although there may have been one or two occasions when the plaintiff was paid more than $400 per week, because he had been paid less than $400 in the previous week, there was no suggestion of consistent accumulation of arrears when the weekly payment was less than $400.
One way of testing whether there was an intention to create legal relations on the part of both John and the plaintiff is whether the plaintiff could have successfully sued Kerredan for the shortfall in payments of $400 per week from the time he commenced his greater involvement in the business in September 2003 until the date of the accident. In the circumstances that I have found applied to the implementation of the arrangement between the plaintiff and John, the answer must be in the negative.
Extensive submissions were made at the hearing by reference to the usual indicia of an employment relationship, as explained in authorities such as Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, 24, 35-37. It is relevant, however, to compare the characteristics of the relationship between the plaintiff and Kerredan with the indicia of an employment relationship only if there was the mutual intention to enter into a legally binding contract. In reflecting on the evidence in the context of the indicia of an employment relationship, I kept returning to the proposition that it was artificial to look at a particular aspect of the evidence of the relationship without taking into account the familial relationship between the plaintiff and John. This highlighted the need to dispose of the threshold issue of whether there was the mutual intention of the parties to enter into a legally binding contract before considering the nature of the contract.
I am satisfied that on an objective analysis of the evidence, at the time the arrangement for the greater involvement of the plaintiff in Kerredan’s business was implemented, there was no intention to create legal relations on the part of both John (on behalf of Kerredan) and the plaintiff and that remained the situation at the date of the accident. If the basic terms that the plaintiff and John had agreed upon had been implemented according to those terms (putting the question of flexibility of attendance by the plaintiff at the business to one side), it would be difficult to escape the conclusion that the plaintiff was other than an employee. That was not however how the arrangement was implemented, when it came to the flexibility of attendance of the plaintiff, the continuation of his assistance at weekends and the lack of consistency in the weekly payment made by John to the plaintiff from the cash funds of the business, either in respect of the weekly amount or in relation to the number of hours worked each week by the plaintiff. The plaintiff’s motivation of wanting to assist his son John in the business at a time of both personal and financial difficulty for John is not irrelevant to the analysis of the evidence about the relationship between the plaintiff and Kerredan from September 2003 to the date of the accident.
In the absence of an intention to create legal relations on the part of both John and the plaintiff, there was no contract of service between Kerredan and the plaintiff. The plaintiff was therefore not an employee of Kerredan within the meaning of that expression in the relevant exclusion in Kerredan’s public liability policy or a “worker” as defined for the purpose of the WCRA.
In the light of this conclusion, the plaintiff cannot pursue its claims against the second defendant on the basis that Kerredan was the employer of the plaintiff. As the plaintiff cannot maintain its claim against the second defendant, there is no point in considering the question of whether the limitation period should be extended to enable the claim to be made against the second defendant.
Answers to the questions
The list of questions set out in paragraph [9] above should therefore be answered as follows:
1. (a)The plaintiff was not employed by Kerredan in terms of the policy when he sustained the alleged injuries.
(b)The plaintiff was not a “worker” pursuant to the WCRA when he sustained the alleged injuries.
2.It is unnecessary to answer question 2.
3.It is unnecessary to answer question 3.
I will hear submissions from the parties on the questions of any consequential orders and the costs of this application.
2
4
1