Citation : CARUSO -v- EWART [2012] WADC 181

Workers' compensation - Appellant engaged to carry out renovation work for respondent - Whether employee or self­employed contractor - Whether appeal from arbitrator to District Court involved question of law - Workers' Compensation and Injury Management Act 1981 (WA), s 247

Workers' Compensation and Injury Management Act 1981 (WA), s 247, s 254

Atanasoska v Inghams Enterprises Pty Ltd [2009] WASCA 17

BHP Billiton Iron Ore Pty Ltd v Brady [2008] WASCA 250

Caruso v Ewart [2012] WADC 181

Catholic Education Office of Western Australia v Granitto [2012] WASCA 266

Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1

Pacific Industrial Co v Jakovljevic [2008] WASCA 60

Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16

Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439

Zurich Australian Insurance Ltd v AMEC Services Pty Ltd (Unreported, WASCA, Library No 980139, 31 March 1998)

2 NEWNES JA: This is an appeal from a decision of Wisbey DCJ in the District Court, who quashed the decision of a WorkCover arbitrator that the appellant was entitled to workers' compensation as a result of injuries he suffered while carrying out renovation work for the respondent: Caruso v Ewart [2012] WADC 181. His Honour found that the appellant was not entitled to workers' compensation as he had been engaged to carry out the work as an independent contractor, not as an employee of the respondent. The appellant contends that his Honour erred in so finding.

3 As the appeal is brought pursuant to s 254 of the Workers' Compensation and Injury Management Act 1981 (WA), the appellant requires leave to appeal. On 14 March 2013, Pullin JA ordered that the question of leave be referred to the hearing of the appeal.

4 The respondent owned a bed and breakfast business in Margaret River, in the south-west of the State, and had engaged the appellant's brother, Angus Ewart, to manage the bookings and run the business. The precise nature of the business relationship between the respondent and Angus Ewart was unclear. It was described by the respondent as a 'sort of partnership'. However, nothing turns on it.

5 The respondent subsequently purchased some land adjoining the property on which the bed and breakfast stood. The land was on a strata title comprising two lots. The respondent sold one lot (lot 1) to his sister, who subsequently sold it to Angus Ewart. The respondent retained the other lot (lot 2).

6 The respondent decided to use the building on lot 2 for short term accommodation under the name the 'Admiral Stirling Inn' (the Inn). The respondent decided to renovate the Inn and, on 6 October 2009, obtained a building licence, as owner builder, from the Shire of Margaret River for that purpose.

7 In about May 2009, the appellant arrived in Margaret River seeking work. Angus Ewart introduced him to the respondent to see if the respondent could provide him with some paid work. The appellant was subsequently engaged by the respondent to carry out painting and related renovation work at the Inn for the sum of $30 per hour. The appellant carried out the work and periodically rendered invoices for the hours worked, which were paid by the respondent.

8 The work associated with the Inn formally concluded on about 5 February 2010, but the appellant continued to carry out work for the respondent, for which he rendered invoices to the respondent. This included work at a building known as 6 Townview Terrace, situated on lot 1, owned by Angus Ewart. It was not in issue that the respondent, rather than Angus Ewart, asked the appellant to carry out the work at the Townview Terrace property and that the respondent was to pay for it. Why that fell to the respondent rather than Angus Ewart was not entirely clear, but it is not significant.

9 On 18 February 2010, while the appellant was fitting downpipes at the Townview Terrace property he fell from a ladder which had become unstable due to the uneven brick paving surface on which it stood. The appellant suffered a fractured right calcaneum and a tear to the right shoulder rotator cuff. He sought workers' compensation for the period that he was incapacitated by his injuries.

10 The respondent denied that the appellant was entitled to workers' compensation, contending that he was not an employee but an independent contractor who had been engaged under an oral contract to provide painting and other services at an agreed hourly rate. The appellant, on the other hand, contended that he was an employee of the respondent.

11 On 28 March 2012, WorkCover Arbitrator Rutherford found that the appellant was a worker who had suffered injury in the course of his employment and ordered the respondent to make weekly payments of compensation for total incapacity from 18 February 2010, calculated pursuant to the provisions of the Act, and such statutory expenses as the appellant had reasonably incurred.

12 The arbitrator identified the issues (relevantly) before him as whether the applicant Mr Ewart was a 'worker' as defined in the Act, and if so, whether the applicant was injured in the course of his employment by the respondent.

13 Based on the oral evidence as to the relationship between the appellant and the respondent and various invoices, tax returns and financial statements, the arbitrator found, among other things, that:

• the respondent supplied all materials for the work (e.g. paint and hardware);
• the appellant supplied his own labour and tools, but the tools were not of a specialist nature;
• apart from one short period, the appellant regularly worked for the respondent over a period of about eight months;
• while the appellant did not obtain paid work from anyone else over that period, there was no evidence that he could not have obtained work elsewhere;
• the appellant was responsible for payment of income tax and claimed tax deductions for work-related expenses;
• the bulk of work performed by the appellant involved painting various rooms at the Inn as part of the renovation project;
• the respondent regularly reviewed the progress of the work 'as one would expect of an owner/builder', instructed the appellant which rooms were to be painted and inspected the quality of the work from time to time [41]; and
• it was to be inferred from a statement the appellant made to the hospital on his admission after the accident that he was 'working for himself' that he saw himself as self-employed [42].

14 The arbitrator concluded that the appellant had been engaged under a contract of service, that is, an employment contract. The arbitrator regarded the most significant indicia supporting this conclusion as being the regular nature of the employment, the supervisory capacity and status of the respondent, the fact that the appellant was not working for any other party over a long period of time, and 'generally the totality of the relationship between the parties [which] is strongly suggestive of an employee/employer relationship'.

15 The arbitrator found that although the accident did not occur at the Inn, that work having finished on or about 5 February 2010, the appellant remained employed by the respondent when he was working on the Townview Terrace property. He concluded that the latter work was done pursuant to the respondent's instructions and during the course of the appellant's employment by him. The arbitrator noted that there was no evidence the appellant's employment with the respondent had been terminated and there was evidence to the contrary, including an invoice dated 12 February 2010 rendered by the appellant.

16 The arbitrator concluded that the appellant was injured in the course of his employment with the respondent and entitled to compensation for his injuries. The arbitrator found that the appellant was totally incapacitated for work.

17 The appellant appealed to the District Court against the decision of the arbitrator. The primary judge allowed the appeal.

The reasons for decision of the primary judge

18 The primary judge noted that, under s 247 of the Act, an appeal against the decision of the arbitrator lay only with leave of the District Court and that leave may not be granted unless a question of law is involved. His Honour found, in effect, that the question of law raised by the appeal was whether on the facts it was open to the arbitrator to find that the appellant was a 'worker' within the meaning of the Act [6]. His Honour concluded that it was not [43].

19 The primary judge noted that the appellant had clearly regarded himself as self-employed. That was evident from his 2010 tax return in which he had stated that no income had been earned as salary or wages, but that the sum of $28,831 had been earned as net business income, after deduction of $6,719 for business expenses, including motor vehicle expenses, replacement of tools, telephone expenses and purchases. His Honour observed that the appellant's self-employment was also supported by other evidence. The control exercised by the respondent over the appellant in the performance of his work was no more than would be expected to be exercised by a person who engaged a painting contractor. No specific directions were given to the appellant as to the hours he was required to work and he had given evidence before the arbitrator that if he had something else he wanted to do he would inform the respondent and then go off and do it. In that connection, his Honour noted that the appellant took approximately three weeks off to carry out kitchen renovations for his daughter; he did not work between 28 May 2009 and 5 June 2009 when he went to Perth to visit family; and he did not work between 18 June 2009 and 1 July 2009 when work was delayed because of the non-delivery of gyprock. He provided his own tools of trade, which he valued at $3,000, and had spent $840 on replacements during the relevant period.

20 His Honour also noted that the appellant was paid a gross hourly amount without any deduction for income tax or compulsory employee superannuation, there was no provision for penalty rates, sick leave or holidays, and the appellant was at liberty to terminate the arrangement at any time.

21 The primary judge concluded that on the facts 'the ultimate question whether the [appellant] was acting as the servant of the [respondent] required a negative answer' [46]. His Honour further concluded that the appellant did not fall within the extended definition of 'worker' in s 5(b) of the Act, as he was not engaged in work for the purpose of the respondent's trade or business at the time of the accident but work of a casual nature on Angus Ewart's property [48] - [49].

22 The respondent's appeal was allowed and the decision of the arbitrator set aside.

23 It is unnecessary to set out the grounds of appeal in full. The substance of them, as developed in the appellant's written and oral submissions, was that the primary judge erred in law:

(1) in concluding that the finding of the arbitrator that the appellant was a 'worker' within the meaning of the Act involved an error of law;

(2) by failing to identify how the arbitrator had erred in finding that the appellant was a 'worker' and in simply substituting his own decision for that of the arbitrator.

24 As mentioned earlier, the appeal to the primary judge was brought pursuant to s 247 of the Act, which provides, relevantly, that an appeal lies to the District Court against a decision of an arbitrator only with the leave of the court, and the court may not grant leave unless 'a question of law is involved'.

25 A question of law arises, among other things, if only one finding is open on the facts: Hope v Bathurst City Council [1980] HCA 16; (1980) 144 CLR 1, 8; Vetter v Lake Macquarie City Council [2001] HCA 12; (2001) 202 CLR 439, 450 - 451. An appeal 'involves' a question of law where either an error of law, or an error of mixed law and fact, is involved: BHP Billiton Iron Ore Pty Ltd v Brady [2008] WASCA 250 [3]; Atanasoska v Inghams Enterprises Pty Ltd [2009] WASCA 17 [20].

26 The appeal to the primary judge plainly involved a question of law. The question, as the primary judge identified, was whether the finding by the arbitrator that the appellant was a 'worker' within the meaning of the Act was open on the facts. His Honour concluded that it was not; that the only conclusion open on the evidence was that the appellant was not a worker within the meaning of the Act but a self-employed contractor. For the reasons I will come to under ground 2, his Honour was clearly correct. I would dismiss ground 1 of the appeal.

27 An appeal under s 247 is neither a hearing de novo, nor an appeal in the 'strict sense', and the District Court, within the constraints marked out by the nature of the appellate process, must conduct a 'real review': see Pacific Industrial Co v Jakovljevic [2008] WASCA 60 [20], [24]. Where a review is undertaken, the appellant must provide a proper basis for disturbing the arbitrator's decision by pointing to some error in it; the appellant may not simply invite the court to ignore the arbitrator's decision and start again with a view to having the court substitute its own decision for that of the arbitrator: Pacific Industrial [20], [26]. See also Catholic Education Office of Western Australia v Granitto [2012] WASCA 266 [56] - [57].

28 It was submitted by the appellant that the primary judge had failed to identify how the arbitrator had erred and had simply, and impermissibly, substituted his own view for that of the arbitrator.

29 I do not consider there is any substance in that. In his reasons for decision, the primary judge, having identified the question of law in issue on the appeal, canvassed the substance of the evidence before the arbitrator and the findings of fact made by the arbitrator. It was not contended by the appellant that his Honour erred in respect of either. His Honour then set out separately those indicia revealed by the evidence which he considered pointed to a contract of service and those which pointed to the appellant being self-employed, as follows:

Indicia suggesting contract of service:

(i) The remuneration was essentially referrable to the [the appellant's] 'personal manual labour services' although painting requires a certain skill level;

(ii) [the respondent] directed [the appellant] as to the various tasks that he was to undertake;

(iii) [the respondent] provided the paint and other necessary hardware;

(iv) although not specifically addressed in the arbitration, it is a reasonable inference that [the appellant] was only going to work for [the respondent] during the period of the performance of the work.

Indicia suggesting self-employment:

(i) the representation by [the appellant] in the relevant tax return and at the Margaret River Hospital was that he was self-employed;

(ii) [the appellant] was remunerated on a gross hourly fee basis, and [the respondent] did not make deductions for income tax;

(iii) [the respondent] did not make statutory superannuation deductions;

(iv) there was no provision in the agreement between the parties for [the appellant] to receive holiday pay, sick leave entitlement or penalty loading;

(v) [the respondent] exercised no greater control than would be expected in circumstances where a person engaged the service of a painter;

(vi) [the appellant] provided hand tools, although not of substantial value;

(vii) [the appellant] appears to have had flexibility concerning how and when he worked (e.g. time taken off to work on his sister's kitchen).

30 Again, it was not suggested by the appellant that his Honour was in error in respect of the indicia he identified or the way in which he classified them.

31 The primary judge directed himself as to the law (correctly in my respectful view) by reference to a passage from the judgment of Wilson and Dawson JJ in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, 36, in which their Honours pointed out that whilst in many, if not most, cases it is still appropriate to apply the control test (in the sense of the right to control) in the first instance other indicia (examples of which their Honours referred to) may also be relevant. I should add that in that case the reasons of Mason J (with whom Brennan and Deane JJ agreed) were to similar effect. Mason J said:

The existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question. ... Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee (24).

32 It was, however, submitted by the appellant that the primary judge ought to have considered the principles set out in the decision of the Full Court of this Court in Zurich Australian Insurance Ltd v AMEC Services Pty Ltd (Unreported, WASCA, Library No 980139, 31 March 1998), and especially those referred to by Ipp J (11 - 14). The appellant did not say in what respect the principles enunciated there differed in any material respect from those enunciated in Stevens nor, if there was a difference, on what basis this court should prefer what was said in Zurich. I am unable to discern any difference. It seems to me that in Zurich the court simply applied what had been said in Stevens.

33 Having directed himself as to the law, the primary judge then considered the various indicia which were relevant in the present case and concluded that in light of them the arbitrator's finding that at the relevant time the appellant was a worker, rather than a self-employed contractor, was not one that was open on the facts; on the evidence, the only conclusion open was that the appellant was a self-employed contractor.

34 The primary judge was correct to so find. At the time, the appellant evidently considered that he was self-employed, as evidenced by his taxation returns and his statement to the hospital, and the evidence pointed overwhelmingly to that being the correct conclusion. As his Honour found, the degree of control exercised by the respondent over the appellant's work was not to the degree to be expected in an employer/employee relationship and was no more than would be expected of someone who employed a contractor. There were no stipulated working hours, the appellant was free to engage in other pursuits, including (as the arbitrator found) other paid work, and the arrangement was one that could be terminated by either party at any time. The appellant provided his own tools of trade. The appellant was paid an agreed hourly amount without deduction of income tax or superannuation, and the agreement had no provision for annual or sick leave, or for penalty rates (although the appellant said he often worked on weekends).

35 Contrary to the conclusion of the arbitrator, the totality of the relationship between the parties pointed irresistibly to the appellant being a self-employed contractor. On the evidence, a finding that the appellant was an employee of the respondent was not open.

36 I would add for completeness that his Honour's further finding that the appellant was not at the time of the accident within the extended definition of 'worker' in s 5(b) of the Act was also correct, for the reasons his Honour gave.

38 I would refuse leave to appeal and dismiss the appeal.