Clarke v Divisional Security

Third Respondent: Lubo Raskovic

CATCHWORDS: Unfair contract - application under s 106 of the Industrial Relations Act 1996 - applicant worked as a security officer - contract under which the applicant worked an oral contract whereby applicant paid at an hourly rate of $12, later increased to $14 per hour - whether the work was performed by the applicant or through his service company Apteka Pty Ltd - consideration as to which corporate entity employed the applicant - whether contract between the applicant and the first respondent was unfair - whether contract between the applicant and the first respondent was against the public interest - whether the contract avoided the provisions of the Security Industry (State) Award - whether the contract permitted the first respondent to use a dominant bargaining position - whether the contract was unfair because of the first respondent's conduct in transferring the applicant's employment to the second respondent - whether the first respondent failed to pay the applicant a superannuation guarantee - contract found to be unfair, against the public interest and to avoid the provisions of the Award - whether s 108B of the Act applicable - consideration of third respondent's culpability and liability to pay the whole of underpayment claimed - third respondent culpably associated with the making and operation of the contract - orders - costs.

Industrial Relations Act 1996 LEGISLATION CITED: Superannuation Guarantee (Administration) Act 1992 (Cth) Taxation Administration Act 1953 (Cth)

Abboud v NSW (Department of School Education) (No. 2) (2000) 99 IR 299 All-Fect Distributors Limited & Ors v Stewart [2007] NSWIRComm 24 Automotive, Food, Metals, Engineering, Printing and Kindred CASES CITED: Industries Union, NSW Branch v David (2006) 154 IR 297 Brown v Rezitis (1970) 127 CLR 157 George Stewart v All-Fect Distributors Limited & Ors [2006] NSWIRComm 195 National Cellular & Anor v Efficient Marketing Services & Anor [2001] NSWSC 244 Wheatley v Armstrong [1995] NSWIRComm 3

HEARING DATES: 20 September 2006, 21 September 2006, 25 September 2006, 7 February 2007. Written submissions: 11 April 2007, 18 May 2007, 23 May 2007.

Applicant: Mr D Shoebridge, of counsel Solicitors: Employment Lawyers

First Respondent: Mr A Britt, of counsel: 20 September 2006, 21 September 2006, 25 September 2006. No appearance: 23 November 2006, 7 February 2007. Solicitors: Jason Li Lawyers: 20 September 2006, 21 September 2006, 25 September 2006. LEGAL REPRESENTATIVES: Second Respondent: No appearance

Third Respondent: Mr A Britt, of counsel: 20 September 2006, 21 September 2006, 25 September 2006. Mr T Russell: 23 November 2006. In person: 7 February 2007. Solicitors: Jason Li Lawyers: 20 September 2006, 21 September 2006, 25 September 2006. ERA Legal: 23 November 2006.

Robert Clarke v Divisional Security (Aust) Pty Limited and others

Application under s 106 of the Industrial Relations Act 1996

1 These proceedings are brought under s 106 of the Industrial Relations Act 1996 (the Act). The applicant, Robert Clarke, in a summons for relief filed on 7 November 2002, claims that contracts between himself and the first and second respondents were unfair. 2 The first respondent, Divisional Security (Aust) Pty Limited was placed under external administration on 21 November 2006. The second respondent, Starfinn Pty Limited has been in liquidation since the commencement of the proceedings. The applicant obtained leave from the Supreme Court under the relevant provisions of the Corporations Act 2001 (Cth) to proceed against both corporate respondents. A term of the leave granted was that there be no monetary orders sought or enforced against either corporate entity. The applicant in these proceedings, therefore, seeks that all compensatory money orders, including costs and interest be made against the third respondent. 3 The third respondent, Lubo Raskovic, in an affidavit affirmed on 21 September 2006 deposes that he had been the managing director of the first respondent until 28 July 1999, and until that date also held shares in the first respondent. Further, that on 18 August 2004 the third respondent was again appointed managing director of the first respondent and acquired shares in that entity on the same date. Between the two periods, the third respondent in oral evidence said that he had been disqualified as a director by ASIC, because of breaches of the Corporations law. He conceded in cross-examination that these breaches (which were not specified in evidence) related to his dealings and operations in his capacity as a director of the first respondent. He said that in that same intervening period his role in relation to the first respondent was that of a security licensed consultant, and that his mother at that time became a director of the first respondent. An ASIC extract dated 11 April 2006 setting out certain details in relation to the first respondent is annexed to the third respondent's affidavit. It asserts that the third respondent was appointed as a director of the first respondent on 18 August 2004 but otherwise contains no specific details as to his earlier status. A second ASIC extract contained in the court bundle of documents produced by the parties shows that the third respondent's mother, Ms Slava Raskovic was the sole director of the first respondent from 29 July 1999 until 21 August 2002 (the date the extract was printed). 4 In a second affidavit sworn on 11 April 2006 and filed in the Supreme Court, the third respondent has described the first and second respondents as part of a corporate group, known as the Divisional Security group. It comprised, according to the third respondent, at various times, the following companies:

(a) Armoured Security Services Australia Pty. Limited (ACN 113 705 598);

(b) Cash and Valuable Logistics Pty. Limited (ACN 074 686 794) ("Cash and Valuables");

(c) Divisional Security (Aust) Pty. Limited (ACN 072 616 749) (in external administration) (the first respondent);

(d) Divisional Security Group Pty. Limited (ACN 099 521 187);

(e) Site Security Services Pty Limited (ACN 099 759 074) ("Site Security");

(f) Working Dogs Academy Pty. Limited (ACN 105 514 047) ("Working Dogs Academy");

(g) Charter Workforce Pty. Limited (ACN 097 177 207) (in liquidation) ("Charter Workforce");

(h) Divisional Holdings Pty. Limited (ACN 051 507 012) (now deregistered) ("Divisional Holdings");

(i) Divisional Protective Services (Australasia) Pty Limited (ACN 071 714 460) (now deregistered) ("Protective Services");

(j) Security Operations Network Services Pty. Limited (ACN 003 837 143) (now deregistered) ("Network Services");

(k) Starfinn Pty. Limited (ACN 094 365 787) (in liquidation) (the second respondent). 5 In the affidavit sworn on 11 April 2006 the third respondent deposes that he operates the Divisional Security group, which conducts business in the security industry. In a case management document provided by the parties at the commencement of the proceedings and tendered into evidence, a section headed "Matters Agreed" contains the following concessions by the first, second and third respondents:

(1) The First Respondent is a corporation carrying on business of providing security services and is able to sue and be sued in its corporate name and style.

(2) The Second Respondent was a corporation (prior to going into liquidation) carrying on business of providing security services and is able to sue and be sued in its corporate name and style.

(3) The Third respondent was a director of the first respondent from 29 January 1996 to 8 February 1999 inclusive and has at all times been a shareholder of the First Respondent, with a proprietary and equitable interest in the First and Second Respondents. The Third Respondent was at all material times the managing director of the First Respondent. The Third Respondent was a "close associate" of the First and Second Respondents, as defined by the Security Industry Act 1997.

(4) The Applicant's employment with the Second Respondent came to an end on 28 February 2002. The claim

6 The summons for relief relied in the alternative on the following elements which constitute the definition of an unfair contract under s 105 of the Act, as against the first and second respondents:

(1) [T]hat the contract between the Applicant and the First Respondent was unfair, harsh, unconscionable or against the public interest, in so far as it was designed to, or did in its operation, avoid the provisions of an industrial instrument, namely the Security Industry (State) Award.

(2) [T]hat the contract between the Applicant and the Second Respondent, was unfair, harsh, unconscionable or against the public interest as a consequence of the First Respondent's conduct in transferring the Applicant's employment to the Second Respondent, which was to the Applicant's detriment.

(3) [T]hat the contracts between the Applicant and the First Respondent and the Second Respondent were unfair, harsh, unconscionable or against the public interest, as a consequence of the unfair conduct of the First Respondent and the Second Respondent in failing to pay the Superannuation Guarantee on behalf of the Applicant in accordance with the Superannuation Guarantee (Administration) Act (Cth) 1992. 7 In written submissions the applicant through his counsel, Mr Shoebridge, characterised each contract with the first and second respondents respectively, as unfair, harsh or unconscionable, or against the public interest on the following bases:

(a) It was designed to or did, in its operation, avoid the provisions of an industrial instrument, namely the Security Industry (State) Award.

(b) It permitted the First and Second Respondents to use a dominant bargaining position over the Applicant to the Applicant's detriment;

(c) It purported to allow the Applicant's employment to be transferred from the First to the Second Respondent without the knowledge or consent of the Applicant and to the Applicant's detriment; and

(d) It allowed the First and Second Respondents to avoid payment of the Applicant's entitlement under the Superannuation Guarantee (Administration) Act (Cth) 1992. The course of the proceedings

8 During cross-examination of the applicant by Mr Britt, counsel for the first and third respondents, made an application to amend the Reply to the applicant's summons. The scope of the proposed amendments, the Court was informed, was to deny that there was in fact a contract at all between the first respondent and the applicant or between the first respondent and the applicant's service company, Apteka Pty Ltd. The following day the first and third respondents filed in court, with the applicant's consent, a notice of motion attaching a draft amended reply. The third respondent's affidavit dated 21 September 2006 was also admitted without objection. The third respondent was then called to give evidence and cross-examined. Evidence was then called by the applicant on the notice of motion. The applicant called Mr Wayne Sylvester Uzelac who told the Court that in about August 1998 he had commenced employment with the first respondent as its operations manager. Following cross-examination of Mr Uzelac the proceedings on the motion were adjourned part-heard until 23 November 2006, the fourth day of hearing. On that day the Court was informed that the first respondent had gone into liquidation on 17 November 2006, and no longer was to be legally represented in the present proceedings. The third respondent had in the interim obtained new legal representation but had himself failed to attend Court. The applicant advised the Court that he intended to seek leave to proceed against the first respondent, and required some time in which to do that. 9 The notice of motion and the substantive proceedings were adjourned part-heard, until 7 February 2007. On that day the third respondent's legal representative sought leave to withdraw from the proceedings on the notice of motion as well as the substantive proceedings. Notices of ceasing to act were duly filed in Court, and the third respondent's legal representative was granted leave to withdraw. The third respondent, appearing for himself informed the Court that he no longer wished to proceed with his application to amend the reply, by way of notice of motion. The applicant then made an application that the evidence adduced on the notice of motion become evidence in the case. The Court informed the third respondent of the consequences of that application, if granted. The third respondent thereafter indicated that he had no objection to the application. The application was granted and the notice of motion was dismissed. Costs of the motion were reserved. The third respondent informed the Court that he did not require the applicant for further cross-examination in the substantive proceedings. The applicant then tendered some further material in his case and the third respondent was given an opportunity to examine this material. He indicated that he did not require anyone for cross-examination. The applicant then closed his case. The third respondent then advised the Court that he did not intend to lead any evidence in his case. The third respondent's case was then closed. The applicant tendered some material in reply, including a sealed order by the Supreme Court granting leave to the applicant to proceed against the first respondent under s 471B of the Corporations Act 2001, subject to the applicant not enforcing any judgment or order that he might obtain in the present proceedings against the assets of the first respondent without the further leave of the Supreme Court. 10 At the commencement of proceedings the parties advised the Court that if it was not taken to a particular part of the court bundle of documents (which comprised 11 volumes) then the Court would not be expected to read it. Prior to the third respondent's legal representative being granted leave to withdraw from the proceedings, the Court was informed that instructions had been obtained from the third respondent confirming that the position of the parties in relation to the court bundle remained unchanged. Background

11 On 27 March 1998 the applicant was interviewed for a position, he says, with the first respondent. During the interview the applicant says he was informed by the third respondent that:

The job would include general security duties and liaison between management of Digital Computers (Compaq) and us (Divisional). You would be required to work Monday to Friday, 6am to 7pm. You would be paid a flat rate of $12.00 per hour. We will know more on Monday morning when we have a briefing with Barry Pereezer from Digital. We also need to run a reference check on you. Apart from Wayne's reference we have also spoken to Marilyn (last name unknown).

(The reference to "Wayne" is a reference to Mr Uzelac who was also present during the interview). 12 At the end of the interview the applicant was offered a job. The applicant agreed to work the hours required at a flat rate of $12 per hour. He was told to pick up his uniform from premises in Surry Hills. The offer of employment was not reduced to writing. The applicant says he was not, at any stage, asked to invoice the respondent for the hours worked, nor was he required to utilise his company, Apteka Pty Ltd. He understood that he was to work exclusively for the first respondent. 13 This latter issue was the subject of significant dispute during the proceedings. According to the third respondent in his affidavit affirmed on 21 September 2006, another company within the Divisional Services group, Divisional Protective Services (Australasia)Pty Ltd paid either the applicant directly or his company, Apteka from 1998 until 4 September 2000 when the second respondent commenced to pay the applicant. Divisional Protective Services (Australasia) is not a party to the proceedings. This issue will be explored in more detail later in this judgment. 14 The applicant was unable to obtain a uniform at the premises to which he had been directed in Surry Hills. Instead, Mr Uzelac delivered a uniform to him later the same evening. The uniform was too large and required alterations which the applicant arranged for a tailor to perform. A receipt dated 27 April 1998 for the alteration of uniform pants and shirts from Ali's Alterations & Tailoring is annexed to the applicant's affidavit. 15 The applicant commenced duties, he says, for the first respondent on Monday, 30 March 1998 at 8am at the premises of a company known as Compaq. At that premises, and in the presence of the third respondent and Mr Uzelac, he was briefed on the duties he would be required to perform. These were:

• Preparation of monthly security reports to the management of Compaq;

• Daily monitoring of the building's BMCS/Environment system;

• Arranging security passes and escorting on-site visitors;

• Appointing Assistant Chief Fire Warden for Compaq;

• Monitoring changes to the status of Compaq's security standing orders via email;

*The requirement to inform Compaq of on site maintenance issues via email; and

• Liaising with Compaq management and employers. 16 In addition to his duties at Compaq outlined above the applicant was required to monitor the movement of persons to and from the entrance to the premises. He did this while physically stationed at the entry to the premises. He also monitored the access-control room on site. In that room he monitored the visual display units, the intruder alarm system which included cameras, and, he also acted upon computerised printouts from the access-control system. His first payslip was dated 2 April 1998. It was in his name for 61 hours at a rate of $12 per hour. The ACN on the payslip (071 714 460) belonged to the company, Divisional Protective Services (Australasia), (according to the third respondent's Supreme Court affidavit annexed to his affidavit of 21 September 2006). Thereafter the applicant says he worked for the first respondent at Patrick's Container Terminal, Darling Harbour. Part of his duties there included the supervision of approximately 30 security guards stationed at 4 gatehouses on the site. He continued to receive a flat rate of $12 per hour, without, he says, receiving any additional loadings or other allowances. On 20 April 1998 he resumed duties at the Compaq site. On 21 April 1998 at the Compaq premises he was required to remain on site until 9.50pm although his shift finished at 7pm. He was not paid any overtime or other additional allowance. A pay slip dated 1 May 1998 for 103.25 hours work quotes the ACN of Divisional Protective Services (Australasia). 17 In May 1998 the applicant had a conversation with Mr Uzelac during which he asked if he was going to be paid overtime rates for the extra hours he was working. He was informed that because of the rate paid by Compaq that "Divisional" could not afford to pay more. During the conversation the applicant was told by Mr Uzelac that sometime in September 1998 he would be assigned to look after, "all the Digital sites". Meanwhile the applicant continued to work at the Compaq site often working overtime but receiving no overtime remuneration or other allowances. On a number of occasions the applicant advised the first respondent of the need to organise a relieving security officer. Only on two occasions however was someone sent to relieve the applicant. This occurred on 4 June 1998 and on 12 August 1998. 18 From 15 May 1998 until 28 February 2002 (which latter date the applicant has identified as the date of termination of his contract) the applicant undertook additional duties for the Divisional Securities group. He says that these additional duties included data entry and managing and administering or operating the intruder alarm system and the access-control system at Compaq. The undertaking of these duties by the applicant from May 1998 at the Compaq site is confirmed by a letter from Compaq's Facilites Manager, John Stewart which is annexed to the applicant's affidavit. 19 On 27 October 1999 the applicant contacted Wilma Rutter, the first respondent's account manager, enquiring about the correct procedure for putting some of his wages into a superannuation fund by way of salary sacrifice. At this time the applicant says he was unaware that the first respondent was not paying the superannuation guarantee charge, although he began to suspect soon after, that this was the case. In about January 2002 he sent a notification to the Australian Taxation Office notifying it of his entitlements under the Superannuation Guarantee. On 24 April 2003 the applicant received a voucher for a superannuation guarantee credit from the ATO in the sum of $13,190.13 which represented the applicant's outstanding superannuation contributions owed to him by the first respondent. At the same time the applicant received advice from the ATO that the credit on the voucher had arisen because the first respondent had paid the superannuation guarantee charge to the tax office instead of making sufficient contributions to a superannuation fund on the applicant's behalf. The applicant was also told the credit voucher had to be paid into a superannuation fund account or similar deposit fund. 20 From about 13 November 1998 until 28 February 2002 the applicant was also "on-call" at the Compaq site. He received an additional $150 gross per week as an "on-call" allowance for being on-call 7 days a week, 24 hours a day. 21 The applicant has annexed to his affidavit, group certificates in the applicant's name for financial years ending 30 June 1998, 30 June 1999 and 30 June 2000. Each document cites the first respondent as the applicant's employer (the group certificate for the year ending 30 June 1999 cites the employer as "Divisional Security Pty Ltd" which I take to be a typographical error). Also annexed to the applicant's affidavit are two PAYG payment summaries both in the applicant's name for the financial years ending 30 June 2001 and 30 June 2002. Both documents cite the first respondent as "payer" during the relevant periods. 22 On 17 October 2000 Mr Uzelac presented a document to the applicant for his signature. The applicant signed it without reading it and without being provided a copy by Mr Uzelac. Some time after the applicant says he had "some concerns" about the document and he contacted the Australian Liquor Hospitality and Miscellaneous Workers Union (the union), of which he was a member, and spoke to a Mr Phil Taylor who advised him that he had signed an enterprise bargaining agreement (EBA) and that he should have been given the opportunity to read it. Following his attempts to obtain a copy of the EBA in order to read it, which were unsuccessful, the applicant sent a letter to the first respondent advising it of his intention to withdraw his signature from the EBA. He received no response from the first respondent to the letter. Instead on about 1 November 2000 he received a document notifying, "all employees", that Mr Uzelac intended to obtain certification from the Australian Industrial Relations Commission of the EBA. The document which had also signed by Mr Uzelac was described as the "Starfinn Enterprise Agreement 2000". 23 The applicant explained in his affidavit that the prevailing system which provided for his remuneration was that he would first provide the first respondent with a timesheet upon which were recorded his fortnightly hours worked, and his wages. Several of these timesheets are annexed to the applicant's affidavit and are headed "Divisional Security Services", a reference to the corporate group operated by the third respondent. There is no reference on the timesheets to any specific corporate entity. After submitting the timesheet the applicant says he received from the first respondent a payment advice slip. One such document expressed to be for the period ending 5 August 2001 does contain an express reference to the first respondent as well as its address, telephone and facsimile numbers. On this particular payment slip the applicant's hourly rate has been increased from $12 to $14. The applicant contacted the corporate group's financial and administrative manager, Wilma Rutter about the pay increase. She confirmed that there had been a pay rise and advised him it was effective from late July 2001. 24 Another payslip received by the applicant, annexed to the applicant's affidavit, which purports to be for the period ending 25 November 2001, contains no reference to the first respondent. Instead it sets out the name of the second respondent as well as its PO Box details, telephone and facsimile numbers. The applicant says that upon receipt of the payment slip for the period ending 25 November 2001 he did not notice the reference to the second respondent. In his affidavit the applicant says; "I did not at first notice that the employer nominated on the slip had changed". The change came to his attention he says in early January 2002 following a conversation with a fellow employee. This same fellow employee, according to a record of an email annexed to the applicant's affidavit, also emailed him a copy of the Starfinn Enterprise Agreement 2000. The applicant says he contacted the union and was informed that it had no record of the EBA. The applicant at that time decided not to take the matter further. Although he says he was never informed by any of the respondents that he was employed and paid by the second respondent, and had never consented to a transfer of his employment from the first to the second respondent, he decided not to pursue the matter further. This was because he was not at that time on the best of terms with Mr Uzelac. In addition he formed the view that notwithstanding that he had been transferred onto the second respondent's payroll without his knowledge or consent, his employer remained the first respondent because his group certificates for the same periods nominated the first respondent as his employer. 25 In early February 2002 the applicant, following a conversation with the first respondent's supervisor (simply referred to by the applicant as "John") and after discussions with Mr Uzelac, formed the view that because the contract with Compaq was coming to an end that he would not be offered any alternative work by the first respondent. He formally resigned by letter dated 12 February 2002. The letter was addressed to the first respondent and indicated that his last scheduled tour of duty would be on Thursday 28 February 2002. 26 With regard to superannuation the applicant says he did not "push the issue" with the first respondent. This was because, he says, of an earlier discussion he had had concerning his decision to "salary sacrifice" part of his wages to a superannuation fund. Following this decision, the applicant says he was contacted by Emma Larkin, the first respondent's operations manager, who told him that she had overheard a conversation during which it was said that if the applicant, "...wanted to push the subject of superannuation then (the applicant) will be looking for a new job". During the period of his employment from about 27 March 1998 to 28 February 2002 the applicant says he received no notification from any of the respondents that they had paid on his behalf a superannuation guarantee. The contract under which work was performed

27 The applicant between about 27 March 1998 and 28 February 2002 worked in the security industry. His duties have been set out earlier in this judgment. The contract under which this work was performed was an oral one. It was a term of that contract that the applicant be paid a flat rate of $12 per hour. This arrangement remained unchanged until sometime in August 2001 when the hourly rate was increased to $14. In addition, in the period 13 November 1998 until 28 February 2002 the applicant was "on call" at the Compaq site and received an additional $150 gross per week for performing this particular duty. 28 An issue which emerged in the proceedings concerns a question of which person performed the work described above, the applicant or his service company Apteka Pty Ltd? 29 In the respondents' reply to the applicant's summons the respondents alleged (at [4]):

In relation to paragraph B4 of the Summons, it is not admitted that the Applicant was employed from 31 March 1998 by the First Respondent. The Applicant never performed the duties of a Grade 3 Security Officer under the Security Industry (State) Award. At all material times in the event the Applicant had been an employee of the First Respondent he performed the duties of a Grade 1 Security Officer under the Security Industry (State) Award. The Applicant was employed between 13 March 1998 and 9 July 1998 by Divisional Protective Services (Australasia) Pty Ltd. The First Respondent contracted with the Applicant through Apteka Pty Ltd trading as Robert T Clarke & Associates on 10 July 1998. In relation to the last sentence of paragraph B4 of the Summons since the Applicant was not employed by the First Respondent there was no obligation on the First Respondent under the Security Industry (State) Award or the Industrial Relations (General) Regulations to provide this information to the Applicant and/or Apteka Pty Ltd. The First Respondent does not know whether Apteka Pty Ltd complied with any obligation under the Security Industry (State) Award or the Industrial Relations (General) Regulations. 30 In his affidavit in support of the notice of motion filed on 21 September 2006 (which was dismissed, part-heard), the third respondent asserts that during preparations for the substantive proceedings, he realised after examining pay records kept by the Divisional Services group, that the corporate entity, Divisional Protective Services (Australasia), paid, "the applicant and/or Apteka Pty Ltd from 1998 until 4 September 2000, when the second respondent started to pay the applicant". A selection of payroll records is annexed to the third respondent's affidavit, presumably to confirm the assertion. A document headed "Payroll Advice 13.5.98 to 30.6.98" with the name and address of "Divisional Protective Services (Aus) P/L" on top of the document, contains several references to the applicant as having worked a number of hours at a rate of $12 per hour for nominated wages. It contains no reference to Apteka. A second document containing the name and address details, of "Divisional Protective Services (Aust) P/L", entitled "Payroll Register (Detail) 4th Quarter" nominates the applicant under a column headed "employee category", and otherwise details wages paid to the applicant for the months April to June 1998, inclusive. Again, the document contains no reference to Apteka. The remaining documents forming part of the Annexure are payroll advices with the name "Starfinn Pty Ltd" on the top of each document and containing details of wages paid to the applicant for fortnightly pay periods from 4 September 2000 to 30 June 2001; and 1 July 2001 to 19 February 2002. None of these documents contain any reference to Apteka. The documents set out the applicant's PAYG withholdings and statutory entitlements paid to the applicant such as holiday pay. The documents suggest that the applicant, not Apteka was engaged to perform the work by corporate entities within the Divisional Securities group. 31 The applicant has also produced various financial records in order to confirm that he and not Apteka undertook the work. Annexed to the applicant's affidavit is a payment advice slip provided by the first respondent. The document covers the fortnightly period ending 5 August 2001 and records wages including sick pay and on-call allowances paid to the applicant and PAYG withholdings. The applicant submitted timesheets upon which he recorded his fortnightly hours worked and wages. The timesheets appear to be proforma documents generated by the Divisional Security group. The timesheets are all headed "Employee: Robert J. Clarke". None of them contain any reference to Apteka. 32 The Court's attention was also directed to a number of payment records in the court bundle of documents. Volumes 8 and 11 of the court bundle enclose payslips all in the applicant's name for work performed by him from about the beginning of May 1998 until the termination of his employment. The payslips appear to be sent by various corporate entities. For ease of reference these payslips and relevant information contained therein are reproduced below: Pay period Payslip sender/addressee 1. Fortnightly periods ending 12 May 1998 until 7 August 1998 Divisional Protective Services (Australasia) Pty Ltd (ACN 071 714 410) 2. Fortnightly periods ending 21 August 1998 until 9 July 1999 First respondent (ACN 072 616 749) 3. Fortnightly periods ending 23 July 1999 until 28 November 1999 First respondent (different ACN 074 686 794) 4. Fortnightly periods ending 14 December 1999 until 11 November 2001 First respondent 5. Fortnightly periods ending 9 December 2001 until 1 March 2002 Second respondent

33 The court bundle of documents also includes a letter from the applicant's accountant who is also Apteka's accountant. The letter, dated 1 May 2003 advises that income received from the first respondent has been included in the applicant's individual tax returns, based on group certificates and PAYG payment summaries for the financial years ending 1998 until 2002 inclusive. The letter also says:

We can confirm that no Divisional Security (Aust ) Pty Ltd income was reported in the Apteka Pty Ltd tax return for the above years. No income has been received by Apteka Pty Ltd since 1999 and nil returns have been lodged for each year. 34 These financial records and other documentation show conclusively that the applicant, and not Apteka was paid for the work he performed for the Divisional Services group as a security officer. The respondents' reply to the summons asserted that the first respondent on 10 July 1998 entered into a contract with Apteka Pty Ltd but that at no stage was the applicant employed by the first respondent. The applicant contends that no such contract was entered into, or existed at that time, or at any time. 35 A copy of this contract can be found in several places in the evidence. It is contained in Volume 11 of the court bundle of documents. The document purports to record an agreement between the first respondent and Apteka whereby the applicant is to perform, "...contracted services for companies or entities apart from Divisional Security (Aust) Pty Ltd". According to the third respondent in his affidavit affirmed on 21 September 2006 it was Mr Uzelac who informed him that the applicant had been engaged as a contractor through Apteka, but the third respondent subsequently discovered that it was Divisional Protective Services (Australasia) Pty Ltd which paid the, "applicant and/or Apteka from 1998" until 4 September 2000 (after which the applicant commenced employment with the second respondent). The applicant relies upon the production in these proceedings of the contract between the first respondent and Apteka, which he says was falsely created by the respondents, in order to show that the Court would simply not accept the respondents' case as asserted in the reply, namely that the applicant was never directly employed by the first respondent and that he entered into a contractor agreement through his company, Apteka. 36 There is little doubt that the contract purporting to be between the first respondent and Apteka is false in that it purports to have commenced on a date some four and a half years before it was created. All the available financial records of the first respondent (and other corporate entities within the Divisional Services group) which record details of payment for the work done by the applicant between March 1998 and March 2002 contain no mention or reference at all to Apteka. The group certificates and PAYG summaries record the applicant's full-time employment with the first respondent for the same period. Mr Uzelac under cross-examination, contrary to what the third respondent suggested in his affidavit, said that the applicant was employed by the first respondent. He also denied creating the contract or approaching the applicant with a copy of the contract. This is contrary to the third respondents' affidavit where he says that at the end of June 1998 be met with Mr Uzelac and they had a conversation about the contract in the following terms:

LR: We have too many loose ends, and there are a number of contractors who have not signed their agreements. I'd like it all tidied up.

WU: Robert Clarke of Apteka Pty Ltd is one of three who has not done so.

One week later, I met with Wayne and I had a conversation in words to the following effect.

WU: Robert Clarke of Apteka has signed it, but I have not got a copy off him yet.

LR: Alright, as long as it is sorted, and you file it away. 37 The third respondent says that following that conversation he assumed that Apteka was the contractor. He also says that Mr Uzelac gave him a copy of the contract in October 2004 and that he believed it to be a genuine document. 38 According to Michael Gaweda, a forensic data specialist, whose affidavit sworn on 21 April 2006 was relied upon by the applicant in the proceedings, the contract which purports to be an agreement between the first respondent and Apteka and which has a commencement date of 10 July 1998, was first created on 11 March 2003, that is some four and a half years after it was alleged to have been entered into. 39 Mr Gaweda says he searched the complete records of the first and second respondents. Using a number of keywords, including "Apteka", Mr Gaweda accessed a number of documents in which the word "Apteka" appeared. In particular two Microsoft word documents were extracted which contained the keyword "Apteka". Mr Gaweda examined the document history of both documents. The second document, described by Mr Gaweda as "Robert Clarke contract.doc" he says was a revision of an earlier document, "Robert Clarke.doc", but saved as a new file under a different name. According to Mr Gaweda the Robert Clarke Contract.doc was created on 11 March 2003 and last saved on 11 March 2003 when the words "Commencement date: 10 July 1998" were added and the document was printed. This document is the contract which purports to be the agreement between the first respondent and Apteka. Although it was, according to Mr Gaweda, (whose evidence was unchallenged) first created on 11 March 2003 it purported, by reason of its commencement date of 10 July 1998, to have been entered into some four and a half years before its creation. 40 I accept the evidence of Mr Gaweda, which was unchallenged, that the document was created on 11 March 2003. It follows from this that its purported date of entry into the contract, namely 10 July 1998, is false and was, at minimum, mistakenly entered on 11 March 2003. Mr Gaweda's conclusion as to the date of creation of the document also tends to be confirmed by both the existence and absence of other documentation. For a substantial period of the applicant's employment with the Divisional Services group the payslips indicate that the applicant's wages were paid directly to him by the first respondent. Other payslips also indicate that the applicant's wages were paid directly to him by Divisional Protective Services (Australasia) (in the period ending 12 May 1998 until 7 August 1998); and by the second respondent (in the period 9 December 2001 until 1 March 2002). Three group certificates and two PAYG summaries spanning five financial years confirm that the applicant was paid directly by the first respondent to perform the work. No other financial records have been produced by any of the parties which suggest, either directly or indirectly, that during the period the applicant worked for the Divisional Services group, Apteka was the recipient of payment for work done by the applicant. 41 Based on the evidence above I find that the applicant and not Apteka entered into a contract to perform work as a security officer between the period about 27 March 1998 until 28 February 2002. 42 The next issue for consideration requires an analysis of the evidence in order to ascertain which corporate entity within the Divisional Services group employed the applicant during the relevant period of employment. The resolution of this issue is complicated by the existence of competing documentation produced by the parties. The applicant says he commenced working for the first respondent from about the end of March 1998. The group certificate for the financial year ending 30 June 1998 confirms this. On the other hand the applicant's payslips which have been produced for the period ending 15 May 1998 up to 7 August 1998 suggest that Divisional Protective Services (Australasia) paid the applicant's wages. According to the applicant he understood that during the period of his employment up to the date of termination on 28 February 2002 that he was employed by the first respondent. This understanding tends to be confirmed by the group certificates and PAYG summaries produced by the applicant which cover most of that period. In addition, for a substantial part of the applicant's period of employment, pay slips indicate that the applicant's wages were paid by the first respondent (between August 1998 and 11 November 2001). 43 According to the third respondent, during preparations for the hearing of this matter he realised after looking at, "pay records kept by the Divisional group relating to the applicant", that, "...Divisional Protective Services Pty Ltd (sic) was the entity which paid the applicant and/or Apteka Pty Ltd from 1998 until 4 September 2000 when the second respondent started to pay the applicant". This statement is at odds with the payslips produced by the respondents (in Volume 11 of the Court bundle of documents) which suggest that only for a few months (12 May 1998 to 7 August 1998) of the total period of the applicant's employment, were his wages paid by Divisional Protective Services (Australasia). It emerged in cross-examination of the third respondent that he did not in fact examine any pay records or wage slips when he says he made the observation that the applicant's employer from 1998 until 4 September 2000 was Divisional Protective Services (Australasia). Later he qualified this statement a little by saying, "I skimmed through the pay records but I can't say I accurately read through all the pay records". 44 Given the absence of corroborative evidence for the third respondent's contention that Divisional Protective Services (Australia) employed the applicant for the period March 1998 until September 2000 and the fact that much of the documentary evidence directly contradicts the third respondent's evidence, the Court is left with the applicant's evidence and the documentary evidence upon which he relies. The applicant's evidence is corroborated by the group certificates and the PAYG summaries. These documents are formal taxation records in an approved form generated by the Australian Taxation Office. 45 The third respondent was cross-examined in relation to the various pay slips, group certificates and PAYG summaries in the applicant's name. Those pay slips which indicated that the first respondent paid the applicant's wages, the third respondent speculated was an, "error of entities of the companies...". He suggested that because of a computer error, the wrong ACN had been entered on the applicant's group certificates. When asked to explain how this could have occurred he said:

A: I say that occurs when the accounts department becomes slightly lazy in order to either correctly identify the appropriate entity and they don't fill out that organisation's details - that company's details and that automatically goes to the first respondent, that you mentioned. 46 Later in cross-examination he suggested that the reason the computer defaulted to the first respondent (thereby incorrectly nominating it as the applicant's employer on the group certificates) was, "mostly human error"; "...one of the people in the accounts, I imagine". He also asserted that the first respondent had never employed individuals. When asked by me whether he had ever checked any of the group certificates he said: "I did check some, your Honour, there were so many to be personally involved".

47 Payslips nominating the first respondent as paying the applicant's wages were also shown to the third respondent. He said that the first respondent's ACN had been incorrectly entered in the records. Again he blamed the company accounts department, saying; " I put down (sic) as human error because the company accounts department has not accurately conducted their duties". Some of these payslips also contained the first respondent's name and other details on the letterhead (but did not cite an ACN). When this was put to the third respondent he said he could not explain it. Later, when pressed for an explanation, he said, "I say its computer error, human and computer error", and; "I'd say the accounts department had not accurately allocated the payslips to the correct entity, that's the explanation". On a number of occasions it was put to the third respondent that the first respondent actually employed the applicant throughout the whole of the period in which the applicant worked for the Divisional Securities group. The third respondent repeatedly denied this. 48 The third respondent's explanations as to why the first respondent was nominated as the applicant's employer on the financial records and its appearance on a considerable number of payslips covering a substantial part of the applicant's term of employment I found implausible. In relation to the payslips, if the appearance of the first respondent's ACN and/or name on those payslips can be attributed to either computer or human error, or both, it follows that over a lengthy period of time the third respondent in his capacity as sole director of the first respondent or consultant either did not examine any of the payslips; or, the discrepancies between the entity nominated on the group certificates and PAYG summaries, being the first respondent, and other payslips which nominated, variously, Divisional Protective Services (Australasia), the second respondent (or in some cases apparently the ACN of another company within the corporate group, namely, Cash and Valuables Logistics Pty Limited) as the entity paying the applicant's wages, were never brought to the third respondent's attention by the accounts department. Both of these alternative hypotheses are unlikely in my view given the relatively lengthy period of the applicant's employment and the number of payslips generated fortnightly over that period. Moreover, the respondents produced (and therefore sought to rely upon) the payslips (in Vol 11 of the court bundle) including those payslips which nominate the first respondent as the entity which paid the applicant's wages. The period in which this occurred (21 August 1998 until 17 November 2001) spans four financial years and confirms the information in the group certificates, namely that the first respondent was the applicant's employer during that period. These internal differences in the third respondent's case are difficult to reconcile, unless resort may be had to other material. 49 Such other material includes evidence and inferences which may be drawn from that evidence as to the origins of the competing classes of document, namely the payslips generated by the accounts department of the Divisional Securities group on the one hand and the group certificates and PAYG summaries on the other hand. 50 According to the third respondent, the section responsible for generating the payslips, namely the accounts department was staffed by "slightly lazy" personnel who constantly made mistakes in the paperwork generated and otherwise did not "accurately conduct their duties". Certainly two different entities (Divisional Protective Services (Australasia) and the second respondent) nominated on the applicant's payslips each purported to pay the applicant's wages while at the same time contradicting the information contained in the group certificates. This suggests in my view that the payslips (or the information contained on them) are inherently unreliable. The competing information contained in the payslips when compared to the group certificates and PAYG summaries suggests that mistakes may have been made by personnel in the accounts department. In contrast, group certificates and PAYG summaries are pro forma documents issued by the Australian Taxation Office to which a number of obligations attach under the Taxation Administration Act 1953 (Cth) (TAA). By way of illustration, the "payer" must give a PAYG summary to the "recipient", plus a copy within 14 days after the end of the financial year with severe penalties attaching for non-compliance. It is also an offence under the TAA for a person to incorrectly or recklessly fail to correctly keep records, accounts, accounting records etc that a person is required to keep pursuant to taxation law: ss 8L, 8Q TAA. 51 In my view the group certificates and PAYG summaries, which are formal taxation documents created under a statutory regime to which a number of legal obligations attach, are more likely to contain reliable and accurate information than payslips generated by a private corporate group many of which, on the evidence of both the third respondent and the applicant contain information which is not correct. It is also of significance that a total of 5 group certificates and PAYG summaries were generated over 5 financial years. It is unlikely in my view that the first respondent and the third respondent over that period would not have noted or been alerted to any discrepancy between the nominated employer and payer on the group certificates and PAYG summaries and the payer nominated on the payslips, and acted to rectify any error or errors. 52 My view that these matters would have or must have come to the attention of the third respondent is not affected by the evidence that the third respondent ceased to be the sole director of the first respondent and acted as a security consultant for the corporate group from about 28 July 1999. After that date an ASIC extract shows that the third respondent's mother acted as the sole director of the first respondent until 21 August 2002 which is the date the extract was printed. In cross-examination the third respondent gave evidence in relation to the circumstances following his disqualification as the director of the first respondent and his continuing relationship with the first respondent following that date:

SHOEBRIDGE: Q. You say that you disposed of your shares in the first respondent on 28 July 1999? A. That's correct.

Q. Who did you dispose of them to? A. To my mother.

Q. She does not take any active role in the operation of -- A. Not at the moment, no.

Q. She has not for, what, the last 6 or 7 years? A. That's correct.

Q. From the period 28 July 1999 to 18 August 2004 when you were not a Director of the first respondent who were the Directors? A. Could you repeat that period?

Q. 28 July 1999 to 18 August 2004? A. The Director was my mother.

Q. During the whole of that period, you said in the last six or seven year, your mother took no active role in the operation of the company? A. Yes.

Q. At that period of time you effectively, as a matter not of law, continued to have the functions and operations of the first respondent? A. That is incorrect.

Q. We know your mother wasn't, she didn't take an active role in the management of the company? A. Yes.

Q. She on ASIC's records was a Director? A. Yes.

Q. If your mother wasn't, and you transferred shares and effectively directorship to your mother, who do you say was? A. I say the organisations were structured in such a manner that they functioned without my mother being a Director or my personal direct involvement.

Q. Let's explore that period 28 July 1999 to 18 August 2004 when you were not acting, you say, as an effective Director of the first respondent. Did you take any active duty as an effective public officer of the first respondent? A. My role was predominantly as a licenced consultant.

Q. What sort of licenced consultant? A. Security licenced consultant.

Q. You are not responsible for the legal affairs of the company? A. I would have consulted on those, yes.

Q. Only in terms of security issues, is that what you are saying? A. That's correct.

Q. Not in terms of, say, the broader legal operations of the company? A. Look, I think it would be fair to say I would have had some input, yes.

Q. I will put it to you again, as at 24 April 2003 you were acting in the capacity, if not at law, at least in fact, as Director of the first respondent? A. That is not correct.

Q. You put your mother as Director of the first respondent simply for convenience to overcome the ASIC ruling against you, didn't you? A. That is not correct.

Q. You put your mother there because you knew she would do as you asked and effectively was your puppet? A. That's incorrect. My mother has a mind of her own. 53 The effect of this evidence is that during the period of the third respondent's disqualification as the director of the first respondent he nevertheless continued to involve himself in the affairs of the company. He says he undertook during that period the role of a consultant in security matters (the principle undertaking with which the Divisional Security group was involved) and he also consulted on matters concerning the legal affairs of the company. These concessions are somewhat at odds with the third respondent's statement that the organisations were so structured that they functioned without his mother as the director or without any "personal direct involvement" on his part. Nevertheless, the evidence is capable of giving rise to the inference that the third respondent remained involved in the operational and legal affairs of the corporate group (which included the first respondent) during the period of his disqualification. In addition during that same period the third respondent took an active role in preparing the reply to the summons. He says he obtained and analysed various financial records of the first respondent with Ms Rutter when preparing a reply. He signed the reply. 54 Ms Rutter was during the applicant's employment the corporate group's financial and administration manager. What purports to be her signature appears on the group certificates. Ms Rutter was not called to give evidence on behalf of the respondents, notwithstanding that she may have been able to proffer an explanation as to why the first respondent was nominated on the group certificates as the applicant's employer, and why on the majority of the applicant's payslips the first respondent appears as the payer. These matters are central to the issue of who or what entity employed the applicant during his period of employment. The failure on the part of the respondents to call Ms Rutter permits an inference to be drawn that any evidence Ms Rutter may have been able to give on behalf of the respondents would not have assisted their cases. The respondents offered no explanation as to why they failed to call Ms Rutter to give evidence.

55 The foregoing evidence and analysis enables the inference to be drawn that the applicant from about 27 March 1998 until 28 February 2002 was employed by the first respondent under a contract of employment. It was a term of that contract of employment that the applicant receive a flat rate of $12 per hour up to about 5 August 2001 and thereafter until 28 February 2002 at a flat rate of $14 per hour. The date of 5 August 2001 as the approximate commencement date of the applicant's increase in his hourly rate from $12 to $14, is taken from a payslip on the first respondent's letterhead for the period ending 5 August 2001 which records that the applicant's hourly rate is $14. Thereafter, the payslips consistently record the increased hourly rate for which the applicant is paid. I therefore find that there was a contract of employment between the applicant and the first respondent under which the applicant performed work as a security officer for the period specified, and, that it was a term of that contract that the applicant receive $12 per hour at a flat rate, later varied to $14 per hour at a flat rate. Was the contract unfair?

56 In the summons for relief the applicant alleges that the contract between the applicant and the first respondent was an unfair contract as defined by sections 105 and 106 of the Act. The alleged unfairness is particularised in the summons in the following way:

(a) The contract was unfair, harsh, unconscionable or against the public interest, in so far as it was designed to, or did in its operation, avoid the provisions of an industrial instrument, namely the Security Industry (State) Award.

(b) The contract was unfair, harsh, unconscionable in that it permitted the First Respondent to use a dominant bargaining position over the Applicant in setting the terms of the Applicant's remuneration.

(c) The contract was unfair, harsh, unconscionable or against the public interest as a consequence of the First Respondent's conduct in transferring the Applicant's employment to the Second Respondent without the consent and knowledge of the Applicant, which was to the Applicant's detriment.

(d) The contract was unfair, harsh, unconscionable or against the public interest as a consequence of the First Respondent's conduct in failing to pay the Superannuation Guarantee on behalf of the Applicant in accordance with the Superannuation Guarantee (Administration) Act (Cth) 1992. Was the contract designed to avoid, or did it avoid the Award? 57 A preliminary matter which must be resolved before enquiring into whether the impugned contract was unfair (because it was designed to or did avoid the provision of an industrial instrument), is to consider whether the relevant industrial instrument in fact covered the work performed by the applicant. The applicant relies on the Security Industry (State) Award (the Award) as the relevant industrial instrument. 58 The applicant contends that the work he performed for the first respondent was covered by the Award, and that this is not "seriously challenged" by the respondents. According to the applicant, the area incident and duration clause of the Award covers his employment. The area incidence and duration clause of the Award is Clause 35. That clause provides that the Award applies, relevantly:

"... to gatekeepers and all persons employed in or in connection with the industry or industries of security or watching excepting security officers employed in or in connection with a retail shop, excluding the County of Yancowinna, within the jurisdiction of the Security and Cleaning, &c. (State) Conciliation Committee." 59 Clause 3 of the Award sets out the duties of a security officer according to five different grades. In written submissions, the applicant contended that he was performing tasks equivalent to a security officer Grade 4 duties. The copy of the Award which was tendered into evidence by the applicant was made on 19 August 1991. It was substantially varied on 1 June 2001. It was further varied on several occasions, for example, in relation to the rates of pay, adjusted on 14 September 2001 and 14 December 2001. The 2001 version of the Award also sets out the definitions of "security officer" according to five grades (Grades 1 to 5). The definitions of Security Officer Grade 4 contained in the 1991 and 2001 Awards (both Awards being in force during the applicant's employment) are identical. For convenience the definition from the 2001 Award is set out below:

6.1.4 "Security Officer Grade 4" means a person employed substantially in a security and/or data input and/or a monitoring function within a central station and principally occupied in one or more of the following duties: Monitoring, recording, inputting information or reacting to signals and instruments related to electronic surveillance of any kind; co-ordinating, checking or recording the activities of Security Officers Grade 1, 2 or 3; operating or monitoring any medium of verbal communication. 60 The applicant's duties undertaken by him in his occupation as a security officer over the period of his employment with the first respondent have been earlier set out in this judgment. The majority of duties undertaken by the applicant involved a monitoring function, for example, the applicant at the Compaq premises monitored on a daily basis the building's BMCS/Environment system, and changes to the status of Compaq's security standing orders. He also, while at Compaq, monitored the movement of persons on-site, as well as the access-control room, visual display units, and the intruder alarm system, which included cameras. These duties conform closely to the description of Security Officer Grade 4 duties. In addition, he also trained and oversaw other security officers and liaised between management of Compaq and management of the Divisional Securities group. These latter duties also appear to fall within Grade 4 duties as defined (co-ordinating, checking or overseeing the activities of Security Officers Grade 1, 2 and 3). I therefore find that the work performed by the applicant for the first respondent was that of a Security Officer Grade 4, as defined under the Award. 61 In relation to whether there was an underpayment to the applicant by reference to the rates in the Award, the applicant produced log books setting out the exact hours worked in the course of his employment. There are also the payslips produced which cover the bulk of the period of his employment (except for several weeks at the beginning of his employment) and which provide evidence of the payments actually made to the applicant. Commencing from about the fortnightly period ending 2 April 1998 until 28 February 2002 (the date of termination), the applicant has calculated the payments actually made to him and compared those amounts with his relevant Award entitlements, with the result that the applicant was underpaid by the first respondent during the period of his employment in a total amount of $52,143. (It is not clear if the calculations take into account all allowances such as meal allowance to which the applicant may have been entitled). 62 It remains to consider whether in the context of the underpayment to the applicant, the contract was unfair in that it was designed to, or does avoid, the provisions of the Award. The applicant relies on the impugned contract which provided for significantly less remuneration than would have applied had the applicant been remunerated in accordance with the Award. In these circumstances, says the applicant, the contract avoided the provisions of the Award. 63 In George Stewart v All-Fect Distributors Limited & Ors [2006] NSWIRComm 195, Boland J considered whether a contract alleged to be unfair under s 105(d) of the Act was unfair on the ground that it avoided an Award. His Honour found, as a matter of objective fact, that it was (at [142]):

Did the contract avoid the Award in any event? It is not easy to understand the purpose of the alternative basis for finding the contract unfair in s105(d). It seems to suggest, though, that even absent intent, if the contract avoids the Award it will be an unfair contract. As a matter of objective fact the contracts between the applicant and the respondents avoided the Award; the contracts did not incorporate into them the terms of the Award and the parties to the contracts proceeded on the tacit understanding that the contract would apply and the Award would not apply. This is not to say the respondents intended to design an arrangement that avoided the Award; there is no evidence that award avoidance entered the mind of Fred Essey when he offered the applicant a position as commission agent. Nevertheless, in making the contract the application of the terms of the Award to the applicant was, in an objective sense, avoided. 64 I adopt his Honour's approach to the issue of whether a contract can be found to have avoided the provisions of an Award. Here, the term of the contract that the applicant be paid a flat rate of $12 per hour, later increased to $14 per hour, avoided, as an objective fact, the provisions of the Award in relation to rates of pay applicable during the period of the applicant's employment. This was because the rates offered in the contract were less than the rates applicable under the Award. I therefore find that the impugned contract between the applicant and the first respondent was unfair in that it did, in its operation, avoid the provisions of the Award. 65 I also find for the same reasons that the contract was against the public interest. In so finding, I adopt, in particular, the remarks of Marks J in Wheatley v Armstrong [1995] NSWIRComm 3 (at p23):

It is a trite observation that the system of industrial awards established by industrial tribunals in New South Wales and elsewhere is designed to reflect industrial justice between employers and employees. The rates of pay and working conditions are intended to establish a fair and equitable regime in circumstances where there are competing economic, social and policy considerations. In my opinion it is not only unfair but also harsh, unconscionable and against the public interest for an employer to enter into a contract of employment which contains terms and conditions which are less advantageous to the employee than are available under an applicable industrial award. It seems to me that such a proposition is so obvious that it does not require further elaboration or examination. Did the contract permit the respondents to use a dominant bargaining position?

66 In assessing whether a contract is unfair because it avoided, in its operation, the provisions of an Award, it is also relevant to consider the nature of the relationship between the parties, that is, whether the contract was entered into, and operated, under circumstances of freedom and equality of bargaining power between the parties: see All-Fect Distributors Ltd v Stewart (2007) 160 IR 90 at [26]-[33]. 67 The applicant contends that the contract was also unfair because it permitted the first respondent (and the second respondent) to use a dominant bargaining position over the applicant to his detriment. The basis of the contention is said to be that the applicant made numerous complaints concerning the non-payment of overtime, excessive shift lengths and the non-payment of his superannuation. The applicant says he simply accepted that he had no or limited bargaining power and therefore accepted the continuing status quo, and that in these circumstances, the relevant unfairness was, "readily apparent". 68 Here, the applicant appears to have freely entered into the contract, accepting without complaint the rates of pay offered as a term of the contract. Nevertheless, as the relationship evolved, the evidence indicates that the applicant, on several occasions, commencing from about May 1998, made enquiries and, at times, complained, about the lack of overtime payments and the failure of the respondents to arrange a relieving security officer which resulted in the applicant often working excessively long shifts. In relation to the overtime enquiries made by the applicant, he was informed by Mr Uzelac in May 1998 that the Divisional Securities group could not afford to pay him for the overtime work performed. In relation to his complaints that he required a relieving security officer, the respondents took action on only two occasions to organise someone to relieve him. The applicant, on the evidence, on a number of occasions, also made enquiries concerning his entitlements to superannuation. On one occasion, after he made enquiries about placing a portion of his wages into a superannuation fund by way of "salary sacrifice", he+ was told by Ms Larkin that she had heard that if he pursued the matter his job would be in jeopardy. After that he did not, he says, "push the issue" with the first respondent. 69 These matters, in my view, suggest a one-sided bargain, with the first respondent benefiting financially to the applicant's detriment. The first respondent took advantage of the applicant's employment on a low rate of pay when compared to the Award rates current at the time of his employment; and, without paying the applicant for overtime worked. As a result, the first respondent was able to derive considerable financial advantage. The applicant, who was entitled to receive information regarding his superannuation entitlements, did not pursue the issue for fear of losing his employment. These matters compel the conclusion that the contract was unfair because it permitted the first respondent to use a dominant bargaining position over the applicant to his detriment: see Stewart v All-Fect Distributors Limited & Ors at [127]. Whether contract unfair because of the first respondent's conduct in transferring the applicant's employment to the second respondent?

70 The applicant also alleges that the contract between the applicant and the first respondent was unfair as a consequence of the first respondent's conduct in transferring his employment to the second respondent without his knowledge or consent, which was to his detriment. 71 As I have found, the contract of employment was one whereby the applicant performed work for the first respondent. The financial records produced by the parties, I found, gave rise to the inference that, at all times during the period of his employment, the applicant was employed by the first respondent, that is, there was no contract of employment between the applicant and the second respondent, and accordingly, no transfer of the applicant's employment to the second respondent.

First respondent's failure to pay superannuation guarantee

72 A consequence of the first respondent's conduct in avoiding the provisions of the Award is that it failed to pay an outstanding amount of the superannuation guarantee, as it was obliged to under the Superannuation Guarantee (Administration) Act 1992 (Cth). In written submissions the applicant contends that the contract was unfair (and ought be varied) because it allowed the first respondent to avoid payment of the applicant's superannuation entitlements. In the summons the contract was alleged to be unfair as a consequence of the unfair conduct of the first respondent in failing to pay the superannuation guarantee on behalf of the applicant in accordance with its statutory obligations. On either characterisation, in my view the contract was, or became, unfair. The term of the contract under which the applicant was paid a flat rate of $12 per hour, later increased to $14 per hour, fell below the wage rates payable under the Award during the currency of the applicant's employment. The amount owing by reason of the underpayment of wages must also take into account an additional amount which represents the employer's obligations to make a specified level of contributions to the relevant superannuation fund. 73 The applicant did not expand further in submissions as to the reasons why it was said the contract was unfair because of the first respondent's failure to pay superannuation entitlements, other than to suggest, in terms of assessing monetary relief that may be payable, that there is authority for the making such order for relief and that the sums claimed are based on the superannuation minimum rates. The applicant also submitted that the definition of "employee" under s 12 of the Superannuation Guarantee (Administration) Act should be applied. (That section it may be observed expands the categories of "employee" for the purposes of the SGAA). 74 According to the evidence, detailed above, the applicant complained about the non-payment of his superannuation. His complaint was not addressed by the first respondent. He notified the ATO in January 2002 of his entitlements under the superannuation guarantee. The ATO sent him a superannuation guarantee credit voucher in the sum of $13,190.13, and directed him to pay the voucher into a superannuation fund account. The amount claimed by way of superannuation contributions presently under consideration arises in addition to the credit voucher received by the applicant from the ATO and, is directly connected to the amount owing to the applicant, as a result of the underpayment. The failure of the first respondent to make sufficient superannuation contributions to which the applicant was entitled, by reference to the wage rates in the Award and resultant underpayment rendered the contract unfair. Other matters

75 In submissions the applicant sought to deal with an issue raised by the respondents under s 108B of the Act. The matter appears to have been raised as an issue in a document forming part of the court bundle which outlines issues for resolution between the parties. This issue was not addressed by the parties at any stage during the proceedings. In any event I have found that the applicant's employment with the first respondent came to an end on 28 February 2002. The summons was filed on 7 November 2002. Section 108B therefore has no application to the proceedings. Orders sought

76 The applicant seeks orders against the third respondent, namely that he pay the applicant's minimum entitlements under the Award, in the sum of $52,143. This amount has been calculated by the applicant based on his term of employment up to and including 28 February 2002. The applicant also seeks an amount for superannuation contributions covering the same period in the sum of $3,965.45. That amount represents the applicant's outstanding entitlement to superannuation calculated by reference to the underpayment owed to the applicant by the first respondent under the Award, in the sum of $52,143. 77 Interest should also be payable on the above amounts from the date of the filing of the summons until the date of judgment: Abboud v NSW (Department of School Education) (No. 2) (2000) 99 IR 299. Whether third respondent liable to pay

78 It remains to consider whether the third respondent as a non-party to the contract should be liable to pay for the whole of the underpayment claimed. 79 The applicant submits that the third respondent was culpably associated with the making, operation and termination of his contract with the first respondent. The applicant says that the third respondent was both a shareholder and director of the first respondent up until 28 July 1999. He has therefore benefited from the inadequate remuneration paid to the applicant either through the payment of dividend or from additional retained profits of the first respondent. 80 The evidence on this particular issue enables a number of inferences to be drawn. The third respondent employed the applicant following the interview on 27 March 1998 at a flat rate of $12 per hour. The first respondent was the applicant's employer during the period about 27 March 1998 until 28 February 2002, and the third respondent was the sole director (as well as shareholder) of the first respondent at the time he employed the applicant until 28 July 1999. After that time he was a security licensed consultant to the first respondent. In this role he continued to involve himself in the first respondent's affairs. He consulted on matters concerning the legal affairs of the company and was involved in the operations of the first respondent in the security industry. 81 These matters taken together give rise to a further inference that the third respondent was culpably and directly associated with the making of the contract and with the activities of the first respondent (in avoiding the provisions of the Award and failing to pay superannuation): see Brown v Rezitis (1970) 127 CLR 157; Automotive, Food, Metals, Engineering, Printing and Kindred Industries Union, NSW Branch v David (2006) 154 IR 297. 82 The applicant also relied here on what he says was the third respondent's intimate involvement in the creation of and, and reliance on, "the fraudulent purported contract". I have already dealt with the evidence concerning the circumstances of the creation of this document. According to the third respondent, while he assumed that the applicant was employed through his service company, Apteka, he did not see the "purported contract" until some time in October 2004. The third respondent's explanation for the different corporate entities appearing in the applicant's payslips and the external inconsistencies between those documents and the group certificates was unsatisfactory. Nevertheless the information on the payslips which indicates that the applicant was paid by at least three companies (and possibly four) within the Divisional Security group is clearly at odds with the information in the group certificates and PAYG summaries. These latter documents I found were more likely to contain the correct information. The financial records of the Divisional Security group I found, for reasons given earlier in this judgment, unreliable both as to their content and creation. It does not follow from this however that the documents, including the "purported contract" were created by or with the dishonest involvement of the third respondent. Rather the state of the financial records in my view may be suggestive of a lack of managerial instruction and supervision of persons working in the finance or accounts section of the corporate group responsible for paying the wages and salaries of staff. The evidence on the issue is in my view not sufficient to found an inference of fraud. 83 For reasons earlier outlined I find that the third respondent was culpably associated with the making of the contract and with the activities of the first respondent which in turn were connected to the applicant's underpayment of wages and failure to pay superannuation by reference to the Award, and, which rendered the contract of employment between the applicant and the first respondent unfair. Accordingly, the third respondent is liable to pay the applicant monetary amounts representing his minimum entitlements under the Award being $52,143 as well as the outstanding superannuation contributions calculated by reference to the underpayment owing to the applicant being $3,965.45. The third respondent should also be ordered to pay interest on those amounts for the period specified above namely from the date the summons was filed until the date of judgment. Costs

84 The applicant also seeks an order for costs on an indemnity basis against the third respondent. The applicant's submissions on this issue seek indemnity costs on two bases:

(ii) "...the behaviours of the third respondent in resisting the Applicant's case in the manner he did, in the filing of the ultimately withdrawn motion seeking to amend the reply, in the positing of the clearly fraudulent Purported Contract, and continuing to press upon the court in evidence its veracity, is such as to impel the exercise of the Court's discretion to award indemnity costs." 85 I have already found that the evidence, taken as a whole, does not support a finding that the "purported contract" was a document created by or with the dishonest involvement of the third respondent as to its purported commencement date. I therefore do not find that the "purported contract" was a fraudulent document. 86 The normal order is that costs should follow the event although certain circumstances may justify a departure from the normal order and result in an order for costs on an indemnity basis. In National Cellular & Anor v Efficient Marketing Services & Anor [2001] NSWSC 244 O'Keefe J made the following observation in relation to orders for costs on an indemnity basis (at [73]):

An order for costs on an indemnity basis generally betokens that a claim has been made which is wholly unjustified or that a defence or claim that is deliberately false or time wasting has been filed or embarked upon, or that there have been some circumstances in relation to the conduct of the case which call for a departure from the usual order for costs. 87 The third respondent on the second day of the hearing moved the Court for orders in a notice of motion seeking to amend the reply to effectively assert a case in reply that the first respondent as a party to the proceedings did not employ the applicant at all, or engage the applicant's services through his service company, Apteka. The history of the proceedings has been canvassed in some detail earlier in this judgment. The application to amend the reply was made orally by the third respondent through his counsel Mr Britt on the first day of the hearing. The notice of motion was heard over the next two days. On the third day the third respondent failed to attend court. A legal representative appearing on the behalf of the third respondent sought leave to withdraw from the proceedings on the notice of motion as well as from the substantive proceedings. On the same day the Court was informed that the first respondent had gone into liquidation. This left the applicant with little option but to seek leave in the Supreme Court to proceed against the first respondent. Accordingly the proceedings were adjourned. On the next hearing date the third respondent, appearing for himself, told the Court that he no longer wished to proceed with the notice of motion. 88 The respondents' reply alleges that the applicant was not employed at the relevant time by the first respondent but by Divisional Protective Services (Australasia) a company within the Divisional Services group. The alleged employment of the applicant by this latter corporation is said to be for the period 13 March 1998 until 9 July 1998 after which it is asserted by the respondents that the first respondent engaged the services of the applicant thorough Apteka. 89 The belated amendments to the respondents' case in reply sought by way of the amended reply came about according to the third respondent because he realised after examining pay records that Divisional Protective Services (Australasia) in fact employed the applicant from 1998 until 4 September 2000 after which he was paid by the second respondent. As I have earlier found in this judgment, this assertion is not borne out by the payslips provided to the court by both the respondents and the applicant. There is little evidence to support the assertion. Apart from some payslips covering a relatively short period of time at the commencement and end of the applicant's employment which indicate that the applicant's wages were paid by Divisional Protective Services (Australasia) and the second respondent, the bulk of the evidence contradicts the assertion. The notice of motion therefore found little support in the evidence and in any event it was subsequently abandoned part-heard by the third respondent following two days of hearing. 90 In these circumstances I am of the view that an order that the third respondent pay the cost of the notice of motion on an indemnity basis is warranted. The applicant sought and was granted costs on an indemnity basis because of the third respondent's failure to attend court on the third day of the hearing of the notice of motion. The applicant is therefore entitled to his costs on an indemnity basis for the first two days of the hearing of the notice of motion (21 and 25 September 2006). In relation to the substantive proceedings I propose to make an order that the third respondent pay the applicant's reasonable costs of the proceedings, as agreed or assessed. Orders

91 The applicant seeks orders that the contract of employment with the first respondent be varied to require certain payments to be made to the applicant consequent upon findings of unfairness. 92 I propose therefore to make the following orders consequent upon the findings of unfairness which I have made:

(1) The contract between the applicant, Robert Clarke, and the first respondent, Divisional Security (Aust) Pty Limited entered into about 27 March 1998 until 28 February 2002 is declared to be:

(c) does avoid the provisions of an industrial instrument, namely the Security Industry (State) Award.

(2) The contract is varied to insert the following provisions:

(i) The first respondent is to pay the applicant remuneration in accordance with the minimum entitlement to remuneration under the Security Industry (State) Award as varied from time to time;

(ii) The first respondent is to pay the applicant superannuation in accordance with the minimum entitlement under the Superannuation Guarantee Levy as varied from time to time.

(3) The third respondent shall pay to the applicant the sum of $52,143 representing the applicant's minimum entitlement to remuneration under the Security Industry (State) Award .

(4) The third respondent shall pay to the applicant the sum of $3,965.45 representing the applicant's minimum entitlement to superannuation under the Superannuation Guarantee Levy.

(5) The third respondent shall pay to the applicant interest on the amounts specified in Orders 3 and 4 above in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. Interest shall be payable from the date of filing of the summons for relief to the date of this judgment.

(6) The third respondent shall pay the applicant's costs of the first two days of the proceedings by way of notice of motion to amend the reply to the summons for relief heard on 21 and 25 September 2006, on an indemnity basis.

(7) The third respondent shall pay the applicant's reasonable costs of the proceedings, heard on 20 September 2006 and 7 February 2007 as well as the costs of the notice of motion to obtain Anton Pillar relief heard before Marks J, as agreed or assessed. _______________________

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