Fair Work Ombudsman v Ecosway Pty Ltd

Federal Court of Australia|2016-03-24|Before: White J

The application is dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

WHITE J: 1 Between 1 March 2011 and 19 September 2012, Heather Wardale was engaged by the respondent (Ecosway) as a Store Operator. She worked at two shops in Adelaide, one at Unley and the other at Kensington Park. 2 The applicant (the FWO) contends that Ms Wardale carried out this work under a contract of service, and that the General Retail Industry Award 2010 (the Retail Award) applied to her employment. She alleges that Ecosway failed to comply with a number of the requirements of the National Employment Standards established under the Fair Work Act 2009 (Cth) (the FW Act) and of the Retail Award and, accordingly, that it contravened ss 44 and 45 of the FW Act. 3 The FWO also alleges that Ecosway contravened s 357(1) of the FW Act on five separate occasions by representing to Ms Wardale, falsely, that under her contract she would be an independent contractor and not an employee. She contends that these representations were contained in five Store Operator Agreements provided to Ms Wardale. Only the first of these agreements was executed by Ms Wardale. 4 By way of relief, the FWO seeks declarations as to Ecosway's contraventions, orders for payment to Ms Wardale of her award and other entitlements and the imposition of pecuniary penalties. 5 Ecosway denies that Ms Wardale was an employee. It asserts that Ms Wardale was throughout her engagement, an independent contractor working under a contract for services. It therefore denies the contraventions alleged by the FWO. 6 Ecosway submits that, even if Ms Wardale is found to have been an employee, it did not contravene s 357 because, at the time of its representations to Ms Wardale, it did not know, and was not reckless as to whether, the contract was one of employment rather than a contract for services (s 357(2)). It accepted that it had the onus of establishing these matters. 7 The Court directed that the trial proceed in two stages with all aspects of the FWO's claim, other than the claim for the imposition of penalties, to be tried in the first stage. 8 Ecosway accepted that, if the Court found that Ms Wardale was an employee, the contraventions of ss 44 and 45 of the FW Act alleged by the FWO would be made out. Further, Ecosway did not dispute that the declarations and compensatory orders which the FWO seeks would then be appropriate. 9 Accordingly, the issues for the Court's determination in this stage of the trial are whether Ms Wardale was an employee and, if so, whether Ecosway has established that it neither knew, nor was reckless as to the possibility, that Ms Wardale was an employee at the time it represented to her that she was an independent contractor. 10 In several of the documents the name "Ecosway" is styled "eCosway". I have used the former as that is the style recorded in the registration of Ecosway by the Australian Securities and Investments Commission. 11 The proceedings were initially commenced in the Federal Circuit Court. They were transferred to this Court on 2 February 2015: Fair Work Ombudsman v Ecosway Pty Ltd [2015] FCA 102; Fair Work Ombudsman v Ecosway Pty Ltd [2015] FCCA 202.

Overview 12 In this section of the reasons, I set out an overview of the circumstances giving rise to the issues just identified. For the most part, the matters I record were non-contentious. 13 Ms Wardale was born in 1955. Much of her work history has been as an employee in the retail and service industries but at times she has also been in business on her own account. In particular, in the early 1990s, Ms Wardale conducted her own lawnmowing business as a franchisee; between 1994 and 1998 she and her partner owned and operated a snack bar and delicatessen; and between 1998 and 2008, she conducted, from her own home, a natural therapies business named "HeatherRuth Natural Therapies". 14 Ecosway is a wholly owned subsidiary of Cosway (M) Sdn Bhd (Cosway (M)), a Malaysian company, which sells health care, nutrition, beauty and related products. Cosway (M) has subsidiaries in a number of countries. Ecosway's head office is in Melbourne. 15 Ecosway was initially incorporated under the name Cosway Value Club (Australia) Pty Ltd. It commenced business in Australia in 2005 selling its products through three conventional retail stores in Victoria, each of which was staffed by persons who were undoubtedly its employees. These stores traded under the name "Cosway Value Club". In 2007, Ecosway abandoned this system and introduced what it describes as a "multi-level network marketing system". At the same time, it terminated the employment of its employees (one store had ceased operating beforehand) and rebranded the stores as Ecosway shops. In 2008, Ecosway opened two further stores, including one at 54 Unley Road, Unley in South Australia. It referred to these stores as its "flagship" stores. The multi-level network marketing system has evolved over time but until 2013 its essential elements remained the same. It is part of an international network marketing system operated by Cosway (M)'s subsidiaries in a number of countries. 16 In 2013, Ecosway launched an online business model and commenced phasing out at least one element of the network marketing model which had applied from 2007. As this occurred after the cessation of Ms Wardale's engagement on 19 September 2012, it is not necessary to refer to the online business model further. 17 In the findings which follow, I am referring to the Ecosway system which was in operation during the period of Ms Wardale's engagement (1 March 2011 to 19 September 2012). 18 The multi-level network marketing system had several elements. At its essence it involved Ecosway engaging network marketers or distributors (referred to as "Business Owners") to sell its products to consumers and to recruit others into their networks who would also sell Ecosway products to people who they had in turn recruited into their networks. 19 There were three categories of business owners: Business Owners; Business Owners who operated "service centres" (referred to as "BOSCs"); and Business Owners who were Store Operators (Store Operators). 20 Most of Ecosway's products were sold through Business Owners. Ecosway consigned its products to Business Owners with the ownership in them remaining with Ecosway until they were sold. Business Owners sold the products in their own time and were remunerated by commissions paid by Ecosway. Many purchasers of Ecosway products from Business Owners chose to join a form of loyalty program and were known as "VIP members" or "VIP shoppers". The principal elements of this program were that, on payment of a fee ($15 per year) or by purchase of a product or products at a minimum stipulated price, the VIP member became entitled to discounts from the retail price of Ecosway's products. It was not necessary to become a VIP member in order to purchase Ecosway products, but many who purchased on a regular basis found it advantageous to do so. VIP members were different from the "downlines" to whom I will refer shortly. 21 A person could become a Business Owner by applying directly to Ecosway or by applying through an existing Business Owner. In either case, the applicant filled out an application form and paid an annual subscription fee of $60. Applicants then became entitled to purchase Ecosway products at discounted prices and, in addition, to sell the products provided to them on consignment through their own networks. Ecosway retained the annual subscription fee even when the new Business Owners had been recruited by another Business Owner. 22 Business Owners who were not Store Operators or BOSCs did not operate from retail or other fixed premises. They sold Ecosway products to customers in networks which, at least in the first instance, they developed by their own personal contacts, promotional skills and energy. In addition, Business Owners could recruit further Business Owners who would in turn sell Ecosway's products through networks which they themselves developed and seek to recruit further Business Owners. All the Business Owners in the levels below the original Business Owner were known as "downlines". Business Owners were remunerated by the profits they derived from the sales which they made to customers, from various commissions which Ecosway paid them, and by commissions on the sales achieved by their downlines, at whatever level in the network the downlines happened to be. The prospect of receiving commissions from the sales made by the downlines in the Business Owners' networks was, and is, a feature of the Ecosway system and provided an incentive for Business Owners at each level in the network to seek to recruit further Business Owners. 23 The relationship between Ecosway and its Business Owners was governed by written terms and conditions prepared by Ecosway. It seemed to be common ground that Business Owners were not employees of Ecosway so that it is not necessary to refer to those terms in further detail. 24 Store Operators were Business Owners who sold products provided on consignment by Ecosway from retail stores made available by Ecosway. They were remunerated by commissions on the sales they made through the retail stores. In addition, Store Operators could continue to sell through their networks, as described above, and to derive an income from those activities. 25 BOSCs were Business Owners who operated from premises other than a shop provided by Ecosway. Usually, this was a room in their own home or an allocated room or area in a shop or business operated by the BOSC. Pharmacies and chiropractors' premises were given as examples in the evidence. The BOSCs had supplies of Ecosway's products in their premises on display which were available for purchase by VIP members, members of the public and other Business Owners. They were remunerated by the commissions Ecosway paid on these sales. The principal differences between Store Operators and BOSCs were that, in the case of the latter, Ecosway did not provide or pay for the premises they used, nor their furniture, fittings and other equipment, and did not pay the handling fee. 26 The documentary evidence indicates that the commissions paid by Ecosway to Business Owners took a variety of forms, some of which were calculated by reference to the volume of products sold. However, neither the oral evidence nor the submissions in the trial indicated that the particular forms of commission were significant to the issues in this case and it is not necessary to refer to them further. 27 Ms Wardale joined Ecosway as a Business Owner in early 2010, having been introduced to Ecosway by some Business Owners named Regan. There was no document in the evidence constituting an application by Ms Wardale to become a Business Owner, but it was common ground that Ecosway's documents relating to Business Owners generally applied in Ms Wardale's case. Ms Wardale was told of the requirements for a Business Owner by the Regans and by a Mr Henkgen who was then the Store Operator in Ecosway's shop at Unley. At the time this was Ecosway's only shop in South Australia. Ms Wardale attended some meetings conducted by the Regans and shortly afterwards joined as a Business Owner. She thereby became one of the Regans' downlines. Ms Wardale paid Ecosway a $60 registration fee and had to purchase approximately $1,000-$3,000 worth of Ecosway products within a month. Each week, Ms Wardale put in an order to Ecosway in Melbourne for products. These were for her own use as well as her customers, mostly VIP members she obtained as part of her own network. 28 At or about the time that Ms Wardale joined Ecosway as a Business Owner, the Regans had told her that their ambition was to have one of their downlines become the Store Operator in the Unley shop. That would have been advantageous to them because they would then become entitled to commissions on the products sold by that downline in the shop. 29 In late 2010, Mr Henkgen wished to cease being the Store Operator at the Unley shop. He and the original Store Operator, Mr Huis Int Veld, encouraged Ms Wardale to take over the shop. After some discussions with Ecosway's General Manger, Mr Phan, Ms Wardale agreed to do so. Ms Wardale had, however, contemplated taking over the shop at least as early as April 2010 as she had then sent an email to Mr Phan asking to discuss that possibility with him. 30 Ms Wardale took over the Unley shop on 1 March 2011. She did not make any payment to Mr Henkgen in order to acquire or take over the business. 31 Ms Wardale had had previous experience with a network marketing system of the kind operated by Ecosway as she had been involved with an organisation known as LifeWave. This organisation sold "transdermal" patches which were said to activate the body's "meridian points". Ms Wardale's involvement with LifeWave involved the establishment of networks and the recruitment of "downlines". She had derived income from sales of the patches which she herself made as well as from commissions on the sale of patches made by her downlines, including the downlines recruited by her own direct downlines. Ms Wardale had ceased active involvement with LifeWave some six months before joining Ecosway as a Business Owner, although she was still receiving commissions on sales made by some of her downlines. 32 Before commencing as Store Operator, Ms Wardale lodged, on 19 January 2011, an application form for appointment as a store operator provided to her by Mr Phan. A friend of Ms Wardale, a Ms Bifulco, was named as co-applicant. Ms Wardale said that Ms Bifulco was included only because Mr Phan had told her that there had to be "someone else on the form". Mr Phan denied telling Ms Wardale that he had told her that she could not apply alone. He said that at the time Ecosway's practice had been to appoint all forms of entities, namely, companies, trusts, partnerships and individuals as Store Operators. 33 I regarded Ms Wardale's evidence as generally reliable and consider her evidence on this topic more likely to be correct as it is consistent with the contemporaneous documentation. First, I note that in an undated document issued by Ecosway promoting the benefits of becoming a Store Operator, Ecosway identified the requirements to be fulfilled by applicants. One of these was as follows: The main applicant must be female. The second applicant can be either male or female. No issue arose in this trial as to the lawfulness of the first of these requirements. It is significant that Ecosway contemplated that there would be both a "main applicant" and a "second applicant". This is consistent with what Ms Wardale says she was told by Mr Phan. 34 Secondly, the application form completed by Ms Wardale and Ms Bifulco contained sections to be completed by the "main applicant" and the "second applicant", which is again consistent with what Ms Wardale says she was told by Mr Phan. Thirdly, despite Mr Phan's evidence, it is plain that the pro-forma application form was intended for use by individuals, and not by entities such as corporations or trusts. Fourthly, I accept Ms Wardale's evidence that Ms Bifulco had no practical involvement in the stores at Unley or Kensington Park. Nor had she been part of the lead-up to Ms Wardale's decision to apply for the shop at Unley. At the time Ms Bifulco joined in the application, she was not even a Business Owner of Ecosway, although she became such an owner later. That makes it unlikely that Ms Wardale would have included her as a co-applicant without having been prompted to do so. 35 Before Ms Wardale took over as Store Operator at the Unley shop, she and Ms Bifulco signed (on 23 February 2011) a pro-forma document provided by Ecosway entitled "Ecosway Store Operator Terms and Conditions" (the Agreement). The Agreement had alternative execution pages: one adapted for use by individuals and partners, and the other adapted for use by a company or a trustee of a trust. Ms Wardale and Ms Bifulco must have overlooked this distinction as they signed on both pages. Mr Phan must also have overlooked the distinction when the executed document was returned to him as he too signed on both pages. It was not suggested that anything turned on the dual execution of the Agreement. 36 Ecosway submitted that the Court could "consider" Ms Bifulco's involvement but did not suggest that "weight" should be attached to it. In particular, there was no suggestion that Ms Wardale and Ms Bifulco were in partnership or operating as joint venturers. It is appropriate to proceed on the basis that, despite Ms Bifulco being named on the application form and signing the Agreement, Ms Wardale was in reality the sole applicant and subsequently the sole Store Operator and that this was known and understood by Ecosway. 37 In her application form, Ms Wardale made a number of statements of a "self-promotional" kind. In relation to the store's location, she said: I would like to see Unley relocated to a more suitable location where there is a lot more foot traffic as well as parking for customers. There is a location down South at Woodcroft Shopping Centre that is currently a health shop. These traders are looking for someone to walk in and take over their lease for 18 months (see attached). 38 In a section inviting Ms Wardale to state her sales predictions, Ms Wardale entered $30,000 per month within six months and $50,000 per month after 12 months. She then stated her ideas for meeting these sales projections as follows: Concentrated effort on bringing customers to a clean, vibrant and well presented store with information on products that will assist customers. Provide excellent Customer Service for all customers to encourage return to shop and repeat business. Do massive mailouts to database introducing customers to the Ecosway concept and business and repeat the process on a regular basis - being consistent and persistent! Provide demonstrations, presentations, information on products to pique interest of customers in stores as well as demonstrate how to build an effective business for the future. 39 In an attached document, Ms Wardale set out her short and long term plans for the Unley store and her overall goals. The short term plans included bringing many new customers to the shop, introducing them to the products and inducing them to become VIP members. The long term plans included the encouragement of the VIP members to become Business Owners to have "their own business centre" either as a home stockist or a retail outlet. 40 Ms Wardale described her career objectives as being: To work in a situation where all of my many skills can be fully utilised to their maximum potential while providing my employer with a valued member of their establishment. To be an independent thinker and step outside the square to achieve results required to be successful. 41 Ecosway had formal eligibility requirements for a person to be appointed a Store Operator. The person had to: (a) be a Business Owner; (b) pass an assessment of product knowledge; (c) have at least three levels of downlines or people able to help out in the store; and (d) have achieved at least $3,000 in total income per month as a Business Owner for the three months prior to making the application. Ms Wardale did not meet all these eligibility requirements. She was a Business Owner and did have six downlines. However, she had earned well less than $3,000 in network income since joining Ecosway in January 2010 as a Business Owner. There was no indication that any of her downlines was able to help out in the shop. 42 The evidence did not indicate how it was, in these circumstances, that Ms Wardale's application was accepted by Ecosway. 43 The Agreement executed by the parties commenced with a statement that Ms Wardale would be an "independent contracting party" and not "an employee, agent, servant or franchise" of Ecosway. It contained multiple terms and conditions grouped under 26 separate headings. It will be necessary to refer to these in more detail later. For present purposes, I record that the Agreement specified the benefits to which Ms Wardale was entitled as a Store Operator and contained detailed prescriptions concerning the provision, delivery and storage of stock, a requirement that Ms Wardale comply with instructions given by Ecosway, the requirements for documentation and payment to Ecosway for products sold, the requirements as to the service to be provided in the store, including a requirement that the shop be open during approved business hours, and requirements with respect to training, ethics, use of credit cards and computer equipment. The Agreement was to commence on the date of Ms Wardale's letter of employment issued by Ecosway (cl 26) but no such letter was tendered at the trial. It appears that its issue may have been overlooked by Ecosway. The costs of maintaining and servicing the store were to be paid by Ecosway (cl 13). This included "rentals, electricity bills, lighting, air conditioning, computers, fittings, furnishings and structural condition, internet broadband and telephone charges" (the latter up to a prescribed limit) and for reimbursement of postal, delivery, stationery and permitted meeting and other miscellaneous expenses relating to the management and operation of the store. The Agreement contemplated that Ms Wardale could engage others to assist in the store. 44 Ms Wardale operated the shop at Unley from 1 March 2011 to 21 September 2011. She found it difficult to do so profitably given the limited foot traffic passing it. 45 At the time Ms Wardale commenced as Store Operator at Unley, she knew that Mr Hengken had been considering relocation of the shop to a place with greater passing foot traffic. Ms Wardale said that she told Mr Phan that she would take over the shop on the condition that she could move the store to a different location. She said that Mr Phan had responded saying that he would consider her request after she had worked for a time in the Unley shop. In his evidence, Mr Phan said that he did not remember this conversation but I see no reason not to accept Ms Wardale's evidence that it did occur. Both in her application and in correspondence to Mr Phan before commencing as Store Operator, Ms Wardale had raised relocation and had mentioned places which she thought would be suitable. 46 By mid-2011, Ms Wardale was pressing for a relocation. In June or July 2011, she recommended to Ecosway that it relocate to a shop which she had found on Magill Road at Kensington Park. In July 2011, Ecosway gave its approval for this to occur. The relocation could not have occurred without Ecosway's approval as it was the lessor of the premises at both Unley and Kensington Park. Ecosway's provision of the store was a substantial expense as the lease payment alone was $48,000 per year. 47 Ms Wardale commenced in the Kensington Park shop on 22 September 2011. She arranged the physical removal from the Unley shop, enlisting the assistance of friends and VIP members. Ecosway was not involved in the physical aspects of the relocation, but did pay furniture removalist, fit out and electricity and telephone connection costs. 48 Ms Wardale continued at the Kensington Park store until she ceased as a Store Operator one year later, on 19 September 2012. 49 In August and September 2011, Ecosway updated its pro-forma Store Operator Terms and Conditions (the Updated Agreement). Ecosway sent a copy of the Updated Agreement to Ms Wardale on or about 22 September 2011. The evidence did not disclose who it was in Ecosway who sent this copy of the Updated Agreement to Ms Wardale, nor the circumstance in which it was sent. 50 The Updated Agreement was posted to Ms Wardale's parents' address, which she had given on her application to become a Store Operator. At Ms Wardale's request, her mother opened the envelope and read out sufficient of the letter or the contract for Ms Wardale to understand that it was a contract which Ecosway wished her to sign in respect of the Kensington Park shop. Ms Wardale was irritated by Ecosway's failure to send the letter to her current address and told her mother to dispose of the letter and its contents. 51 On 21 December 2011, Mr Stamatelos, Ecosway's then General Manger, sent another copy of the Updated Agreement to Ms Wardale at the Kensington Park shop telling her that it would supersede her existing contract. He asked Ms Wardale to read, sign and return the Updated Agreement. Ms Wardale did not comply with that request. 52 Mr Du of Ecosway telephoned Ms Wardale in April 2012 requesting again, with some firmness, that Ms Wardale sign and return the Updated Agreement. He sent an email to Ms Wardale on 17 April 2012 attaching a copy of the Updated Agreement. Ms Wardale did not open the attachment and did not sign and return the Updated Agreement. 53 Mr Du tried again on 18 May 2012 by an email to Ms Wardale which attached a further copy of the Updated Agreement. Ms Wardale did not sign or return this copy of the agreement either. Ecosway made no further attempts to have Ms Wardale sign the Updated Agreement. 54 When Ms Wardale took over the Unley shop, its opening hours were 9 am to 5.30 pm Monday to Saturday. Ms Wardale suggested a variation to Mr Phan because parking restrictions on Unley Road meant that there was little trade before 10 am. Mr Phan approved the opening hours suggested by Ms Wardale, being 10 am to 6 pm Mondays, Tuesdays, Wednesdays and Fridays, 10 am to 8 pm Thursdays and 10 am to 5 pm on Saturdays. 55 At Kensington Park, the business hours of the shop were 10 am to 5 pm Mondays, Tuesdays, Wednesdays, Fridays and Saturdays and 10 am to 8 pm on Thursdays. However, in the last eight weeks that she operated the Kensington Park store and with the approval of Mr Stamatelos, Ms Wardale closed the shop on Thursdays at 7 pm. 56 There was relatively little difference between the parties as to the tasks carried out by Ms Wardale as Store Operator at the Unley and Kensington Park shops. Ms Wardale opened and closed the shops each day and was responsible for store security. She ordered the stock each week and received, prepared and displayed it for sale in the shops. She attended to the sale of the products to customers, including obtaining payment, whether by cash or credit card, using Ecosway's Point of Sales (POS) system. Ms Wardale banked the sales proceeds into Ecosway's account. She provided regular sales reports to Ecosway and from time to time undertook stocktakes directed by it. Ms Wardale also undertook the cleaning of the shops. In general, Ms Wardale was responsible for the running of the shops in every respect and, apart from receiving some assistance from volunteers to whom I will refer below, undertook these tasks personally. Ms Wardale said, and I accept, that she worked in the stores approximately 45 hours each week, spread over six days. 57 Ecosway had detailed procedures for several of the tasks. Many of these were contained in a document entitled "Store Operator Manual". In addition to complying with the requirements of the manual, Ecosway would from time to time send emails to Ms Wardale (and other Store Operators) informing them of changes to its policies and procedures. 58 There was some disagreement between the parties about the stock which it is not necessary to detail. Ms Wardale had to order stock periodically, and was expected to order sufficient to fill a pallet and also to take Ecosway's promotional lines. Sometimes she received stock she had not ordered as Ecosway overrode some orders. 59 Ms Wardale's operation of the Unley and Kensington Park stores was not a financial success. Her remuneration was relatively modest, so much so that from time to time, Ecosway paid her a "subsidy". The following table indicates the remuneration paid to Ms Wardale. Store Month Handling Charges Subsidy Total Store Inc Network Income Total Income Remarks Unley Mar-11 1,232.39 1,232.39 1,232.39 Apr-11 830.80 830.80 830.80 May-11 1,128.99 1,128.99 1,128.99 Jun-11 1,198.32 1,198.32 1,198.32 Jul-11 821.97 821.97 26.06 848.03 Net of repayment of $300 for earlier subsidy Aug-11 1,840.82 1,840.42 185.69 2,026.51 Net of repayment of $300 for earlier subsidy Sep-11 827.84 827.84 531.06 1,358.90 Kensington Park Sep-11 690.29 690.29 690.29 Net of repayment of $300 for earlier subsidy Oct-11 2,259.86 2,259.86 463.74 2,723.60 Net of repayment of $300 for earlier subsidy Nov-11 2,935.87 2,935.87 367.33 3,303.20 Net of repayment of $300 for earlier subsidy Dec-11 2,681.12 2,681.12 318.41 2,999.53 Jan-12 2,458.55 2,458.55 120.00 2,578.55 Feb-12 2,220.47 2,220.47 269.23 2,489.70 Mar-12 2,233.18 2,233.18 266.92 2,500.10 Apr-12 2,004.57 2,004.57 237.68 2,242.25 May-12 1,960.97 1,960.97 288.44 2,249.41 Jun-12 1,614.89 1,236.69 2,851.58 195.20 3,046.78 Subsidy provided to increase income to $3,000 Jul-12 2,289.63 795.18 3,084.81 3,084.81 Subsidy provided to increase income to $3,000 Aug-12 1,495.55 1,479.45 2,975.00 2,975.00 Subsidy provided to increase income to $3,000 Sep-12 788.02 788.02 788.02 Total 33,514.10 $3,511.32 37,025.42 3,269.76 40,295.18

60 As can be seen, during the period 1 March 2011 to 19 September 2012, Ms Wardale earned handling charges totalling $33,514.10, was paid subsidies totalling $3,511.32 and received income from her network of $3,269.76. 61 The "earlier subsidy" which Ms Wardale repaid was an advance to defray the expenses Ms Wardale incurred in travelling to Sydney for training. 62 Ecosway agreed to pay a subsidy for the months of June, July and August 2012 after Ms Wardale told Mr Phan that she did not feel able to continue operating the store. After some negotiation, Ecosway agreed to pay an additional amount so as to ensure that Ms Wardale received a minimum payment of $3,000 each month. 63 Mr Phan deposed that he agreed to pay the subsidies in June, July and August 2012 so as to ensure that, by reason of Ms Wardale's absence, Ecosway did not breach the terms of its lease by not having the store open at the required times. His evidence did not indicate whether he sought to avoid that circumstance by providing an inducement to Ms Wardale to continue or by providing her with sufficient funds to engage another. Given that he did not depose to any discussions with Ms Wardale concerning the latter, I infer that his purpose was to induce Ms Wardale not to abandon the store. 64 The termination of Ms Wardale's engagement with Ecosway was not amicable. During 2012, Ms Wardale had experienced ill health which compromised her ability to perform work in the store. She had found doing so more and more difficult. On 19 September 2012, Ms Wardale sent a letter to Mr Phan containing the following: Dear Chee, As of Wednesday 19 September I am no longer able to operate the Kensington Park Ecosway store in the capacity that I have for the past twelve months. When I agreed to operate the store I was totally unaware of the implications and the restrictions handed down to store operators by Ecosway that would inhibit the further growth of sales and the ability to create a reasonable income that would compensate the operator for duties carried out. Operation of the store under the extreme and unreasonable conditions has left me physically, emotionally and financially exhausted and I am no longer able to continue working on full-time basis as expected by Ecosway. Ms Wardale then went on to complain about Ecosway's treatment of her and the lack of proper remuneration and continued: After all of my attempts to make the necessary changes to allow me to operate the store under some more "humane" working conditions I have no option but to walk away from the situation in order to regain my declining health. Ecosway is a MLM company with alleged support and backup for store operators, from both upline members as well as the Company. My efforts to carry out and perform all of these tasks solely have made it impossible to operate the store as it is allegedly designed to do. My involvement in the company has proven to be a manager for the company providing services for Ecosway members both in South Australia and interstate, therefore I can consider myself to be employed by Ecosway and not under the original content of the contract originally issued by Ecosway, which I did not sign under advice. 65 As can be seen, in this passage, Ms Wardale began to articulate a view that she was an employee rather than engaged in any other capacity. 66 Ms Wardale included in the letter the keys to the Kensington Park store and instructions as to how Ecosway could obtain access to it. 67 Ecosway responded with a letter from its solicitors dated 15 October 2012 in which it contended that, by failing to trade since 19 September and otherwise to comply with the terms of the Agreement, Ms Wardale was in breach of the Agreement so that Ecosway was entitled to terminate it. The solicitors demanded compliance by Ms Wardale with certain of the requirements of the Agreement. 68 Ms Wardale was not paid as though she was an employee in either the Unley or Kensington Park stores and so did not receive the minimum wage, payments for overtime and penalty payments for which the Retail Award provided. Nor did she have any sick or annual leave.

Authorities and principles 69 Section 45 of the FW Act provides that a person must not contravene a term of a modern award. The Retail Award is a modern award. By s 46, a modern award does not impose obligations on a person, and a person does not contravene its terms, unless the award applies to the person. By s 47(1), a modern award applies to an "employee" and an "employer" if defined conditions exist. Ecosway acknowledged that, if Ms Wardale was an employee, the Retail Award imposed obligations on it in relation to her employment. 70 By s 42 of the FW Act, the term "employee" is defined to mean "an national system employee". Such an employee is a person who is employed by a "national system employer". Ecosway accepted that it was "national system employer" as defined in s 14. Accordingly, the question is whether Ms Wardale was "employed" by Ecosway and in turn whether she was employed under a contract of service. 71 The law has not been able to identify a single test to be applied in determining whether a given relationship is one of employment or one for the provision of services. It adopts instead a multi-factorial approach. Perram J summarised the position in ACE Insurance Ltd v Trifunovski [2011] FCA 1204; (2011) 200 FCR 532, at first instance, at [29]: [F]irst, the distinction between an employee and an independent contractor is "rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own (Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 at 39 [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ citing Marshall v Whittaker's Building Co (1963) 109 CLR 210 at 217 per Windeyer J); secondly, the answers to that question are to be determined by reference to the 'totality' of the relationship (Hollis at 33 [24]); thirdly, a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative: the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party 'represents' the other; for the benefit of whom does the goodwill in the business inure; how 'business-like' is the alleged business of the putative employee - are there systems, manuals and invoices; and so on - the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at 42-45 [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at 172-173 [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ ... 72 It is the totality of the relationship between the contracting parties which must be considered (Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 29; Hollis v Vabu Pty Ltd [2001] HCA 44, (2001) 207 CLR 21 at [24]) and, as Bray CJ noted in R v Allan; Ex parte Australian Mutual Provident Society (1977) 16 SASR 237 at 248, there is no magic touchstone. Particular features may carry greater weight in some contexts than others. Allsop CJ made this point in Tattsbet Ltd v Morrow [2015] FCAFC 62; (2015) 233 FCR 46 at [5]: The statutory and factual context will always be critical in a multifactorial process of characterisation of a legal and human relationship: employment. 73 In recent times, reference has been made in a number of the authorities to the statement of Windeyer J in Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210 at 217 that the distinction between a servant and an independent contractor is "rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own": Hollis v Vabu at [40]. 74 On my understanding, this statement of Windeyer J was in the nature of a prelude to his consideration of the totality of the circumstances existing in that case. I observe that in Stevens v Brodribb at 35, Wilson and Dawson JJ said that Windeyer J was to be understood as posing the ultimate question in a different way, rather than offering a definition which could be applied for the purpose of providing an answer. That is to say, that the identification of the question is not necessarily to identify the criterion by which it is to be answered. 75 The "label" which the parties themselves place on their relationship is relevant but not conclusive. The parties cannot deem the character of their relationship to be something it is not: Hollis v Vabu at [58]; ACE Insurance Ltd v Trifunovski [2013] FCAFC 3, (2013) 207 FCR 146 at [11], [28]. However, when the competing indicia are reasonably evenly balanced, the parties' own understanding of their relationship may be decisive: Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389. 76 The question of whether Ms Wardale was an employee for the purposes of ss 44 and 45 of the FW Act is to be resolved by the Court considering all aspects of the parties' relationship, taking into account all the indicia which may point either way. This usually requires an examination of the reality of the relationship in practice so that the Court does not consider only the written contractual terms: On Call Interpreters & Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [189]-[200]. Nevertheless, the terms of the parties' written agreement when such exists are usually fundamental. 77 The power to control the manner of doing the work is neither a sufficient, nor even a necessary, element of a contract of service but nevertheless its presence remains an important factor pointing in favour of a relationship being that of employer and employee: R v Allan at 248. The assessment of the indicia is not to be undertaken in a mechanical fashion, that is, by checking off a list of matters which decided cases have identified as tending towards the characterisation of a person as an employee or an independent contractor: Lopez v Deputy Commissioner of Taxation [2005] FCAFC 157; (2005) 143 FCR 574 at [82]. Nor is it helpful to proceed by way of a detailed comparison of the circumstances of the present case with those in which an employment relationship has been found and those in which an independent contractor relationship has been found: Forstaff v Chief Commissioner of State Revenue [2004] NSWSC 573; (2004) 144 IR 1 at [68]. Instead, having examined the totality of the relationship and all the various indicia the Court should come to a conclusion by standing back and examining the overall effect of the facts as found: Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448 at [35]. 78 In Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; (2015) 228 FCR 846 the Full Court (North and Bromberg JJ, with whom Barker J agreed) considered that the question of whether workers were employees or independent contractors should be determined by examining first whether they were engaged in the conduct of their own businesses: at [175]-[200]. However, in Tattsbet v Morrow Jessup J (with whom Allsop CJ and White J agreed) said that the framing of the issue in this way could distract attention from the true question for the Court's consideration, namely, whether the person is an employee: [61] [The trial Judge] ultimately saw the question as one which involved, in effect, a dichotomy between a situation in which the putative employee works in the business of another and a situation in which he or she conducts his or her own business as an "entrepreneur". To view the matter through a prism of this kind is, however, to deflect attention from the central question, whether the person concerned is an employee or not; or, perhaps, as Mason J put it in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, 28, to "shift the focus of attention" to a no less problematic question. As Buchanan J put it in ACE Insurance, "[w]orking in the business of another is not inconsistent with working in a business of one's own" (209 FCR 146, 182 [128]). On the other hand, if the putative employee's circumstances exhibit the characteristics of a business, that will undoubtedly be a matter proper to be taken into account in determining the question at hand, so long as sight is not lost of the question itself. The question is not whether the person is an entrepreneur: it is whether he or she is an employee. As can be seen, this passage indicates that, while it may be appropriate to take into account that the putative employee's circumstances exhibit the characteristics of a business, the focus of the judicial enquiry should remain on whether the person is an employee.

The Agreement 79 As Ms Wardale did not execute the Updated Agreement provided to her, it was common ground that the terms of the Agreement governed the parties' relationship throughout her engagement. Accordingly, it is a principal source of information as to the nature of their contractual relationship: Australian Mutual Provident Society v Chaplin at 388. This makes it appropriate to refer to the terms of the Agreement in some detail. 80 The Agreement was a pro-forma document containing no specific reference to the Unley store. Although styled by the parties as an Agreement, the document's title is "Ecosway Store Operator Terms and Conditions". Most of the terms and conditions imposed obligations or restraints on Ms Wardale rather than on Ecosway, reflecting, no doubt, that it had been prepared by the latter. 81 The Agreement commenced with the statement: Your appointment as an eCosway Store Operator does NOT make you an employee, agent, servant or franchisee of eCosway. You are an independent contracting party. The scope of your appointment as an eCosway Store Operator is confined and limited to the following Terms and Conditions. (Emphasis in the original) 82 As already noted, this description of the parties' relationship is not conclusive of its character. It was not open to them to alter the true character of their relationship by putting a false label on it. Further, the subsequent conduct of the parties may indicate that their relationship was different in character from that suggested by the terms of this opening statement: Hollis v Vabu at [47]. 83 It convenient to make findings as to the content of the Agreement under the following headings.

Ms Wardale's remuneration 84 Clause 1 specified that Ms Wardale was entitled to "benefits" of three types. First, there were "Handling Charges". These were in fact commissions on the monthly sales in the store of Ecosway products. A commission of 5% inclusive of GST was paid on monthly sales of Ecosway "Special eV Product sets" and a commission of 12% inclusive GST on monthly sales of all other Ecosway products. There were no minimum or maximum amounts of handling charges so that the amount which Ms Wardale received depended on the number of each type of product sold in the store. 85 Ms Wardale was not entitled to handling charges in respect of "certain products and promotional items" to which a separate scheme applied (cl 1(b)). The evidence did not indicate the content of this scheme, nor the form or amount of these payments. I infer that they were not significant. 86 The third source of Ms Wardale's remuneration was to arise from her participation in "various competitions and/or incentive programs organised by Ecosway for Ecosway Store Operators". Again, these do not appear to have been significant. 87 The Agreement did not contain any stipulation as to how or when Ms Wardale would receive the remuneration to which she was entitled. In practice, Ecosway made monthly payments of the accrued handling charges into Ms Wardale's bank account, and provided a reconciliation statement to her.

Arrangements concerning stock 88 Clause 2 of the Agreement contained detailed prescriptions concerning Ecosway stock. 89 Stock was delivered to the store on a consignment basis (cl 2(a)). Ecosway retained ownership, the "exclusive right" to deal with stock in whatever manner it deemed fit (cl 2(a)), and to recall it for any reason whatsoever (cl 2(b)). Ms Wardale was obliged to store the stock at premises approved by Ecosway (cl 2(b)) and to ensure that it was kept in proper condition (cl 2(e)). Ecosway was entitled to enter the store, whether or not Ms Wardale was present, to inspect or retrieve stock if it had been unable to contact Ms Wardale for three consecutive days (cl 2(c)). Ms Wardale was to carry the risk of products being damaged as a result of poor storage conditions as she was required to purchase all such stock (cl 2(e), (g)). She could return stock to Ecosway only with its prior written approval and, even then, Ecosway had the discretion to accept or reject the return (cl 2(f), (g)). 90 Ms Wardale was required to check each delivery of stock for completeness, and to verify it to Ecosway (cl 2(h)); to check the monthly Ecosway "Sales and Inventory Statement" against her physical stock inventory (cl 2(k)); and to conduct at least two stocktakes each year as and when directed by Ecosway (cl 2(l)). She was to submit the stocktakes to Ecosway in accordance with its "Stock Check Procedures". In the event of discrepancies, Ms Wardale was obliged to purchase the stock which could not be located (cl 2(m)). 91 Ms Wardale was also obliged to comply with any instructions by Ecosway to transfer stock to any other store, BOSC or, indeed, any other designated location (cl 2(o)). 92 The Agreement did not contain any express stipulation as to the price at which Ms Wardale was to sell Ecosway's products, but it seems to have been implicit that she would sell at the prices fixed by Ecosway. In practice, Ecosway did fix the prices at which Ms Wardale sold the products in the store: there being one price for "members" and a higher price for "non-members". Ecosway did not permit Store Operators to sell a product for less than the price it fixed without its prior permission, and there was evidence that it had terminated the appointment of one operator for reasons which included a breach of that condition.

Reporting 93 Ms Wardale was required to remit to Ecosway immediately all monies she received on behalf of Ecosway, in the manner it directed (cl 3(c)). In practice, this involved frequent (but not daily) banking. If Ms Wardale failed to remit a payment as required, then cl 3(d) provided that she pay interest on the unpaid amount at the rate of 18% per annum, calculated daily. 94 Ms Wardale was required to submit regularly and punctually all the reports required by Ecosway according to a schedule which it determined (cl 3(b)) and to complete all documents accurately and carefully in accordance with Ecosway procedures (cl 3(a), (e)).

Compliance with instructions 95 Clause 4 required Ms Wardale to comply with instructions given to her by Ecosway as follows: (a) You are to take serious note and adhere to all information and instructions given by Ecosway. (b) You shall notify Ecosway of product movements, problems and suggestions. (c) You are to read and understand the Ecosway Newsletters and other letters or material circulated by Ecosway. (d) You are required to comply with all policies, procedures, directives and instructions issued by Ecosway. 96 By cl 3(e), Ms Wardale was obliged to "adhere to Ecosway's procedures in documenting membership applications, membership renewals and in particular the submission of all receipts and payments". The Agreement provided that Ms Wardale would be liable for "any negligence/oversight in the submission of members' sales, membership applications and renewals" and that "all bonuses due to members" arising from her negligence/oversight were to be borne by her (cl 3(e)). 97 By cl 3(f), Ms Wardale gave her irrevocable consent to Ecosway's employees and/or representatives entering the store "for the purpose of inspecting all materials relating to the business and to taking copies of any relevant documents".

Service requirements 98 The Agreement provided for close supervision by Ecosway of the store's opening hours. The hours specified in the Agreement were 10 am to 6 pm on Mondays, Tuesdays, Wednesdays and Fridays, 10 am to 8 pm on Thursdays and 10 am to 5 pm on Saturdays (cl 5). A note indicated that these hours were given by way of example only and that the actual hours could be agreed on a case by case basis. Clause 5(c) required Ms Wardale to apply to Ecosway for approval for any change in the hours, one month before the proposed change. 99 As already noted, when Ms Wardale commenced in the Unley store, it opened at 9 am and closed at 5.30 pm Monday to Saturday. Ms Wardale obtained Mr Phan's approval to change those hours to those in the example given in the Agreement. 100 In addition to being required to have the store open during the specified hours, Ms Wardale was obliged to notify Ecosway when, for any reason, she could not do so for more than two days, and she was then obliged to find a replacement (cl 5(b)). Ecosway's prior written approval was required for each replacement person (cl 5(b)). 101 Ms Wardale was not permitted to close the store temporarily without Ecosway's approval, and she had to seek that approval two months in advance (cl 5(c)). 102 The Agreement also descended into detail as to the manner in which Ms Wardale was to deal with members: to serve them on a first come-first serve basis and to fulfil all orders as long as stock was available (cl 5(d)); to treat all members equally (cl 5(e)); not to consign products to members or other individuals unless authorised in writing by Ecosway (cl 5(e)); not to allow members to take products on credit (cl 5(f)); and to maintain "sufficient product folders, brochures and membership application forms" to provide the required service to new and existing members (cl 5(h)). Clause 5(i) imposed an overarching obligation on Ms Wardale to be "courteous, friendly and … presentable at all times". 103 By cl 7(m), Ms Wardale was required to conduct herself "in an honest and ethical manner" and not in any way to "injure, or cause disrepute to Ecosway, Ecosway's name and/or its affiliated brand names".

Insurance 104 Ecosway bound itself to take out two forms of insurance: first, on Ms Wardale's behalf, and at her expense, insurance "to cover all personal injuries", presumably public liability insurance (cl 2(i)); and, secondly, "fire and theft/burglary insurance" for its stock in the store (cl 2(j)). Although there is some clumsiness in the drafting, it seems that Ms Wardale was bound to pay for any lost or damaged stock which was not covered by Ecosway's insurance (cl 2(i)).

Restraints 105 The Agreement imposed a number of restraints on Ms Wardale's activities as a Store Operator. By cl 2(d), she was not permitted, without the prior consent of Ecosway, to use the store premises for any business involved in the supply of products or services which were competitive with Ecosway products or services. 106 By cl 7, Ms Wardale was precluded from recruiting as new members any persons in one or other of 12 listed kinds of relationships with an existing Ecosway member or who were accustomed to purchase Ecosway products from another Business Owner.

Store equipment 107 Ecosway bound itself to provide to Ms Wardale a Microsoft Windows operating system, a laser printer with a scanning function (for the printing of documents), a handheld scanner and broadband internet access (cl 10). In addition, Ecosway required Ms Wardale to use its POS system or other software program (cl 9). Clause 11 contained detailed prescriptions as to Ms Wardale's processing of credit card payments.

Sales and recruitment targets 108 Clause 12 required Ms Wardale to achieve Ecosway's "monthly product, sales and recruitment targets" and entitled Ecosway to terminate the Agreement if she failed to do so.

Operating costs 109 Ecosway paid the lease costs, airconditioning costs and electricity supply costs of the store as well as providing the computers, fittings, furnishings and other structural items (cl 13(a)). It also paid the costs of providing internet and telephone access as well as the postal, delivery, stationery and permitted meeting expenses relating to the management and operation of the store (cl 13(c)). Ms Wardale described Ecosway as paying for everything in the stores "except for ink for the printers, printing paper and other little extra" such as window cleaning and the cost of any extra posters or flyers she had made up. However, cl 13(d) obliged Ms Wardale to bear the costs of any labour engaged in the store.

Training 110 Ms Wardale was obliged "to initiate and conduct regular motivation, recruitment and product training sessions for all members and non-members to ensure their understanding of the Ecosway profit plan, product knowledge as well as the various offers and promotions" (cl 6).

Ecosway trademarks and business name 111 Ecosway retained ownership of the signage, the business name and any trademarks (cl 8).

Indemnification 112 Clause 14 required Ms Wardale to indemnify, and keep indemnified, Ecosway with respect to all loss, damage or liability suffered by it resulting from a breach of the Agreement.

Non-exclusivity 113 Ecosway reserved to itself the right to appoint additional stores or Business Owner support centres in Ms Wardale's "area" (cl 15).

Termination of Agreement 114 Ms Wardale was required to give two months' notice to Ecosway of her termination of her operation of the store (cl 16(a)). Ecosway was entitled to terminate Ms Wardale's operation of the store without notice in three circumstances: if Ms Wardale failed to achieve any of the monthly product, sales and/or recruitment targets for her; if the continued operation of the store at the premises became unlawful; and if Ecosway determined to discontinue distribution of its products through such stores (cl 17(a) and (b)). The Agreement did not otherwise provide for termination by Ecosway. On any termination, Ecosway had the right to withhold any monies owing to Ms Wardale pending the return of its stock and other proper accounting by her (cll 16 and 17).

Acknowledgment 115 Ms Wardale acknowledged that Ecosway had not, before she entered into the Agreement, represented or warranted that the store would achieve, or was capable of achieving, any particular level of turnover or profitability or that it had any particular occupancy, labour or other overhead costs (cl 24(a)).

Miscellaneous 116 The Agreement contained a number of other provisions. Clause 19 contained an agreement with respect to the venue for the settlement of any dispute; cl 20 provided that Ecosway could amend and/or revise the Store Operator Terms and Conditions at its absolute discretion; and cl 25 obliged Ms Wardale to abide with the terms and conditions of the tenancy agreement between Ecosway and the management of the shopping complex in which the store was located. Clauses 22 and 23 dealt with GST and withholding tax respectively. I will refer later to the tax arrangements.

Consideration 117 It is convenient to commence with some general observations about the parties' evidence and submissions. The evidence of Ms Wardale, and some of the submissions made on the FWO's behalf, tended to focus less on the terms of the Agreement and more on what Ms Wardale had done in practice during her operation of the two stores. 118 Ms Wardale's evidence also revealed her belief that she had been treated poorly by Ecosway, in particular, that she had been inadequately remunerated and had not been provided with sufficient support. This evidence did not bear upon the issues for the Court's determination, although Ms Wardale's perception explains in part why, in the latter period of her engagement, she came to think that she was an employee. 119 Both Ms Wardale's evidence and the FWO's submissions focussed very much on her activities as a Store Operator, and gave little regard to her role as a Business Owner more generally. As will be seen, I consider that this was inappropriate. 120 Much of the evidence, and some of the submissions made on behalf of Ecosway, tended to focus on the "system" of which Ms Wardale's engagement as a Store Operator formed part. This meant that there was a good deal of evidence about what Store Operators generally could do and, to an extent, less focus on the particular arrangements which Ecosway had with Ms Wardale. This was understandable, as Ms Wardale was one of several Store Operators appointed by Ecosway and she was functioning in the context of Ecosway's Business Owner/Store Operator system. This made it easy for the witnesses to elide from the arrangements applicable more generally to the circumstances of Ms Wardale's. The effect was that much of the evidence of Ecosway was at a level of generality rather than being personal to Ms Wardale. 121 In making the assessment of the parties' relationship, I have thought it appropriate to focus on the features of their particular relationship and not the Ecosway system more generally. It may be, for example, that Ecosway has entered into agreements with incorporated entities for the operation of stores which were similar to those at Unley and Kensington Park but, to my mind, that does not assist in the task presently before the Court. 122 There are undoubtedly a number of indicia pointing to Ms Wardale having been an employee. She was subject to close supervision and control by Ecosway. As already noted, the Agreement required her to "take serious note and [to] adhere to all information and instructions given by Ecosway (cl 4(a)) and to "comply with all policies, procedures, directives and instructions issued by Ecosway" (cl 4(b)). The instructions which Ecosway did issue were detailed. The evidence included many memoranda sent by Ecosway concerning numerous aspects of the operation of the stores. These included memoranda relating to stock reporting, credit notes, consignments, stock returns, the reporting of stock reaching its expiry date, promotional brochures and material, the handling of cash, the issuing of IOUs to customers, the availability and pricing of particular documents, the discontinuance of product lines, the manner in which stock was to be displayed, the removal of stock from displays, use of product codes, use of the POS system, customer complaints, the content and timing of product orders, the forms to be used by persons applying for VIP membership, as well as other memoranda concerning the implementation of Ecosway's distribution network. Nearly all of these memoranda were circulated to Store Operators generally and not just to Ms Wardale. 123 In addition to its frequent memoranda, Ecosway issued manuals containing procedures with which Ms Wardale was expected to comply. The Store Operator Manual issued in June 2012 contained detailed prescriptions on a number of topics: the manner in which Store Operators were to process applications from persons wishing to become VIP members; the manner in which persons were to apply to become Business Owners; inventory and stock control; stock ordering; stock receiving; stock returns; the display and presentation of products; daily reporting; claims for reimbursement of expenses; as well as numerous other matters. Ecosway issued other manuals as well, of which the Store Operator POS Manual, the Store Operator POS Inventory Manual and the Standard Operational Procedures for handling complaints on defective products are examples. I am satisfied that by its various memoranda and published manuals, Ecosway did give detailed instructions to Ms Wardale and imposed binding obligations upon her. The effect was that the manner in which Ms Wardale could operate the stores was closely circumscribed and, correspondingly, that she had only a limited discretion in that respect. The nature and extent of the instructions Ecosway gave are typical of those seen in an employment context and are an indicator pointing towards Ms Wardale having been an employee. 124 Ms Wardale reported to Ecosway at the end of each day, in particular, by informing it of the amounts of credit card and cash payments for the day. In addition, she banked the sales proceed once or twice weekly in Ecosway's account. 125 It is appropriate to keep in mind, however, that control of the kind exercised by Ecosway is also seen in other contexts. It is common for franchisors to impose obligations of a similar kind on franchisees when the products sold are distributed to franchisees nationally and there are common forms of promotion and marketing. Mr Phan deposed, and I accept, that Ecosway has currently 31 Store Operators in Australia. I infer that the numbers were similar in 2011 and 2012. That being so, it is understandable that Ecosway implemented common accounting and recording systems, and that such common systems would have been imposed whether or not Ms Wardale was an employee. Further, Ecosway's multi-level networking system made it necessary for it to be able to calculate the commissions arising from the sale of each product which were payable at each level in the distribution network. Again, this necessitated in practical sense the use of common systems. Put slightly differently, the close control and supervision by Ecosway of Ms Wardale is not consistent only with the relationship having been one of employer and employee. 126 Another indication which points to Ms Wardale having been an employee is that she had to contribute, and therefore put at risk, very little of her own capital. Her contribution was in substance her labour. In particular, Ms Wardale did not supply any significant plant, tools or equipment as everything of that kind required in the stores was provided by Ecosway. Correspondingly, the circumstance that Ecosway provided the stores (by taking out the lease and paying the rent) as well as paying the costs of running the stores points against an independent contractor relationship. 127 It is also significant that ownership of the products sold in the Stores remained with Ecosway until their sale to the ultimate consumer. The circumstance, had it been the case, that Ms Wardale bought her own stock and ran the risk of being able to sell it to consumers would have been more consistent with her being an independent contractor. Ms Wardale provided her Australian Business Number (ABN) to Ecosway. However, she was not registered for GST. As the stock was owned by Ecosway, it was liable to charge and account for the GST on the sales. Ms Wardale did not have to deal with GST on sales nor did she have to prepare Business Activity Statements in respect of the stores' operations. It was Ecosway which had that function. This is more consistent with Ms Wardale having been an employee but is not inconsistent with her being an independent contractor selling goods on consignment. 128 Ms Wardale did have her own ABN which relieved Ecosway from deducting withholding tax from the handling charges which it paid to her. 129 I do not attach much significance to the circumstance that Ecosway fixed the prices for the products. That circumstance is likely attributable to the fact that its marketing was nationally based and not conducive to store to store price variations. 130 The manner in which Ms Wardale accounted to Ecosway for the proceeds of sales and in which she received her remuneration also points against an independent contractor arrangement. Ms Wardale provided to Ecosway all the funds she received and then, on a monthly basis, Ecosway paid the handling charges into her bank account. Ms Wardale was provided with a monthly statement at the time the payments were made. This was not a relationship in which Ms Wardale paid Ecosway for the services, products and facilities it provided, and kept the remaining store income for herself. 131 There was little to distinguish Ms Wardale's manner of working in both the Unley and Kensington Park stores from that of a person working as an employee in a retail establishment. I take into account however, that the tasks and functions which she carried out may not have been significantly different from those tasks and functions carried out by an owner/operator of a store. Accordingly, they are not consistent only with the relationship being that of employer and employee. 132 The hours Ms Wardale worked in both stores were determined principally by the hours which the stores had to be open. Ecosway determined those hours. Ms Wardale could not change those hours without Ecosway's approval. 133 Counsel for the FWO also emphasised that in practice in both stores Ms Wardale had sold exclusively Ecosway's products; that each store was leased, fitted out, branded and supplied with stock by Ecosway; and that in operating the store, Ms Wardale used Ecosway's POS system, its computer programs and its loyalty system. All those matters are consistent with Ms Wardale having been an employee but some, no doubt, are a manifestation if Ecosway's national marketing system. 134 Ecosway imposed restrictions on the form of advertising which Ms Wardale could use. She could develop and use sales aids, advertisements and other literature without Ecosway's approval if, and only if, they contained no direct or indirect references to Ecosway, its merchandise, trademarks, trade name, service marks or any other type of identifying information. The rationale for these restrictions is readily apparent: Ecosway sought to avoid its name and reputation being put in jeopardy by statements in advertising over which it had no control. Nevertheless, it was a form of control by Ecosway over Ms Wardale's manner of operation. I accept, however, that this control is also consistent with the relationship being other than employer-employee. 135 It is pertinent to note on this topic that Ms Wardale did a lot advertising at her own expense. This included the distribution of some 500 flyers shorty after she commenced at the Unley store, of which about 100 were sent by post. At other times, Ms Wardale spent her own money on flyers, letters, and invitations of a promotional kind. She acknowledged that she had a discretion as to when and how the promotional material of this type was circulated. The circumstance that Ms Wardale paid for advertising herself is an indicator pointing against an employment relationship. 136 Ecosway's payment to Ms Wardale of a monthly subsidy in the months of June, July and August 2012 is, to my mind, a neutral factor. It is equally consistent with her having been an independent contractor or an employee. 137 Although the matters mentioned are indicia consistent with an employment relationship, there are also a number of indications that the relationship of the parties was not that of employer and employee. 138 A requirement for personal service is an important consideration in the determination that a relationship is of that kind. As Buchanan J observed in ACE Insurance Ltd v Trifunovski [2013] FCAFC 3, (2013) 207 FCR 146 at [38], the determination should be made: … in the context that a basic (but often unstated) premise is that a contract of service requires discharge of duties by the personal service of the employee, whereas in a contract for services that is only one of the possibilities. The fact that the need to characterise the relationship at all only ever arises when personal service is, in fact, provided, is an important element to be borne in mind. The possibility for confusion about the character of the relationship can usually only arise in that circumstance. 139 However, the ability of the putative employee to enlist the assistance of others may not be decisive, as the circumstances of Lehigh Valley Coal Co v Yensavage 218 Fed 547 (1914 2nd CCA) to which Allsop CJ referred in Tattsbet v Morrow at [4] indicate. 140 There are some indications that Ecosway expected personal service by Ms Wardale. At the time Ms Wardale commenced in the Unley store, she was in receipt of the Newstart Allowance. Ms Wardale continued to receive that allowance, presumably because her involvement in the store was regarded as an attempt by her to engage in remunerative activity. A condition of the Newstart Allowance was that Ms Wardale demonstrate attempts to obtain full-time employment. After she started in the Unley store, she sought to be relieved from that obligation. Accordingly, she asked Mr Phan to provide a letter to her JobSearch provider confirming that she was fully committed in the Unley store. Mr Phan provided the following letter: To Whom This May Concern, This letter is to advise that from March 1st 2011 Heather Wardale is operating the Unley eCosway store at 54 Unley Road. The hours required for this operation are between 10am-6pm Mon, Tues, Wednes & Friday, Thursdays 10am-8pm and Saturday from 10am-5pm. This is a full-time commitment required to operate the store. 141 Counsel for the FWO submitted that the hours stipulated in the Agreement together with Mr Phan's description of Ms Wardale's commitment as "full-time" indicated that Ecosway expected personal service by her. 142 Mr Ong, the General Manager of Training and Communications of Ecosway's parent in Malaysia, gave a PowerPoint presentation in Adelaide in January 2011 about Ecosway and, in particular, about the operation of its "free stores". A slide entitled "How to Qualify to apply for a Free Store" indicated that there were two criteria. The first was that the applicant had achieved a minimum turnover as a Business Owner. The second was stated to be "full-time, willing to commit & personally operate the store". Counsel for the FWO emphasised the requirement for personal operation. 143 However, there are also indications to the contrary. Clause 5(b) of the Agreement obliged Ms Wardale to find a replacement for any period of more than two days during which she could not operate the shop. The replacement was subject to Ecosway's prior written approval (cl 5(b)). Mr Phan explained that Ecosway imposed the requirement for its approval to be obtained for "security reasons" relating to the holding of stock and cash and also to ensure that there was continued compliance with the lease covenants. Ms Wardale did not ever request approval for a replacement operator. She did, however, when unwell, telephone Mr Phan and obtain his approval to close the store for that day. 144 In addition to these provisions for a substitute, the Agreement contemplated that Ms Wardale could enlist the assistance of others, including by employing labour in the store. Clause 13(d) of the Agreement provided that "labour or assistant's wages or salary, if any, will be borne by the Store Operator". Clause 7(h) provided that Ms Wardale was "fully responsible for the conduct and actions of person(s) assisting you in the running of your Ecosway store" and that such persons should be "presentable and knowledgeable as reasonably required by the demands of the business". Clause 7 imposed a number of restraints on "you and/or spouse/your partner(s)". Each was obliged to uphold the interests of Ecosway, to conduct themselves in a manner "characterised by courtesy, fairness and due consideration", and not to abuse the confidence entrusted in Ms Wardale by Ecosway (cl 7(g)); each was obliged to be an Ecosway member in the same line of sponsorship; each was prohibited from operating under another membership with the intention of changing the line of sponsorship (cl 7(j)); and each was obliged to adhere to the Fair Trading Act of its State and to avoid any conduct which might breach the Trade Practices Act 1974 (Cth) (cl 7(l)). These provisions contemplated expressly that Ms Wardale could have the assistance of her spouse or partners (I infer domestic partners) in the store. They are inconsistent with a requirement for personal service, as is the provision contemplating that Ms Wardale could employ labour. 145 Ms Wardale did not in fact employ anyone to assist her in either the Unley or Kensington Park stores. She did however receive assistance from a friend, Yvonne. Yvonne was a pensioner who assisted "because it gave her something to do". It was Yvonne's practice to attend in the store from about noon each day until closing time. While there, Yvonne assisted Ms Wardale by unpacking and checking stock and dealing with customers. Yvonne also did the banking and other errands for Ms Wardale relating to the store. On about six occasions, Ms Wardale left Yvonne in the store while she went out to do the banking or attend to other tasks. 146 Ms Wardale did not pay Yvonne for her assistance. However, Yvonne was also a Business Owner and Ms Wardale allowed her to attempt to recruit every second person who came into the shop as either a VIP customer or into her own network. By this means Yvonne had the opportunity to obtain some reward for her efforts. Ms Wardale did inform Mr Phan that Yvonne was providing assistance but did not seek Ecosway's approval for her to do so. Mr Phan did not tell Ms Wardale that Yvonne's assistance was inappropriate and that she should be doing all the work herself. 147 The evidence indicated that Ms Wardale may also have had assistance from Business Owners she had recruited in her own network who wished to have their own store. However, the evidence about the assistance provided by these persons was limited. It appears to indicate no more than that they attended at the Unley and Kensington Park stores as volunteers in order to familiarise themselves with the manner of running a store and that, while doing so, they provided assistance to Ms Wardale. I do not regard assistance of that kind as being significant in the present context. 148 In my opinion, the circumstance that Ms Wardale did not have to provide all the services personally is a strong indication against her having been an employee. There are other indications. 149 First, the Agreement imposed a number of the risks concerning stock on Ms Wardale. She ran the risk of stock being damaged by poor storage (cl 2(e)) and was in fact bound to purchase such damaged stock "at the then current BO price" (cl 2(g)). Ms Wardale had to bear the cost of discrepancies in stock revealed by the periodic stocktakes, again having to pay for missing stock at "current BO prices" (cl 2(m)). Ms Wardale undertook other risks. Mr Phan explained that Ecosway generally did not permit any Store Operators to send back stock which they had over-ordered, the general rule being that Store Operators ordered stock at their risk. Ms Wardale ran the risk that the sales she would achieve in the Store may be only modest. The same could of course be said for any employee who works for commissions or whose remuneration depends on results but it was, nevertheless, a risk run by Ms Wardale. The acknowledgement by Ms Wardale in cl 24(a) that Ecosway had made no representation as to the profitability or turnover of the Store may not be absolutely inconsistent with the relationship being one of employer and employee, but it is unusual. 150 Secondly, the liabilities imposed on Ms Wardale by the Agreement are not usually seen in employment relationships. I refer in particular to Ms Wardale's liability for the public liability insurance premium, her liability to Ecosway in respect of lost or damaged goods to which the fire, theft and burglary insurance policy did not respond, her liability to pay interest to Ecosway in respect of any monies received in the store which she did not remit to Ecosway as and when required, and to her liability pursuant to cl 14 of the Agreement to indemnify Ecosway in respect of any loss, damage or liability resulting from a breach of the Agreement. 151 Next, the Agreement contains a number of provisions which would not have been necessary if the parties' arrangement was intended to be a contract of service. By subcll (2)(c) and 3(f), Ms Wardale gave her irrevocable consent to Ecosway's authorised representatives entering the store for inspection and other purposes. Clause 2(d) precluded Ms Wardale from using the premises for any business in competition with Ecosway. I mention again, cl 2(i) which provided that the public liability insurance should be at Ms Wardale's expense. Clause 8 provided that the signage and intellectual property was to remain that of Ecosway. Clause 15 provided that, despite Ms Wardale's appointment as store operator, Ecosway had the right to appoint additional stores or BOSCs in her area. Finally, cl 23 contained an acknowledgement by Ms Wardale that Ecosway was required by the Income Tax Assessment Act 1997 to deduct withholding tax from the handling charges payable to her during any period in which she did not hold an ABN. Provisions of these kinds would not have been necessary if the parties were contemplating that Ms Wardale would be an employee. 152 The Agreement contemplated expressly that Ms Wardale could sell products other than Ecosway's in the Store providing that they were not competitive with those of Ecosway. Presumably, Ms Wardale had a discretion about those products and the terms on which she would sell them. That is inconsistent with an employment relationship. 153 The provision in cl 5(a) of the Agreement of the store's opening hours seems to imply that Ms Wardale would otherwise have had a discretion as to those hours. That is suggestive of Ms Wardale operating her own business. Further still, it is noteworthy that the Agreement specifies store opening hours but not Ms Wardale's working hours. 154 Clause 19 contains prescriptions concerning the venue for settlement of disputes. Such prescriptions may not be inconsistent with an employment relationship but they are unusual. 155 The circumstance that the Agreement did not contemplate Ecosway being able to terminate the engagement on notice counts against it being a contract of service. 156 Ecosway emphasised the circumstance that Store Operators were also Business Owners. This meant, it submitted, that the relationship between the parties was not to be assessed on the basis that the terms of the Agreement contained a complete understanding of the relationship. Instead, one had to assess the relationship contemplated by the Agreement in the context of the existing Business Owner relationship. Many of the terms of the Agreement are explicable on that basis. It also meant, Ecosway submitted, that Ms Wardale could earn money from commissions on the sales by her downlines in their respective networks as well as from the sale of products in the store. The effect was that Ms Wardale's income was not dependent on her work in the store but also on her success in building up a network of downlines. 157 The FWO, on the other hand, submitted that the roles of Business Owner and Store Operator were separate and distinct. Counsel referred in this respect to statements by Ecosway in a promotional document entitled "A Revolutionary Business Concept" which compared store ownership and business ownership: Operating one of our free stores is kind of like being a franchisee, but focusing on building a network of people who buy our products, do our business or get free stores is kind of like being a franchisor. Which would you rather be? A franchisee, or a franchisor? Some people are cut out for the day-to-day grind of actually running a store, and some people would rather just focus on network building and sales. As an Independent Business Owner, you are welcome to use any of the stores, to bring your prospects to shop. The commission received by the store operator is separate and distinct from the network profits so all stores are "your" stores. This part of promotional brochure does contrast the different roles in running a store, on the one hand, and focusing only on network building and sales, on the other. However, the same brochure goes on to demonstrate the inter-relationship between the two roles: Having a store can certainly help you to build a network (because all of the people walking by who aren't already members of eCosway can be introduced by you) but it isn't necessary for success. Some of our top earners have never personally run stores. It's up to you. You can take advantage of just one, or both of these amazing opportunities. (Emphasis added) 158 I consider that the position for which Ecosway contended should be accepted and that Ms Wardale's role as Store Operator was complementary with her role as Business Owner. In particular, I am satisfied that one of the attractions of being a Store Operator was the opportunity it provided the Operator to recruit the shop's customers as downlines. This feature of the relationship accounts for a number of terms in the Agreement. These include the numerous restrictions on the persons whom a Store Operator could recruit into the Ecosway network contained in cl 7; the requirements in cl 5 as to the way in which Ms Wardale was to deal with "members" (and not customers); and the requirements in cl 6 that Ms Wardale "initiate and conduct regular motivation, recruitment and product training sessions for all members and non-members". 159 Ms Wardale appreciated the potential which being a Store Operator provided for the recruitment of downlines. On 1 April 2010 (some 11 months before she commenced as the Store Operator at Unley), Ms Wardale had written to Mr Phan asking to meet him in order to "discuss the possibility of working in the shop in Unley along with the view of taking over the shop in time". Ms Wardale was enthusiastic about the business opportunities saying: [W]e have decided it is such a great investment that no matter how long it takes to get a solid foundation it is certainly worth the effort. When I start working at the shop for that one day a week I plan to bring as many people as I can to the shop that day. I will send out invites for people to attend etc and present to them all in that day - I just cannot bear the thought of just sitting in the shop waiting for people to come in. As I have a large list of people that I have been involved with over the years with natural therapies, I will not find it difficult to achieve this … I have a lot of marketing ideas that I would love to put into action. … I have many ideas - too many to tell you about in this email. To recap - is it possible to meet with you during the day next Thursday to discuss these matters further. I would appreciate your time. I have my heart set on making this business a success. (Emphasis added) 160 In her evidence, Ms Wardale explained that she had thought that working in the Unley store would assist her as a Business Owner because of the opportunities it would give her to meet new people and to expand her own network. 161 On 13 December 2010, Ms Wardale wrote again to Mr Phan in connection with taking over the Unley store. Her email included the following: [T]he concept of running an eCosway store is still pulling at me therefore … after talking at length with Arthur I feel that it is timely for me to make the commitment and pursue my dream. Arthur explained that Eric would be leaving the store at the end of February and eCosway were looking for something to take over the store. I explained to Arthur that I really would like to take on the challenge of being in a shopping complex and really building the business with a large traffic flow. … Arthur suggested I work towards taking over Unley then building my team and applying for a store within a few months, I agreed this would be a great idea. (Emphasis added) Ms Wardale acknowledged that the business to which she referred was her own business. 162 In a long email to Mr Phan on 16 January, Ms Wardale said: I want to learn so much about the business and put my marketing and networking skills into practice. (Emphasis added) Again, Ms Wardale acknowledged that the business to which she was referring was the business as the Store Operator at (initially) Unley. 163 Ms Wardale referred again to the business she proposed developing in an email to Mr Phan of 24 January 2011. In particular, she spoke about the steps she intended to taking on a regular basis until she had "built the business" to the levels she sought. 164 In an email dated 13 June 2011 to a Ms Davis, a person associated with Ecosway, Ms Wardale spoke about some of the difficulties at the Unley store and the prospect of moving to Kensington Park, saying: Having now settled into the store it is becoming increasingly obvious just how difficult it may be to build my business with these restrictions. I am now looking at how I can bring in a new influx of customers to the store and planning meetings, social nights, letter box drops, mail outs that will enable me to "grow" my business and increase the sales of the store. Having not had the chance to previously build my downlines I am a little restricted with support from other members and very much "doing it alone at this time". However I'm very determined to succeed in this business and still feel very privileged to be operating the store. (Emphasis added) 165 As previously noted, Ms Wardale "rewarded" Yvonne by giving her the opportunity of recruiting every second customer in the store as a downline in her own network. Ms Wardale also acknowledged that she had understood that Ecosway's Statement of Policies and Procedures for Business Owners had continued to apply to her in her role as Store Operator. 166 In my opinion, this adds to the impression that Ms Wardale was operating a business on her own account. I agree that it is conceptually possible that, in her role as a Business Owner, Ms Wardale was operating her own business and that, in her role as Store Operator, she was an employee of Ecosway: ACT Visiting Medical Officers Association v Australian Industrial Relations Commission [2006] FCAFC 109, (2006) 153 IR 228 at [8], [31]; Victorian WorkCover Authority v Game [2007] VSCA 86, (2007) 16 VR 393 at [27]. However, I consider that the close inter-relationship between the two roles indicates that this is not an appropriate analysis of the relationships in the present case. 167 The opportunity to recruit the store's customers as downlines is, to my mind, relevant in two further ways. In the first place, it meant that instead of Ms Wardale receiving the 5% or 12% handling charge on the products when the persons had purchased as customers, she would receive the "upline" commission on their purchases as downlines. The evidence did not indicate whether this was more or less favourable to Ms Wardale, but Ms Wardale clearly stood to benefit if the new downlines developed their own networks. 168 Secondly, the Agreement did not, at least expressly, contemplate Ms Wardale developing goodwill in the store which she could in due course sell. However, the limited circumstances in which Ecosway could terminate the Agreement may have meant in practice that she had the opportunity to obtain a payment for goodwill from someone wishing to take over the operation of the Store. The ability to sell goodwill is inconsistent with a person being an employee. 169 Ms Wardale also considered that she could sell the entitlement to commissions from her downlines. She was aware that Mr Hengken had purchased the downlines of Mr Huis Int Veld, his predecessor in the Unley store. By recruiting shop customers as downlines, Ms Wardale could increase the amount she would receive on such a sale. 170 Even if Ms Wardale could not sell the goodwill which she developed, the opportunity to recruit customers as downlines meant that she could continue to receive from their purchases (as well as those by the networks they developed) commissions after she ceased operating the store. This is not a usual feature of the remuneration of retail employees and to my mind is inconsistent with the relationship having been that of employer and employee. 171 Ecosway referred to other matters. These included statements made by Ms Wardale before entering into the Store Operator Agreement on 23 February 2011 which suggested an understanding on her part at that time that she would be developing a business and not working as an employee and the statement of Ms Wardale in an email to Mr Stamatelos (Ecosway's then General Manager) of 18 April 2012 in which Ms Wardale acknowledged expressly that she did not "actually work for the company". I do not attach significance to these statements. Strictly speaking, evidence of a party's subjective intention is not admissible: Codelfa Construction Pty Ltd v State Rail Authority (NSW) (1982) 149 CLR 337 at 352. Further, as already noted, the parties own characterisation of the nature of their relationship is not conclusive. 172 Consideration of the relationship as a whole gives rise to the strong impression that Ms Wardale was not an employee. Several features of the relationship are to my mind inconsistent with an employment relationship and there are none which are consistent only with Ms Wardale having been an employee. I think it particularly significant that Ms Wardale undertook a number of risks in the business which extended beyond the risk that the exercise of her labour may prove to be unremunerative, that there are numerous provisions in the Agreement which would not have been necessary at all if Ms Wardale was an employee, and that Ms Wardale's engagement as Store Operator was an adjunct to her role as Business Owner in which it was accepted that she was an independent contractor. Many of the indicia which point to an employment relationship are explicable as necessary incidents of the multi-level network marketing system operated by Ecosway. 173 I conclude that Ms Wardale was not an employee.

Section 357 174 Given my conclusion that Ms Wardale was not an employee, it is not necessary, strictly speaking, to address the FWO's s 357 claims. However, in case this matter goes further, I set out my conclusions below. 175 Section 357 provides: Misrepresenting employment as independent contracting arrangement (1) A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor. … (2) Subsection (1) does not apply if the employer proves that, when the representation was made, the employer: (a) did not know; and (b) was not reckless as to whether; the contract was a contract of employment rather than a contract for services. 176 The FWO alleges that Ecosway contravened s 357(1) of the FW Act on five separate occasions. Each representation is said to have been made by the provision to Ms Wardale of the Store Operator Terms and Conditions (the Agreement and the Updated Agreements). For convenience, I will repeat the words in the preamble to each document said to comprise the representations. In the Agreement, the preamble was: Your appointment as an eCosway Store Operator does NOT make you an employee, agent, servant or franchisee of eCosway. You are an independent contracting party. (Emphasis in the original) 177 In the first form of the Updated Agreement provided to Ms Wardale on 21 September, the preamble provided relevantly: The Company is pleased to appoint you Heather Wardale ABN ... as the Store Operator for eCosway Kensington Park commencing on 22 September 2011. Your appointment as an eCosway Store Operator does NOT make you an employee, servant or franchisee of eCosway. You are an independent contracting party. (Emphasis in the original) 178 The preamble in each of the remaining versions of the Updated Agreement sent to Ms Wardale was identical, save only that the preamble in the document sent on 21 December had the date "21 December 2011" instead of 22 September 2011. The reference to Ms Wardale not being an agent of Ecosway was not reproduced in any of the versions of the Updated Agreements. 179 Because the representation in the Agreement was made to Ms Wardale before she commenced as a Store Operator, it was a representation made to a prospective employee. The remaining representations were made to Ms Wardale during the currency of her existing employment. The reasons of North and Bromberg JJ in Quest South Perth at [70] suggest that the questions to be considered in relation to the representations in these two situations may be different. Neither party submitted that this distinction was material in the present case. That is to say, I understood the parties' submissions to proceed on the basis that there was no difference between the representation in the proposed contract between Ecosway and Ms Wardale, on the one hand, and the representation as to the effect of an existing relationship on the other. 180 Ecosway did not dispute that it had made the representations to Ms Wardale on which the FWO relies. As previously indicated, it accepts, that, if the Court finds that Ms Wardale was an employee, each of the pleaded contraventions of s 357(1) would be made out unless it discharges the onus under s 357(2). It accepts that this would require it to prove that, at the time of each representation, it did not know that its contract with Ms Wardale was a contract of employment, and not a contract of service, and that it had not been reckless as to that possibility. See Quest South Perth at [241], [337].

The requirement for an absence of recklessness 181 This requires consideration of what an employer must establish in order to prove that it had not been reckless in the sense contemplated by s 357. Different views have been expressed in the Federal Circuit Court on this issue but, so far as I can tell, the matter has not yet been considered in this Court. 182 The Circuit Court judgments have referred to in Banditt v The Queen [2005] HCA 80; (2005) 224 CLR 262 in which the High Court considered the concept of recklessness in relation to the offence of rape to which s 61R(1) of the Crimes Act 1990 (NSW) refers: [A] person who has sexual intercourse with another person without the consent of the other person and who is reckless as to whether the other person consents to the sexual intercourse is to be taken to know that the other person does not consent to the sexual intercourse. 183 In construing the meaning of the term "reckless" in this provision, the High Court examined its legislative history, including the Report which had led to the enactment of its progenitor, the Sexual Offences (Amendment) Act 1976 (UK), as well as authorities which had considered it. It is evident that the Court was concerned, amongst other things, "to accommodate the term to the requisite mental element" for the offence of rape, namely, knowledge of absence of consent by the victim, at [33]. In that context, the plurality accepted that the term "reckless" in the context of s 61R encompassed "indifference to whether or not there is consent", "determination to have intercourse with the person, whether or not that person is consenting", and "awareness of the possibility of absence of consent and proceeding anyway" (at [16] and [88]). These formulations involved proof of the accused's subjective state of mind rather than the application of any objective criterion. 184 In Fair Work Ombudsman v Metro Northern Enterprises Pty Ltd [2013] FCCA 216, Judge Barnes referred to Banditt and noted that different considerations may apply when, as here, the absence of recklessness is a criterion of a defence as opposed to its presence being a necessary element of liability. Her Honour considered that recklessness in s 357 relates to the respondent's state of mind as to whether the contract was one of employment, at [387], but did not elaborate on the state of mind it required. However, it is evident that Judge Barnes considered that recklessness involves an element of objectivity: [403] On all the evidence it is apparent that, notwithstanding this advice and knowledge, Metro acted in a manner that was careless or incautious as to whether the contracts with the complainants were in fact contracts of employment. ... ... [405] Mr Bizimovski was or should have been aware that there was a real risk that the contracts with the complainants were contracts of employment, notwithstanding the statement in the Independent Agent Agreement that they were not employees. He was aware of the possibility of ramifications if a complainant was wrongly categorised. (Emphasis added) 185 In Director of the Fair Work Building Industry Inspectorate v Bavco Pty Ltd (No 2) [2014] FCCA 2712; (2014) 291 FLR 380, Judge Manousaridis considered that the approach of the plurality in Banditt should be applied in relation to s 357(2) so that it should not be understood as including any element of objectivity. Essentially, this was because both provisions used the term "reckless as to whether" and because if the legislature had intended that recklessness should be determined objectively, terminology indicating that that was so had been readily available to it. On this basis, Judge Manousaridis concluded at [65] that an employer seeking to establish that it had not been reckless within the meaning of s 357(2)(b) had to prove one of two things: first, that it did not know there was a possibility that the employee might be an employee; alternatively, if the employer was aware that there was a possibility that the employee was an employee, that it had not been indifferent about whether the employee was in fact an employee: at [65]. 186 In my respectful opinion, there are difficulties with the analysis adopted in Bavco (No 2). An employer seeking to prove the first limb would have to establish, not only that it did not know that the contract was one of employment rather than for services (the requirement imposed by subs (2)(a)), but, in addition, that it did not know that there was even a possibility that the putative employee might be an employee. That is to say, although recklessness is usually understood as involving a state of mind which is less than actual knowledge or actual intention, the matter to be proved to discharge the first limb would be even more stringent than an absence of actual knowledge. That seems improbable. 187 The second limb also involves difficulties. It is unlikely that an employer who does care about whether a contract is a contract of service or who hopes that it is properly characterised as a contract of service could be said to have been indifferent to the possibility that the contract is of that kind. But, on the formulation in Bavco (No 2), an employer with that state of mind who chose to proceed regardless would not be held to have been reckless. I consider that this result too could not have been intended. If correct, it would mean that an employer who proved that it did care about whether the putative employee was in fact an employee or that it had hoped that the putative employee was in fact an employee would establish that it had not been reckless, even if it had chosen to make the representation regardless and without any further consideration. This seems improbable. 188 One of the difficulties in construing the term "not reckless" in s 357(2) is that recklessness may have many meanings both in the law and in ordinary speech. The first meaning of the word "reckless" in the Macquarie Dictionary is "utterly careless of the consequences of action; without caution". In Banditt at [2], Gummow, Hayne and Heydon JJ referred to some of the meanings of the word "reckless" in the law. Later, at [36] the plurality said: It may well be said that "reckless" is an ordinary term and one the meaning of which is not necessarily controlled by particular legal doctrines. However, in its ordinary use, "reckless" may indicate conduct which is negligent or careless, as well as that which is rash or incautious as to consequences; the former has an "objective", the latter a "subjective", hue. 189 When regard is had to the matters which influenced the reasoning of the plurality in Banditt, I do not consider that the decision in that case should be regarded as self-evidently governing the meaning of the term "reckless" in s 357(2). First, obviously enough, s 357 has a different legislative history from s 61R; secondly, it is not concerned with the imposition of criminal responsibility; and thirdly, s 357(1) does not otherwise incorporate a mental element (at least other than consciousness and voluntariness) to which it is necessary to accommodate the concept of recklessness. 190 In my opinion, considerable assistance is obtained from the legislative history. Section 357 had predecessors in ss 900 and 901 of the Workplace Relations Act 1996 (Cth). The former proscribed a representation that a current contract was a contract for services when it was in fact a contract of employment. The latter proscribed a representation by a person offering to enter into a contract that the contract was one for the provision of services when it would in fact be a contract of service. Each of s 900 and s 901 provided for a defence which, while not identically expressed, had the same effect as s 357(2). In the case of s 900, subs (2) provided for a defence if misrepresentors proved that at the time the representation was made, they did not know that, and were not reckless as to whether, the contract was a contract of employment rather than a contract for services". 191 In relation to this provision, the Minister gave the following explanation in the Explanatory Memorandum accompanying the Second Reading Speech: Subsection 900(2) would provide a defence to the civil penalty in subs 900(1). Subsection 900(2) would provide that a person would not contravene the civil penalty if, when they made the representation that there was an independent contracting relationship, they believed the contract was for independent contracting and could not have reasonably been expected to know that the contract was one of employment. The onus to prove the defence in subs 900(2) would rest with the person who made the representation. This is a reversal of the burden of proof; the burden of proof normally rest with the person making the civil remedy application. The reason for this reversal is that the matter in subs 900(2) would be peculiarly within the knowledge of the defendant and would be significantly easier for the defendant to disprove and for the person making the application to prove. (Emphasis added) The emphasised portion is a clear indication of an understanding that the term "reckless" in s 900(2) was to have an objective element. It is reasonable to suppose that the term has the same meaning in s 357(2), the successor provisions. 192 I observe that this understanding of the term "reckless" is consistent with some usages of the concept of recklessness in other areas of the law, albeit in contexts with a different legislative history. 193 The definition of recklessness in s 5.4 of the Criminal Code Act 1995 (Cth) incorporates an element of objectivity. It provides: 5.4 Recklessness (1) A person is reckless with respect to a circumstance if: (a) he or she is aware of a substantial risk that the circumstance exists or will exist; and (b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk. (2) A person is reckless with respect to a result if: (a) he or she is aware of a substantial risk that the result will occur; and (b) having regard to the circumstances known to him or her, it is unjustifiable to take the risk. (3) The question whether taking a risk is unjustifiable is one of fact. (4) If recklessness is a fault element for a physical element of an offence, proof of intention, knowledge or recklessness will satisfy that fault element. As can be seen, in each limb of s 5.4, a person who has the awareness for which subpara (a) provides will be reckless if, having regard to the circumstances known to him or her, it is unjustifiable to take the risk. That question is one of fact (subs (3)). In R v Saengsai-Or [2004] NSWCCA 108; (2004) 61 NSWLR 135, Bell J (with whom Wood CJ at CL and Simpson J agreed) held that the question of whether it had been unjustifiable for the accused to take the risk required the jury to make a moral or value judgment concerning the accused's advertent disregard of the risk. See also Lustig v The Queen [2009] NSWCCA 143 at [74]. This seems to involve an element of objectivity although the assessment is to be carried out by reference to the facts as the accused perceived them. 194 Some States have introduced an objective criterion into the definition of recklessness for the purposes of sexual offences. For example, s 47 of the Criminal Law Consolidation Act 1935 (SA) provides: 47 - Reckless indifference For the purposes of this Division, a person is recklessly indifferent to the fact that another person does not consent to an act, or has withdrawn consent to an act, if he or she - (a) is aware of the possibility that the other person might not be consenting to the act, or has withdrawn consent to the act, but decides to proceed regardless of that possibility; or (b) is aware of the possibility that the other person might not be consenting to the act, or has withdrawn consent to the act, but fails to take reasonable steps to ascertain whether the other person does in fact consent, or has in fact withdrawn consent, to the act before deciding to proceed; or (c) does not give any thought as to whether or not the other person is consenting to the act, or has withdrawn consent to the act before deciding to proceed. (Emphasis added) 195 In Principles of the Criminal Law (3rd edition, Lawbook Co, 2010), the authors Bronitt and McSherry refer to New South Wales, Northern Territory and Australian Capital Territory authority indicating that recklessness in the criminal law of those jurisdictions encompasses two distinct forms: (i) Advertent recklessness: when the accused realises the possibility that the other person is not consenting but goes ahead regardless; (ii) Culpable inadvertence, when the accused fails to consider whether or not the other person is consenting, notwithstanding that the risk that the other person is not consenting would be obvious to someone with the accused's mental capacity if they had turned his or her mind to it. (Emphasis added) The second limb incorporates an element of objectivity. 196 In these circumstances, a conclusion that the concept of recklessness in s 357 involves an element of objectivity does not involve a radical departure from its meaning in some areas of the law. 197 It is also appropriate to have regard to the mischief to which s 357 is directed. North and Bromberg JJ referred to this in Quest South Perth at [95] as "the attempted avoidance of legal entitlements due to an employee through arrangements which falsely disguise the employee as an independent contractor". Their Honours went to describe ss 900 and 901 as "remedial and beneficial despite their penal nature". The same can be said of s 357. 198 In my opinion, construing the word "reckless" in s 357(2) as including an objective element is consistent with the purpose for which the provision was enacted. 199 Accordingly, I consider that employers seeking to discharge the s 357(2) onus must prove that they did not know that the contract was a contract of employment rather than a contract for services and further that, in the circumstances known to them at the time they made the misrepresentation, they could not reasonably be expected to have known that the contract may be a contract of employment. That is the approach which I will apply in this case.

The origins of the Agreement 200 The template of the document which became the Agreement was prepared by Mr Ong. He was responsible for the operations of Ecosway from early November 2008. Mr Ong replaced Ms Yeap, who had had responsibility for Ecosway's BOSCs and Store Operators. Ms Yeap had in turn taken over those functions from Ms Sook Sook who had been the manager of Ecosway's operations in Australia until November 2007. Before November 2007, Ms Yeap had assisted Ms Sook Sook. Ms Yeap has been the General Manager of Business Development of Cosway (M) since April 2010 and has had the responsibility within that company for Ecosway's operations in Australia. 201 As noted at the commencement of these reasons, between 2005 and 2007 Ecosway conducted business in Australia through conventional retail stores. At the time it changed from the conventional retail store model to the multi-level network marketing model, Ms Sook Sook engaged Mr Paul Kean of MCW Lawyers in Sydney to provide advice about the change generally and to prepare what she described as "draft Business Owner Support Centre Terms and Conditions (BOSC Agreements), one for use for home based stores, and another for use for shop based stores". Shop based stores were those like pharmacies in which shop owners sold Ecosway's products as an adjunct to their own business. They were not free standing stores provided by Ecosway. In the affidavit containing her evidence in chief, Ms Sook Sook said that, although she could not identify any document which recorded her instructions to Mr Kean and could not recall any conversation in which she had conveyed the instructions, she knew that: [12] Ecosway wanted to ensure that the BOSC Agreement would not constitute a franchise, with Ecosway being the franchisor, and the Business Owner the franchisee. … [13] Ecosway also wanted to ensure that its relationship with Business Owners in both home based stores and shop based stores was under an independent contract, and was not a relationship of employment. 202 Ms Sook Sook said that Mr Kean prepared several drafts of "the BOSC Agreement" for her consideration and comment. It is sufficient to refer to one such draft marked "final version" provided to Mr Kean in June 2007. It commenced with the statement: Your appointment as a Support Centre Business Owner does NOT make you an employee or franchisee of eCosway. You are an independent contractor. The scope of your appointment as a Support Centre Business Owner is confined and limited to the following Terms and Conditions. 203 Although the draft had some terms which were the same as those in the Agreement signed by Ms Wardale, it did contain significant differences. For example, it required the BOSC to provide a "security deposit" of $5,000 (cl 13) and it specified that the BOSC (and not Ecosway) provide the equipment to be used (a Microsoft Windows Operating System, a printer, a scanner, internet access and "uninterrupted power supply" (cl 10)). The draft did not reserve to Ecosway the right to terminate the BOSC for failing to meet monthly targets: instead it provided for the BOSC's appointment to be for a fixed term and for renewal to be subject to satisfactory performance. 204 In notes which apparently accompanied the "final version", Mr Kean noted that the question of whether a "stockist" (a BOSC) was an employee was a "complex issue". He said that there was a risk that a "stockist" may be entitled to workers' compensation and may be regarded as an employee for the purposes of the Superannuation Guarantee Act. 205 In some passages of her affidavit, Ms Sook Sook suggested that Mr Kean had provided drafts of two template agreements, one for "home based stores" and the other for "shop based stores". However, Ms Sook Sook did not produce or identify any particular documents as being the drafts to which she referred. I observe that the "final version" is entitled "Support Centre Business Owner Terms and Conditions" and seems more adapted to "home based stores". 206 Ms Sook Sook deposed that as Business Owners were approved to conduct either a home based or a shop based store, they were asked to execute "a BOSC Agreement appropriate to their operation". However, Ms Sook Sook did not identify any particular Store Operator who was asked to execute an agreement for a "shop based store" and did not provide a copy of the Agreement executed by any such person. 207 Ms Yeap deposed that: In late 2007 or early 2008 Sook Sook gave me two template Business Owner Support Centre Terms and Conditions (BOSC Agreements). She told me that one template was for use for Business Owners in home based stores, and the other for Business Owners in shop based stores. I have a specific recollection that both templates had been developed by Mr Kean in consultation with her, specifically for use in Ecosway's multi-level marketing operations in Australia. I do not remember whether she said anything to me about the legal status of Business Owners working under the BOSC Agreements. I knew that an essential feature of Ecosway's multi-level network marketing model was that all Business Owners were, and knew themselves to be, building and running their businesses, on their own account and not as employees. Ms Yeap did not produce the two template agreements which she said Ms Sook Sook had given her. 208 Ms Yeap then deposed that, on her instructions in early 2008, Mr Phan had sent out agreements to be signed by the Store Operators. Three such agreements were signed: by the operators of the stores at Unley, Box Hill and The Glen on 23 April 2008, 23 May 2008 and 12 June 2008 respectively. Each of these agreements appears to have been in the terms of the "final version" provided by Mr Kean referred to above. Amongst other things, they required the appointee to provide the equipment and the security deposit contemplated by the draft. 209 In relation to Mr Phan's sending out of the agreements to be signed by the Store Operators, Ms Yeap deposed: For these agreements, Ecosway used the BOSC Agreement template for shop based Business Owners that I received from Sook Sook. This was my decision to use the shop based template rather than the home based template. I believe that this was the correct agreement to be used for our flagship stores because … I believe that Ecosway's Australian lawyer had advised that the Business Owners were not employees and that the BOSC Agreements reflected Ecosway's multi-level network marketing model, including that they were independent contracts and not contracts of employment. 210 As can be seen, it is implicit in Ms Yeap's evidence that Ecosway had two alternate templates. I note, again, however, that Ecosway put in evidence only one such template. Perhaps of more significance is that Ms Yeap chose, without obtaining further legal advice, to use the template agreement developed for Business Owners who operated from their own premises in the materially different circumstance of store operators in shops provided by Ecosway. 211 When Mr Ong took over responsibility for Ecosway's operations in Australia in November 2008, Ms Yeap assisted him for a time. She provided him with "both of the BOSC Agreement templates and said that she had "a general recollection" that the templates had been developed by an Australian lawyer in consultation with Ms Sook Sook. 212 Mr Ong deposed that Ms Yeap had told him that the template BOSC Agreements had been cleared "by our Australian lawyers" and that he too knew that an essential feature of Ecosway's multi-level marketing system was that Business Owners were not employees. He said that in that circumstance "it went without saying" that any contract which had been approved by an Australian lawyer for use in Ecosway's multi-level marketing operations had been assessed by the lawyer to have achieved this objective under Australian law. 213 Mr Ong deposed that in June 2009, after Ecosway had increased the number of stores (by adding three in Sydney and one in Brisbane), he had been instructed to review the BOSC Agreement for shop based Business Owners and to adapt it "for use in the expanded 'Free Store Program'". He said that for this purpose he had used the BOSC Agreement for shop based Business Owners provided to him by Ms Yeap as his "starting point". He sent the revised version to Mr Phan, then Ecosway's Australia's General Manager, for comment and had received final approval from "our CEO". Mr Ong said that the revised agreement was renamed as "Store Operator Terms and Conditions". The revised draft was in the terms of the Agreement executed by Ms Wardale and Mr Phan. It was materially different from that previously used by Ecosway in that it did not require appointees to pay a security deposit or guarantee and provided for Ecosway to provide the equipment which it had been previously been the appointee's responsibility to provide. The revised template also contained other differences which Mr Ong summarised in an email of 3 July 2009 to Mr Phan and others: To summarize the pertinent points of the agreement: • Handling charges are specified 12% and 5% for special EV sets (1(a)) • Clause included on handling charges of possible future items such as credit cards, etc (1(b)) • There is no fixed term or renewal • There is no deposit or guarantor • Operating hours will be determined according to the type of location (5(a)) • Termination by company is under one clause (17) • Termination can be exercised immediately if there is failure to meet monthly target (12 and 17) • There is a specific clause to state that wages or salary of any assistant or labour in the store should be borne by operator (13(d)) • New clause - operator to abide with any rules of agreement with shopping centre where applicable (24). (Emphasis in the original) 214 I accept the evidence of Mr Ong but note that he did not produce the BOSC Agreement for shop based Business Owners provided to him by Ms Yeap which he had used as his starting point. Nor did Mr Ong detail how the revisions had been made to that agreement, but he did say that in the course of preparation of the revised draft, he had referred to an agreement used by Ecosway's counterpart in Singapore. Ecosway did not adduce any evidence of the Singaporean agreement nor attempt to show that it provided a reliable basis for an agreement which would be subject to Australian law. 215 I infer that it was Mr Ong himself who made the revisions to the BOSC template. That inference is supported by the terms of Mr Ong's email correspondence to Mr Phan and others within Cosway (M) in mid-2009. 216 Thus, in early 2008, Ecosway had used a template agreement prepared for a different purpose as its store operator agreement, and it revised that template in mid-2009. On neither occasion did Ecosway seek legal advice about the appropriateness of the template agreement for the new circumstances in which it was now being used. 217 In his oral evidence, Mr Ong acknowledged that he had been aware in mid-2009 that there was a difference between an employee and an independent contractor but said that he had not been aware that there was a risk that the law might characterise a person as an employee even though the parties had themselves characterised that person as an independent contractor. He said that he had become aware of that risk only by reason of the present proceedings.

Consideration 218 Ecosway's pleaded case was that the relevant state of mind to be considered for the purpose of the applicant of s 357(2) was that of Ms Yeap. It submitted that she was the person "so closely and relevantly connected" with it that her state of mind should be identified with it and treated as its state of mind: Krakowski v Eurolynx Properties Ltd [1995] HCA 68; (1995) 183 CLR 563 at 582-3. See also Bell Group Ltd (in liq) v Westpac Banking Corporation (No 9) [2008] WASC 239, (2008) 39 WAR 1 at [6444] and Lee v Westpac Banking Corporation [2015] FCA 467 at [23]. The principles stated in these authorities may also be applicable when it is a defence, rather than a company's liability, which is being addressed: Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531 at 548-9. 219 The submission of Ecosway had as an unstated premise the proposition that the objective determination of whether a body corporate had been reckless in making a representation required the identification of the mind of a single person within the corporation and an examination of whether the corporation's conduct, having regard only to whether that person's state of mind, had been reasonable. Such a proposition seems inherently implausible. The objective determination would appear to require instead an examination of the conduct of the corporation as a whole, taking into account the actions and states of mind of the relevant responsible officers or employees of the corporation. However, it is not necessary to consider that aspect of the submission further as I consider that it fails in any event for other reasons. 220 In contending that it was Ms Yeap's state of mind which is relevant, Ecosway relied on Ms Yeap's evidence that, in her position as General Manager of Business Development in Cosway (M), she had the responsibility for Ecosway's operations in Australia. I accept Ms Yeap's evidence that she held that position and that she had the responsibility to which she deposed. 221 Ms Yeap deposed that, in February 2011, she "did not believe or understand [the template of the Agreement] to be a contract of employment". Her belief was that the template agreement established "independent contracts". Ms Yeap deposed that her belief in this respect was informed by what Ms Sook Sook had told her about "the Australian lawyer's advice" and her own knowledge of Ecosway's multi-level network marketing operations. She said that she relied also on the opening statement in the template agreement and the review by Ecosway's lawyer, Mr Kean, of the Store Operator Terms and Conditions in 2011. 222 Ms Yeap deposed that she had not been aware in February 2011, or at any of the times when the Updated Agreements had been provided to Ms Wardale, of any possibility that the appointee could be an employee of Ecosway or that the template agreements when executed could be regarded as contracts of employment. Ms Yeap also said that from the time in late 2007 or early 2008 when Ms Sook Sook had given her the two template Business Owner Support Centre Terms and Conditions, it had not crossed her mind that an appointee may be an employee. In her oral evidence Ms Yeap said that she had positively adverted to the possibility that appointees may be employees and had taken the view that they were contractors. She repeated in her oral evidence that she attached significance to the fact that Mr Kean, a lawyer, had given advice about the document. She also relied upon what she had been told by Ms Sook Sook who she regarded as "very professional and responsible". 223 Ms Yeap's evidence had a formulaic quality about it. My confidence in the reliability of her account was diminished by the fact that there was no evidence that, as at February 2011, Mr Kean had even looked at the template document containing the Store Operator Terms and Conditions which became the Agreement when executed by the parties, and yet Ms Yeap said that the provision by Mr Kean of advice had been something on which she had placed reliance. 224 I do not accept the submission that Ms Yeap was, in relation to the Agreement and the Updated Agreements, "so closely and relevantly connected" with Ecosway that her state of mind should be regarded as that of Ecosway. As previously noted, Ms Yeap had the responsibility of oversight in Australia of Ecosway's operations between November 2007 and November 2008, and continued to assist Mr Ong for a few months thereafter. In that position, Ms Yeap had some involvement in earlier versions of the Agreement. However, Ms Yeap did not depose to any involvement in, or knowledge of, the revised agreements prepared by Mr Ong in mid-2009, nor to any knowledge of, or involvement in, the preparation of the template of the Updated Agreements provided to Ms Wardale in late 2011 and early 2012. It would be artificial in these circumstances to treat her state of mind as the relevant state of mind of Ecosway. 225 Mr Phan did not give any evidence concerning the source of the document which he sent to Mr Wardale for her signature in February 2011. Nor did he depose to his own state of mind when sending the Agreement to Ms Wardale in February 2011 for her execution. The affidavit containing Mr Phan's evidence in chief was in large part a description of Ecosway's system generally, was frequently expressed in the third person or the passive voice, and was in part conclusionary and argumentative in style. Mr Phan deposed, for example, that "Ecosway's position was and is that all of [the Business Owners operating flagship stores] were and are independent contractors and not employees". Mr Phan did not depose to matters bearing upon the discharge of Ecosway's onus under s 357(2) and it was apparent that Ecosway did not rely on his state of mind in relation to the s 357(2) onus. 226 Ecosway did not adduce any evidence at all from Mr Stamatelos who sent the Updated Agreement to Ms Wardale on 21 December 2011, nor from Mr Du who sent the Updated Agreements to Ms Wardale on 17 April and 18 May 2012. 227 Ms Sook Sook had responsibility for Ecosway's operations in Australia between October 2005 and November 2007. This was well before Ms Wardale commenced her involvement with Ecosway in early 2010. Ecosway contended positively that Ms Sook Sook's state of mind was not a relevant state of mind in relation to the discharge of the s 357(2) onus. 228 I have already referred to Mr Ong's evidence about his preparation of the template agreement in 2009. I observe that Ecosway did not adduce any evidence from the "CEO" who gave Mr Ong approval to proceed with the form of the agreement which he prepared in mid-2009. 229 I am willing to accept that none of the Ecosway employees knew that the Agreement was, and that the updated Agreements would be, contracts of employment. It is highly improbable that any of the employees, or for that matter Ecosway more generally, would have proceeded in the way they did had that been their state of mind. 230 The issue accordingly is whether Ecosway has shown that, when providing the Agreement and the Updated Agreements to Ms Wardale, it had not been reckless as to whether the Agreement and the Updated Agreements were contracts of employment rather than contracts for services. 231 A number of matters are pertinent to that assessment. First, all of the senior employees who gave evidence, Mr Phan, Ms Sook Sook, Mr Ong and Ms Yeap, were aware of the distinction between employees, on the one hand, and independent contractors on the other. Each was aware that employees had entitlements which independent contractors did not. 232 Secondly, both Ms Sook Sook and Ms Yeap knew that stores of the kind operated by Ms Wardale were different from the home based and shop based BOSCs to which the BOSC Agreements prepared by Mr Kean in 2007 referred. 233 Thirdly, despite the differences being known, Ecosway chose to use the template BOSC Agreement prepared by Mr Kean as the basis for the quite different arrangement it had with persons operating stores which it itself provided. This was so even though Mr Kean had told Ms Sook Sook when providing the "final version" in mid-2007 that the question of whether a BOSC was an employee was a "complex issue" and that the BOSCs may be regarded as employees for some purposes. In my opinion, it is surprising in those circumstances that Ecosway did not obtain further advice from Mr Kean about the legal effect of the revisions it had made to his drafts. Ecosway's solicitors made a formal admission to the FWO that it had not obtained further legal advice. 234 Ecosway's omission to obtain further legal advice contrasts with the requests which it made to Mr Kean in respect of other contracts. For example, in November 2010, Ecoway sought advice from Mr Kean as to whether its "staff employment contract" complied with Australian law. 235 In these circumstances, I consider that Ecosway's failure to appreciate that the template agreement provided to Ms Wardale may be a contract of employment cannot be regarded as reasonable. I am satisfied that Ecosway could reasonably be expected to have known that the Agreement may be a contract of employment. That is particularly so given the advice of Mr Kean when providing the draft agreement in 2007 that persons working under the agreement may have entitlements as an employee. 236 Had it been necessary to make the finding, I would not have been satisfied that Ecosway had shown that it had not been reckless in the representation it made to Ms Wardale in the Agreement. 237 There is some evidence that, before the Updated Agreements were provided to Ms Wardale in late 2011, Ecosway had obtained Mr Kean's advice about its efficacy. That evidence comprises a marked up copy of the Updated Agreements apparently provided by Mr Kean. However, Ecosway led no evidence as to a request for advice to Mr Kean, nor as to the advice which he provided. This is significant. Again I note that, Mr Kean had previously told Ecosway that the question of whether or not a person is an employee is complex and had given advice to the effect that persons working under agreements which he had provided may have the entitlements of employees. 238 It was open to Ecosway to have led evidence from Mr Kean with a view to demonstrating the reasonableness of its conduct. Indeed, the senior counsel then appearing for Ecosway had informed the Federal Circuit Court on 23 July 2014 that Mr Kean was to be called as a witness, that arrangements had been made for him to travel to Adelaide for that purpose, and that he would give evidence in respect of his advice to Ecosway on the topic of the employment relationship. Further, in an application made when the proceedings were still in the Circuit Court, counsel then acting for Ecosway sought leave for Mr Kean to give his evidence orally rather than by way of affidavit. After the transfer of the proceedings to this Court, junior counsel for the respondent informed the Court on 20 February 2015 that "Mr Kean will deal with the sham contracting arrangement". 239 In these circumstances, I accept the submission of counsel for the FWO that it is appropriate to draw the inferences of the type discussed in Jones v Dunkel (1959) 101 CLR 298, namely, that had evidence been adduced from Mr Kean it would not have assisted Ecosway and that any inference sought to be drawn by the FWO may be drawn more confidently. In the latter respect, I am willing to draw the inference in the absence of any other evidence that Mr Kean had not advised Ecosway that Store Operators would not be characterised as employees. 240 This means that, had it been necessary to make the finding, I would not have been satisfied that Ecosway had shown that it had not been reckless in relation to the representations contained in the Updated Agreements. 241 I add that Ecosway did not submit that the circumstance that Ms Wardale had not read the Updated Agreement provided on about 21 September 2011 and had not opened the email sent by Mr Du on 17 April 2012 meant that it could not be held to have made representations of the kind to which s 357 refers by its provisions of those documents. 242 For these reasons, had it been necessary to do so, I would have found that Ecosway did not discharge the s 357(2) onus. However, for the reasons given earlier, I am not satisfied that the representations made by Ecosway were incorrect, as I consider that Ms Wardale was an independent contractor.

Conclusion 243 For the reasons given above, the application of the FWO is dismissed. I certify that the preceding two hundred and forty-three (243) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White.

Crimes Act 1990(NSW)s 61R(1)

Trade Practices Act 1974(Cth)

Workplace Relations Act 1996(Cth)ss 900, 901

Fair Work Act 2009(Cth)ss 14, 44, 45, 46, 47, 357

earch Pty Ltd v Federal Commissioner of Taxation [2010] FCAFC 52; (2010) 184 FCR 448 Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 Tattsbet Ltd v Morrow [2015] FCAFC 62; (2015) 233 FCR 46 Universal Telecasters (Qld) Ltd v Guthrie (1978) 18 ALR 531 Victorian WorkCover Authority v Game [2007] VSCA 86; (2007) 16 VR 393

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