Mrs Kerryn Smith - Alleged breach of s 900(1) by Maclean Bay
124 Section 900 of the WR Act is headed: "Misrepresenting an employment relationship as an independent contracting arrangement".
Section 900(1) provides:
(1) A person contravenes this subsection if:
(a) the person is a party to a contract with an individual; and
(b) the person makes a representation to the individual that the contract is a contract for services under which the individual performs work, or is to perform work, for the person as an independent contractor; and
(c) the contract, as in force at the time of the representation, is a contract of employment under which the person is the employer of the individual, rather than a contract for services under which the individual performs work as an independent contractor.
125 Maclean Bay employed Mrs Smith at the resort from 12 December 2006 until 12 February 2009. She worked in the restaurant and reception area of the resort. Maclean Bay first engaged Mrs Smith as a casual employee from 12 December 2006 until 3 September 2007. Mrs Smith was offered full time employment on 4 September 2007. She commenced full time employment on 10 September 2007 and worked in that capacity until 12 February 2009.
126 By letter dated 26 January 2009, Mrs Smith resigned from her "full-time position at Diamond Island resort". In that letter Mrs Smith said that she:
… would consider some part-time work on a regular basis, in the office/reception area of Diamond Island, and when large groups attend workshops or conferences …
127 In her affidavit tendered in the proceeding, Mrs Smith said that after her resignation (some time in mid-February 2009) she telephoned Mrs Robinson and a conversation occurred to the following effect:
Mrs Smith: Julie, as I indicated in my letter I would like to continue working at the resort but I want to work less hours. Is this going to be possible?
Mrs Robinson: We want you to come back but Wendy has said that the only way that you'll be able to come back is as a contractor. To do this you will need to get an ABN number.
Mrs Smith: OK, I will organise that.
128 In her evidence in chief Mrs Robinson said that Mrs Wells was happy to have Mrs Smith back at the resort, "but the only conditions would - were on the contract basis".
129 Mrs Smith obtained an ABN from the Australian Taxation Office. The registration date is 24 February 2009. Her "business" is described as that of a "sole trader". She did not use the ABN for any purpose not related to the resort.
130 On 19 February 2009, Mrs Robinson provided Mrs Smith with a document entitled "Diamond Island Resort Contractor's Agreement". A copy of the document was tendered in the proceeding and is Exhibit AG.
131 Mrs Smith said in her affidavit that she worked at the resort from 2 March 2009 until 9 April 2009. She filled out time sheets recording the number of hours which she worked. Mrs Robinson provided her with weekly invoices generated by Maclean Bay.
132 Mrs Smith worked, in March/April 2009, at the times she was directed to by Mrs Robinson. She had no choice as to when she worked. The same applied when she was engaged as an employee, prior to her resignation. She did not provide services to any entity other than Maclean Bay. When she recommenced work in March 2009 she wore a "Diamond Island Resort" shirt, as she had done when engaged as an employee. It was the same shirt she had previously worn. She did not provide any equipment or other items to perform her duties. She was paid $25 per hour.
133 Mrs Smith's contract (Exhibit AG), required her to hold the position of Personal Assistant to the Resort Manager. It also obliged her "to assist staff" as required by management and "provide limited spa services when requested".
134 Mrs Robinson gave evidence that she did not require Mrs Smith to provide her with an invoice. Mrs Robinson also gave uncontradicted evidence that in the period from early March 2009 until 9 April 2009, Mrs Smith:
worked in the front office of the resort;
performed "exactly the same" duties as she performed when she was engaged as an employee;
worked in accordance with a roster produced by Mrs Robinson;
performed the precise duties and work determined for her by Mrs Robinson;
did not provide any equipment or materials in performing her work; and
wore a Diamond Island shirt.
135 For the purposes of s 900(1)(a) of the WR Act it is not in contest that Maclean Bay was a party to a contract with Mrs Smith from 2 March 2009 until 9 April 2009.
136 For the purposes of s 900(1)(b) of the WR Act the applicant relies on the representation made in a telephone conversation between Mrs Robinson and Mrs Smith sometime between 12 and 19 February 2009 to the effect that the only way Mrs Smith would be able to resume working at the resort would be if she was engaged as a contractor and obtained an ABN for that purpose. The making of that representation is not contested.
137 The representation made in the telephone conversation was that the contract was one for services under which Mrs Smith "is to perform work" for Maclean Bay as an independent contractor. Therefore s 900(1)(b) is satisfied.
138 There is a contest about whether s 900(1)(c) is satisfied. Counsel for Maclean Bay stresses the words "as in force at the time of the representation" in s 900(1)(c). He contends that the contract did not come into force until 2 March 2009, so s 900(1)(c) is not breached. Counsel for the applicant accepts that the effect of s 900(1)(c) is that the contract must be in existence "at the time of the representation". However he contends that "the time of the representation" is not the same as "when the representation is made". He submits that s 900(1)(b) deals with when a representation is made but does not do so in any temporal way. He relies on authority to support the proposition that the effect of a representation is not necessarily confined or limited to when it is made. There is much force in those submissions. The representation did not cease to exist when the contract came into force. The reality was that Mrs Smith was back at work because she was consenting to be engaged under a contract for services (albeit a sham as she continued to work as an employee would in performing her duties). The representation continued to apply right up to the making of the contract and beyond. The representation had "a continuing effect during the period of time following the date upon which [it] was made"; see Gate Gourmet Australia Pty Ltd (in liq) v Gate Gourmet Holding AG [2004] NSWSC 149, per Einstein J at [284]. The representation may also be described as a continuous one in the sense discussed by Allsop J in McGrath v Australian Naturalcare Products Pty Ltd (2008) 165 FCR 230 at [148]. There his Honour said:
Another form that a so-called continuous representation might take is that in all the circumstances it can be taken as being repeatedly or even continuously made, that is remade. It is unproductive to seek to categorise or label such circumstances. It is enough to say that the infinite possibilities of human conduct might give rise to it. The representation so repeatedly or continuously made could be one as to a present state of affairs or, conceivably, as to a future matter. In the former case, such a representation would be falsified by proof of the state of facts at any point along the relevant time continuum. In the latter case, such a representation would be falsified by proof of the lack of reasonable grounds at any point along the relevant time continuum.
139 I find that the representation made in the telephone conversation continued to have effect after the making of the contract on 2 March 2009. I accept the submission of counsel for the applicant that the representation was made as to future matters. It concerned the possibility of Mrs Smith coming back to work at the resort after the conversation. It centred on her only doing so as an independent contractor with an ABN.
140 The second representation relied on by the applicant is the clause in the contract [Exhibit AG] which expressly stated that Mrs Smith "is an independent contractor" and described her as "the contractor". That representation was made to Mrs Smith before the contract was formed. It continued to apply on its making and thereafter until 9 April 2009 by constituting a term of the contract.
141 The third representation is the conduct of Maclean Bay in generating weekly invoices from 2 March 2009 until 9 April 2009 which referred to Mrs Smith as "the vendor" with the resort mentioned under the heading "shipped to" and a purchase number. The provision of those invoices via Mrs Robinson to Mrs Smith also forms part of this representation.
142 Counsel for the respondents relies on an absence of evidence as to precisely when the invoices were generated and provided to Mrs Smith. This submission is rejected. It ignores the evidence of Mrs Smith that weekly invoices were generated by Maclean Bay and provided to her by Mrs Robinson. Those invoices (or a copy thereof) are in evidence as Exhibit AH and are dated 3 March, 9 March, 23 March, 30 March and 6 April 2009 respectively. The invoices refer to an hourly rate of pay in respect of a weekly period. The court is entitled to, and does, infer that the invoices were provided to Mrs Smith on or about the dates they bear.
143 I also reject the submission of counsel for the respondents that Mrs Robinson had no express or apparent authority to provide the invoices to Mrs Smith. Mrs Robinson was, at all material times, the manager of the resort. All her actions with respect to staff were the actions of Maclean Bay. Her job was, in part, to be a conduit between management and the workers at the resort. Mrs Robinson did not provide the invoices to Mrs Smith as part of some frolic of her own. To suggest as much is patently absurd. No one has gone into evidence on behalf of Maclean Bay to assert that Mrs Robinson had no authority to issue the invoices. Mr Wells gave evidence but did not traverse the topic. Mrs Wells failed to give evidence, without explanation. The providing of invoices to employees was part of a charade to make them look like independent contractors and was part of the business practice of this employer. Mrs Robinson's role in providing the invoices to Mrs Smith was done in the course of carrying out such business practice.
144 It is beyond doubt that as the manager of the resort Mrs Robinson was clothed with the authority to deal with staff. That was an integral part of her role. Mrs Smith was entitled to believe that in dealing with Mrs Robinson as the manager of the resort that Mrs Robinson had the authority to so act.
145 Section 826(2) of the WR Act applies to Mrs Robinson's conduct to make it the conduct of Maclean Bay. She engaged in conduct on behalf of the company as an employee of it within her actual or apparent authority. That conduct is also taken to have been engaged in by the company. Justice Heerey considered the operation of s 826 in Jordan v Mornington Inn Pty Ltd (2007) 166 IR 33. In Jordan, Heerey J rejected a submission to the effect that a manager had engaged in a frolic of his own in dealing with staff. At [109] to [111], his Honour observed that the normal functions of the manager were to deal with staff, negotiate their terms of employment and arrange their rosters and that, for the purposes of s 826, the manager was the company for those employed by it; see at [110]. Mrs Robinson as the manager in the instant circumstances was in a like position. It must be remembered that, in respect of Mrs Smith and others in the period March to April 2009, Mrs Robinson had the responsibility for the day to day running of the resort.
146 Further as counsel for the applicant submits the invoices were an essential part of the fulfilment of Mrs Wells' desires to have staff "engaged on contract". It was an integral part of a sham arrangement. There is no dispute, on the evidence or pleadings, that Mrs Robinson did not exceed her actual or apparent authority in sending the contract [Exhibit AG] to Mrs Smith. In fact, the evidence before the Court on this issue is that Mr Barnett, the company accountant, telephoned Mrs Robinson to enquire why she was generating the invoices. Mrs Robinson said she did so in order that the staff had a pay slip to allow them to know how much was going into their bank accounts. She said that Mr Barnett's reply was "right, ok, no worries". This evidence was not contradicted.
147 Mr Barnett gave evidence that he "created" the form for "recipient-created tax invoices" in 2000 and then later adapted it for use at the resort. He could not recall a conversation with Mrs Robinson about whether contractors were getting invoices from Maclean Bay. However, Mr Barnett said he was aware in some instances that invoices were being provided but said that he expected the contractors would provide an invoice to the company. He referred to the workers in his evidence as "suppliers". Although he preferred "suppliers" to provide their own invoices he said he would have "no problem" if the resort received invoices even if they were recipient created invoices as long as the tax office had been informed.
148 All the evidence concerning the circumstances of the recipient created invoices supports the view that Mrs Robinson prepared and delivered them as part of her duties as business manager in the course of Maclean Bay's method of attempting to show the existence of independent contractual relationships with its employees.
149 I also reject the submission of counsel for the respondents that, for the purposes of s 900(1)(c), the Court is unable to take into account circumstances extraneous to actual words of the contract in determining whether the relationship was an independent contractual one between Maclean Bay and Mrs Smith or an employer/employee relationship.
150 It is trite law that one considers the entire relationship between the two relevant parties in determining the nature of that relationship; see Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [24]. Mrs Smith, when she returned to work at the resort in March 2009, was an employee. She worked subject to the directions of Mrs Robinson as she had in her previous time as an employee at the resort. She was subject to control by Mrs Robinson and ultimately Mr and Mrs Wells. She did not carry on a business of her own. The contract provided for her was a sham designed to disguise the real relationship between the parties. It involved Maclean Bay engaging in a form of exploitation against a person who had no power to raise any protest about the basis upon which she was being re-employed.
151 Counsel for the respondents also submits that the provision of spa services in the contract supports the existence of an individual contractual arrangement. This argument is arid as no spa services were provided and Mrs Smith was never requested to provide them.
152 For the above reasons the Court finds that Maclean Bay breached s 900(1) of the WR Act by making three representations to Mrs Smith that the contract under which it re-engaged her was one for services in which she was to perform work as an independent contractor. So much was a sham. The contract at the time of the continued operation of those representations was, in reality, one under which Maclean Bay was the employer of Mrs Smith. It was not a contract for services when considered in the context of what work was actually performed pursuant to it and the manner of its performance. Part 22 of the WR Act is headed "Sham Arrangements". It accurately describes Maclean Bay's conduct with respect to its contract with Mrs Smith and the representations which preceded it and continued in operation during its term in March and April 2009.