George Stewart v All-Fect Distributors Limited and others [2006] NSWIRComm 195 | Case summary

George Stewart v All-Fect Distributors Limited and others [2006] NSWIRComm 195 | Case summary | Zoe

[6]

Unfair contract - Application under s 106 of the Industrial Relations Act 1996 - Applicant engaged to sell confectionery to retail outlets - Credit of witnesses - Witnesses had read affidavits of other witnesses prior to swearing own affidavits - Whether applicant an employee or independent contractor - Consideration of various tests including control test - Whether contracts unfair, harsh or unconscionable - Whether contracts against the public interest - Whether contracts provided a total remuneration that was less than a person performing the work would receive as an employee performing the work - Whether the contracts were designed to or did avoid the provisions of the Commercial Travellers &c, (State) Award - Whether entitlement to payments in respect of leave, notice and severance pay - Whether entitlement to superannuation payments - Compensation - Liability of various respondents - Mitigation - Contracts found to be unfair - Compensation ordered - Four respondents culpably associated with making or operation of contracts - Costs CATCHWORDS: Employee or independent contractor - Unfair contract - Application under s 106 of the Industrial Relations Act 1996 - Applicant engaged to sell confectionery to retail outlets - Credit of witnesses - Witnesses had read affidavits of other witnesses prior to swearing own affidavits - Whether applicant an employee or independent contractor - Consideration of various tests including control test - Whether contracts unfair, harsh or unconscionable - Whether contracts against the public interest - Whether contracts provided a total remuneration that was less than a person performing the work would receive as an employee performing the work - Whether the contracts were designed to or did avoid the provisions of the Commercial Travellers &c, (State) Award - Whether entitlement to payments in respect of leave, notice and severance pay - Whether entitlement to superannuation payments - Compensation - Liability of various respondents - Mitigation - Contracts found to be unfair - Compensation ordered - Four respondents culpably associated with making or operation of contracts - Costs

[16]

5 It was in or about early 1994 that the applicant entered into an agreement with Fred Essey to sell the first respondent's products. At the time Mr Stewart was 64 years old. Besides being a director of the first respondent, Fred Essey was its founder and unmistakeable patriarch of the family business. The third, fourth and fifth respondents were the sons of Fred Essey. The first respondent's products were essentially confectionery products purchased locally or from overseas. The products included branded lines, such as Mars Bars and Cadbury products and what might be described as generic or unbranded lines such as "Jelly Babies", chocolate bullets, gum balls, etc. The products were sold to retail outlets such as liquor stores, video shops, petrol stations and small retailers. 6 A marketing idea that met with some early success for the first respondent was the placement of a confectionery stand in the retail outlets, which consisted of rows of perspex hoppers containing lollies and other sweets from which customers could, apparently, serve themselves. Mr Stewart's arrangement with Mr Essey included the promotion and sale of these hopper stands and the lollies to fill them. 7 Prior to 1994 the applicant was in business for himself as a sole trader in confectionery products amongst other things. He used the business/trading name, "St George Discount Confectionary" (sic). Generally speaking, he would purchase wholesale confectionery and resell it to retail outlets at a profit. Mr Stewart said in his first affidavit: I was finding it harder to compete as I worked servicing the "corner store". As a result of my business only making marginal income, I thought it best to see whether or not I could get on board with the company [the first respondent]. At that time I was aware that the company was a major player in the provision of wholesale confectionary products to retail outlets across NSW. 8 The applicant's "marginal income" according to his tax returns was a loss of $14,211 in 1992 and an income of $6,320 in 1993. Staying with his tax returns for the moment, there was no return for 1994. In 1995 Mr Stewart described his occupation as "Confectionery Wholesaler" with the business name of "St George Confectionery". His net business income was $4,783. Mr Stewart claimed deductions for such matters as motor vehicle expenses, cost of sales, external labour costs. In 1996 the applicant's net business income as St George Confectionery was $15,037. Again Mr Stewart claimed deductions for business expenses. This pattern continued through to 2003 when the applicant's net business income was $19,113. For a number of years from about 1998 Mr Stewart claimed expenses for rent on the basis that half of his house and garage was used for business. 9 The applicant stated that in early 1994 he approached Fred Essey "to discuss whether or not there was any opportunity for me to obtain work with the company." Mr Stewart said that, in general terms, he put the following proposal to Fred Essey in the alternative: (a) To work full-time for All-Fect and to give away my wholesaling business; or (b) To come to an arrangement to purchase the display stands and utilise same in my own business without the requirement to be locked into using the company's product. 10 Mr Stewart stated that it was his intention to give away his business for the security of gainful employment; "I wanted to work for the company on wages." It was his intention, he said, to continue to operate the business in a way to get access to the display stands. This, he stated, "would have allowed me to set the prices I sold the product to what would have been my clients." 11 Mr Stewart deposed that he recalled the following conversation with Fred Essey: Applicant: "Fred, I've noticed the display stands in a number of outlets and it seems to me a really good concept. I want to discuss an arrangement whereby I can purchase the stands on terms that are mutually agreeable. They seem to be me to be the way that the market is heading. They would be a good idea for my business." Fred: "Yes, the display stands are doing very well and they are exclusive to us [the company] and that is the way I want to keep it. There is no scope for you to buy the stands as that would not be in the company's interests." Applicant: "I can understand that you want to protect your own interests. I am looking to get out of my business, as the margins are not there on the range I carry. Would you be interested in putting me on full time, as a sales rep for the company?" Fred: "Look, I'm happy to take you on, but I am not sure how we would set it up. We could put you on as a sales rep… perhaps you can use your own vehicle and sell directly for us which would be the same thing. I want you to remember, All-Fect owns the stands and the products in them. Therefore, if you want to work for All-Fect, you'll sell only All-Fect lollies into the stands and the customer is only allowed to buy off All-Fect and no one else. You'll need to make sure that every outlet in which you place a stand you'll need to call on it each fortnight and ensure that orders are taken and that the stand is clean and you will be responsible for filling it with our product. If you want out of your business then it does not matter what happens to your clients. You can start by getting them [clients of St George Discount Confectionary] for the company. We have our own agreements and you must use them." Applicant: "Okay, but how would I get paid then? How would I get paid for the work?" Fred: "Perhaps we can place you on a commission only basis? I have not done this before, so, what about paying 10% commission on the gross sales you make which includes all expenses?" Applicant: 'Fine, it sounds as though I can make it work. Let's give it a go." Fred: "Okay, but as I said I am not entirely sure as to how we should sets things up. Lets give it a go for a month then we can see if it is working out." Applicant: "No worries. Thanks for the opportunity." 12 Mr Stewart said in his evidence that as a result of the foregoing conversation it was his understanding that he had agreed to work exclusively for the first respondent as an employee in the position of Sales Representative but on commission. Whilst this was not exactly what he had in mind, it was an arrangement that he thought would help him out of the financial position he was in at the time. The applicant said Fred Essey was quite sure about the way he wanted to structure the arrangement and he, the applicant, did not have any bargaining power.

[17]

13 The applicant further stated in his evidence: I recall having a number of conversations with Fred along the lines that this was the first time he had entertained such an arrangement where he employed someone to work on a commission-only basis. I recall thinking this explained why Fred was keen to have me work for a month to see how things worked out. I had some reservations concerning the remuneration that the payment of 10% commission on the amount I sold would not cover my expenses. The probationary period was therefore mutually beneficial so I was happy to agree to it. We did not discuss the areas I would be servicing and I was not aware how much I would be required to travel each week canvassing for clients for the company. I recall that I was expected to cold canvass where I could. Fred knew, and so did I, that the only way I could get through the first month was to sign up as many of my clients' for the company. Unless I used my contacts, I would not be able to get the sort of orders in that would keep the company happy. It was a gamble for me as once the stands were in the stores of the clients' my business used to have it would be virtually impossible for me to get them back. Accordingly, I had to make the arrangement work as best I could, so I set out for the first month working well in excess of 50 hours per week. 14 Fred Essey's version of the engagement of Mr Stewart was different to that of the applicant. Mr Essey said he first met the applicant in early 1990. At that time, Mr Essey said the applicant conducted his own business whereby he purchased confectionery from the first respondent, on a wholesale basis, and on-sold it. 15 Mr Essey said that in about June 1992, he developed the concept of placing bulk confectionery stands in various retail outlets and it became an important part of the business. The concept was to identify suitable retail places in which to put the stands and then enter into servicing arrangements with the proprietor of the shop in which the stand was placed.

[19]

GS: "I think they would". FE: "We would enter into a supply arrangement with the shop owner, and we would pay you a commission on whatever is sold through your shops. You would service the stands, fill them up etc. on your usual run through the shops. It could complement your business and be an additional earner for you." GS: "That sounds like a great idea. I'll take it up with my shop owners". 17 Fred Essey denied the conversation recounted by Mr Stewart that is set out earlier. Mr Essey deposed: The Applicant was not the one who proposed the arrangement to me - I proposed it to him. He did not say anything to me about "looking to get out" of his business. He certainly did not say anything about becoming "a sales rep." We have sales representatives, and they operate on a completely different basis to the Applicant. Firstly, they are treated as employees by us, with group tax deducted, superannuation contributions paid etc. Secondly, they are not paid on commission, like the Applicant, rather, they are paid wages regardless of the quantum of sales they make. Thirdly, we control their activities, plan who they see, and how they distribute our range of products. By way of contrast, we never had any control over the Applicant. We simply paid him commission on sales made. At paragraph 50 of his affidavit, the Applicant mentions the names of some of our sales reps - Elvis Boustani, Brian Elias, Wayne Henderson and Richard Anderson. Because we are a small company, he knew how these men operated. The Applicant never said anything to me, at any time in our 11 year association, about joining the ranks of our sales reps. On the contrary, he did things contrary to the idea of being a sales rep. He continued to sell other lines of confectionery, such as Nutters Honey Corn. He took other jobs, such as delivering magazines for Gordon & Gotch and papers for B. A. S. transport. He invoiced us for "consulting services" with GST added. 18 Mr Essey stated that the applicant never said a word to him, in 11 years, which suggested that he was an employee of the first respondent. Further, that: The arrangement set out in this initial conversation developed over time. The Applicant introduced us to "his" shops, one after the other. As far as I knew during this initial period, he kept up his wholesaling business with them as well. Over time, I gave him some of "our" shops, too, such as some Video Ezy stores. He gradually added new shop owners to the system. After about a year, he had quite a few outlets - "his" and "ours" and he gradually built a commission business around these outlets. We basically paid him 3% commission on branded confectionery lines, and 10% on unbranded lines, which we manufactured. We made more money on the unbranded lines, so we encouraged him to sell them by way of this higher commission rate. 19 Mr Essey stated that the first respondent only ever paid the applicant commission on sales actually made. There was never any other basis for payment, and none was ever asked. First month

[20]

20 It was the applicant's evidence that shortly after the conversation with Fred Essey he commenced work for the first respondent. He said Fred and Joseph Essey gave him instructions. Mr Stewart deposed that: I recall that he [Fred Essey] told me to focus on the Eastern Suburbs and Campbelltown areas. The Eastern Suburbs and Campbelltown areas were regularly serviced by Lewis [Theoly], but as a result of the display stands concept, the company had direct Lewis to remain largely at the premises where he was required to pick up the stands and install the stands as directed. Initially, I was trained by Lewis on how to install the stands which was not something that I had any relevant experience. Because of the fact Lewis was working at the premises and combined with the fact he was spending most of his available time each day actually installing the display stands, it was logical that I was given his area to work. It soon became apparent that part of my work for the company, was to physically install the display stands in the outlets which I obtained for the company. I recall that the display stands were manufactured at the direction of All-Fect and after the initial training by Lewis, I would often pick them up from their premises, situate at Lidcombe. 21 As to directions he received from Joseph, Mr Stewart said he was expected to follow the procedure set out below on a weekly basis: (a) Monday: call on new and existing clients within my designated areas, with the focus of taking orders for the company. Return to the premises the next morning and place the orders received so they could be processed, packed and be ready for me to deliver on the Wednesday, thus ensuring a 2 day turn around for the clients of the company. (b) Tuesday: call on new and existing clients within my designated areas, with the focus of taking orders for the company. Return to the premises the next morning and place the orders received so they could be processed, packed and be ready for me to deliver on the Thursday, thus ensuring a 2 day turn around for the clients. I was also expected to pick up my fortnightly remuneration. (c) Wednesday: arrived at the premises to collect the orders from Monday that was ready for delivery. The majority of the day was spent delivering the orders and placing the product in the stands and keeping them clean and tidy for the client. (d) Thursday: arrived at the premises to collect the orders from Tuesday that was ready for delivery. The majority of the day was spent delivering the orders and placing the product in the stands and keeping them clean and tidy for the client. (e) Friday: call on new and existing clients with the focus of taking orders for the company. Spend time installing the display stands if required. I would only work until noon having the rest of the day off by arrangement. The company knew that I worked on the weekend. If I could not get done all that was expected of me then it was expected that I would do it in my own time as it were on the weekend. 22 On the subject of directions the applicant further stated: Fred was quite clear that he wanted me to sell the company's products in the manner of their choosing: I worked exclusively for the company by placing their display stands in outlets and to continually manage those stands; liaising between All-Fect and their clientele; arranging orders and delivering those orders. It was during this time that Lewis made it abundantly clear to me that unless you worked the way the company wanted then you simply did not work at all. This was a reinforcement of the clear directions the company had given me previously. 23 Mr Stewart deposed that it was up to him to find clients on behalf of the first respondent. He said during the first month he worked particularly hard to try and make a good impression. Accordingly, he utilised all his contacts in the industry, working the clients he had previously obtained through his own business as a starting point. Further, that during the first month, he was also given samples of the company's lines, credit application forms for him to provide on behalf of the first respondent to clients, order sheets, and agreements for the provision of the display units, which were to be entered into between the first respondent and the client. 24 The applicant's evidence was that he did not sell anything to these clients in his own right. He said he had no power to decide the prices for each item and had to use the pricing given to him by the first respondent. Mr Stewart said he was directed by Fred Essey to use the first respondent's forms and documents and did so. Once the order was placed with the applicant, he sent the order to the account manager for the first respondent. Payment for the order was made through the first respondent. Mr Stewart said he never received any payment from clients, as he had no right to. 25 During the first month, the issue of Mr Stewart's pay arose in conversation. The applicant recalled the following conversation with Mr Paul Essey: Applicant: "Paul, Fred mentioned to me that I was required to provide an invoice in order to get paid. How do you want me to invoice you?" Paul: "It does not matter to me, just right it on a piece of paper if you like." Applicant: "I have an old invoice book can I use that?" Paul: "No problem as long as it is an invoice." 26 The applicant said that, consequently, he used an old invoice book from when he was in business for himself as a wholesaler of toys. 27 In response to Mr Stewart' evidence regarding the first month, it was Fred Essey's evidence that: (1) The applicant came to have an area in the Eastern Suburbs and Campbelltown. This was more a function of where "his" shops were, rather than anything Fred Essey said. (2) Lewis Theoly was not employed at the time the applicant commenced. (3) He did not make it "quite clear" that the applicant had to sell the first respondent's products "in the manner of [our] choosing". (4) It was true that the applicant had to fit in with the first respondent's systems but Mr Essey did not tell or direct him to do this, it was just a natural result of the logistics of confectionery supply and delivery. (5) It was not true that the applicant worked "exclusively" for the first respondent.

[21]

28 In relation to the issue of directions to the applicant by the first respondent, Paul Essey gave evidence. Paul was general manager of the first respondent from about 1995 and later, managing director. Prior to taking on the general manager's role Paul "worked in administration in the office". Paul Essey deposed: The Applicant would service the shop proprietor, in a similar way to that in which he had previously operated. Whereas before he would simply go to the shop and ask about their confectionary needs, ordering from us to fill them, now he would just go to the hopper and replenish whatever diminution in confectionery there was as a result of consumer use. He would also maintain his relationship with the "corner store" shop proprietor, much in the way he previously had done. He was free to continue to supply them with other products, not purchased from us, which I believe he did. I believe he supplied his corner store operators with Nutter's Honey Corn throughout. In this regard, the Applicant had full operational freedom as to how he would maintain his relationship. We never gave him any directions at all as to how to do this. Indeed, directions from us would have been totally inappropriate to his relationship with "his shops". It was up to him to manage the sales, and he got paid on the basis of whatever sales he made. No other criteria ever entered into the equation. I never asked him about the way he arranged sales, I just assumed that he was maintaining his relationships in the same manner as he had done formerly. 29 Paul Essey also stated in his evidence: (1) The applicant always invoiced the first respondent under the registered business name "St George Confectionary". (2) The applicant supplied all necessary equipment required to do the job including his van, ropes, tarpaulins, street directories and whatever other accessories were necessary or appropriate to the task of picking up confectionery from the first respondent and delivering it to the bulk confectionery stands at the various retail outlets. (3) He never knew what hours the applicant worked. It was Paul Essey's belief during the period from 1992 (sic) through to 2003 that the applicant worked as a bookmaker's clerk on Saturdays and sometimes Wednesdays, and he was a golfer on Fridays. Paul Essey never said to the applicant words to the effect of "You should work longer hours" or "You should not go to golf" or gave him any direction whatsoever. (4) He never regarded the applicant as an employee. (5) When the GST legislation became law after 1 July 2001, the first respondent was invoiced by the applicant for his services, plus GST.

[22]

30 The applicant stated in his first affidavit that about three months after he commenced working for the first respondent, the following conversation took place with Fred Essey: Fred: "George, I have been thinking about the arrangement and have decided to put Lewis back on the Eastern Suburbs and Campbelltown area… Its not that I am unhappy with you but we do not have any place for you." Applicant: "So you don't need me any more?" Fred: 'Yeah, sorry about that, unless you can come up with something else." 31 The conversation occurred on a Friday and on the Monday, in the company of his wife, the applicant approached Mr Fred Essey and according to Mr Stewart, the following discussion took place: Applicant: "Fred, can I have a word?" Fred: "Sure George, what do you want to talk about?" Applicant: "I was thinking over the weekend and as a result of you taking me off the Eastern Suburbs and Campbelltown areas, I was thinking that there is a large cross over between Brian's and Lewis' areas. If you allowed me to work the Western Suburbs and Sutherland areas then I would have enough to do and it would not affect either Brian or Lewis?" Fred: "I suppose that could work…okay give it ago and we shall see what happens." Applicant: "So we are agreed! Excellent. I will get onto it right away. But before I go I wanted to talk to you about getting the branded lines in the stores as there is a demand for me to be selling these? Can we do the same arrangement?" Fred: "We make a lot less on those lines. There is no way I can do 10%; at best I could do 3%." Applicant: "Okay." 32 The applicant said he was happy to have his job back, although the Western Suburbs and Sutherland areas were going to be far harder to service given the distances he was required to travel from the company's premises. 33 Fred Essey emphatically denied that any conversation took place in 1994 whereby he put Lewis Theoly back on the Eastern Suburbs and Campbelltown area and told the applicant he was not needed any more. Mr Essey deposed: In fact the Applicant worked the Eastern Suburbs until 1996 when I terminated his arrangement due to his poor performance. Some months passed, and the Applicant came back to me and said in something of a pleading way: GS: "Fred, I'm sorry I didn't do all that well before. It's true I got lazy. But I'd like to come back with you, is there anything you can do for me". I thought about this and felt sorry for the Applicant. We did have something of an opening in the Western and Southern suburbs so I said to him: FE: "Well, perhaps you could do the runs in the Western and Southern suburbs on the same terms as you previously did the City and Eastern Suburbs". When referring to these areas, it was more by way of general focus than "clear cut" areas. The Applicant had shops dotted around Sydney, including on the North Shore. 34 In relation to the termination of the relationship between the applicant and the first respondent, it was Paul Essey's evidence that: At one point, in 1996, due to unsatisfactory performance, my father terminated the Applicant's engagement. I refer to his affidavit filed in these proceedings. We reached the view that he simply wasn't putting enough effort into distributing our product, so we had someone else perform this task in the territory which he was operating within - the Sydney City and Eastern suburbs area. A few months went by where we had no arrangements at all. The Applicant came back to our offices and said to my father (in the terms more fully set out in his affidavit) that he would try harder. My father then gave him a new territory in Western and Southern Sydney on the same terms as he had previously operated. He was again paid commission on those sales he actually effected. 35 One significant difference between the Esseys' evidence and that of the applicant regarding the initial termination was the timeframe. The applicant said that the initial disengagement was some three months after he commenced working for the first respondent. That would make it early to mid-1994. The Esseys' contended that Mr Stewart's services were terminated and he was re-engaged on another run in 1996. Mr Stewart's recollection of events was far from perfect. Initially in his affidavit he deposed that he commenced working for the first respondent in 1992 but changed that to 1994. The Esseys stated in their affidavits that Mr Stewart commenced selling their products in 1992. Whether this was as a result of their recollections or because they simply adopted what the applicant had initially deposed to in his affidavit, is not clear. 36 Counsel for the applicant, in his questioning of the respondents' witnesses, appears to have accepted that the initial separation did occur in 1996. I am prepared to accept it was 1996. I also intend to proceed on the basis that the applicant commenced his relationship with the first respondent in 1994. 37 The effect of the separation in 1996 and the subsequent new agreement represents, in my opinion, two separate contracts. Any orders that might be made in these proceedings would need to be addressed to the two contracts. 1996 to 2003

[23]

38 The applicant stated that from the time of the re-engagement "the work required to be performed under the work contract did not change until it was terminated in April 2003." In seeking to further support the assertions in the summons for relief that he was an employee, the applicant deposed to the following: (1) He was working conservatively 40 hours on average per week, five days per week and took off Friday afternoon to play golf. (2) He gave up his right to deal directly with his old clients. In this respect the applicant stated: As a result of the work contract, and the nature of the relationship with the company, I no longer had any contractual relationship with these customers. I was directed to solicit ordered from the clients for the company and only those clients I was entitled to work in my areas which in turn was allocated by the company. Under the arrangement I entered into with the company and, as a result of the fact that I could only deal exclusively with the company's confectionary range, the clients I obtained prior to the commencement of the subject contract were taken over, as it were, by the company. In order to make the relationship work, it was necessary for me to call on those clients which I had obtained prior to the commencement of the work contract. The display stand was provided in their outlet and they effectively became the client of All-Fect. Apart from selling some confectionary and novelty lines such as popcorn, on a very infrequent basis, they were exclusively the client of All-Fect and I had to respect that relationship. (3) His remuneration was variously described as "commission" and "salary". (4) He did not receive the benefit of the superannuation guarantee charge from the company during the life of the work contract. (5) His training included training in the use of the company's procedures with respect to taking and placing orders, delivery of same, and the promotion of their stock lines over any other; suggestive selling by referring to promotions and specials, and the company's policy on pricing. He was told at all times that he represented the company and that he worked for the company. (6) He was required to attend sales meetings conducted by the company at their premises on no less than eight occasions per annum during the life of the work contract. He recalled many occasions when the sales manager would call him on behalf of Fred Essey and tell him to make sure he was at the staff meeting usually scheduled for the next day. These meetings usually started at 7:30 am on a Tuesday. (7) The first respondent gave directions about various things such as: new products; the best ways to sell products and engage the client; discussion on sample lines he had to carry with him; new promotions; discounted lines and offers he needed to be aware of and the conditions that attached to same; the importance of pushing the lines that the company manufactured over and above other lines as the margin was the best for the lines they manufactured; products to which the company had exclusive distribution rights; previous month(s) sales performance by each individuals; and, improvements to his selling technique. (8) In 1997, he was directed by Fred Essey to wear the livery of the first respondent, which comprised of a blue collared shirt with All-Fect logo on the pocket, together with displaying signage of All-Fect's logo on each door of the van and the rear of the van. He was required to wear this uniform at all times while performing duties under the work contract. (9) It was always the case that Fred, Joseph, Paul and Johnnie continued to "keep an eye" on him at all times. They achieved this through ensuring that they knew where he was supposed to be at all times and when he deviated from the agreed working week, they were pretty quick to pull him up. If they were unhappy then he was told in no uncertain terms. (10) During the life of the work contract he used his own motor vehicle. This was by mutual agreement at the outset. What he did not factor in was the actual expenses that he would incur under the arrangement as determined by the first respondent. He did not receive a car allowance in any shape or form. He had to carry to entire cost himself. He was required to carry the burden of work related mobile telephone expenses, fuel costs and bridge tolls, etc. (11) The applicant was directed to carry out induction training and supervision of the first respondent's employees namely, Sales Representatives/Merchandisers, on occasions. (12) At no stage during the life of the work contract was he permitted to delegate his responsibilities under the work contract. (13) He was not paid any annual leave during the life of the contract. 39 In relation to the foregoing matters, they were essentially denied by Paul Essey. Mr Essey denied: · that the applicant "gave up his right to deal with his "old clients"; · that the applicant "could only deal exclusively with the company's confectionary range" stating that as far as the first respondent was concerned, "the Applicant could deal in whatever he wanted, including Gordon & Gotch products and Nutter's Honey Corn"; · that the applicant was "required to attend sales meetings";

[31]

FE: "OK". 42 In relation to the applicant's version of what transpired in their conversation about retirement, Mr Essey stated: He leaves out the fact that the retirement question arose out of our mutual retirements. I did not say "it's nothing you have done" - he had done something - lost Video Ezy. Nor did I say "business has slowed so we don't need you anymore". Business had not slowed. All I did was tell him, in the above terms, that I thought he was sick of the work and that I was retiring. He suggested his own retirement and the date of Easter. There was no element of coercion or "pushing him out" by me at all. 43 Mr Paul Essey's evidence about the termination of the relationship was that: I was aware, prior to my father retiring on 31 March 2003, that the Applicant was leaving us at Easter. My father said to me, before he left on 31 March 2003: FE: "George is going to finish up at Easter". My father retired on 31 March 2003 and I took over as managing director. I naturally saw the Applicant around the premises of the First Respondent during early April. At some point in about mid April, he said to me: GS: "I think I'll finish the day before Anzac day". PE: "OK". On that day, 24 April, the Applicant brought to me his invoice dated 24 April for payment ... I paid it and wished him well. It was a friendly parting, with no mention of the allegations now made. I would add that if the Applicant had said "I think I'd like to finish at the end of May", I would likewise have been agreeable to that. There was no urgency to the Applicant finishing. The Applicant had been with us 11 years, and as far as I was concerned, he could pick his date of departure. It is true in a general sense I wanted him to leave, because he'd lost the Video Ezy account, and I did not think he was putting the effort into the clients he had, given his newspaper run and other commitments. It was up to him to pick the date of his departure and he picked 24 April. At the time, seemed quite happy about "retiring" on this day. Concurrent contracts for work

[32]

44 The applicant's evidence regarding work contracts he had that were concurrent with the work he did for the first respondent, and remuneration for work that he undertook following the termination of the contract with the first respondent, was as follows: I commenced working for B.A.S Transport Pty Ltd on 18 February 2001. At that time I needed to supplement my income as it was impossible to live on the money I was making from the company so I needed to get other work. At that time I was working for B.A.S Transport Pty Ltd from 3am to 5 am in the morning 4 days per week. I received $440.00 gross per week. Over time this grew to $462.00 gross per week. Since 25 April 2003, I increased my availability to B.A.S Transport Pty Limited, delivering magazines from four nights per week to five. Since that time I have been working an average 20 to 24 hours per week and receive payment on the following basis: (a) Base rate per week $380.00 gross per week (b) Picking up returns $30.00 gross per week (c) Delivering Catholic weekly $10.00 gross per week $10.00 gross per week (d) Special arrangement, early delivery to Rocks Newsagency $100.00 gross per week. Accordingly, I receive a total remuneration under the contract, per week, in the sum of $520.00 gross per week. This arrangement first began after I was terminated due to the fact that I was desperate to obtain employment in any shape or form. B.A.S Transport Pty Limited understood that I had been terminated from my work with the First Respondent and therefore I was anxious to take on any opportunities they were prepared to provide. On occasion I was also given the opportunity to do special delivery which, on average, occurred approximately once per month since April 2003 to the present, which involves me sometimes travelling as far a field as Sussex Inlet, to the south, or Newcastle, to the north. These are largely special deliveries of magazines and there is a separate arrangement usually on a job-by-job basis... First Fleet Transport Pty Limited In early May 2004, First Fleet Transport Pty Limited ("First Fleet") exacted work from B.A.S Transport Pty Limited. As a result, I was provided with further opportunities to engage in employment. The arrangement with First Fleet Transport Pty Limited commenced May 2004. First Fleet took things one step further from B.A.S Transport Pty Limited in that they required me to actually provide an invoice and my own documentation and to complete it in my own hand. Other than that, the arrangement that was in place under B.A.S Transport Pty Limited has not changed. ... On average I am working 50 hour per week and earning approximately $1000.00 gross per week since I started. 45 The applicant made the point in his evidence that the contracts to perform work that operated concurrently with his arrangement with the first respondent did not impact at all on that arrangement, such contracts being performed in the early hours of the morning and late at night. Video Ezy

[33]

46 Reference has been made to the loss by the first respondent of a contract to supply the Video Ezy chain of stores and to that being the trigger for Fred Essey to approach the applicant about retirement. It was alleged by the respondents the loss was brought about by the poor servicing by the applicant of the Video Ezy store at Chatswood. In this respect, Graham Fox gave evidence. Mr Fox was the manager and franchisee of the Chatswood store. Mr Fox complained that Mr Stewart was neglecting the store. He stated: He's stopped coming regularly, and when he does come, he looks scruffy and he's just not very interested. He wants to give me a fax number for our orders, but it's no good giving me a fax number. That's hopeless. I want someone to deal with properly. Also, if the wrong order arrives, he doesn't fix it, he just tells me to ring the warehouse. That's no good either. 47 In response, Mr Stewart deposed: With respect to the matters raised in the Affidavit of Graham Fox I say that it was well known to the Respondents that the Video Ezy store at Chatswood largely only bought branded lines which provided for a 3% commission opposed to the higher commission recovered on unbranded and novelty lines. The fact that Graham Fox only recalls me turning up on a number of occasions it is probably as a consequence of the fact that he was usually out of the store when I arrived. This also created problems concerning ability of the store to place orders with the First Respondent given that on numerous occasions I indicated to the store and also to the Respondents that as a result the person left in charge invariably indicating that they had no authority to place such an order I suggested to them which was ratified by the Respondents that it might be easier for them to fax orders through to the warehouse given that they were unable to place the orders on the majority of occasions that I visited the store. 48 As to the assertion by the respondents that they lost the contract with the Video Ezy chain because of the poor service provided to the Chatswood store, the point was made by counsel for the applicant that that store was a stand alone operation and there was no evidence that poor servicing at that location was the reason for the entire chain deciding not to use the first respondent. Evidence of Phillip McLeod

[42]

58 The credit of a number of the witnesses was a significant issue in the proceedings. Taking, firstly, the applicant. It was submitted by Mr Shoebridge of counsel for the applicant that Mr Stewart would be accepted as a witness of credit. He submitted the applicant's demeanour and veracity were unshaken despite considerable cross-examination by Mr Hassett, solicitor for the respondents. Furthermore, it was submitted, the applicant's recollection of events was not challenged by any contrary contemporaneous documentation. 59 I did not find Mr Stewart to be altogether convincing in his testimony. To make out an affidavit stating that it was 1992 when he commenced with the first respondent and to later change that to 1994, must immediately raise suspicions in the mind of a finder of fact about the reliability of Mr Stewart's recollections. To be years out, not weeks or months, about when a significant event in his life occurred, that being, according to Mr Stewart, the commencement of full time employment after many years of operating his own business, must attract some scepticism about the reliability of the applicant's testimony. Moreover, Mr Stewart stated that his initial disengagement from the first respondent occurred three months after he commenced in 1994 whereas the general consensus, the applicant's counsel included, was that it occurred in 1996. 60 Putting aside for the moment whether Mr Stewart was in fact and in law an employee, I also consider that the applicant's testimony, where he sought to make out that he was an employee and not an independent contractor or agent, was embellished. Notwithstanding the unreliability of the evidence of the Esseys, I was not satisfied that the various indicia the applicant sought to rely upon as in some way being indicative of the control exercised by the respondents over the applicant was as clear cut as the applicant tried to make out. For instance, I am not convinced Mr Stewart was required to wear the shirts supplied by the first respondent or that he was required to place an All-Fect sign on his van, or that he was required to attend sales meetings or that there was any close supervision of his daily activities. The evidence of Mr Kostidis conflicts with the applicant's evidence and I am inclined to believe Mr Kostidis who, it appeared to me, had no allegiance to the Essey's and was his own man. 61 The applicant asserted that he was engaged as an employee sales representative on a commission only basis and contended this was a unique arrangement, it being the case that hitherto there were only two classes of persons engaged by the first respondent, namely, commission agents who were independent contractors (or possibly agents) and paid by commission only, and sales representatives who were employees and received a regular wage. 62 The difficulty I have with this evidence is that it is quite clear Mr Stewart knew of the difference between employees and commission agents. In cross-examination of the applicant the following exchange occurred: Q. Now as opposed to the Commission agents, there were also employed sales representatives of All-Fect, weren't there? A. Yes.

[46]

63 Understanding the difference between an employee and a commission agent, and believing he was being treated no differently to other commission agents engaged by the first respondent, Mr Stewart continued to work for the first respondent for nine years without raising with any of the respondents why it was, as an employee, he was not receiving a wage and other employment conditions as other employees were or, for that matter, why he was treated the same as a commission agent receiving only commission when he understood he was an employee. Even if the applicant considered the arrangement he had with the first respondent was unique in that he was the only employee remunerated on a commission only basis, the question must have exercised his mind at some stage in the nine years he was with the first respondent as to how it was he came to be treated no differently to other commission agents. 64 Moreover, just to add to the confusion, contrary to what the applicant deposed to in his affidavit that he regarded himself as an employed sales representative, in cross-examination of the applicant the following exchange took place: HASSETT: Q. You told us this morning you didn't think you were an employee. Do you think you were an employee or not? A. I didn't think I was an employee. I knew I worked on behalf of All-Fect for commission for myself. 65 As the applicant submitted, the evidence of Mr Paul Essey was, to a large extent, hearsay and unhelpful. I will return to this evidence shortly. 66 Mr Fred Essey was a volatile and defensive witness. His evidence in cross-examination was that he had not properly read his affidavit before affirming the truth of its contents. Parts of his own affidavit he condemned as wrong and his statement that he was too busy to take the time to read his affidavit before affirming its contents as true and correct was unconvincing. 67 As Mr Shoebridge for the applicant submitted, the affidavits of Paul and Fred Essey openly disclose the fact that they were sworn after the deponents had read other affidavit material relied upon (or not) by the respondents. Mr Paul Essey confirmed this fact in cross-examination. Mr Fred Essey denied he had done so but was unable to explain how the references to other affidavits remained in his affidavit material. 68 Mr Shoebridge submitted: The ultimate result is that the evidence of Messrs Paul and Fred Essey about any particular matter may well have been overborne by what that witness read in the balance of the respondents' affidavit material. This seriously undermines the process by which the respondents' evidence was taken. What was done was improper. It further undermines the credibility of the respondents' witnesses and impels the Court towards accepting the applicant's evidence in all circumstances of substantial conflict. 69 Counsel for the applicant referred to Day v Perisher Blue Pty Ltd [No 2] [2005] NSWCA 125 where Sheller and McColl JJA, together with Windeyer J, adopted the following passage from Sheller JA in Day v Perisher Blue Pty Ltd (2005) 62 NSWLR 731:

[50]

75 Whether Mr Stewart was an employee of the first respondent is an important question because if the contracts with the first respondent were found to be unfair and money orders warranted, consideration would necessarily need to be given to those heads of entitlement related to employment such as wages, notice, severance pay, annual leave and long service leave. 76 It was the applicant's case that he was an employee of the first respondent from the outset. I am satisfied on the evidence that in the initial discussions between the applicant and Fred Essey that it was not said to the applicant that he would be employed as a sales representative on a commission only basis. The first respondent operated with two classes of salespersons: Sales representatives who were employees and paid a wage (no commission on sales); and, commission agents (who were agents or independent contractors) who were paid only a commission on sales. Fred Essey did not create a third class of salesperson as claimed by the applicant, namely, an employee paid only on a commission basis. This, of course, is not the end of the matter. 77 The question is whether, in fact and in law, Mr Stewart was an employee as distinct from an independent contractor, regardless of the words spoken at the time of engagement. In Hollis v Vabu (2001) 207 CLR 21, in the context of a claim based upon an allegation of vicarious responsibility of the employee for injuries caused to a pedestrian by a bicycle courier, the High Court considered whether bicycle couriers were independent contractors or employees. At first instance and on appeal to the New South Wales Court of Appeal (Hollis v Vabu Pty Ltd (t/as Crisis Couriers) (1999) Aust Torts Rep 81-535, it was held the couriers were independent contractors. In both instances the findings in Vabu Pty Ltd v Federal Commissioner of Taxation (1996) 81 IR 150 were relied upon. The majority in the High Court (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ) held the couriers were employees. McHugh J considered the couriers were not employees or independent contractors in the strict sense but could be regarded as agents of Vabu. His Honour said, "extending the classical tests or their application to make the couriers employees of Vabu ... would be likely to unsettle many established business arrangements and have far-reaching consequences" (at [69]). Callinan J did not address the question of whether the couriers were employees. 78 The majority in Hollis v Vabu noted with approval what Mason J said in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 29: [T]he common law has been sufficiently flexible to adapt to changing social conditions by shifting the emphasis in the control test from the actual exercise of control to the right to exercise it, 'so far as there is scope for it', even if it be 'only in incidental or collateral matters': Zuijs v Wirth Brothers Pty Ltd (1956 65 CLR 561 at 571). Furthermore, control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.

[51]

And stated at [45]: So it is that, in the present case, guidance for the outcome is provided by various matters which are expressive of the fundamental concerns underlying the doctrine of vicarious liability. These include, but are not confined to, what now is considered "control". 79 In identifying the error in the Court of Appeal the majority in Hollis stated at [47]: In classifying the bicycle couriers as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories. Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might, for example, be appropriate where the investment in capital equipment was more significant, and greater skill and training were required to operate it. The case does not deal with situations of that character. The concern here is with the bicycle couriers engaged on Vabu's business. A consideration of the nature of their engagement, as evidenced by the documents to which reference has been made and by the work practices imposed by Vabu, indicates that they were employees. 80 The majority then proceeded to identify a number of indicia that it considered led to the conclusion the bicycle couriers were employees and not independent contractors. These indicia may be summarised as follows: (1) The couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any "goodwill" as a bicycle courier. The notion that the couriers somehow were running their own enterprise is intuitively unsound, and denied by the facts disclosed in the record: [48]. (2) The couriers had little control over the manner of performing their work. The evidence does not disclose whether the couriers were able to delegate any of their tasks or whether they could have worked for another courier operator in addition to Vabu during the day. It may be thought unlikely that the couriers would have been permitted by Vabu to engage in either activity: [49]. (3) The couriers were presented to the public and to those using the courier service as emanations of Vabu. They were to wear uniforms bearing Vabu's logo. Certain attire ("thongs, singlets, swim shorts, torn jeans and other unclean or torn attire") was not permitted. Further, Vabu required that all couriers "should be clean shaven unless that person is bearded": [50]. (4) Vabu was aware of the dangers which its couriers presented to pedestrians, yet failed to adopt any means for personal identification of individual couriers by the public: [53]. (5) Vabu superintended the couriers' finances: Vabu produced pay summaries and couriers were required to dispute errors by 6.00 pm Friday of the same week. "Unjustified or unsubstantiated" claims for additional charges, such as due to waiting time, wrong address or excess weight, could result in total deduction of that particular job payment. There was no scope for the couriers to bargain for the rate of their remuneration. The method of payment, per delivery and not per time period engaged, is a natural means to remunerate employees whose sole duty is to perform deliveries, not least for ease of calculation and to provide an incentive more efficiently to make deliveries: [54]. (6) The situation in respect of tools and equipment also favours, if anything, a finding that the bicycle couriers were employees. Apart from providing bicycles and being responsible for the cost of repairs, couriers were required to bear the cost of replacing or repairing any equipment of Vabu that was lost or damaged, including radios and uniforms. Although a more beneficent employer might have provided bicycles for its employees and undertaken the cost of their repairs, there is nothing contrary to a relationship of employment in the fact that employees were here required to do so. This is all the more so because the capital outlay was relatively small and because bicycles are not tools that are inherently capable of use only for courier work but provide a means of personal transport or even a means of recreation out of work time. The fact that the couriers were responsible for their own bicycles reflects only that they were in a situation of employment more favourable than not to the employer; it does not indicate the existence of a relationship of independent contractor and principal: [56]. (7) As a corollary to the second point mentioned above, this is not a case where there was only the right to exercise control in incidental or collateral matters. Rather, there was considerable scope for the actual exercise of control. Vabu's whole business consisted of the delivery of documents and parcels by means of couriers. Vabu retained control of the allocation and direction of the various deliveries. The couriers had little latitude. Their work was allocated by Vabu's fleet controller. They were to deliver goods in the manner in which Vabu directed. In this way, Vabu's business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu's business. It was not the case that the couriers supplemented or performed part of the work undertaken by Vabu or aided from time to time; rather, as the two documents relating to work practices suggest, to its customers they were Vabu and effectively performed all of Vabu's operations in the outside world. It would be unrealistic to describe the couriers other than as employees: [57]. 81 In Abdalla v Viewdaze Pty Ltd (2003) 122 IR 215 the Full Bench of the Australian Industrial Relations Commission provided a summary of principles said to have been extracted from High Court authorities concerning the question of whether a worker was an employee for the purpose of termination of employment provisions. The Full Bench stated: [34] Following Hollis v Vabu , the state of the law governing the determination of whether an individual is an employee or an independent contractor may be summarised as follows: (1) Whether a worker is an employee or an independent contractor turns on whether the relationship to which the contract between the worker and the putative employer gives rise is a relationship where the contract between the parties is to be characterised as a contract of service or a contract for the provision of services. The ultimate question will always be whether the worker is the servant of another in that other's business, or whether the worker carries on a trade or business on his or her own behalf: Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210 at 217 per Windeyer J approved by the majority in Hollis v Vabu (2001) 207 CLR 21 at 39; 106 IR 80 at 92; see also Brodribb per Wilson and Dawson JJ at 37. That is, whether, viewed as a practical matter, the putative worker could be said to be conducting a business of his or her own: Hollis v Vabu (2001) 207 CLR 21 at 41-42, and 45; 106 IR 80 at 93-94, and 97. This question is answered by considering the totality of the relationship: Brodribb esp Mason J at 29. (2) The nature of the work performed and the manner in which it is performed must always be considered. This will always be relevant to the identification of relevant "indicia" and the relative weight to be assigned to various "indicia" and may often be relevant to the construction of ambiguous terms in the contract. (3) The terms and terminology of the contract are always important ( Brodribb per Wilson and Dawson JJ at 37) and must be considered. However, in so doing, it should be borne in mind that parties cannot alter the true nature of their relationship by putting a different label on it ("The parties cannot create something which has every feature of a rooster, but call it a duck and insist that everyone else recognise it as a duck"; Re Porter (1989) 34 IR 179 at 184 per Gray J; Massey v Crown Life Insurance [1978] 2 All ER 576 at 579 per Lord Denning approved by the Privy Council in AMP v Chaplin (1978) 18 ALR 385 at 389). In particular, an express term that the worker is an independent contractor cannot take effect according to its terms if it contradicts the effect of the terms of the contract as a whole: AMP v Chaplin at 389. That is, the parties cannot deem the relationship between themselves to be something it is not: Hollis at 45; 106 IR 80 at 97. Similarly, subsequent conduct of the parties may demonstrate that relationship has a character contrary to the terms of the contract ( AMP v Chaplin at 394). If, after considering all other matters, the relationship is ambiguous and is capable of being one or the other, then the parties can remove that ambiguity by the very agreement itself which they make with one another: Massey at 579 per Lord Denning . (4) Consideration should then be given to the various "indicia" identified in Brodribb and the other authorities bearing in mind that no list of indicia is to be regarded as comprehensive and the weight to be given to particular indicia will vary according to the circumstances. Where a consideration of the "indicia" points one way or overwhelmingly one way so as to yield a clear result, the determination should be in accordance with that result. For ease of reference we have collected the following list of "indicia":

[61]

(6) Completing the necessary paperwork; (7) Collecting stands from customers who no longer wanted them; (8) Cleaning the stands. 84 The respondents contended that the arrangement with the applicant was quite straightforward: "Take our products and sell them to whomever you can sign up as a customer and we will pay you a fixed commission on sales. How you do it and when you do it is a matter for you." To a certain extent that description is correct. However, the respondents exercised, or had the right to exercise, control over the applicant in the following respects: (1) The territory in which product would be sold and in respect of Campbelltown, Sutherland and the Western suburbs, established customers of All-Fect to whom product was to be sold (plus any new customers the applicant was able to sign up); (2) The price at which the products were to be sold; (3) How the confectionery stands were to be displayed; (4) That the applicant was not to sell confectionery in competition with All-Fect's products where retail outlets were supplied with the respondents' products; (5) The paperwork to be used in the selling process was that of the first respondent; (6) The system of work. Whilst the system of work was relatively logical and straightforward and there was little, if any, leeway for the applicant to implement a different system if he had the independence to do so, it was clearly the case that the respondent had the right to determine how the process of supply and ordering was to be carried out. The respondent also exercised the right to change the applicant's territory as evidenced by the unilateral decision of Fred Essey to terminate the arrangement with the applicant in 1996 and to later re-assign him to different territories; (7) The work the applicant performed appeared to be little different from the persons employed by the first respondent as sales representatives although there was a lack of reliable evidence upon which a determination could be made about this issue. (8) The contract for the supply and servicing of the confectionery stand and/or the supply of confectionery was between the retail outlet and the first respondent, not the applicant. 85 Against these foregoing considerations are the following: (1) The assignment of a territory in which confectionery was to be sold would not seem to be an indicator one way or the other as to whether a person was an employee or independent contractor. Employees are assigned selling territory and it is quite common in business and commerce for agents and contractors to be assigned territories for selling purposes, obviously so that they are not attempting to sell to the same customer. Here, the applicant was given specific territories upon which to focus his efforts but his mandate was to sell where he could and when he did he was paid a commission. I notice from one of the exhibits, Mr Stewart had customers as far flung as Sylvania, Kurrajong, Manly, Kemps Creek, Mittagong, Mosman and Berowra Heights in 2001. It is noteworthy that Mr Stewart was not required to meet any particular quota or target in terms of sales. (2) Having been assigned a territory or, more accurately, having agreed in the initial stages to a territory that the applicant was, at least in part very familiar with (the Eastern suburbs), the applicant was essentially free to develop that territory to maximise his income. (3) There was no restriction on the applicant working for another supplier. However, the practical reality was that most of the applicant's time, at least initially, was consumed by his work in selling the stand concept to his existing customers and to new customers. The applicant did not have sufficient capacity to continue on with his old business or any other business of his own and, in any event, there were not sufficient returns in that old business to bother. (3) The applicant was not precluded from selling confectionery products not supplied by All-Fect. The fact that the applicant continued to sell a product known as "Honey Corn", which the respondents knew of but did nothing about, is proof of that. 86 The hours of work of the applicant were not in any sense fixed under the arrangement with the respondents. The applicant claimed he worked about 44 hours per week, taking Friday afternoon off. He claimed that he worked weekends, installing and cleaning confectionery stands. I am more inclined to believe that the applicant worked about 38-40 hours per week, which were the hours worked by Mr Kostidis. The number of hours worked each week was determined not by the respondents but by the number of customers the applicant serviced and, I expect, the imperative of making sufficient sales to earn a worthwhile commission. 87 The issue of control is, therefore, not clear-cut. Control, however, is not the only consideration here. In Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 24, Mason J noted: But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question ... 88 In Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497 MacKenna J observed at 526: A man does not cease to run a business on his own account because he agrees to run it efficiently or to accept another's superintendence. Whether the worker performs work for others (or has a genuine and practical entitlement to do so) 89 The applicant did perform work for others during the period 1994 to 2003. Mr Stewart continued to sell Honey Corn supplied by another manufacturer, but this involved only small quantities and Honey Corn was not a product in competition with the products sold by All-Fect. This would tend to indicate that the respondents, who knew about the Honey Corn but did nothing to prevent the applicant continuing to sell it, had no objection to the applicant selling other suppliers' products during normal business hours, provided those products did not compete with All-Fect products. 90 The applicant also worked for BAS Transport from 2001 in order to supplement his income from All-Fect. That work was done in the early hours of the morning and late at night. In no way did the work conflict with the applicant's obligations to the respondents and in no way could it be successfully contended that because the applicant performed work for BAS outside of ordinary business hours it pointed to the applicant being an independent contractor. However, it does appear that the respondents were aware that the applicant was doing this other work and took no objection to it. This again would tend to indicate there was an entitlement for the applicant to perform work for others, although this must be treated with some caution because it is not known what the respondents' reaction would have been if the work being performed by the applicant for BAS had encroached on the applicant's time spent performing work for the respondents. They may have accepted it and filled any gaps with another commission agent (it not costing them anything to do so because all costs were born by the agent), or they may have terminated the arrangement with the applicant, or they may have directed him to fully service the customers in his territory on a full time basis. 91 Given the state of the evidence it would be speculation on my part to make any firm finding that the applicant had a genuine and practical entitlement to work for others so that the applicant might be able to draw income from a number of sources and not be tied to one supplier. The only inkling that the applicant was free to work for others was his selling of Honey Corn, which was a very small enterprise, and the fact that the respondents took no objection to the BAS job.

[62]

Whether the worker has a separate place of work and/or advertises his or her services to the world at large 92 In his annual taxation returns Mr Stewart claimed deductions for the use of his home and garage for business purposes. But it is difficult to describe his home as a separate place of work. Essentially what he did was store confectionery stands (and some product) in his garage and cleaned the stands from time to time on weekends. Moreover, the applicant did not advertise his services to the world at large. During normal business hours the applicant worked essentially selling the first respondent's products and did not seek to attract customers or clients other than on behalf of the first respondent and perhaps to a limited extent, the supplier of Honey Corn. Whether the worker provides and maintains significant tools or equipment 93 The applicant provided all of the tools and equipment necessary to carry out the work including a van and mobile phone. The applicant also bore all of the expenses of running and maintaining the motor vehicle and the phone. 94 On the question of the provision of a motor vehicle McHugh J in Hollis stated at [71]: Given the course of authority in this Court concerning workers who provide their own equipment, it seems impossible to say that those couriers who provided their own motor vehicles were employees ( Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 359; Humberstone v Northern Timber Mills (1949) 79 CLR 389; Wright v Attorney-General for the State of Tasmania (1954) 94 CLR 409). The right to supervise or direct the performance of a task cannot transform into a contract of service what is in substance an independent contract ( Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552). and, when a person has to provide equipment such as a motor vehicle, the conventional view is that the person is not an employee. In principle, there can be no distinction between those couriers working for Vabu who provide their own bicycles and those couriers who provide their own motor vehicles. 95 In Humberstone, Dixon J stated at 404-405: The essence of a contract of service is the supply of the work and the skill of a man. But the emphasis in the case of the present contract is upon mechanical traction. This was to be done by his own property in his own possession and control. There is no ground for imputing to the parties a common intention that in all the management and control of his own vehicle, in all the ways in which he used it for the purposes of carrying their goods, he should be subject to the commands of the respondents. 96 In Hollis the majority considered that the provision by the couriers of their own bicycles did not favour a conclusion that the relationship was one of independent contractor and principal, rather the reverse. The majority, however, observed that the case concerned liability for bicycle couriers, not motor vehicle or motorbike couriers: [22], [47]. They also accepted (at [47]) that a significant investment in capital equipment might lead to a different conclusion. 97 In Australian Air Express v Langford (2005) 147 IR 240 the New South Wales Court of Appeal considered whether a delivery driver who delivered goods on the appellant's behalf pursuant to an Owner/Driver Agreement and who provided his own truck and bore the expense of its maintenance and operation, was an employee or independent contractor in the context of a claim by the respondent for damages for personal injury. McColl JA with whom Ipp and Tobias JJA agreed, held that the respondent was an independent contractor. It was further held, inter alia, that ownership of an expensive item of equipment such as a truck was a significant factor favouring the conclusion that a person was an independent contractor as it tended to indicate that the chance of profit and loss in the business of carriage were the owner/driver's. 98 At [44]-[47] her Honour found as follows: 44 There is a consistent line of High Court authority supporting the "conventional view" that owners of expensive equipment such as the truck owned by the respondent are independent contractors. As MacKenna J said in Ready Mixed (at 526), such ownership indicates a contract of carriage rather than one of service because "the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are [the owner/driver's] and not the company's". That proposition was referred to with approval by Meagher JA in the Taxation Decision (at 538). 45 Although the Taxation Decision was disapproved by the majority in Hollis insofar as it related to bicycle couriers, it retains its force insofar as it concerns the significance of the ownership of expensive capital equipment such as motor vehicles. It is therefore, an earlier decision of this Court which, to that extent, remains binding. 46 It remains to note several facts concerning the respondent's truck to which the primary judge did not expressly refer. It was purchased for $67,323.00. In the 1998 and 1999 financial years he incurred approximately $26,000 and $32,000 in running expenses to keep it operational. It is clear it represented a considerable investment. 47 In my view the primary judge was justified in holding that the respondent's ownership of his truck was a significant factor favouring the conclusion that he was an independent contractor. 99 It is interesting to note the matters taken into account by the judge at first instance in arriving at his view the respondent was an independent contractor. These matters were reproduced in the judgment of McColl JA as follows: 14 In favour of his being an employee was as follows: (a) the defendant required the plaintiff to report to its premises each day at 6.00 am to receive orders for delivery; (b) though the plaintiff supplied his own truck, the defendant's name was painted on it, at the defendant's request and cost; (c) the plaintiff was supplied by the defendant with livery, consisting of shirts, trousers, shorts and jumpers; (d) the defendant supplied a radio, at its cost, for installation in the plaintiff's truck, for communication during the work day, and paid for its maintenance; though when the plaintiff bought the truck he had when injured, he chose not to have the radio installed, instead using his own mobile phone; this arrangement he conceded was for his own convenience; (e) though he had his own "run" this was chosen for him by the defendant; changes, which the defendant could direct, could result in income loss; (f) loading of goods for delivery and unloading, on the truck's return, was performed using forklift machines supplied by the defendant and operated by its employees; (g) the plaintiff used the defendant's telephone at its depot, its software for records, its computer printer, fax machine, amenities room, and toilets; (h) the plaintiff attended computer and safety lectures, work barbecues and Christmas functions, organised by the defendant; (i) the defendant supplied him with a photographic identification card and he carried it at the defendant's request, producing it as needed, on occasions, in the course of his work; (j) he carried no personal accident insurance; (k) no reference was made in the contractual documents to workers compensation or the need for self-insurance for sickness and accident; (l) he had to produce medical evidence if he claimed to have been sick; (m) he applied for and received Comcare workers compensation benefits when he suffered the subject injuries, (as he had done for other injuries) only commencing these proceedings when Comcare declined further liability, asserting, contrary to its earlier view, that he was not an employee of the defendant when injured, but an independent contractor; (n) it is clear from the contractual documents that the defendant maintained a high degree of control, including powers to discipline; this control was contrary to the position in Humberstone v Northern Timber Mills (1949) 79 CLR 389; however though there was at least a degree of control over how the work was to be done, insofar as skill and experience was concerned, which did not require or permit control, in the case of an experienced and skilled worked in a specialised field, control is of less importance: Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561. 15 In favour of his being an independent contractor was as follows: (a) he supplied his own truck, and met all running expenses for it; (b) he was paid on piece rates - the more deliveries or pickups he did, the more he was paid - though there were some limits; it is said however that payment by piece rates casts little light on the relationship: Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395 at 405 (per Stephen J); (c) the only tax deducted from his earnings was PPS tax. This was 25%, 20% being compulsory, the additional 5% at his own request; (d) communication with him when on the run was by his mobile phone, the cost of which he met; though it could have been by a radio supplied by the defendant; this was the same however for Mr Bell; (e) he was not required to work all day: once his morning deliveries were finished, and before his pick ups started (usually no earlier than 2.30 pm) his time was his own and he could, if he chose, go to the beach, though he took the phone with him; however this also was available to Mr Bell; (f) he could, if he chose, not do the work, but employ another, provided his choice was agreed to by the defendant. On one occasion he went overseas for 3 months, leaving in his place a substitute, for whom he took out a workers compensation policy, and to whom he paid a salary not fixed by reference to pieces of work performed; (g) the defendant supplied him, each week, with a summary of his earnings, in which he was described as a "subcontractor"; though labels are not, and cannot be, determinative: Hollis at [58]; (h) there was no 'clocking on' or off, though there was for Mr Bell, who worked the same hours; (i) though he had no sickness and accident insurance he said (and I accept) this was because his health, consistently with the early deaths of his parents, and an earlier unsuccessful attempt, would not permit it; Mr Russell, whose company had the agreement with the defendant paid for his own sickness and accident cover, though he said that was to fill gaps not covered by Comcare; (j) he paid his own union fees annually, by personal cheque; (k) he was paid no sick leave, no holiday pay, and no superannuation, apart from as provided by the 1995 agreement: see cl 30. This appears to have been less than what Commonwealth legislation requires for an employee and would appear not to have been paid to satisfy such legislation. Mr Bell, however was paid for holiday and sick leave; (l) though the defendant's employees received silver and gold awards for 5 and 10 years service respectively, he did not: he did say he had once received $200.00 from the defendant but could not recall what it was for and there was no other evidence about it; it was obviously different from what the defendant's employee, Mr Bell, received. As to the gold and silver awards, Mr Bell said he thought they were just for "company drivers"; (m) theoretically he could have worked for others as the 1995 agreement did not forbid him from doing so: though the hours he was required to be available to the defendant, and having the defendant's name on his truck, might have hindered any such ambitions. 16 Though there are powerful agreements (sic - arguments) in favour of the plaintiff's having been an employee, I am not so persuaded. First, he supplied and paid for his own truck. Secondly he was not treated as a PAYE employee. Thirdly he had the ability to substitute others to do his work, subject to satisfying the defendant the substitute was appropriate. None of the indicia of employment in [14] above are inconsistent with his being an independent contractor. The factor I find quite inconsistent with his being an employee, is his ability to substitute other drivers. Having looked at the totality of the relationship, I am persuaded the plaintiff was not an employee, but an independent contractor. 100 It seems to me, with respect, that the observation by the judge at first instance that there were "powerful agreements (sic - arguments) in favour of the plaintiff's having been an employee" was an understatement but, nevertheless, upheld on appeal, with the provision of a truck by the delivery driver figuring prominently in the Appeal Court's reasoning. 101 Given the conventional view that a person who has to provide equipment such as a motor vehicle is not an employee and the line of authority referred to in Australian Air Express v Langford and the decision in that case, it must be accepted that the provision by the applicant in this case of a motor vehicle and the fact that he bore the whole of the expense for operating and servicing that vehicle, points strongly in the direction of him being an independent contractor. As it was held in Australian Air Express v Langford the finding in that case was not inconsistent with Hollis because in Hollis the majority were concerned with bicycles in respect of which the capital outlay was relatively small and because bicycles were not tools that were inherently capable of use only for courier work but also provided means of personal transport or recreation. Further, as I noted earlier, the majority in Hollis also accepted that a significant investment in capital equipment might lead to a different conclusion. 102 I have had regard to the fact that the cases referred to in Australian Air Express v Langford involved a drover providing horses, men and equipment (Queensland Stations), a timber carter (Humberstone), an owner/driver carting concrete (Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497), a courier driver (TNT Worldwide Express (NZ) Ltd v Cunningham [1993] 3 NZLR 681) and bicycle couriers (Hollis). None of the cases relied upon involved persons who might be described as commercial travellers. However, the principle relied upon in Australian Air Express v Langford was that ownership of the motor vehicle indicated a contract of carriage rather than one of service because "the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are [the owner/driver's] and not the company's": [44]. Whilst the contract between the first respondent and the applicant was not a contract of carriage, the chance of profit and the risk of loss was the applicant's and not the respondent's.

[65]

105 I tend to believe Mr Fred Essey that the issue of delegation never arose for discussion; the issue was never part of the contracts between the first respondent and the applicant. The practical reality, however, was that there was no scope to delegate for the reason I have explained. However, I do not consider there was anything inherent in the contracts between the applicant and the first respondent (for example, the exercise of a particular skill or talent) that required personal service by the applicant. In other words, if the applicant had chosen to delegate it is difficult to see how the respondents could have objected. Whether the putative employer has the right to suspend or dismiss the person engaged 106 There was no evidence about a right to suspend or about any right of the respondents to take disciplinary action against the applicant. In 1996 Fred Essey terminated the arrangement with the applicant and later re-engaged him but this was not necessarily indicative of an employment relationship. When the arrangement was terminated in 2003, Mr Stewart did not receive any payment in lieu of notice, severance payment, accrued holiday or long service leave entitlements. Whether the putative employer presents the worker to the world at large as an emanation of the business 107 Whilst the respondents provided the applicant with shirts that displayed an All-Fect logo and signage that Mr Stewart displayed on the sides and rear of his van, I earlier found there was no obligation on the applicant to wear the shirt or display the signage. In this respect I have had regard to Mr Kostidis' evidence that there was no requirement to wear the shirt or display the signage. Whether income tax is deducted from remuneration paid to the worker 108 No income tax was deducted from the commission paid to Mr Stewart. It appears that every fortnight or so Mr Stewart submitted an invoice to the first respondent which showed the value of his sales plus 10 per cent GST. On the invoice the applicant calculated the commission on sales (whether it be 3 per cent or 10 per cent) and claimed payment for that amount, which presumably, was paid. 109 Mr Stewart's whole approach to taxation of his income suggested that he was an independent contractor rather than an employee. He did not pay PAYE tax and never queried this with the respondents, he described his main business activity on his tax returns as St George Confectionery and he claimed deductions for the cost of sales, rent, motor vehicle expenses and other expenses.

[71]

Conclusion as to status of applicant 115 Whilst indicia exist to suggest the applicant was an employee, I have concluded, on balance, that the applicant was an independent contractor. The considerations that have most influenced me in arriving at that conclusion are as follows: (1) The evidence supports a conclusion that whilst the applicant had sought employment with the first respondent he understood that what was offered to him was a commission agent's position, something he knew was not considered by the respondents to be an employee. He accepted this offer and continued in the role for nine years without questioning his status. (2) Whilst the respondents maintained a degree of control over the applicant it was not of the same character as that exercised over the bicycle couriers in Hollis and apart from the system of work relating to ordering and supplying confectionery to customers, how the applicant went about the task of selling was a matter for him. (3) That the applicant was assigned a territory in which to sell the respondent's products and represented an exercise of control over the applicant by the respondents, it did not negate a conclusion that the applicant was an independent contractor. (4) The applicant did not have a fixed quota or target to meet. (5) The respondents did not exercise close, day-to-day supervision of the applicant. (6) The applicant was entitled to sell products not in competition with those of the respondents. (7) The applicant had no fixed hours of work. (8) The applicant provided his own vehicle and paid for all of the costs associated with running the vehicle. (9) The applicant was not required to wear or display the respondents' livery. (10) The applicant invoiced the first respondent for the commission he made on sales and was not paid a wage or salary. The applicant did not pay PAYE tax but portrayed himself as being in the business of a confectionery wholesaler and claimed deductions for business expenses. (11) The applicant did not receive annual leave, long service leave or sick leave. 116 In Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 Mummery J at 944 stated: The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. 117 In weighing up whether the applicant was an employee or independent contractor I have taken a step back from assessing each of the indicia and asked whether, despite those indicia, and considering the matter from a global perspective, it could be said the applicant was running his own business or had independence in the conduct of the operation: See Hollis at [47]. Such an inquiry cannot be made on the assumption that in order to find the applicant was an independent contractor he had to be absolutely free of any degree of supervision or control by the respondents: See ReadyMix at 526 per MacKenna J. In my opinion the applicant was running his business subject only to a degree of supervision and control by the respondents necessary for the business to run efficiently and to maximise the applicant's income from sales. Accordingly, on balance, I consider it may be concluded the applicant was not an employee. Whether the contract between the applicant and the contract was an unfair contract

[75]

GS: "That sounds like a great idea. I'll take it up with my shop owners". 124 On this evidence there is no indication of misrepresentation or dominance of bargaining power by the respondents in the making of the contract between the applicant and the first respondent. So, whoever is to be believed, either the applicant or Fred Essey, in the making of the contract there would appear to have been no unfairness on the part of the respondents. The initial agreement between the parties, however, evolved into an arrangement whereby Mr Stewart would canvass his former clients in the Eastern Suburbs about the idea of installing a confectionery stand as well as seek out new customers. It appears Mr Stewart also agreed to service the Campbelltown territory for the respondents. 125 In 1996, Fred Essey terminated the contract with the applicant. The effect of this was that the applicant was left with nothing from his two years with the first respondent or from his previous wholesale confectionery business. The applicant had, in effect, lost his previous clientele from his Eastern suburbs territory because it had been subsumed into the respondents' business. The respondents thereby benefited, not only from the addition to their business of the applicant's former customers, or at least some of them, but this was achieved at minimal cost to the respondents, that cost being only the commission on sales paid to the applicant. 126 I have the impression from the evidence that in approaching Fred Essey the second time for work there was a hint of desperation on the part of the applicant that was never fully explained. That is to say, for some reason (perhaps impecuniosity) the applicant was desperate to be re-engaged by the first respondent and accepted sales territory in the Western suburbs and Sutherland Shire, basically on the same conditions as the previous arrangement. 127 It may have been that Fred Essey was sympathetic to the applicant's personal plight, as he stated in his evidence, and that was the reason why he offered the applicant the Western suburbs and Sutherland Shire. But when one considers the whole of the relationship over the nine-year period that it existed, despite the fact that Mr Stewart freely entered into the contracts with the first respondent on two occasions and never complained about its terms for the whole of that period, an unavoidable conclusion is that it was a very one sided bargain; the first respondent expanded and serviced its customer base in the areas assigned to Mr Stewart at minimal cost to the first respondent. The respondents accepted the benefit of the applicant working up to 44 hours each week on occasions selling their products and it would have been obvious to them that the applicant would have no time left to engage in a business of his own. For his part, Mr Stewart received commission on sales that represented an income, but well below that he would have received if he had been an employed sales representative. At the end of nine years with the first respondent the applicant was left with less than what he started with. 128 I consider that pursuant to s 105(a), on balance, the contract between the applicant and the first respondent was unfair.

[76]

Whether contract was against the public interest 129 In The Federated Miscellaneous Workers' Union of Australia, New South Wales Branch v Wilson Parking (NSW) Pty Ltd and others [1980] AR (NSW) 352, Dey J considered whether a contract between a company that operated parking stations and a car-parking attendant was against the public interest pursuant to s 88F(1)(c) of the Industrial Arbitration Act 1940. At 363 his Honour stated: Moreover, in my view it was against the public interest within the meaning of s. 88F (1) (c) as that paragraph has been interpreted. Disregarding the legal dress in which the arrangement was clothed, its substance is for the performance by Mr Suneson of the work of a car park attendant at one of the company's parking stations in the same way as the actual work would have been performed if he had been a worker in the industry protected by the award. Section 88F was described by Menzies J. in Brown v. Rezitis as "clearly intended to confer a comprehensive power upon the Commission... to put such a worker in no worse position than if he had been working under a contract of employment protected by award conditions". The union has an obvious interest in protecting the rights of its members from an erosion of their employment prospects by the employment of persons at less than award rates. The power of the Commission under the section was described by Jacobs J.A. in Ex parte V.G. Haulage Services Pty Limited as being derived from the concern of the legislature that the impinged agreement had a recognisable impact upon the conditions of employment and disclosed a purpose that by the adoption of the arrangement the industrial objectives of the legislation would be more or less defeated. The argument that it is not against the industrial system to conduct one's business in a way that reduces costs even if its gives a competitive advantage, is met by the observation of Sheldon J in Davies v. General Transport Development Pty Limited with which I respectfully agree, that the protection of the arbitration system which the section is designed to achieve includes protection against those who seek to avoid the regulation of wages and conditions of employment by award, by getting their work done for them in a way which gives them "a business advantage over competitors so bound". It has long been accepted that the prescription of minimum rates of pay not only protects employees from exploitation by unscrupulous employers, but also protects fair employers from inequitable competition from employers who pay less than just wages. Intervention upon this basis, in my view, in no way involves the Commission becoming and economic regulator.

[90]

145 In Smith v Botany Council (1998) 81 IR 97 Cahill VP observed at 107 that: [E]ven if the description in s.105(c) is found to apply to a contract in a particular case, and that, as a result, the contract is found to be unfair, it does not automatically follow that an order will be made declaring void or varying the contract. That is a matter for the discretion of the Court in the particular circumstances. Furthermore, in the event that such an order is made, it does not automatically follow that an order for payment of money will also be made. That too, is a matter for the discretion of the Court having regard to considerations of justice. (See in this regard Hodges v. Streets Ice Cream Pty Ltd ((1985) 11 IR 60) and Autobake Pty Ltd v. Budd ((1986) 19 IR 18)). 146 Based on the evidence in Smith v Botany Council (which included the applicant's "willingness, indeed the eagerness" to enter into the contract and his lack of complaint about its provisions over the whole period) his Honour declined to make orders sought by the applicant for the full amount claimed. Instead, his Honour took the following approach (at 108): While acknowledging that the applicant made no complaint about this situation, I have come to the conclusion, not without some hesitation, that the requirement of the contract under which the contractor, in what was basically a one-man contract for the performance of work, to work 52 weeks in the year and to be thus unable to have a holiday respite unless he paid another person to take his place, was unfair, and I hold accordingly. I therefore intend varying the contract from its commencement to provide that, at the end of each year of its duration, an amount equivalent to four times the weekly contract retainer then applicable should be paid by the council to the applicant. I also intend to make an order requiring the council to make payment of an amount calculated in accordance with the contract as so varied, together with interest at the appropriate rate calculated as from the date of commencement of the proceedings.

[91]

147 As the Court held in both Wilson Parking and Wheatley it is unfair and against the public interest for an employer to enter into a contract of employment which contains terms and conditions that are less advantageous to the employee than what is available under an applicable industrial award. Moreover, I note the reference to deterrence in the majority's decision in Hollis at [53]. That is to say, the majority considered it appropriate to regard the couriers as employees because fixing the employer with responsibility for the employee's wrongful act, even where the employer was not negligent, may have a deterrent effect. Section 105(b), (c) and (d) serve a deterrent purpose and it is strongly arguable their provisions should be given full force and effect in the making of any money orders. 148 Against these considerations, however, is that the applicant entered freely into the bargain with Fred Essey, not once but twice. He was aware of the difference between a sales representative employed by the first respondent and a commission agent who was not regarded as an employee and did not receive the benefits of an award. There was no misrepresentation of the position by the respondents and no inducement offered to the applicant to give up his own business and work for the respondents. The applicant continued in the role of commission agent for nine years without complaint. He now says the contracts were unfair and that he is entitled to the benefits of the Award. 149 On the other hand, however, as I earlier observed, the contract was a one sided agreement, with the first respondent achieving a significant benefit from the arrangement whilst the applicant worked for nearly nine years at significantly less than the relevant award rate of pay with no paid annual leave, no superannuation, no long service leave, no sick leave and no severance pay - benefits he would have received if he had been an employee performing work under the Commercial Travellers, &c., (State) Award. As I noted earlier, the applicant was left with less than what he started with. The applicant, nevertheless, must carry a level of responsibility for what occurred and the respondents cannot be required to shoulder the full burden of his claim. He did not strike me as an unintelligent person and he knew that the first respondent employed sales representatives performing much the same work as himself. Yet he accepted the arrangement with the first respondent without complaint and now claims the contract is unfair. Nevertheless, as Haylen J observed in James Stanley Moore t/as Hastings Couriers v TNT Australia Pty Ltd [2006] NSWIRComm 181 at [111], awareness of the nature of the contract is not a bar to granting relief (see A & M Thompson v Total Aust. Ltd 1980 2 NSWLR 1 at 13-14); nor has the foolish or unbusinesslike action of the applicant provided a reason to deny a remedy (see Williams v Calmex Products Pty Ltd [1971] AR (NSW) 264; Spicer v Clifford [1969] AR (NSW) 273). 150 On the basis the applicant was an employee, his legal representatives have calculated/claimed the following entitlements (plus interest): · Wages: $103,990.80 (This amount represents the difference between the applicant's gross earnings from the first respondent for the years 1995 to 2003 and the minimum annual remuneration under the Award, including the appropriate locomotion allowance calculated on the basis of 1,000 kilometres travelled per week). · Annual Leave (plus loading): $ 10,562.00 (gross) · Notice and severance pay (20 weeks): $ 10,274.00 (gross) · Long service leave (7.641 weeks): $ 3,925.20 (gross) · Superannuation: $ 13,826.00 151 Given the competing considerations in these proceedings, the exercise of discretion is not a simple matter. What I have decided though, in order to remedy the unfairness but having regard to the applicant's unquestioning acceptance of the two contracts offered to him, is that the applicant should receive compensation based on half of the difference between the applicant's gross earnings from the first respondent for the years 1995 to 2003 and the minimum annual remuneration under the Award, including the appropriate locomotion allowance (based on greater than two-litre engine capacity without air conditioning) calculated on the basis of 1,000 kilometres travelled per week. The amount of this difference has been calculated at approximately $104,000, plus interest. I propose to order that the respondents pay half of this amount plus interest to the applicant. Given the applicant's status as an independent contractor and his acceptance of that arrangement, I do not propose to provide any compensation in respect of annual leave, long service leave, payment in lieu of notice or severance pay.

[93]

(3) If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract. 153 The question is whether Mr Stewart worked under a contract that was wholly or principally for his labour. In Vabu Pty Ltd v Commissioner of Taxation ("the Taxation Decision") the New South Wales Court of Appeal held that bicycle couriers employed by the appellant were independent contractors. As I earlier pointed out, in Hollis that decision was found to be in error. However, in the Taxation Decision the Court of Appeal also considered whether the bicycle couriers, as independent contractors, worked under a contract that was wholly or principally for their labour pursuant to s 12(3) of the Superannuation Guarantee (Administration) Act. In relation to that statutory provision Meagher JA stated at 152: This statutory formula, or something very like it, has been used in many revenue statutes of the Commonwealth. As such it has attracted the attention of several courts: see Neale v Atlas Products (Victoria) Pty Ltd (1955) 94 CLR 419; World Book (Australia) Pty Ltd v Commissioner of Taxation (1992) 27 NSWLR 377. Those cases decide that the relevant question to be asked in the present case with respect to each courier is: is he working for himself or is he providing his labour in the service of another? In view of the fact that each courier provides his own capital and faces the loss of that capital if the venture does not work out, I am of the view that the courier is working for himself. 154 Sheller JA agreed with Meagher JA that the couriers were not employees. At 155 Sheller JA stated: For reasons that I gave in World Book (Australia) Pty Ltd v Commissioner of Taxation (at 385-386) I do not regard a person who enters into a contract to produce a given result and who is paid for that result, as working under a contract wholly or principally for the labour of that person. On the one hand the person employs himself or herself to produce the result, on the other the person is working in the service of the other contracting party. In the present case, as Meagher JA has said, the couriers supplied their own vehicles and bore the expense of maintaining and running them. In short they provided the resource and bore the cost, in large measure if not entirely, of delivering parcels and other items which the appellant had contracted with its clients to deliver. The couriers were paid a flag fall payment and, where they used vehicles, a running rate per kilometre for each contract of carriage undertaken. The contracts between the appellant and the couriers were neither wholly nor principally for the labour of the couriers. Each courier agreed to deliver the parcels and items that the appellant had contracted to deliver for the particular client, that is to say, to produce the result the appellant had contracted with that client to produce. Accordingly the courier was not an employee within the extended meaning of that term under s 12(3) of the Administration Act.

[94]

Beazley JA agreed with the reasons for judgment of both Meagher and Sheller JJA. 155 In Neale v Atlas Products the High Court (Dixon CJ, McTiernan, Webb, Kitto and Taylor JJ) held as follows at 425: The question then arises whether the particular provision that the defined term shall include payments made under a contract which is wholly or substantially for the labour of the person to whom the payments are made sufficiently widens the meaning of the term to embrace, at least in some circumstances, the remuneration of an independent contractor. In the argument addressed to this Court there may have been a suggestion that if in the case of any independent contractor it appeared that the parties contemplated that the contractual work would be substantially performed by the independent contractor himself, although the terms or conditions of the contract, whether express or implied, did not actually require it, the particular extension of the defined term would be sufficient justification for characterizing his remuneration as salary or wages for the purposes of s. 221C. This suggestion, however, is without validity, for if the contract leaves the contractor free to do the work himself or to employ other persons to carry it out the contractual remuneration when paid is not a payment made wholly or at all for the labour of the person to whom the payments are made. It is a payment made under a contract whereby the contractor has undertaken to produce a given result and it becomes payable when, and only when, the contractual conditions have been fulfilled. Moreover, the nature of the payment is not affected by the circumstance that the contractor has himself performed the bulk of the work under the contract or that it was the expectation of the parties that he would do so if, in truth, the contract did not create the relationship of master and servant. It may be, however, that in cases where an independent contractor is required by the terms of his contract to perform the contractual work himself the addition to the general definition may have some application, but it is unnecessary, in the circumstances of this case, to express any concluded view concerning contracts of such a special class. If this be so, however, it is the result rather of chance than design for the extension of the defined term was not, in our view, directed to considerations of the nature referred to. 156 It is clear in the present proceedings that the contractual remuneration payable to the applicant was a payment under the contract whereby Mr Stewart had undertaken to produce a given result, namely, the sale of the first respondent's products, and it became payable when, and only when, the contractual conditions had been fulfilled. It was not a payment made wholly or principally for the applicant's labour. 157 I conclude that as an independent contractor, Mr Stewart was not entitled to superannuation contributions from the first respondent.

[98]

Mitigation 162 Section 106(6) of the Act provides: In making an order under this section, the Commission must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. 163 Unlike most unfair contract cases, these proceedings were not primarily about the loss of employment or the loss of some other contract or arrangement but rather about the unfairness of the rate of remuneration during the period of the contracts. 164 In English v Aradlay Insurance Brokers Pty Ltd (2005) 145 IR 129 at [35], the Full Bench observed that the principles of mitigation of damages are relevant but not decisive as to what order should be made. In Brent v Bastian (2003) 124 IR 223 the Full Bench at [29] - [30] stated: The amendment embodied in s 106(6) makes it clear that the Commission in Court Session must take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. However, the statute does not specify what course the Commission is to take once it has taken into account any action to mitigate loss. That is left to the discretion of the Commission. That this so is clear on the face of s 106(6). But in any event, as a matter of statutory construction, it is evident that it was the Legislature's intention to retain the Commission's discretion as to the application of the mitigation principle. 30 Section 106(6) requires the Commission, in making orders under the section, to take into account whether or not the applicant (or person on behalf of whom the application is made) took any action to mitigate loss. One class of order that the Commission may make is a money order under s 106(5) provided the Commission considers the order "just in the circumstances of the case". We consider it follows that in making any money orders, what is just in the circumstances of the case will determine how the Commission is to exercise its discretion on a question involving mitigation. 165 It seems to me that the money I consider is owed to the applicant is in the nature of a debt and the principle of mitigation does not apply to debts: Westfield Holdings v Adams (2001) 114 IR 241 at [137]. I do not propose to discount any compensation ordered under s 106(5) for considerations relating to mitigation. Orders

[99]

166 The Court makes the following orders: (1) The contract entered into between the applicant, George Burns Stewart and the first respondent, All-Fect Distributors Limited in or about early 1994 and the contract entered into between the applicant and the first respondent in or about 1996 are declared to be unfair contracts on the following grounds, namely that the contracts: (a) were unfair, harsh and unconscionable; (b) were against the public interest; (c) provided a total remuneration that was less than a person performing the work would receive as an employee performing the work; (d) avoided the provisions of an industrial instrument, namely, the Commercial Travellers, &c., (State) Award. (2) The contracts are varied by inserting a provision to the following effect: All-Fect Distributors Limited is required to remunerate the George Burns Stewart at a rate commensurate with half of the Minimum Award Rate that would be payable to the applicant if he were a Local Employee under the provision of the Commercial Travellers, &c., (State) Award together with the locomotion allowance payable to a Local Employee in respect of a motor vehicle up to and including 2,000 cc during the life of the contracts. (3) The respondents shall pay to George Burns Stewart an amount of $52,000 on the basis that first respondent shall pay one-half, the second respondent shall pay one-quarter and the fourth and fifth respondents shall jointly and severally pay one-quarter. In the absence of any agreement as to the calculation of this amount the parties, or any of them, have liberty to have the matter re-listed before the Court. (4) The respondents shall pay interest on the amount specified in Order (3) hereof in accordance with Schedule 5 of the Uniform Civil Procedure Rules 2005. The interest shall be payable from the date of filing of the original summons for relief to the date of this judgment. (5) The respondents shall pay the applicant's costs of the proceedings in an amount as agreed or assessed. If the parties are unable to agree, they have liberty to approach. ___________________________

George Stewart v All-Fect Distributors Limited and others

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Judgment (100 paragraphs)

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Legislation Cited (1)

Cases Cited (32)

Cited By (6)