Homecare Direct Shopping Pty Ltd & Anor v Gray; State of Victoria v Gray [2008] VSCA 111

Court of Appeal (Vic)|2008-06-19|Before: NEAVE and KELLAM JJA and FORREST AJA

ACCIDENT COMPENSATION - CONTRACT - Appeal - Accident Compensation Act 1985 - Contract of service - Agency - Implied agency - Triangular employment contract - True nature of parties' relationship - Appeal dismissed.

ACCIDENT COMPENSATION - Application for leave to appeal - Contract of service - Whether compliance with s 134AB - Application refused.

1 For the reasons given by Forrest AJA, I would dismiss the appeal by Homecare Direct Shopping Pty Ltd and CGU Workers Compensation (Vic) Ltd, and the application for leave to appeal by the State of Victoria.

2 I have had the benefit of reading the draft judgment of Forrest AJA. For the reasons expressed by him I agree that the trial judge was not in error in concluding that there was a contract in existence between the respondent and Homecare, with the result that under s 8 of the Accident Compensation Act 1985 the respondent was deemed to be a worker and Homecare was deemed to be her employer. It follows that I agree that the appeal by Homecare should be dismissed.

3 Furthermore and for the reasons stated by Forrest AJA the application for leave to appeal by the State of Victoria should be refused.

4 In June of 2000, the respondent, Judy Gray, fell and sustained a nasty injury to her right knee whilst visiting a house at Mooroolbark. At the time that she sustained the injury, she was engaged in selling products on behalf of the first Appellant, Homecare Direct Shopping Pty Ltd ('Homecare').

5 The respondent issued proceedings in 2005 in the County Court seeking payment of compensation under the Accident Compensation Act 1985 ('the Act') asserting that she was a worker and that Homecare was her employer ('the Workcover proceeding'). At the hearing of preliminary issues in January 2006, the County Court judge was required to determine whether the respondent was a worker within the meaning of the Act and whether Homecare was, by virtue of

either the general law or the provisions of the Act, to be regarded as her employer.

6 A related issue also had to be determined at the hearing. It turned upon the application of the serious injury provisions of the Act to the respondent's injuries. The respondent had, in 2002, issued common law proceedings ('the common law proceeding') against the owner of the premises, the State of Victoria ('the State') and the lessee (a Roslyn Dahlman). In its defence to that proceeding, the State asserted that the respondent was a worker under the Act and therefore was obliged to comply with the provisions of s 134AB of the Act prior to instituting proceedings. It was common ground that she had not done so, and the State sought dismissal or a stay of the common law claim.

7 The County Court judge, after a three day hearing in the Workcover proceeding, concluded that a contract existed between the respondent and Homecare. Accordingly the respondent was a worker within the meaning of s 8 of the Act and Homecare was found to be the deemed employer. Declarations were made consistent with those findings. Her Honour also concluded that the respondent was engaged by Homecare under a contract of service - albeit that later in her reasons she qualified such a conclusion 'tentatively'. The declaration of her Honour, however, only identifies findings consistent with her conclusion that s 8 of the Act applied.

8 Homecare appeals against her Honour's finding that there was a contract between it and the respondent. The State seeks leave to appeal against a subsequent determination by her Honour not to dismiss the respondent's claim against it.

9 The point of Homecare's appeal is narrow; as the trial judge noted:

The parties before the Court do not dispute that Mrs Gray was working under some kind of contract with someone. It is common ground that Mrs Gray delivered Homecare catalogues and Homecare products to customers in their homes and collected money which was transmitted back to Homecare. The only issue is whether this contract was with Mr De Groot or Homecare.[1]

10 The grounds of appeal relate solely to the judge's finding that there was a contract between Homecare and Gray. Homecare does not dispute that it was open to her Honour to conclude that if there was such a contract then it fell within s 8 of the Act and that therefore Gray was a deemed worker and the deemed employer was Homecare.

11 The respondent relies upon a notice of contention. She asserts that the findings of the trial judge should lead to a conclusion that the respondent was working under a contract of service with Homecare and, therefore, regardless of s 8 is a worker within the meaning of the Act. This notice is unnecessary. The real issue is the existence of a contract, not its characterisation. The argument below and before us turned solely on the existence of a contract between Homecare and the respondent - it being accepted that if there was such a contract, the respondent inevitably would be found to be a worker, whether pursuant to a contract of service or under s 8 of the Act[2] which required the respondent to establish a contract to perform any work on behalf of Homecare.

12 This appeal, brought pursuant to s 52 of the Act, is confined to a 'question of law' and to succeed the appellants must show legal error on the part of the judge. As will be seen, her Honour's finding that there was a contractual relationship between Homecare and the respondent turned upon two discrete interpretations of their relationship. One was that the area manager De Groot acted as agent for Homecare in entering into an agreement with the respondent. Alternatively, her Honour appears to have concluded that there was an implied contract between Homecare and the respondent. Determining whether there was such a contractual relationship involved considerations of mixed fact and law.

13 In Green v Victorian WorkCover Authority,[3] the Court of Appeal was required to consider whether a contract of service between a worker and a putative employer existed. Tadgell JA said of the application of s 52 of the Act:

Upon my interpretation of s.52(1) the appeal cannot raise the question whether the conclusion was against the evidence and the weight of the evidence. In order to succeed the appellant must demonstrate that there was no basis on which the Chief Judge could reach the conclusion he did: Putting it another way, the only question is whether the Chief Judge was bound, as a matter of law, to conclude that the appellant was a worker - i.e. that he was employed by the Wilsons under a contract of service. (My emphasis, citations omitted.)

It is not, therefore, the task of this Court to determine whether on the facts established it would have reached the same conclusion as her Honour. Rather the question is whether her Honour was bound to conclude that a contract did not exist between Homecare and the respondent.

The State's Application for Leave to Appeal: The Issue

14 The State, understandably, does not contest her Honour's finding that the respondent was a worker. However, it seeks leave to appeal a further ruling of her Honour on 15 December 2006 on the basis that her Honour, having concluded the respondent was a worker, should then have stayed or dismissed her claim as she necessarily had not complied with s 134AB of the Act - which her Honour declined to do.

15 In late 1999 the respondent met with De Groot to 'work for Homecare'. De Groot was the responsible area manager for Homecare. He had in March 1997 entered into an area manager agreement ('the area manager agreement') with Homecare.

16 The relevant parts of the Area Management Agreement read as follows:

The terms and conditions hereunder form the agreement between HomeCARE Direct Shopping Pty Ltd (hereafter called "the Company") and you, whose details appear below:

Area Manager's full name: Wilhelmus Cornelius (Wim) and Ela de Groot

a. The Company is engaged in the business of direct selling through catalogues, marketing a range of products.

b. The Area Manager has applied to the Company for appointment as an independent Agent to act on behalf of the Company for the purpose of soliciting sales for the Company's product.

c. The Company has agreed to appoint the Area Manager as an independent Agent subject to the following terms and conditions.

(1) The Area Manager is hereby appointed as the sole Independent Agent within the Area described above to buy products from the Company and resell those products on the following terms. ...

(4) The Area Manager may sell the products personally, or resell to any contracted Independent Sub Agents (Distributors) he/she may appoint, who may resell the products to customers. For administrative purposes it is a requirement that a Distributor Agreement be forwarded to the Company before such time as any products can be delivered in the name of the Distributor. The Area Manager shall have the right to appoint Independent Sub Agent (Distributors) with the written consent of the Company upon such terms as the Company in its discretion may require. ...

(7) The Company may, from time to time, offer incentives, bonuses, prizes or other performance related inducements to Area Managers. These are not intended to be fundamental to the nature of this Agreement, nor to be considered an integral part of an Area Manager's potential profit. These will be offered solely at the discretion of the Company. The Area Manager agrees to abide by any decision made by the Company or its representatives in the resolution of any dispute over these prizes, incentives, bonuses or other performance related inducements. ...

(13) The Area Manager has no authority to make any claims whatsoever about any of the Company's products, other than those claims contained in the current HomeCARE catalogue.

(14) The Area Manager must bear the costs and expenses of running his/her own business and is responsible for keeping his/her own business records and for discharging his/her own tax obligations and maintaining adequate insurance coverage.

(15) The Company and the Area Manager expressly agree that it is intended that this agreement shall create the relationship of principal and agent between them and they acknowledge that it is not their intention to create any other relationship. In particular, this Agreement is not intended to create the relationship of employer and employee or the relationship of partners or joint venturers.

(18) The Area Manager may terminate this Agreement at any time by 14 days prior written notice to the Company at its Head Office. The Area Manager shall not be required to ascribe any reason for termination.

(22) The Area Manager acknowledges that this Agreement contains the whole agreement between the parties and he/she has not relied upon any oral or written representations made to him/her by the Company or its employees or agents and has made his/her own independent investigations into all matters relevant to the independent agency business ...

17 Having been introduced to De Groot in 1999, the respondent was placed on a trial period for a short period selling Home Products. On 28 March 2000 the respondent entered into a distributor agreement with De Groot ('the distributor agreement'). The respondent was appointed as 'an independent distributor' for Homecare.

18 The relevant parts of the Distributor Agreement read as follows:

This is an agreement between the HomeCARE Area Manager and you whose details appear below.

a. The Area Manager is engaged in the business of direct selling through catalogues marketing a range of products as a duly authorised Area Manager of HomeCARE Direct Shopping Pty Limited (herein after called HomeCARE).

b. The Distributor has applied to the Area Manager of Lilydale (designated area) for appointment as an independent Sub Agent/Distributor to act on behalf of the Area Manager for the purpose of soliciting sales of HomeCARE products within the Territory described above.

c. The Area Manager has agreed to appoint the Distributor as an independent Sub Agent/Distributor subject to the following terms and conditions.

1. The Area Manager hereby appoints you as an Independent Distributor. You are a Sub Agent to the Area Manager for the purpose of soliciting sales orders for HomeCARE products on the Area Manager's behalf which are then subject to acceptance by HomeCARE.

2. For administrative and organizational purposes, you will be allocated the Territory described above within which to conduct your business. This will be assigned to you by your Area Manager and may be altered from time to time. However, you are free to solicit sales from friends and relatives outside of this area.

3. You will pay COD on products received unless otherwise allowed by the Area Manager. If credit for products received is extended, then a term no longer than 7 days after receipt of products shall be provided.

4. You are entitled to receive a commission on acceptable orders that are not cancelled and which have been delivered and paid for. This commission will be as specified in the Commission Schedule furnished by the Area Manager from time to time and which shall be capable of variation.

5. You have no authority to represent HomeCARE in any way other than to obtain acceptable orders of its products on behalf of the Area Manager.

6. You have no authority to make any claims whatsoever about any HomeCARE product other than those claims contained in the current HomeCARE catalogue.

7. You shall not without the previous consent in writing of the Area Manager, be concerned or interested either directly or indirectly in the supply of any goods or products which are similar to or competitive with HomeCARE's products and shall not sell any of HomeCARE's products to any person in your Territory, knowing or having reason to believe that they would be resold outside your Territory.

8. You are not an employee of the Area Manager and nothing herein shall imply otherwise. Notwithstanding the above, the Area Manager will require minimum standards of performance in the activities of procuring orders. These performance standards will be as determined by the Area Manager from time to time.

9. The Area Manager shall support the Distributor in his/her efforts to promote his/her independent Sub Agency business and the sale of HomeCARE's products by providing to the Distributor:

b) stationery as required by his/her business needs

c) a convenient point from which to collect HomeCARE's products

10. You must bear costs and expenses of running your own business and are responsible for keeping your own business records and for discharging your own tax obligations and maintaining adequate insurance coverage.

11. You shall have the right to return to the Area Manager any product that is not of merchantable quality or returned on behalf of a customer in accordance with such customers right of return. You shall receive a refund credited to your account provided that the return of the product to the Area Manager is made within a period of 14 days from the date of return of the product to you.

12. You may terminate this Agreement at any time by written notice to the Area Manager in which case you will return to the Area Manager any HomeCARE property then in your possession. In addition all outstanding debts owed to the Area Manager must be paid in full immediately.

13. The Area Manager may terminate this Agreement by notice in writing to you (and if such notice is sent by post it shall be effective three days after the date of posting to the (sic) your address herein appearing), in the event that:

a) you are declared bankrupt or enter into any scheme of arrangement, or make any assignment for the benefit of your creditors

d) you engage in any conduct or activity prejudicial to the independent agency business, the sale of HomeCARE's products, the reputation or goodwill of HomeCARE or HomeCARE's best interests or which would be likely to bring HomeCARE into disrepute.

e) you commit a breach of any term of this Agreement

f) your minimum performance as in clause 8 is not achieved

g) the Area Manager decides to give and gives to you not less than 3 days written notice without the necessity for the Area Manager to ascribe any reason for such termination.

14. This agreement is subject to the laws of Victoria.

19 It is a reasonable inference that both the standard form Area Manager Agreement and the standard form Distributor Agreement were prepared by Homecare. Homecare also produced a document known as a Homecare Distributor Manual. It discloses the method by which the Homecare business operates. The respondent could not say whether she had or had not received it.

20 The catalogues contained a range of Homecare products. The essence of the Homecare business was the delivery of the catalogues to customers by the distributors and then collection of the orders by the distributors from the clients who, upon receipt of the goods, would then pay the distributor. It is necessary to set that process out in more detail.

21 The Area Manager would initially provide Distributors with induction and training and advise them as to the particular designated areas in which they were to operate.

22 Homecare catalogues would be delivered by a Distributor to residents within the Distributor's designated area. The Distributor would then identify the houses to which catalogues had been dropped on a Homecare distributor call sheet. Subsequently the distributor's task was to collect the catalogues and, hopefully, any orders. This was carried out using Homecare branded documents either in the form of a 'delivery envelope' or a 'Sorry I Missed You' slip. The delivery envelope makes no reference to the area manager; it acknowledges the order and identifies a date upon which the goods will be delivered by the distributor with the note 'We bring the store to your door'. The customer order-receipt is also a Homecare document provided to the customer which identifies the documents purchased, the distributor details and a Homecare guarantee in respect of the quality of the items. There is no mention of the area manager.

23 Once orders had been received by the distributor, a distributor order form and a summary of orders (both Homecare documents) were completed, provided to the area manager and then forwarded by the manager to Homecare. Approximately one week later, Homecare would arrange delivery of the goods the subject of the orders to the Area Manager's house - in this case to De Groot's home at Wandin. The goods would be accompanied by a tax invoice from Homecare to the Distributor invoicing the delivered goods.

24 The Area Manager would then place the Homecare goods the subject of the order into a box, which would be collected by the Distributor. The Distributor would then allocate the goods into separate bags for the purchasers, and then effect delivery to the purchasers. Payment would usually be made to the Distributor by the purchaser at the recommended retail price, such price having been set out in the catalogue and described in the order form. In the respondent's case this was the standard practice.

25 If payment was made by the customer in cash it would be forwarded to the area manager with the appropriate deduction made by the Distributor for the commission. If it was paid by cheque, the cheque would be made out to Homecare and given to the area manager. If it was by credit card, the payment would be made to Homecare's credit card account using a Homecare credit card facility. The amount forwarded to the Area Manager was the recommended retail price which had been received from the purchaser less 20% being the commission retained by the Distributor. The Area Manager would, in turn, forward payment to Homecare less a further 10% of the recommended retail price, retained by the Area Manager as his or her commission.

26 All the respondent's dealings concerning Homecare products were solely with De Groot. Once the respondent was appointed as a distributor she was supplied with catalogues and order forms by De Groot.

27 The respondent gave evidence that as far as she was concerned she was working for Homecare and that De Groot was her supervisor and area manager. The respondent did not work for any other organisation during the time she carried out sales of Homecare products. Approximately once a week the respondent attended De Groot's home to pick up goods which had been ordered. She also attended meetings arranged by De Groot with other distributors.

28 The respondent was provided with both Homecare documentation and apparel identifying her as a Homecare distributor. She was given a white T-shirt with Homecare written on it and had a badge which she wore when carrying out activities on behalf of Homecare. Whilst the use of either was not compulsory she usually wore the badge and at times wore the T-shirt.

29 Although the respondent's commission was calculated by Homecare which was sent to her as a 'distributor tax invoice' invariably she retained her commission out of the cash paid by the customers regardless of the method of payment.

30 No income tax was deducted from the respondent's earnings and no Group Certificate provided at the end of the financial year. The respondent bore any expenses associated with her work such as stationery and travel. No holiday pay, sick leave or maternity leave was paid to the respondent.

31 The respondent asserted that on 15 June 2000 she suffered an injury to her knee whilst delivering an order to a customer, that is, providing the goods which had been ordered by the customer. She slipped and fell on the step at the premises at 31 Miora Crescent, Mooroolbark. She had with her items supplied by Homecare which were being delivered to the customer.

32 Based upon these facts the respondent asserts that her injury occurred when she, as a worker within the meaning of the Act, was injured in the course of her employment with Homecare and sustained 'compensable injury'. It is convenient to now refer to the relevant provisions of the Act.

33 Section 5 of the Act describes worker as follows:

(a) a person (including a domestic servant or an outworker) who has entered into or works under a contract of service or apprenticeship or otherwise with an employer whether by way of manual labour, clerical work or otherwise and whether the contract is express or implied, is oral or is in writing;

(b) a person who under this Act is deemed to be working under a contract of service;

34 Section 8 of the Act deems a person to be working under a contract of service in the following way:

(1) Notwithstanding anything in this Act or any other law, where any person (in this section referred to as 'the principal') in the course of and for the purposes of a trade or business carried on by the person enters into a contract with any natural person or natural persons (in this section referred to as 'the contractor') -

(a) under or by which the contractor agrees to perform any work not being work incidental to a trade or business regularly carried on by the contractor in the name of the contractor or under a firm or business name; and

(b) in the performance of which the contractor does not either sublet the contract or employ workers or although employing workers actually performs some part of the work personally-

then for the purposes of this Act the contractor shall be deemed to be working under a contract of service with an employer and the principal shall be deemed to be that employer and the amount payable by the principal to the contractor in respect of the performance of work under the first-mentioned contract shall be deemed to be remuneration and shall be deemed to include any payment that would be a superannuation benefit if made in relation to a person in the capacity of an employee. (Emphasis added.)

35 Section 82 of the Act provides that a worker is entitled to compensation under the Act if the injury occurs, inter alia, in the course of employment with the employer.

36 Section 134AB of the Act requires a worker to establish that he or she has a 'serious injury' under the meaning of the Act (and to comply with a raft of conditions imposed by the Act) before a claim for damages can be made. Section 134AB(1) stipulates that a worker:

who is entitled to compensation in respect of an injury arising out of or in the course of, or due to the nature of, employment on or after 20 October 1999

may bring proceedings provided there is compliance with the extensive provisions of the section relating to serious injury and pre-trial dispute resolution.

The trial and the findings of the trial judge

37 Viva voce evidence was adduced from three witnesses, namely, the respondent, De Groot and the finance manager for Homecare, Jennifer Lawrence.

38 The trial judge inferentially accepted the evidence given by the respondent save for one relatively minor issue.[4] She preferred the evidence of De Groot to the effect that the catalogues did not have to be purchased by distributors; catalogues and other Homecare stationery were provided to distributors without charge.

39 The trial judge concluded that there was a contract between the respondent and Homecare. Her Honour's analysis of the matters which founded her ultimate finding as to the existence of a contract is not entirely clear. In her reasons the concepts of agency and implied contract seem to be conflated. However, it can be deduced that her Honour reached her conclusion by these two routes, namely:

(a) that the respondent in entering into the distributor agreement contracted with Homecare through its agent De Groot - the distributor agreement was, notwithstanding the nominated parties, an agreement between Homecare and the respondent; and/or;

(b) that when the totality of the conduct (including the terms of the area manager agreement and the distributor agreement) of the parties was analysed, an implied contract existed between Homecare and the respondent.

This analysis of her Honour's reasons was accepted by the parties on the appeal.

40 In respect of the agency agreement her Honour said[5]:

It is obvious from the document that it is Homecare that has prepared it and that the obligations imposed upon the Distributor can be enforced by Homecare. Homecare is a corporation, that is, an artificial legal entity only able to act via servants and agents. The objective bystander reading this document is likely to conclude, in my view, that Mrs Gray is entering an arrangement with Homecare. The Area Manager is the agent for Homecare. The unnamed Area Manager is not contracting as principal but as a representative for the corporation. (My emphasis.)

In respect of the contract, her Honour said:[6]

To adopt the principles enunciated by Blackburn J and Pollock CB, if Homecare so conducts itself or by a course of conduct or by actual expressions causes another to reasonably infer that she is entering into a contract with Homecare, then Homecare is bound by that contract and may not gainsay the reasonable inference to be drawn from its documents and conduct regardless of what its real or secret intentions were.

Her Honour concluded that the respondent was working under a contract of service being, as she said, particularly influenced by the decision of the High Court in Hollis v Vabu Pty Ltd.[7] Her Honour did, however, express the view that the exercise was not easy and was conscious that reasonable minds might differ.[8]

41 Her Honour then turned to s 8 of the Act and applied it to the facts of the case, concluding that the respondent had entered into a contract with Homecare to perform work; therefore she was a deemed worker under the Act and Homecare was her deemed employer. Her Honour made a declaration in the following form:

(a) On 28 March 2000 Judy Gray entered into a contract with Homecare Direct Shopping Pty Ltd via its agent, W.C. De Groot and

(b) under such contract and pursuant to s 8 of the Accident Compensation Act Judy Gray is deemed to be a "worker" working under a contract of service with Homecare Direct Shopping Pty Ltd which is deemed to be her employer.

Was there a contract between Homecare and the respondent?

42 First, was it open to her Honour to conclude that De Groot was acting as agent for Homecare when he entered into the distributor agreement with the respondent. If this is answered affirmatively, then such a contract patently relates to the performance of work on behalf of Homecare and resolves the question of a relevant contractual relationship between Homecare and the respondent. The second inquiry (which may be superfluous if the first question is answered affirmatively) is to determine whether there was an implied contract between Homecare and the respondent for the performance of work by the respondent on Homecare's behalf.

The distributor agreement: Was De Groot acting as agent for Homecare?

43 The role of Homecare was pivotal to the relationship between the area manager and the distributor. An undisputed relationship of principal and agent existed between Homecare and the respondent.[9] Homecare's case was that the arrangement between the parties was one of principal, agent and sub-agent. The argument before this court relates not to the existence of the relationship of principal and agent but, rather, to the scope of De Groot's authority as an agent of Homecare. The issue, I think, can be distilled to the following question: Did De Groot have implied authority from Homecare to enter into the distributor agreement on its behalf?

44 In Scott v Davis[10] Gummow J said of the relationship between principal and agent:

The term 'agency' is best used, in the words of the joint judgment of this Court in International Harvester Co of Australia Pty Ltd v Carrigan's Hazeldene Pastoral Co,[11] 'to connote an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties'.

Usually the legal relations so created will be contractual in nature. In all these cases, the principal's liability will not be vicarious. The resultant contract is formed directly between the principal and the third party and there is no contract between the agent and the third party which is attributed to the principal.

45 In most circumstances the extent of the actual authority will be express, either in written or oral form. To an extent this case provides such an example - here there was a written agreement between the principal and the agent providing express authority for certain acts to be carried out by the agent: the soliciting of sales and buying and re-selling Homecare products. However, as the cases demonstrate, there are situations in which the agent's authority may be wider than that which is set out expressly; a court is entitled to have regard to all the circumstances of the case and the conduct of the parties to determine whether the actual scope of the agent's authority is, in fact, wider than the express provisions.[12]

46 In Morley v Statewide Tobacco Services Ltd, Ormiston J, after an illuminating analysis of the principles relating to the implied authority of an agent, said as follows:[13]:

It is, however, important to realise the breadth of the concept of implied actual authority. This can best be seen from the brief summary appearing in Bowstead, Law of Agency, 15th ed, p.93: 'The most obvious cases of implied authority arise in the forms of incidental authority (implied authority to do whatever is necessarily or normally incidental to the activity expressly authorised), usual authority (implied authority to do whatever an agent of the type concerned would usually have authority to do) and customary authority (implied authority to act in accordance with such applicable business customs as are reasonable); there is a further general category of implied authority arising from the course of dealing between the parties and the circumstances of the case'[14]. (Emphasis added.)

47 Subsequently, in Cousens v Grayridge Pty Ltd,[15] this court considered the decisions of the English Court of Appeal in Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd[16] and Hely-Hutchinson v Brayhead Ltd[17] and concluded as follows:

Freeman & Lockyer and Hely-Hutchinson are both cited by Bowstead on Agency for the proposition that every agent has such authority as is to be inferred from the conduct of the parties and the circumstances of the case.

48 In South Sydney District Rugby League Football Club Ltd v News Limited[18] Finn J expounded a number of propositions relevant to determining the existence of a principal/agent relationship. With appropriate adaptations I respectfully adopt these considerations in the context of determining the scope of an agent's actual authority:

(a) The question of the scope of the authority of an agent, beyond what is the subject of written or oral authority, is to be implied from all the surrounding circumstances; whilst a written agreement may be indicative of the intentions of the parties, it cannot of itself be conclusive.

(b) In this context (as opposed to determining whether an agent had ostensible authority) the focus in determining the implied authority of an agent is upon the agent's relationship with the principal. The position of third parties is only relevant to the analysis of the overall conduct of the principal and agent. In determining what is the actual authority of the agent, the belief or views of a third party is irrelevant.

(c) It is legitimate for parties to limit the extent of the authority given to an agent in express terms. But whether or not they are successful in achieving that end does not depend upon whether, by use of an express provision within their agreement, they attribute or deny to their relationship a particular limitation.

(d) The parties cannot by 'labelling', no matter how genuinely intentioned, either confer a particular legal character on a relationship that it does not possess or deny it a character that it does possess. 'Labels' are not a substitute for legal analysis of the evidence.

(e) Save where an express 'labelling' provision is shown to be a sham, a provision limiting the authority of an agent (as a manifestation of the parties' intent) must be given its proper weight in relation to the rest of the agreement and such other relevant circumstances as evidence the true character of their relationship. This may lead to it being disregarded entirely or to it being given full force and effect.

49 The appellants contended (both on this argument and on that pertaining to implied contract) that it was inappropriate to look beyond the express terms of both agreements. They relied upon what was said by the Full Court in Commissioner of Payroll Tax v Mary Kay Cosmetics Pty Ltd. The case involved a determination of whether 'beauty consultants' were engaged by a cosmetics company under a contract of service and were therefore to be regarded as its employees. A specific provision within the contractual arrangement between the beauty consultant and the company stipulated that the relationship was that of principal and independent contractor. At first instance, the determination of whether the contract was one of services was determined by the trial judge after an analysis not limited to an analysis of the agreement between the beauty consultants and the cosmetics company; it also involved an examination of the conduct of the parties:

The learned judge, after thorough review of the evidence, concluded that the beauty consultants, including the sales directors, enjoyed a degree of independence which was inconsistent with a contract of service. He further concluded that although the beauty consultants were vital to the respondent's business, they remained merely accessory to it.[19]

Ultimately, the Full Court concluded that the circumstances surrounding the arrangements with the beauty consultants did not -

provide any impulse to look behind the status assigned to a beauty consultant in the agency agreement.[20]

The court also considered that the agreement was the best evidence of the relationship between the parties. On the other hand, it also noted with apparent approval Lord Denning's remarks in Massey v Crown Life Insurance Co that:

The parties cannot alter the truth of that relationship by putting a different label upon it.[21]

50 Mary Kay Cosmetics Pty Ltd does not stand for the proposition that one cannot look beyond the contract in question to ascertain the true nature of the arrangement. At best it is authority for the proposition that one should be careful before looking behind the express terms of the agreement, particularly where there is ambiguity. However, as both the trial judge and the Full Court made clear, the agreement needed to be considered in the light of the other written material (in that case a manual) and the conduct of the parties. In my view, nothing which was said in Mary Kay Cosmetics Pty Ltd precludes an analysis based on the conduct of the parties as well as all the relevant written material in determining the scope of the principal and agent relationship between Homecare and De Groot.

51 It is appropriate now to consider the circumstances of the case and the conduct of the parties.

52 The area manager agreement stipulated that the agreement created the relationship of principal and agent and purported to exclude any other form of legal relationship. It also purported to establish that De Groot was an agent of Homecare solely for the purposes of soliciting sales and buying and re-selling Homecare products and no more. As I have said on the hearing of the appeal, counsel for Homecare contended that the scope of the relationship of principal and agent did not go beyond the express terms of the agreement, ie that of the sale of products to the distributors and did not extend to Homecare authorising De Groot to enter into the distributor agreement with the respondent on its behalf.

53 There are three matters which flow from the area manager agreement:

(a) First, as already noted, it establishes a relationship of principal and agent between Homecare and De Groot.

(b) Second, clause 4 demonstrates that Homecare had in contemplation the selling of its products by distributors recruited by the area manager.

(c) Third, in my view importantly, by clause 4 it provides nominally 'for administrative purposes' that a distributor agreement not only must be forwarded to Homecare before products can be delivered in the name of the distributor, but the area manager's right to appoint a distributor is conditional upon 'the written consent of the company upon such terms as the company in its discretion may require'.

(d) Fourth, as a matter of fact the agent's primary function identified in the agreement of buying and re-selling Homecare products simply did not take place; rather the goods were delivered by Homecare and funds forwarded from the distributor with commission being deducted by the distributor and the area manager.

54 Turning now to the distributor agreement which, on its face, establishes that the contracting parties are De Groot and the respondent, and inferentially excludes Homecare as a party to that agreement. It purports to be based on a series of separate relationships of principal (Homecare), agent (De Groot) and sub-agent (the respondent). However, there are certain aspects of this agreement which need to be considered:

(a) The document itself is a Homecare document prepared by it.

(b) The agreement is said to be between a 'Homecare area manager', not De Groot, and the respondent. De Groot is described as a 'duly authorised area manager', of Homecare.

(d) The agreement is specifically for the purpose of soliciting sales orders for Homecare products within a particular area and does not permit sales orders in any other area other than if sold to friends and relatives. The area allocated, the evidence disclosed, was an area within which other Homecare distributors did not operate.

(e) The distributor is prevented from selling Homecare products to any other person within his or her territory if it was believed such products were to be resold outside the territory.

(f) The agreement precluded the distributor selling products other than Homecare products.

(g) The area manager, within his express authority as an agent for Homecare, was responsible for management of many of the commercial activities of the distributor eg distribution of Homecare products, allocating areas, training sessions - all for the benefit of Homecare and its sales.

(h) The commission to the respondent was not payable by De Groot but by Homecare.

(i) The distributor was given authority on behalf of Homecare to represent it in obtaining acceptable orders of its products on behalf of the area manager.

55 In my view analysis of both agreements demonstrates that, despite the purported parties being the area manager and the distributor, the provisions of the distributor agreement relate primarily to furthering Homecare's interests and have little, if anything, to do with the interests of the particular area manager. Homecare, not De Groot, determined where the distributor worked and what she earned. It was Homecare's goods which were provided to her. Homecare determined whether she could or could not be a Homecare distributor selling Homecare goods. It, not De Groot or any other Homecare manager, determined the terms of the relationship using a standard form Homecare document. Homecare provided the material detailing the distribution and sale of Homecare products. In my view, there is nothing in the area management agreement when viewed in context which demonstrates that De Groot, acting independently, is the true contracting party with the respondent; nor do the terms of the distributor agreement and its application support that suggestion.

56 The conduct of the parties in the sale of Homecare products also points to Homecare contracting through its agent De Groot with the respondent:

(a) Homecare supplied all the products, via De Groot, to the respondent.

(b) Homecare received payment for the products via De Groot from the respondent.

(c) Neither De Groot nor the respondent purchased the goods from Homecare and then on-sold them. They were only supplied by Homecare once an order had been received.

(d) Homecare fixed the amounts of commission recoverable by the respondent and De Groot.

(e) All the products were described as Homecare products.

(f) Homecare controlled the mode of distribution of the products once purchased.

(g) The respondent was known and required by Homecare to be known as a Homecare Distributor and worked solely in the area (Mooroolbark) stipulated.

(h) The respondent was required to provide the customers with Homecare catalogues.

(i) The customers placed orders for Homecare products detailed in Homecare catalogues with the respondent.

(j) Homecare, via De Groot, provided the respondent with a means of utilising credit card transactions with payment being made to Homecare.

(k) The respondent was provided with Homecare apparel and badges.

57 In determining the scope of De Groot's authority, the substance of the arrangement with Homecare and the respondent is paramount, particularly when the form, I think, is directed to subverting or deflecting the true nature of the relationship. In the circumstances that existed, the description of De Groot as the contracting party, rather than contracting as agent for Homecare, does not and cannot resolve the matter.

58 The 'labelling' throughout the distributor agreement portraying the role of the distributor as a sub-agent to the area manager demonstrates a distortion of the true picture. When the area manager agreement is looked at as a whole, and particularly in the light of the distributor agreement and the surrounding facts, the relationship is, in truth, one between Homecare and the distributor, with the area manager acting as Homecare's agent. Notwithstanding the wording of the two agreements it was, as I have endeavoured to set out, open to the trial judge to conclude that De Groot was acting on behalf of Homecare when he entered into the distributor agreement. It was, accordingly, open to her Honour to conclude that the distributor agreement was between Homecare and the respondent and, at the least, related to the respondent's performance of work on behalf of Homecare. For the purpose of this appeal characterisation of the contract is not necessary. Whether the contract was 'for services' or 'for the performance of work' does not matter, as the parties accepted that the existence of either form of contract meant that the respondent was a worker within the meaning of the Act.

59 This conclusion means that the appeal must fail.

An Implied Contract between Homecare and the Respondent?

60 It is not strictly necessary to deal with this issue, however given the argument before us and her Honour's findings, I hope it may assist the parties if I set out my conclusions on this topic.

61 No express agreement existed between Homecare and the respondent; rather the question is whether any contract can be inferred or implied from their conduct and, if so, what is the nature of that contract - in the context of the two written agreements.

62 Whether a contract exists between two parties is a question of fact which has to be determined within the appropriate legal framework. In the present case there was neither a written nor an oral agreement between Homecare and the respondent. The general law, and in this case a statutory provision directly applicable to the respondent's claim, s 5 of the Act, recognises that a contract may be implied between parties.

63 All contracts, express or implied, require an intention to create legal relations. Absent such an intention a contract at law cannot exist. In Ermogenous v Greek Orthodox Community of SA Inc[22] the High Court said:

Because the inquiry about this last aspect may take account of the subject matter of the agreement, the status of the parties to it, their relationship to one another, and other surrounding circumstances, not only is there obvious difficulty in formulating rules intended to prescribe the kinds of cases in which an intention to create contractual relations should, or should not, be found to exist, it would be wrong to do so. Because the search for the "intention to create contractual relations" requires an objective assessment of the state of affairs between the parties (as distinct from the identification of any uncommunicated subjective reservation or intention that either may harbour) the circumstances which might properly be taken into account in deciding whether there was the relevant intention are so varied as to preclude the formation of any prescriptive rules. Although the word "intention" is used in this context, it is used in the same sense as it is used in other contractual contexts. It describes what it is that would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened. It is not a search for the uncommunicated subjective motives or intentions of the parties. (My emphasis.)

64 The law has recognised for centuries that the objective assessment of the conduct of the parties may lead a Court to infer that the parties intended to create a contractual relationship. For instance, in Young v Moller, a bill of lading case, Baron Parke said:

No doubt where a cargo is received under a bill of lading, that, though not necessarily raising a contract in law, is evidence from which a jury may infer a contract to pay freight, in consideration of the captain giving up his lien on the goods.[23]

Over the years, there have been many such cases in which contracts have been inferred between parties other than those originally party to a particular bill of lading. Those authorities were assembled and considered by the English Court of Appeal in The Aramis[24] in which Bingham LJ concluded:

These cases may be said to decide no more than that whether a contract is to be implied is a question of fact and that a contract will only be implied where it is necessary to do so.

65 In recent years in the United Kingdom that line of authority has been applied to cases involving the outsourcing of labour by the use of labour hire arrangements. On occasions courts have considered the implication of a contract of service between labour hire employees and those whose workforce they had been integrated into absent any express contract - in a situation where it is accepted that the employee has a parallel enforceable contract with the labour hire organisation. Of course in this case the issue is not so limited - any implied contract merely need extend to the performance of work by the respondent on behalf of Homecare, to trigger the application of s 8 of the Act.

66 In Brook Street Bureau (UK) Ltd v Dacas[25] the English Court of Appeal was required to determine whether a person engaged as a cleaner pursuant to a labour hire agreement was an employee of either the labour hire company or the end user, a local council. Although the case turned on establishing a 'contract of service', there was a thorough analysis by the Court of the implication of a contract in the context of the performance of work by one person for another. Mummery LJ said:[26]

The statutory definition of a contract of employment as a "contract of service" expressly includes an "implied" contract. This should not be overlooked. I think that it has been. Like other simple contracts, a contract of service does not have to be in any particular form. Depending on the evidence in the case, a contract of service may be implied - that is, deduced - as a necessary inference from the conduct of the parties and from the circumstances surrounding the parties and the work done. As already indicated, the overall situation under consideration is shaped by the triangular format used for the organisation of the work: the applicant, the employment agency and the end-user are all involved. Each participant in the triangular situation may have an express contract with either one of, or with each of, the other two parties.

The critical point is that, although the construction of the contractual documents is important, it is not necessarily determinative of the contract of service questions, as contractual documents do not always cover all the contractual territory or exhaust all the contractual possibilities. In determining the true nature of the relationship (if any) between each of the respective parties, it is necessary to consider the total situation occupied by the parties. The totality of the triangular arrangements may lead to the necessary inference of a contract between such parties, when they have not actually entered into an express contract between the applicant and the end-user in this case, that absence does not preclude the implication of a contract between them. That depends on the evidence, which includes, but may not be confined to, the contractual documents. (My emphasis.)

67 These statements are consistent with what was said by the High Court in Ermogenous: the search for whether a contract exists may not be confined to an examination of the terms of a particular contractual document. In certain cases, of which I think this is one, it is the whole of the circumstances viewed objectively that will determine whether a contract exists or not. Indeed, this has consistently been the approach of the High Court in determining the characterisation of contracts where one party carries out work for the benefit of another: Dietrich v Dare[27]; Stevens v Brodribb[28] Hollis v Vabu[29]. Moreover, the Act itself, by s 5, envisages a contract of service being either express or implied.

68 It is, therefore, both permissible and, in this case, I think, necessary to look outside the express terms of the distributor agreement to determine whether there was a separate contractual arrangement between Homecare and the respondent in relation to the work carried out by her for Homecare's benefit.

69 I return to Brook Street Bureau and what was said by Sedley LJ[30]:

The argument for Wandsworth proceeds from the fact that it had no written agreement of any kind with Mrs Dacas to the submission that there was accordingly nothing into which any terms could be implied. This, however, misses the critical point that there are more means of expressing mutual intentions than putting them in writing. In the field of employment it is not uncommon to find that a contract of employment has come into being through the conduct of the parties without a word being put in writing or even, on occasion, spoken. In particular, conduct which might not have manifested such a mutual intention had it lasted only a brief time may become unequivocal if it is maintained over weeks or months. Once the intention to enter into an employment relationship is so expressed, the common law will imply a variety of terms into it and simultaneously will spell vicarious liability out of it; and statute will add a series of other rights and obligations. (My emphasis.)

70 Brook Street Bureau has subsequently been considered on several occasions by English courts.[31] My analysis of these cases is that there has been no departure from the principles set out in Brook Street Bureau. The question in these subsequent cases, as here, is whether the facts, including the nature and terms of any written agreements, support the implication of a contract between the relevant parties.

71 I will not repeat the factors which led me to conclude that De Groot was the agent of Homecare and that the distributor agreement was, in fact, with Homecare. Each of the following matters, in my view, supports the proposition that there was an implied contract between Homecare and the respondent. The respondent's work selling Homecare's products was for Homecare's benefit and involved mutual benefits and obligations. Homecare determined whether the respondent would sell Homecare products and through De Groot where she would work and what goods she would sell. All the goods, catalogues and documentation for the sales were prepared and provided by Homecare. If the respondent engaged in activities prejudicial to Homecare's interests she was in breach of the distributor agreement. Her mode of selling, rate of commission and accounting for her sales was determined by Homecare through De Groot. It was up to Homecare whether it accepted sales orders obtained by her. On occasions the respondent would account directly to Homecare for the sale of Homecare products. There was no reselling of goods by Dr Groot to the respondent. In this setting, both Homecare and the respondent obtained mutual benefits from the arrangement - Homecare sold its products and the respondent received payment for such sales. Viewed in this light, it was open to the trial judge to conclude that there was an implied contract between Homecare and the respondent relating to the performance of work by the respondent on Homecare's behalf.

72 I should add that I am of this view irrespective of De Groot's capacity to act as agent for Homecare in entering into the distributor agreement. Although I accept that if De Groot was acting independently, rather than as Homecare's agent, this would cast a different light on the mutuality of the obligations between Homecare and the respondent, it would not, in my view, exclude the finding of a separate implied contract between the respondent and Homecare. In Brook Street Bureau Mummery LJ said:[32]

[52] This means that, in ascertaining the overall legal effect of the triangular arrangements on the status of Mrs Dacas, the Employment Tribunal should not focus so intently on the express terms of the written contracts entered into by Brook Street with Mrs Dacas and the Council that it is deflected from considering finding facts relevant to a possible implied contract of service between Mrs Dacas and the Council in respect of the work actually done by her exclusively for the Council at its premises and under its control, until it took the initiative in terminating that arrangement. The formal written contracts between Mrs Dacas and Brook Street and between Brook Street and the Council relating to the work to be done by her for the Council may not tell the whole of the story about the legal relationships affecting the work situation. They do not, as a matter of law, necessarily preclude the implication of a contract of service between Mrs Dacas and the Council. There may be evidence of a pattern of regular mutual contact of a transactional character between Mrs Dacas and the Council, from which a contract of service may be implied by the tribunal. I see no insuperable objection in law to a combination of transactions in the triangular arrangements, embracing an express contract for services between Mrs Dacas and Brook Street, an express contract between Brook Street and the Council and an implied contract of service between Mrs Dacas and the Council, with Brook Street acting in certain agreed respects as an agent for Mrs Dacas and as an agent for the Council under the terms of the express written agreements. (My emphasis.)

73 Recently in James v London Borough of Greenwich, Mummery LJ returned to this topic:

The two types of contract - agency agreement and contract of employment - are not necessarily mutually exclusive. It is legally possible for a worker to have one kind of contract with an employment agency and another kind of contract with the end user to whom he renders services. This is an exercise in legal classification. It requires the fact-finding tribunal to examine and assess carefully all the relevant evidence placed before it by the parties in the particular case for the purpose of determining whether the claimant fits the description of an 'employee', as defined in the 1996 Act.[33] (My emphasis.)

74 I accept this approach and reject the appellants' submission that the existence of the contract between De Groot independent of Homecare and the respondent (if that was found to be the case) necessarily excluded an implied contract between Homecare and the respondent. The inquiry is not so limited and involves a consideration of all the factual issues, including the written agreements.

75 Finally on this issue, I should return to the decision of the Full Court in Commissioner of Payroll Tax v Mary Kay Cosmetics Pty Ltd.[34]. The appellants argued that application of the reasoning of the Full Court in Mary Kay Cosmetics Pty Ltd precluded the implication of an agreement between Homecare and the respondent, it being said that an express agreement between De Groot and the respondent resolved the matter. In my view, the Full Court's reasons do not cast any real light on the determination of the relationship in this case. In Mary Kay Cosmetics Pty Ltd, the issue before the court was whether beauty consultants engaged by a cosmetics company through a party plan system were independent contractors or, as contended by the Commissioner, employees. The issue to which the court's attention was directed was therefore the characterisation of the nature of the contract, rather than the existence of the contract.

76 Consistent with other judgments in employment cases, the judgment of the Full Court demonstrates that each case involving a determination as to the status of a person carrying out work on behalf of another is essentially a question of fact:

As with most cases in this area of the law, there is a good deal which can be said on each side of the argument. A court is usually faced with a large collection of relevant facts and circumstances, some pointing this way and some the other. The resolution of the problem usually comes down to a very subjective matter of individual impression. It all depends upon where the emphasis is laid.[35]

77 In any event, there are significant factual differences between those of Mary Kay Cosmetics Pty Ltd and the present case:

(a) As observed, the issue to be determined in Mary Kay Cosmetics Pty Ltd was the characterisation of the work carried out by the beauty consultant and no more than that.

(b) The Homecare distributors were not only vital to the business, they were the only way in which the business could operate - they were not accessories to the business as the beauty consultants were described by the trial judge in Mary Kay Cosmetics Pty Ltd.

(c) The contract in Mary Kay Cosmetics Pty Ltd specifically stipulated that the beauty consultant was an independent contractor and not an employee of the company. In the present case, the area management agreement creates a relationship of agency and then purports to limit it. The distributor agreement sets out an agent - subagent relationship. Nowhere does either agreement specifically exclude the existence of an implied agreement between the distributor and Homecare. Even if it did, that would not resolve the question.

(d) No territorial restriction was placed upon where the beauty consultants could work.

78 In my opinion, it was open to the trial judge to conclude that there was an implied contract between Homecare and the respondent. On this basis, also, the appeal must fail.

79 In my view, the trial judge was not bound to conclude that there was no contract between the respondent and Homecare. It was open to her to conclude that there was such a contract whether by reason of De Groot's acting as agent for Homecare when he entered into the distributor agreement or alternatively by reason of the existence of an implied contract between Homecare and the Respondent.

80 No error of law has been shown on the part of the trial judge in her conclusion that there was a contract between Homecare and the respondent. The appeal should be dismissed.

81 The applicant brought the common law proceeding against the State on the basis that the premises were unsafe. The State pleaded in its defence to that proceeding that it was 'statute barred on account of a failure to comply with the provisions of s 135AB of the Act'. There was no issue that the relevant provision was, in fact, s 134AB of the Act. The relevant parts of that section have been set out at [36].

82 Section 134AB(1) is the primary provision within s 134AB. As Phillips JA stated in Barwon Spinners v Podolak:[36]

With that established, sub-s (1) is seen to be dominant; it is truly a preface to all that follows in s 134AB, including sub-s (2), and the latter cannot be preferred over the former, as if in some way independent of it. It then becomes critical for a plaintiff to identify, for the purposes of sub-s (1), compensable injury that is referable to employment on or after 20 October 1999 but not to employment before it.

83 The resolution of the question as to whether the person is or is not a worker does not of itself determine the question of applicability of s 134AB of the Act. It must then be established whether a compensable injury exists. This requires an inquiry into whether the worker is, pursuant to s 82 of the Act, entitled to compensation. Relevant to this, a court will be required to make findings of fact as to whether the asserted injury is an injury within the meaning of the Act[37] and, further, whether the injury arose out of or in the course of employment[38]. Only then can it be said that s 134AB(1) is engaged.

84 On 2 November 2005, her Honour Judge Harbison ordered:

that the defences raised in paragraphs 13, 14 and 15 of the first defendant's further amended defence in this proceeding dated 04.02.2005 be listed for determination with the WorkCover proceeding before Judge Hogan on 23.01.2006 as a preliminary issue (cause, estimate 1 day).

The State's defence squarely raised the issue as to whether the respondent's injury at the premises was the subject of s 134AB of the Act and whether there was compliance with its provisions.

85 Notwithstanding the terms of the defence and Judge Harbison's order (which was procedural in nature), it is clear from the manner in which the hearing was conducted before her Honour that the sole issue to be determined was the status of the respondent. During the course of the hearing which lasted four sitting days, the State was represented by counsel and took an active part in the proceeding and made submissions to her Honour. No submission was made by the parties, including the State, to her Honour, that she should determine more than whether the respondent was a worker within the meaning of the Act, which was a common issue for Homecare and the State.

86 The hearing concluded on 27 January 2006. Her Honour gave judgment on 16 August 2006. Pursuant to her Honour's order, written submissions as to costs were to be filed and a further mention was listed on 20 October 2006. On that date questions of costs and future conduct of the proceedings were raised. Counsel for Homecare, to use her Honour's words "made it clear that whether the plaintiff was acting in the course of her employment at the time of any injury was still 'a live issue'".[39] At that hearing, counsel for the State argued that her Honour should dismiss or stay the respondent's claim. Her Honour reserved her decision.

87 On 15 December 2006 her Honour ruled that, in effect, it would be premature to accede to the State's application, stating:

All that I have determined as a preliminary point is the relationship between the plaintiff and Homecare. I have determined that, pursuant to a contract between the plaintiff and Homecare via its agent, Mr De Groot, and pursuant to s 8 of the Accident Compensation Act 1985, the plaintiff is deemed to be a worker working under a contract of service with Homecare, which is deemed to be her employer. I have made no determination whatsoever as to whether she suffered an injury or, if she did suffer an injury, whether it was in the course of her employment with Homecare.[40]

At a glance

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Judgment (241 paragraphs)

Legislation Cited (2)

Cases Cited (7)