Kassafern Pty Ltd & Anor v Battery Assist Pty Limited - [2003] NSWIRComm 327 - NSWIRComm 2003 case summary — Zoe

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Kassafern Pty Ltd & Anor v Battery Assist Pty Limited

[2003] NSWIRComm 327

Industrial Relations Commission (NSW)|2003-11-06|Before: Kavanagh J, Dr J

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Source facts

Court

Industrial Relations Commission (NSW)

Decision date

2003-11-06

Before

Kavanagh J, Dr J

Catchwords

05/14/2003
05/15/2003
05/16/2003
05/20/2003

Source

Original judgment source is linked above.

Catchwords

05/14/200305/15/200305/16/200305/20/200305/30/200306/24/200307/07/2003 DATE OF JUDGMENT: 11/06/2003

Judgment (139 paragraphs)

[1]

Industrial Relations Commission of New South Wales in Court Session

[2]

CITATION : Kassafern Pty Ltd & Anor v Battery Assist Pty Limited (now known as ClubAssist Pty Limited) [2003] NSWIRComm 327 First Applicant: Kassafern Pty Ltd PARTIES : Second Applicant: John Barry Geraghty Respondent: Battery Assist Pty Limited (now known as ClubAssist Pty Limited) FILE NUMBER: IRC2076 of 2001 CORAM: Kavanagh J CATCHWORDS : Section 106 application - Alleged unfairness of contract term requires 24 hour service, 365 days a year by service delivery provider - labour returns meagre reward - Evidence as to hours worked by second applicant requires identification of "on-road" service or "on-call" time - question of public interest - whether the applicant an employee - issue as to whether contract returns, as remuneration, less than that which would be earned by an employee - application dismissed. LEGISLATION CITED : Industrial Relations Act 1996 Burgess & Ors v Mount Thorley Operations Pty Limited (2002) 115 IR 13 Stevenson v Barham (1976-77) 136 CLR 190 McNaught v Micador Australia Pty Ltd (1998) 83 IR 111 Brown v Rezitis (1970-71) 127 CLR 157 CASES CITED : Lipman & Anor v A G Lifestyle Management Pty Limited & Anor [2003] NSWIRComm 160 Metrocall Inc v Electronic Tracking Systems Pty Ltd (2000) 101 IR 66 Mitchforce v Industrial Relations Commission & Ors [2003] NSWCA 151 McNaught v Micador Australia Pty Ltd (1998) 83 IR 111 Stevens v Brodribb Sawmilling Company Proprietary Limited, Gray v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16 Stevenson v Barham (1976-77) 136 CLR 190 HEARING DATES: 05/13/2003; 05/14/2003; 05/15/2003; 05/16/2003; 05/20/2003; 05/30/2003; 06/24/2003; 07/07/2003 DATE OF JUDGMENT: 11/06/2003

[14]

11 Schmidt J in Burgess & Ors v Mount Thorley Operations Pty Limited (2002) 115 IR 13 as to relief sought through a summons said at [115, 117, 118 and 120]: 115 It is convenient to deal with this issue at the outset. It has now been held by this Court in a number of different contexts, that cases advanced under s106, must be determined on the claims advanced by the applicant in the summons. Summonses are often amended after filing, particularly after conciliation under s109 of the Act has failed. That was the case here. Very late applications for leave to amend a summons are on occasions received by the Court. Whether leave is granted in such a case, depends upon whether any injustice might be visited upon a respondent as a result. No application for such leave was here made. . . . 117 In Bourke Air Charter v Easton (2001) 109 IR 443, the Full Court has recently considered a case where at first instance, relief was granted in relation to a claim for payment of overtime, an order not sought in the summons, nor there otherwise pleaded or particularised. In that case the claim had first been raised by the trial judge in questioning of witnesses at the hearing, over the objections of the respondent's counsel. The claim was then pursued by the applicant's counsel in closing submissions. 118 The Full Court upheld the appeal, concluding at p455 that a claim must be particularised in the summons and that it is not sufficient if reference to a claim is made in affidavits filed by the applicants or in transcript. If such a claim is to be pursued, the summons must be amended to make it clear what order is sought, as well as the basis upon which it is advanced. This approach is entirely in accordance with the requirements of s106 itself, as well as with the Court's Rules and the form there provided, which requires that the orders sought and the grounds of the application, be specified. The approach of the Full Court in Bourke Air was similar to that earlier taken by another Full Court in Vision Publishing Pty Limited v PK Lane Holdings Pty Limited and Others (1998) 84 IR 277. . . . 120 The formulation of a claim in the summons is a different matter to how any money orders might ultimately be framed by the trial judge, who is at that point not confined to the precise terms of the orders sought in the summons. Depending upon the approach which the parties adopt to the litigation, formulation of such final relief can be a difficult process. It was held, for example, by the Full Court in Barclays Australia Investment Services Limited & Ors v Nordby (1995) 99 IR 258 at p279 that: 'The task of assessing a "just" monetary amount is one which, not infrequently, involves the exercise of a broad judgment without the assistance of defined and identifiable parameters or heads of loss or damage.'

[17]

14 The applicants claim the Agreement was unfair in its operation in that it required Mr Geraghty, the second applicant, to deliver a service 24 hours a day, 365 days a year. Under the contract, he, it is alleged, "had to work long hours for meagre reward". The applicants plead as follows: 40. In so far as the contract in its terms required the Second Applicant to be available for work 24 hours a day seven days a week it is unfair, harsh and unconscionable and/or against the public interest. 41. In so far as the contract in its operation resulted in the Applicant being required to be available for work 5 days at 18hrs a day and 2 days at 24hrs for a taxable income of approximately $35,000 per annum it is unfair, harsh and unconscionable and against the public interest. 42. Further, the Applicant relied upon the statements of Mr Wallis to the effect that there was a "real possibility" of "spiralling growth". This growth did not eventuate and the Applicants eventual earnings were such as to make the operation of the contract unfair, harsh and unconscionable and against the public interest. 43. The Applicant was an employee within the meaning of the decision of Hollis v Vabu Pty Ltd [2001] HCA 44 (9 August 2001). Consequently, he was entitled to 4 weeks holiday pursuant to s34 of the Annual Holidays Act 1994 (N.S.W.) 44. If, it not be the case that at law the Second Applicant was an employee then a contract or arrangement requiring a contractor to work the hours which are the subject of these proceedings and which does not provide for annual holidays is against the public interest. 45. Further, as an employee it is unfair, harsh and unconscionable and against the public interest that the Second Applicant should have to work the hours the subject of these proceedings to achieve a taxable income of $34,502 per annum which is significantly discordant with prevailing award rates and conditions within the State of New South Wales. 46. If it be the case that the Second Applicant is not at law an employee then it is unfair, harsh and unconscionable and/or against the public interest that a contractor should have to work the hours the subject of these proceedings to achieve at taxable income of $34,502 per annum which is significantly discordant with prevailing award rates and conditions in the State of New South Wales. 15 Relevantly, the applicants allege the contract is unfair, and/or is against the public interest, in that the second applicant's labour returned him less than a person performing the same work would receive as an employee and/or the said agreement avoids the provisions of the relevant awards. The definition of unfair contract is relied upon: 105 Definitions In this Part: "contract" means any contract or arrangement, or any related condition or collateral arrangement, but does not include an industrial instrument. "unfair contract" means a contract: (a) that is unfair, harsh or unconscionable, or (b) that is against the public interest, or (c) that provides a total remuneration that is less than a person performing the work would receive as an employee performing the work, or (d) that is designed to, or does, avoid the provisions of an industrial instrument.

[18]

Orders Claimed 16 The applicants claim, by way of the Amended Summons, the following orders as just compensation arising from a contract which, it alleges, should be impugned for unfairness and varied accordingly: 1 An order declaring the contract or arrangement entered into between the first applicant and the respondent on 9 April 1997 was unfair, harsh or unconscionable and/or against the public interest. 2 An order varying that contract from its commencement or from some other date in order to provide the following terms: (a) operation of the contract or arrangement shall not be harsh, unjust or unreasonable and/or against the public interest (b) that the contract or arrangement may only be terminated upon the payment of $114,044.76 (c) that the Second Applicant as the principal of the First Applicant be able to negotiate on the open market to sell the battery run. (d) that the Second Applicant could take reasonable living expenses from cash moneys received pending a monthly reconciliation with the Respondent 3 An order that the respondent pay to the First Applicant the sum of $114,044.76. 4 In the alternative to order 2(b) an order varying the contract so that on its termination the Respondent pay to the Applicants such other amounts as the Commission in Court Session considers just in the circumstances of the case. 5 An order that the Respondent pay to the Applicants interest. 6 An order that the Respondent pay the Applicants' costs of and incidental to these proceedings. 7 Such further or other Orders as the Commission in Court Session may see as just to provide relief to the Applicant. Relevantly, particulars were provided of the manner in which the above amount claimed was calculated: Using the classification of employees in charge of vehicles selling confectionery under the Shop Employees (State) Award at casual rates for 138 hours per week (138 x $13.60 per hour) would see an entitlement of $1,876.80 per week. Over 23 months (92) weeks this would total $172,665.60. The amount earned at $4.79 per hour at 138 hours per week over 92 weeks = $60,813.84. The First and Second Applicants' claim is therefore for $111,851.76, plus a further $2,193.00 (being $34,502 per annum /365 days x 20 days holiday + 16% loading). Total claim = $114,044.76 17 The respondent identified the issues raised in the Amended Summons and from submissions at the close of the case to be as follows: (i) The circumstances surrounding the Service Delivery Agreement being entered into by Kassafern; (ii) Whether John Geraghty (the principal of Kassafern) was an employee of Club Assist or Kassafern? (c) Whether a change in the Service Delivery Agreement or the operation with Club Assist is evidence of unfairness of the Service Delivery Agreement between Kassafern and Club Assist; (d) Did the Service Delivery Agreement essentially require John Geraghty to be available for work 7 days a week, 24 hours a day? (e) Whether Kassafern is entitled to any additional monies and if so, whether the amount ought be referable to an Award.

[21]

1.3 The SDC shall at all times in the conduct of the said agency:- (a) Perform the services required of the SDC under the terms of this Agreement to discharge its responsibilities as an Agent herein to the best of its skill and ability and in particular adhere to the standards required of Australian Standard regarding Quality Service Matters AS3902 and the Procedures Manual and shall actively promote the business interests and reputation of BA and NRMA insofar as they relate to the agency hereby created. (b) Use the appropriate printed forms from time to time provided by BA which forms shall not be altered by the SDC. (c) Strictly observe and obey all relevant acts, regulations or other requirements of law from time to time affecting the activities of the SDC or any servants or agents of the SDC and without limiting in any way the generality of the foregoing shall comply at its own costs and expenses with all acts of the Commonwealth and the State of New South Wales and all regulations, by-laws, ordinances and orders made thereunder and the lawful requirements of any public, municipal or other authority so far as they may affect or apply to this Agreement or the Services required to be provided under this Agreement and shall comply with all relevant Industrial Awards and agreements and shall obtain throughout the term and hold throughout the term all necessary consents, authorisations, approvals and licenses or permits to deliver the Services and to produce same to BA upon request by BA and to forthwith notify BA of loss or suspension of any such consent, authorisation, approval, license or permit. (d) In the event of any dispute arising with an NRMA member in relation to the provision of an on road battery delivery and replacement service, inform BA forthwith of the dispute provide a written report to be made available for collection by BA within 12 hours of the dispute arising and not without BA's consent in writing purport to take any action or proceeding in respect of or compromise the dispute or grant a release to any NRMA member. In the event of BA being unable to immediately resolve the dispute it shall be referred to NRMA which shall act as an Arbitrator and its decision shall then be final and binding on the SDC who undertakes to promptly and strictly abide by the said decision. . . . . (j) Pay and be liable for all expenses associated with its provision of the battery delivery and replacement service. (k) The SDC acknowledges that all communication between the SDC and NRMA shall be solely for the purposes of rendering services as provided herein. Under absolutely no circumstances whatsoever shall the SDC communicate directly with NRMA on matters other than matters relevant to the rendering of the services to the customers and members of the NRMA. The SDC acknowledges that at all times the SDC must respect the confidentiality provided for in Clause 15 hereof and undertake no discussions with NRMA in relation to any matters touching the relationship between the SDC and BA. (l) The SDC hereby indemnifies and holds harmless BA in respect of any loss or damage suffered or expense incurred by BA arising out of any act of the SDC which is beyond the authority of the SDC as set out herein. (m) The legal relationship between BA and the SDC is that of principal and agent and not that of employer and employee or partnership. The SDC shall be liable for its own income tax payments and (if applicable) payroll tax payments in relation to employees, servants or agents employed by the SDC pursuant to this Agreement. The SDC hereby indemnifies BA from and against any liability that may rise in relation to the payment of any such taxes. (n) In the event that the SDC must carry out some of its duties through servants, employees or agents, the SDC shall immediately notify BA of such fact and the SDC shall not carry out its duties through servants, employees or agents without the consent of BA.

[26]

24 The second applicant gave varying evidence as to the status of advice he received from his father on the contract. However, his father, a solicitor, also gave evidence and I find his evidence persuasive. Mr Barry Geraghty, the father of the second applicant, was asked: Q. You then had discussions with John? A. No. I had discussions with him when I was going over to Neutral Bay to acquire the shelf company. He discussed it with me in the car. Q. This was the first time you had spoken to John about this issue? A. Yes. Q. Can you recall those discussions? A. He just told me he wanted to do it and the thanked me for any financial support that he and my wife were going to give him. I said "Best of luck," wished him well. . . . Q. You said a little while ago you are a conveyancing solicitor? A. Yes. Q. When you were having discussions with (sic) Mark did it occur to you you might advise him he should see somebody else? A. No, it did not because I have never had a relationship with my children on a solicitor/client basis. It has always been father/son father/daughter basis. Q. So this is the first time? A. Yes, bearing in mind one thing, both boys had the opportunity to see their sister. Q. Who is their sister? A. Jackie Geraghty, who is also a solicitor. She is my eldest daughter. Q. You are telling the court they had that opportunity? A. Yes. . . . Q. Just look at the first page. When John provided you with that service delivery agreement, you read it? A. No, I did not read it in full from recollection. Q. You had already read Mark's agreement? A. Yes. Q. You understood it to be the same? A. I just asked him "Is this the same as Marks' agreement? Make sure it is," or words to that effect. . . . Q. When he gave it to me I remember casually flicking through, like you have a heading here, I was looking at the headings. I didn't sit down and go through the agreement in depth. I remember I was on the way out for an appointment and I went through the headings and I said "It seems to be the same as Mark's agreement but make sure that they are." I said "They contain the same as the agreement with Mark." Q. Is that all you said? A. I think I said "It is not my expertise." I repeated what I said to Mark "It is not my expertise. You have to rely on what the Battery Assist representative said to you as to the income. You know you have to provide a vehicle." I think I said "You are not buying goodwill; there is no goodwill purchased. You have to work hard and rely on what they represented to you as the income growth," etc. That was basically it. Q. You said to him "This agreement is very much tilted in favour of Battery Assist"? A. Yes. It was, yes. Q. You said that? A. Yes. Q. And you said "You are at risk; there is the depreciation of the van; they do not seem to be asking you for goodwill." Is that what you said? A. Yes. Q. You said "There are a lot of hours of work involved?" A. Yes. Q. When you said that you were referring to the second page of the summary document, clause 7.1? A. To be available seven days a week 365 days a year, yes. Q. When you said that about the hours you were referring to that clause? A. Yes, basically to that clause.

[33]

Clause 5.1 of the Agreement provided: At its own expense the SDC agrees to equip the delivery vehicle with the tools and other equipment detailed in Schedule C to this Agreement with such tools and other equipment to be as specified by or acceptable to BA. 30 The evidence revealed the estimates from the respondent given to the applicant as to the costs of obtaining a vehicle and equipping it required an outlay of $30,000 approximately. Mr Geraghty confirmed that was the approximate cost to him to lease the required van and to set it up with the necessary tools and equipment. Although the respondent under Clause 19 asserts no representations given prior to the signing of the agreement are legally binding on it, I am satisfied in its "General Information and Proposal for Potential Service Delivery Provider Companies" document it gave a fair estimate of $29,470.50 as start up costs. While the agreement allocated a defined area for the service delivery no goodwill was paid upon entering the agreement. The System of Work 31 A driver's work was monitored and controlled by the NRMA digital network. A driver's procedures as defined by Counsel for the applicants required: When entering the van he (the driver) had to transmit that he was en route. He then had to verify when he was on the job. He then, when the job had been completed, had to so report. There was essentially no contest between the parties as to the proposition that the operations of Battery Assist, and therefore the work of a Service Delivery Provider such as the second applicant, were tied to the operation of the NRMA patrol network. Indeed, all work was despatched to the service deliverer by means of the NRMA radio network through its call centre. I accept the details of the second applicant's work were closely monitored and organised by this digital network. Mr Wallis, NSW Operations Manager of Battery Assist agreed the purpose of the contract was to provide a "seamless service" to the NRMA under the terms of the Contract Preamble and Clause 1.1. [at recital "C"]. 32 The second applicant was also required to wear a uniform totally in harmony with that worn by NRMA Patrol Officers, that is, the "on road" NRMA employees. In accordance with Clause 6.1 of the Service Agreement: The SDC agrees to provide at its own expense its employees and agents with a uniform approved by and in accordance with the details of uniform provided by BA. . . .

[43]

41 The Procedures Manual given to the applicants explained the Buddy System thus: 8. AFTER HOURS BUDDY SYSTEM 8.1 PURPOSE The purpose of this procedure is to detail how and when the After Hours Buddy System is implemented. 8.2 NORMAL AVAILABILITY Between the hours 6.00am and 7.00pm daily each Service Delivery Contractor must ensure that their Battery Delivery Van is available to receive communication from the NRMA Assistance Centre. 8.3 AFTER HOURS BUDDY SYSTEM For the purpose of this procedure, After hours is to be defined as the period between 7.00pm and 6.00am the following day. It is possible during this period for one SDC to cover his assigned work plus the work of any one (1) adjoining SDC. No Buddy System will be allowed until approved by Battery Assist /l after consideration of all relevant details. After approval of a Buddy System, the Buddy system will operate under the following conditions. 8.5 CONDITIONS The two SDCs who operate the Buddy System will devise a roster that each agree upon. If agreement cannot be reached, each SDC will be responsible for their allocated work on a 24 hour basis. At 7.00pm the rostered off SDC will contact his buddy to check that he is able to go to the Buddy System. The SDC can only implement the Buddy System if the rostered on SDC is willing to take on the extra work, and if the rostered off SDCs work is completed. The rostered off SDC will then contact NRMA Assistance Centre and inform them that the rostered on SDC is covering his work until 6.00am the following day. The rostered off SDC must complete all outstanding jobs that would be allocated to him before rostering off. The rostered off SDC must be contactable on his usual mobile number so as to be available should the work load become to great for the rostered on SDC. Reasonable effort will be made by NRMA Assistance Centre to allocate the work load but the rostered off SDC must consider himself on stand-by and be available should the need arise. In the event of the rostered off SDC being called out there must be no discussion with NRMA Assistance Centre regarding whose responsibility the job is. Battery Assist may at any time suspend the Buddy System for operational reasons. 42 It was the second applicant's view the Buddy System was not effective. The system allowed for two drivers in adjoining areas to roster, between each other, over particularly defined hours, one of them to cover both areas. Battery Assist disavowed any responsibility for the Buddy System except as to allowing it under the contract.

[52]

52 The general information proposal as to potential income able to be earned under the service agreement which was provided to the applicants before the contract was signed was as follows: 4. POTENTIAL INCOME Potential income is based on the best available data and experience from existing operations. Battery Assist make no claims or guarantees to the actual returns for individual operators. Battery Assist recommend that you consult a professional financial planner, accountant or solicitor to assure you that the figures indicated here are reasonable. It is envisaged that Service Delivery Provider companies attend 3,000-4,000 jobs per year. Average jobs per day 8-11 (averaged annually) Average Delivery Fee per job $18.50-$20.00 GROSS INCOME $148-$220 per day $1036-$1540 per week $4501-$6691 per month $54,020-$80,300 per annum 53 The applicants alleged a further unfairness related to their reliance upon assurances as to "potential growth" of the business given to them by Mr Wallis prior to the execution of the Service Delivery Agreement. The second applicant submits he entered into the agreement under false expectations given to him by Mr Wallis. Mr Wallis revealed: At that time the figure of approximately $80,000 per annum was the relevant amount for an SDC to gross, with a possible range of up to $95,000 per annum. I agree I would have indicated that gross sales by the previous SDC in the NRMA region "O" (the Chatswood area generally) would, if the SDC had stayed, have been in the order of $80,000 per annum. Such statement is in accordance with my standard practices... At that time Battery Assist had between 5-10% of the market of New South Wales and the company expected to grow. It was my standard practice to indicate that Battery Assist was growing and to state nothing more. 54 Mr Geraghty may well have relied upon comments made by Mr Wallis as to potential growth for his service delivery business. He was given an indication of an income of $80,000.00 per annum. The company, Kassafern, was paid a gross income per annum in excess of this amount for the full financial year in which it operated. The earnings under the agreement will be later addressed.

[96]

95 The respondent further submits the terms of the contract were respected by the respondent and in the performance of this contract there was no unfairness. The first applicant was remunerated in accordance with the terms of the contract and the second applicant was fairly remunerated for the service he provided to the first respondent. Employment 96 As to the employment relationship, the applicants assert the facts establish the second applicant was an employee of the respondent. Some guidance as to determining an employment relationship is found in Stevens v Brodribb Sawmilling Company Proprietary Limited, Gray v Brodribb Sawmilling Company Proprietary Limited (1986) 160 CLR 16. The High Court (Wilson and Dawson JJ) said (at 35): The classic test for determining whether the relationship of master and servant exists has been one of control, the answer depending upon whether the engagement subjects the person engaged to the command of the person engaging him, not only as to what he shall do in the course of his employment but as to how he shall do it: Performing Right Society, Ld. v. Mitchell and Booker (Palais de Danse), Ltd. [1924] 1 KB 762. The modern approach is, however, to have regard to a variety of criteria. Further (at 36-37): In many, if not most, cases it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. That is not now a sufficient or even an appropriate test in its traditional form in all cases because in modern conditions a person may exercise personal skills so as to prevent control over the manner of doing his work and yet nevertheless be a servant: Montreal v. Montreal Locomotive Works (1947) 1 DLR 161, at p 169. This has led to the observation that it is the right to control rather than its actual exercise which is the important thing ( Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561 at 571) but in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. . . . The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance. 97 These tests were applied by the High Court more recently in Hollis v Vabu Pty Ltd (2001) 106 IR 80 where it was found a bicycle courier, over whom the company held control for job allocation, finances and riding outfits was found to be an employee. The fact the couriers provided their own tools, eg, bicycles, did not indicate they were independent contractors. However, I distinguish this case. The couriers' relationship was directly with the company that exerted the control. In the circumstances before me there is an intervening relationship between the parties to the litigation and a third party, the NRMA.

Kassafern Pty Ltd & Anor v Battery Assist Pty Limited

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