Murton v TD Preece and Co. Pty Ltd

Murton v TD Preece and Co. Pty Ltd - [2006] NSWIRComm 367 - NSWIRComm 2006 case summary — Zoe

[25]

The applicant says he found the proposal satisfactory. 12 According to the respondent however, it was the applicant who first suggested that he preferred to work as a contractor through Windjar rather than as an employee, and that the respondent reluctantly agreed. As a result of the agreement Mr Preece says that he offered to engage Windjar to provide the applicant's services at a salary of $80,000 per annum payable fortnightly in arrears. The salary, the applicant was told by Mr Preece, was to be paid on the basis that it was inclusive of superannuation, annual leave sick leave and, "...regular employee entitlements". The respondent denied that the applicant was ever offered a $20,000 bonus per annum. It also denies receiving a request from the applicant or Windjar for a written contract. 13 The applicant commenced work on 4 February 2002. The applicant says his duties extended to the overall management and control of the respondent's accounting and financial reporting, accounts payable, wages and payroll, fixed assets and management of staff, the latter duty involving issues such as workers compensation and occupational health and safety. The respondent disputes that the applicant's duties were so wide-ranging. According to the respondent the applicant's supervisory duties extended to the receptionist only; and although it says the applicant was required to update the accounts, he was not responsible for maintenance of the computerised accounting system, nor for fixed assets. 14 On or around 8 February 2002 the applicant says he produced a 12 page report in relation to the implementation of the computer system and the updating of the accounts. He said the report estimated a time period of one month within which to catch up on two months of neglected work (a legacy of the respondent's previous financial controller, Mr Norm Tardiff) and that the estimated completion date for this task was October 2002. When he presented the report to Mr Preece the applicant says he was told:

[35]

Mr Preece denies the allegation. 20 The third matter related to the applicant's attempt to form an occupational health and safety committee. He says he was told by Mr Preece to immediately stop the formation of the committee. Mr Preece denies that the applicant attempted to form the committee or even that such a function formed part of his duties. 21 The final matter concerns an alleged failure on the part of the respondent to provide its employees with procedural fairness upon dismissal from employment. This particular allegation appears to have been made in the context of an incident involving Peter Lane, an employee of the respondent who the applicant says was summarily dismissed on 18 February 2002 by Mr Preece following a heated argument at the end of which Mr Preece told Mr Lane, "you're sacked". The applicant says that Mr Preece then asked him to investigate whether the respondent could be exposed to a claim for unfair dismissal as a result of the termination of Mr Lane's employment. The applicant says he informed Mr Preece that a claim for unfair dismissal if brought by Mr Lane may well be successful. According to the applicant Mr Lane returned to work on or around 21 February 2002. The respondent's response to this particular allegation is to point out that Mr Lane continues to be employed by the respondent as its manufacturing manager. 22 The applicant says that during his period of employment with the respondent he regularly worked 10 hours per day from 8.00am to 6.00pm. He says that during this time he was under constant pressure to implement the new computer system and update the accounting records. He had two sick days leave for the entire period although he experienced headaches and nausea because of the level of work-related stress as well as smoking in the workplace. He also maintains that no superannuation contributions were made on his behalf by the respondent despite the respondent's agreement to do so. During his oral evidence given during the proceedings, however, the applicant amended his statement to relate only to life insurance contributions and not superannuation, and later conceded that at his second employment interview he was informed by Mr Preece that his $80,000 salary, payable through Windjar, was to be inclusive of superannuation. 23 On 17 April 2002 the applicant says he was taken to lunch by Mr Preece for the purpose of discussing his work performance but that Mr Preece made no adverse comments regarding his performance, nor was any indication given to the applicant that Mr Preece was considering terminating his employment. 24 On 19 April 2002 the applicant's agreement was terminated by the respondent. The applicant recalls Mr Preece saying to the applicant: "I'm terminating your agreement, you'll be paid your annual leave calculated up to today". The applicant then asked Mr Preece why the agreement was being terminated but he says Mr Preece did not respond. Mr Preece agrees that the applicant's services were terminated on 19 April 2002. He says he told the applicant at that time that the arrangement, "was not working out", and that he reminded the applicant of the numerous occasions he had warned the applicant about his performance. He also says he told the applicant that he was on a "trial period" which had now come to an end. Contract under which work performed 25 The work performed by the applicant for the respondent as a financial controller clearly conforms to the description of work performed in any industry as required under s 106(1). A central issue, however, is who was the contracting party, the applicant or Windjar? The issue assumes importance because Windjar is not a party to the proceedings. 26 Putting aside the conflicting accounts as to who made the initial suggestion that the applicant be remunerated through Windjar, or whether the applicant indicated a preference to work as a contractor through Windjar, the applicant's primary contention is that he was the respondent's employee. The respondent contends that the proper party to the contract was Windjar. 27 In order to place the issue properly in context, it will have been readily observable from the summary of the background factual material in this judgment that no formal written contract was entered into between the parties. Nor is there any dispute about this. A related issue about which there is contest between the parties, but which in my view is not a necessary consideration as to whether relief may be granted, is whether the applicant may be classified as an employee or an independent contractor. In either case, so long as the necessary pre-condition for a finding that the impugned contract is unfair exists, the applicant may become entitled to relief: Hammond v Manildra Flour Mills Pty Ltd [2003] NSWIRComm 64 at [21]; Faraci v The Leak Shop Pty Ltd [2003] NSWIRComm 169 at [13]. 28 The respondent's primary position, that Windjar and not the applicant, was the contracting party, is based on several matters, namely:

[40]

30 The final invoice dated 19 April 2002 is, unlike the other invoices, expressed to be from Windjar alone and includes an amount expressed to be for, "annual leave to date of termination" in the sum of $1,299.54. 31 The second matter asserts that the applicant took advantage of the "tax amelioration advantages" and attributed his income in his income tax returns to Windjar. The applicant's income tax return for the year ending 2002 does not form part of the tender bundle. An Australian Taxation Office document dated 30 October 2003 sent to the applicant and headed "Income Tax Return 2002" suggests that the applicant for the year ending 30 June 2002 had a taxable income of $2,900. In cross-examination, the applicant conceded that all monies paid by the respondent to Windjar were not treated by him as personal services income, but as monies received by Windjar. As to whether the arrangement proved advantageous to the applicant, I note that it would also have been advantageous to the respondent who would have been relieved of the burden of making workers compensation payments, as well as paying payroll tax. Moreover, whoever initiated the suggestion that the applicant's services be paid through Windjar, it seems that both parties acquiesced in that arrangement, as evidenced by the fortnightly invoices from Windjar and the handwritten notation indicating that the amounts due were paid. 32 As to the third matter, the applicant's position has been made clear from the outset, namely, that he, and not Windjar, was employed by the respondent. 33 As to the fourth matter, the applicant, on the second day of the proceedings, made an application to amend the summons to include Windjar as a party. The application was opposed by the respondent and the applicant abandoned the application later in the proceedings on the same day. 34 The applicant's response to the four matters outlined above has been to first emphasise his primary submission that he was, at all relevant times, an employee of the respondent, and, secondly, to rely in the alternative, on a submission that even if it were correct that Windjar was the contracting party, the Court would still have jurisdiction to determine the application "because the contract was one whereby work was performed by the applicant for the respondent". The applicant quotes a passage from the Court of Appeal decision of Zahos v Industrial Relations Commission of NSW (2005) 148 IR 208 in support of this alternative submission. The passage is extracted below:

[46]

40 Turning to the present circumstances and adopting the analysis of the Full Bench in Metrocall the evidence reveals that the applicant was the sole director of Windjar and personally performed the work as financial controller for the respondent. In order to illustrate the latter point it is instructive to look at what the applicant actually did while working for the respondent, not so much for the purpose of assessing whether the work performed was done in the capacity of employee or independent contractor but whether it can be said that the applicant, "personally ... carried out the work". 41 The evidence discloses that the applicant commenced work on a full-time basis as the respondent's financial controller on 4 February 2002. The extent of his duties has been a matter of some dispute but the tax invoices, for example contain a brief description of his duties, namely the installation of "WinMagic" (sic) (the computer system), and, "For Debtors, Creditors and General Ledger". The terms of the advertisment in the Sydney Morning Herald sought a person for the position of financial accountant/controller with a minimum of 5 years experience in the manufacturing field, preferably a practising accountant, and "strong computer skills essential". The advertisement also sought the services of a "self-motivated person with team management exp., management and accounting and financial reporting... Experience in export-foreign cover/forward cover would be an advantage". The applicant is a qualified accountant who when he commenced work with the respondent had some 15 years experience as a financial controller and manager of various companies. This experience is indicated in the applicant's curriculum vitae which is annexed to the affidavit of Mr Preece. 42 According to the applicant he regularly worked about 10 hours per day for the respondent from 8:00am to 6:00pm. During that time he worked on implementing the new Magi computer system and updating the accounting records, as well as other duties. Mr Preece says the applicant was in charge of the paymaster duties and that through Windjar he was engaged to perform duties limited to maintaining the respondent's aged creditor/debtor listings, maintenance and updating of the general ledger and associated accounts, supervision of the receptionist and management reporting including the quarterly preparation of profit and loss statements and balance sheets. 43 Whatever the true extent of the applicant's duties, on either version in my opinion, he, "personally ... carried out the work" which he was engaged to do either directly or through Windjar as a financial controller. Moreover, the letter dated 28 March 2002 suggests on its face that the applicant and not Windjar was directly employed to do the work. It is not however necessary to decide this latter point, since in my view it is open in accordance with the terms of the summons and the available evidence to find that the applicant was party to an arrangement between himself, Windjar and the respondent, and therefore a party to a contract in its extended sense under s 108. This was the basis for the finding that the additional applicant could be joined as a party to the summons in Metrocall at [17]. The present applicant was entitled to commence proceedings under s 106 because he was a party to the arrangement. In the absence of a formal written contract, the available documentation and other evidence adduced during the proceedings confirms the existence of the arrangement. First, the work to be performed, being that of a financial controller, was performed solely by the applicant. Secondly, the applicant was the sole director of Windjar. Thirdly, although Windjar invoiced the respondent for the applicant's services, it is significant that some 7 weeks into the applicant's engagement, the respondent signed the letter dated 28 March 2002 which stated that the applicant "...is employed by (the respondent) as Financial Controller and his salary package including superannuation is $80,000". While the reference to the applicant being "employed" is not conclusive evidence of that fact it does, in my view, indicate the reality of the working relationship between the applicant and the respondent, in the absence of a formal contract and particularly given that as at the date of the letter the applicant had been working for the respondent under the direct supervision of Mr Preece, for 7 weeks during which time a number of invoices had been generated by Windjar for services provided by the applicant. The letter of 28 March suggests that the respondent at least viewed the nature of the working arrangement with the applicant as that of employer and employee. Was the contract unfair?

[55]

The contract is alleged to be unfair because it did not contain sufficient protective mechanisms against the termination of the contract without notice, procedural fairness and with regard to the circumstances of the applicant; see... paragraph 33(c)(d) of the summons". 47 The applicant in submissions also contended that the contract was unfair because it, "...failed to require the respondent to make contributions to a superannuation fund". In the applicant's second affidavit he states that he does not recall Mr Preece informing him that the $80,000 yearly salary was to be inclusive of superannuation. In his first affidavit he asserted that the respondent did not make any superannuation contributions despite an agreement to do so. In cross examination however the applicant said that the reference to "superannuation contributions" related to the applicant's inclusion in the respondent's life insurance plan. The applicant also in cross examination retracted his earlier statement that he did not recall Mr Preece informing him that the $80,000 yearly salary was to be inclusive of superannuation, conceding that his earlier statement was, "incorrect". These clarifications in my view lend support to the respondent's contention that superannuation was neither owed nor owing to the applicant at the time of his termination. In addition the 28 March 2002 letter clearly states that the applicant was employed as a financial controller and, "... his salary package including superannuation is $80,000". Taking all these matters into account I find that the contract did not fail to require the respondent to make superannuation contributions on the applicants behalf. On the contrary it appears that this was never the intention of the parties. Consequently no issue of unfairness arises. 48 The respondent relies on a submission that all of the heads of alleged unfairness set out under paragraph 33 of the summons are outside the ambit of the Court's jurisdiction by reference to Sydney Water Corporation Ltd and Another v Industrial Relations Commission of NSW and Another (2004) 61 NSWLR 661; 141 IR 14. Upon closer analysis, however, the submission as I understand it really relates to the allegation of a failure to provide for adequate notice; the respondents' primary contention in this regard being that a reasonable notice period was implied (in the absence of an express term in the contract). In my opinion, however an implied term of reasonable notice, although not of itself unfair may nevertheless operate unfairly on the contract in circumstances where the termination of an applicant's engagement or employment under the contract constitutes unfairness under the contract by reason of, for example, the failure to make a monetary payment in lieu of notice, or make provision for any notice where there is no finding of misconduct. In Hammond v Manildra Flour Mills, Marks J found that the contract there under consideration (which did make provision for one week's notice) was unfair in relation to the circumstances of the applicant's termination on the following bases:

[56]

Whether the contract be one of employment or principal and independent contractor, the courts will imply a right to terminate upon reasonable notice, in the absence of any express term to the contrary. What is reasonable will depend upon all of the circumstances. Such a provision can never, in my opinion, be unfair. The converse is that any period which is not reasonable must ipso facto be prima facie unfair. I do not regard the fixing of a period in a contract by reference to an arbitrary period (here, one week) as indicating in any way that that period is reasonable. 2. It is more likely than not that the applicant was an independent contractor and that he anticipated that his engagement would last for approximately 12 months. It is more likely than not that the respondent had the same contemplation. 3. The applicant at the time of commencement of the proceedings was aged 59. He gave evidence that work was difficult to obtain in the central west area of New South Wales and, in any event, his age inhibited his ability to obtain alternative employment. 4. The applicant was required to relocate from Lithgow to Manildra in order to take up the engagement. 5. The respondent acted unfairly in terminating the engagement of the applicant. 6. The unfair termination took place at the very beginning of the contemplated period of engagement. 49 Whether the circumstances of the applicant's summary termination rendered the contract unfair will be considered shortly, but plainly a relevant consideration will be the fact, which is not in dispute, that at the time of termination the applicant received no payment in lieu of notice. 50 A further issue raised by the parties during the proceedings concerned whether the applicant was subject to a 3 months period of probation as a condition of his engagement or employment. There appeared to be some confusion between the parties as to whether the allegation of a 3 month probation period went to the issue of credit alone (the applicant's contention) or to the issue of unfairness (the respondent's contention). 51 I intend to dispose of the issue in the following way:

[61]

(v) the respondent's reliance on Director General of the Department of Corrective Services v Mitchelson (1992) 26 NSWLR 648 at 658 for the proposition that the probation period was "an extension of the interview process...(and)... not a permanent engagement" is misconceived insofar as it purports to provide support for the submission that the applicant's summary termination was not unfair. Similarly, reliance by the respondent on Burks v Zanmarl Pty Limited (2000) 107 IR 187 for the proposition that the probationary period of 3 months is commonplace and not, " ipso facto unfair". 52 A brief analysis of the above points reveals that the existence of a 3 month probation period depends entirely on the unsupported assertion of Mr Preece, that is, in the absences of any supporting documentation and in the face of an express denial by the applicant that it was a condition of his engagement or employment. In my view, if the respondent was sufficiently concerned about the necessity to impose a period of probation on the applicant then the condition could or would have been expressed in the letter signed by Mr Preece on 28 March 2002. In any event the existence of the condition would not, as I earlier observed, preclude a finding of unfairness referable to the contract, that is, termination of service without more, during a period of probation may not necessarily disentitle an applicant from obtaining relief if the circumstances of the termination were found to be unfair. Further, the applicant relied in the first instance on the issue as one going to the credit of the parties and not as an indicia of alleged unfairness. 53 As to the question of credit, it is difficult to ascertain on the submissions of the parties to what issues it was intended to be directed. There is no dispute for example that the applicant's services were summarily terminated without notice after about 11 weeks of engagement or employment, and that upon termination the respondent did not pay the applicant any moneys in lieu of notice. 54 These are the principal issues which the Court has to decide in relation to whether the contract was unfair. These issues are independent of issues as to credit (because they are not disputed) and therefore the necessity to make adverse credit findings against either party may be dispensed with. I should however note for completeness that I found both the applicant and Mr Preece to be unsatisfactory witnesses in relation to some aspects of their evidence. The applicant's evidence in relation to the issue of superannuation, which I have earlier outlined, contained internal inconsistencies, although I am unable to conclude whether this was because the applicant was being untruthful or simply being unreliable as to his recollection of events. Mr Preece on the other hand said in his affidavit that he had been unsuccessful in his attempts to speak to any person who could provide a reference for the applicant. In cross examination Mr Preece was systematically asked about each of the applicant's former employers nominated in his curriculum vitae as to whether he had attempted to speak to any of them about providing a reference for the applicant. In relation to each nominated employer Mr Preece's response was either that he could not recall whether he had made any attempt or he didn't know. This alleged inability to make contact with any of the applicant's former employees was according to the respondent the basis upon which it decided to impose the three months probation period as a condition of the applicant's engagement. The failure to recall by Mr Preece as to whether he in fact attempted to contact anyone with a view to obtaining a reference must undermine to some extent the purported rationale for allegedly imposing a period of probation in the first place. 55 It remains to decide whether the circumstances of the applicant's termination and the failure to provide for adequate notice provisions in the contract were unfair. The applicant's services were summarily terminated without notice in circumstances where the applicant had worked for the respondent for just under 11 weeks in a relatively senior position which involved a significant degree of responsibility and trust (the applicant was for example the paymaster) and which, at the time the applicant commenced in the position, he would have had a reasonable expectation of long term employment. This latter point is borne out in my view by reference to the terms of the advertisement in the Sydney Morning Herald which indicated an arrangement in the long term. The advertisement does not, for example, refer to employment for a fixed term or for a period confined to the completion of a particular project. Certainly no competing or contrary inference is available from the evidence. 56 The respondent asserts that the applicant's services were terminated because of poor performance. There is little substance to this allegation in my view. First, the allegation is supported by little detail either by way of oral evidence from the respondent or by way of any supporting documentation. Many indications revealed by the evidence are in fact to the contrary. First, the very short period of employment, on 11 weeks, is not necessarily a satisfactory period of time in which to properly and reasonably assess someone's standard of work. Secondly, the respondent apparently without any resistance or complaint consistently paid the fortnightly invoices submitted by Windjar. Thirdly, there was no evidence of any letters or other types of correspondence, an otherwise common device for alerting employees about employer dissatisfaction with work performance, which the respondent could have at any time sent to the applicant in order to give him some notice of its particular concerns. Fourthly, the letter of 28 March 2002 is sent some 7 weeks after the applicant has commenced work. Any concerns about his work performance could have been readily addressed in that letter. Mr Preece in his evidence during the proceedings said he had become dissatisfied with the applicant's work performance after only 4 weeks. Instead the letter of 28 March 2002 simply confirms in writing the applicant's employment and his annual salary. 57 I find for the reasons outlined above that the applicant's summary termination was not influenced by any considerations pertaining to work performance. I therefore find that the contract operated unfairly against the applicant because it failed to protect him from the circumstances of summary termination. The following reasons have influenced my decision:

[68]

I have been influenced to select a period of five months because the applicant's engagement was terminated at an early stage when he had only been working there for a short period. In some respects it might be thought that the converse should apply namely that given such a short period of engagement a shorter period of notice would be reasonable. However there are circumstances where, in my opinion, the termination of an engagement without justifiable cause which occurs shortly after it is entered into should require the assessment of a longer period of reasonable notice. I instance the recent decision of the Full Bench of this Court in King v State Bank of New South Wales [2002] NSWIRComm 353 where the Court on appeal extended the period of reasonable notice from six months to nine months albeit that there was a short period of employment only, given the circumstances which applied in those proceedings. 61 In my view adopting the reasoning of Marks J above, a reasonable period of notice in all the circumstances (referable to my findings of unfairness in relation to the applicant's circumstances of termination outlined above) is 2 months, or $13,330. In assessing this amount I have also taken into account whether the applicant has taken steps to mitigate his loss. The applicant's evidence in this regard is that following the respondent's termination of his services he did contracting work through Windjar. This work apparently entailed short term arrangements through a business called Accounting Placements. The work was not full-time and for the first three months following his termination the applicant estimates he obtained about 2 weeks work. This evidence shows that the applicant made reasonable attempts to mitigate his loss. I do not therefore consider it appropriate to reduce any payment made on the basis of the principle of mitigation. 62 I also take into account the applicant's contention that his salary package included a $20,000 bonus. I decline to consider this claim for a number of reasons. First, there is little or no evidence as to the nature or character of the bonus or how it is to be calculated. Secondly, there is nothing documented to confirm that the respondent had a bonus scheme of some description or that the applicant would be guaranteed any bonus payment. Thirdly, and perhaps of greatest significance, is the fact that it does not form part of the applicant's claim for relief as set out in the summons nor was any application made during the proceedings to amend the summons to include a $20,000 bonus payment as part of the relief sought. 63 Interest should also be payable on the amount assessed above as payable from the date of the application, that is, from 6 November 2002.

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