Solicitor for the appellant: Watkins, Tapsell and Nolan

2. Orders of the Chief Industrial Magistrate in matter no.

87/1249 set aside.

3. Orders of the Chief Industrial Magistrate in matter no.

88/275 set aside.

4. Orders of the Chief Industrial Magistrate in matter no.

88/276 affirmed.

5. Orders of the Chief Industrial Magistrate in matter no.

88/277 varied, by substituting the sum of "$116,938.59"

for ;the sum of "$103,016.22" as the amount which the

defendant is required to pay for outstanding overtime.

NOTE: Settlement and entry of orders is dealt with by O.36 of the Federal Court Rules.

This appeal is from a decision and orders of the Chief Industrial Magistrate for New South Wales. The respondent laid a total of eight complaints against the appellant. One of those complaints was made under legislation of the State of New South Wales relating to long service leave, and is not the subject of the appeal. In the remaining seven proceedings, the respondent sought to recover penalties for breaches or non-observances of terms of an award, pursuant to s.119 of the Conciliation and Arbitration Act 1904 ("the Act"). Of those, three complaints were dismissed. The decision was pronounced on 22nd February 1989. Orders were made on 22nd March 1989. In each of the four matters, the appellant was ordered to pay a penalty in the sum of fifty dollars.

2. The award concerned was the Horse Training Industry Award 1976-1982 ("the Award"), an award made pursuant to the Act. The respondent is an officer of the Australian Workers' Union ("the Union"), an organization of employees registered pursuant to the Act. It was admitted that the respondent was authorised pursuant to the rules of the Union to bring the proceedings. The award, by clause 4(a), provided that it was binding on the Union and its members. The appellant carried on, among other businesses, that of horse training. He was a member of the Australian Trainers Association ("the Association"), an organization of employers registered pursuant to the Act. The award, by clause 4(a), was binding on the Association and its members. Between August 1978 and 18th March 1987, the appellant employed Trevor William Hunt as a foreman in his horse training establishment at Warwick Farm in New South Wales. Each of the complaints related to an allegation that the appellant had underpaid Mr. Hunt in respect of some entitlement.

3. In each of the proceedings in which he found the complaint made out, the Chief Industrial Magistrate made an order pursuant to s.119(3) that the appellant pay to Mr. Hunt the amount to which he was entitled under the relevant clause of the award. In matter no. 87/1249, the appellant was ordered to pay $607.53 in respect of outstanding annual leave entitlements. In matter no. 88/275, the appellant was ordered to pay $11,624.97 for underpayment of wages. In matter no. 88/276, the appellant was ordered to pay $664.34 in respect of outstanding public holidays entitlement. In matter no. 88/277, the appellant was ordered to pay $103,016.22, being for outstanding overtime.

4. The Warwick Farm premises consisted of stables and a two storey building, with accommodation for stable hands on the lower floor, and a flat on the upper floor. It was in this flat that Mr. Hunt and his family lived throughout the relevant period of employment. He was designated and described himself as the foreman.

5. The appeal raised a number of issues. Perhaps the most important was as to the rate of remuneration to which Mr. Hunt was entitled. This depended upon whether he was properly classified as a "stable foreman", or as an "unsupervised stable foreman" under the award. The definition of "unsupervised stable foreman" is:

"Unsupervised stable foreman shall mean a

person employed in any stable where there are

three or more horses in work who, for the

greater part of his normal working time

throughout any period of thirteen weeks, is

responsible, whether expressly authorised in

that regard or not, for supervising the work

of the stable without himself being under

direct personal supervision."

6. "Stable foreman" on the other hand is defined to mean:

"A stablehand appointed to be in charge of or

directing the work of not less than three

stablehands."

7. It was not disputed that there were at all material times three or more horses in work in the stable where Mr. Hunt was employed. Nor has it been suggested that the general nature of Mr. Hunt's work changed in any significant respect during any period of thirteen weeks while he was employed by the appellant. Thus, the two questions which the Chief Industrial Magistrate first had to resolve were whether Mr. Hunt was responsible for supervising the work of the stable, and whether he discharged that responsibility without himself being under direct personal supervision.

8. The Chief Industrial Magistrate referred to the definition in the Shorter Oxford English Dictionary of the verb "supervise" and went on to say:

"The words "supervising" and "supervision"

therefore have a number of senses to describe

a variety of acts. Their meaning must be

related to the context in which they are used.

The word "supervising" as contained in the

phrase "supervising the work of the stable" is

unqualified. It means "supervising the stable

work". Giving the word "supervising" its

ordinary dictionary meaning, two meanings are

implied from the above phrase, the first being

either the supervision of the stablehands and

the second, supervising whatever work is

required to run a stable. Based on the

ordinary grammatical meaning of the words

within the phrase, and bearing in mind the

definition of a "stable foreman" contained in

Clause 3, the second meaning above is

preferable to the first. It seems to me that

if the phrase was to mean supervising the work

of the "stablehands", this would have been

specifically put by the draughtsperson in the

definition, as it is in the definition of a

"stable foreman"."

9. In our view, no error has been demonstrated in the construction accorded by the Chief Industrial Magistrate to the phrase "responsible for supervising the work of the stable". Also, there was ample evidence to support the finding that Mr. Hunt was responsible for supervising the work of the stable in the sense in which that phrase is used in the Award. That finding was expressed as follows:

"On either or both of the above meanings of

the phrase, Mr. Hunt qualified. He was

supervising the work of the stable which

included ensuring that the stablehands

performed their tasks, be they routine, and

ensuring that the stable operated in

accordance with Mr. Poletti's instructions,

and met his needs as the trainer. The

definition of "unsupervised stable foreman"

does not say the work of training horses,

therefore the work of the stable must be

viewed in an unrestricted sense. This is

confirmed by the definition of "horse training

industry" in Clause 3. The phrase is given an

extended meaning in the Award."

10. The Chief Industrial Magistrate had earlier summarised the evidence of the appellant himself, as to the responsibilities of a foreman which, it is clear, was a description of what the appellant expected of Mr. Hunt while he was employed in the stable. That summary is in these terms:

"In summary, they (the responsibilities of a

foreman) were to ensure:-

1. the supervision of the work of the

stablehands, who averaged at least four

in number throughout the period of Mr.

Hunt's employment;

2. there was sufficient feed at the stable;

3. the veterinarian was advised of any

problems that a particular horse may

have;

4. that the gear kept at the stables was

kept in good order;

5. that if a horse needed a blacksmith that

one attended this horse;

6. when a horse was going to the races, the

horse and stablehand were ready to go

when the float came to pick them up;

7. that the horses went to the track in

accordance with Mr. Poletti's

instructions;

8. the foreman to report to Mr. Poletti on

the horses' activities during the day and

their condition; and

9. to carry out the duties delegated by Mr.

Poletti."

11. The Chief Industrial Magistrate then concluded that "there was no doubt that Mr. Hunt performed these duties and responsibilities required of him."

12. In the light of that evidence, it cannot be contradicted that Mr. Hunt was responsible for supervising the work of the stable, even when that work was performed away from the stable at the training track or at race meetings. Accordingly, it is necessary to consider whether it was open to the Chief Industrial Magistrate to find that Mr. Hunt discharged that responsibility for supervising the work of the stable without himself being under direct personal supervision.

13. There is no warrant, in our view, for giving to the noun "supervision" in the definition of "unsupervised stable foreman" a meaning different from that to be given to the gerund "supervising". Both connote the oversight, general direction or control of the work of another, or of others. The relation between the activity of the supervisor and the work of those whom he supervises may be proximate or remote, or direct or immediate on the one hand or indirect on the other. Since the exclusionary supervision contemplated in the definition of "unsupervised stable foreman" must be "direct" and "personal", the draftsman has ordained that the relation between the supervisor and the supervised foreman must be closer than that which would be permitted if mere supervision were the criterion.

14. Obviously, the Award contemplates that different training establishments will exhibit a range of degrees of supervision of foremen. Account has to be taken of the scope which the activities of a foreman afford for the foreman himself to be supervised. Since he himself is a supervisor, the constant physical presence of his own supervisor would render useless the work of the foreman. On the other hand, it would be inconsistent with ordinary usage, in the context, to describe a supervisor who did not daily attend the stable and who gave many of his directions by telephone, as affording "direct personal supervision" of the foreman.

15. In our view. the Chief Industrial Magistrate correctly distilled from Owen v. Evans and Owen Builder Limited (1962) 1 WLR 933 the conclusion that "the extent of the supervision required by the words 'direct personal supervision' is a question of degree which will depend on the particular circumstances of the case".

"the degree of supervision must depend upon

the nature, difficulty and danger of the task

and the competence of the workmen. It is

quite impossible to lay down any general

rules."

17. To the same effect, Pearson LJ. pointed out, at 942:

"It would not be enough for the supervisor to

give instructions however full at the

beginning of the day or, it may be, for a

large part of the rest of the day. There must

be immediate supervision, which is a much

stronger thing than merely giving the

requisite directions. There is a difference

between "under immediate supervision of a

competent foreman or chargehand" and "under

the direction of a competent foreman or

chargehand". There must be much more

supervision than is implied merely by the

giving of directions. But one still has to

give the proper meaning to the words

"immediate supervision," which don't mean

constant, continuous, unintermittent

supervision,...".

18. In the light of those passages, it is undesirable for this Court to attempt to define a minimum degree of supervision which would qualify as "direct personal supervision" in the application of this Award to all cases which may arise under it. It is sufficient for us to conclude, as we do, that even on those facts which could be found on the evidence reviewed by the Chief Industrial Magistrate, which are most favourable to the appellant, such supervision as the appellant accorded to Mr. Hunt fell short of "direct personal supervision". Those facts included, first, that the appellant normally attended track work on three or four days a week, returned to the stables to shower and breakfast, had a discussion with his foreman and then left for his office at Canley Vale from which he conducted, amongst other things, a formwork business and the business of a motel-keeper. Secondly, the appellant returned to the stables later in the same day if he was able to do so. He spoke with Mr. Hunt by telephone every night about the feed to be given to the horses, their condition and training routines. In the light of those facts, we are unable to ascribe any error to the Chief Industrial Magistrate in the conclusion essential to the result which he reached, that Mr. Hunt in supervising the work of the stables was not under the direct personal supervision of the appellant.

19. The remaining issues in the appeal must therefore be dealt with on the basis that the Chief Industrial Magistrate's conclusion that Mr. Hunt was entitled to be remunerated at the Award rate for an unsupervised stable foreman was correct. The evidence disclosed that the appellant and Mr. Hunt fixed the remuneration without reference to the rates laid down in the Award. Mr. Hunt had worked for the appellant prior to his engagement as foreman in 1978. At the time when he accepted that engagement, Mr. Hunt was working for another trainer. He was engaged on the basis that he would be paid whatever the other trainer was paying him, plus $50 per week.

20. When Mr. Hunt received his weekly pay envelope, it had endorsed on the outside of it an amount which was the amount recorded and declared for income tax purposes. The envelope, however, contained a larger amount of money. In other words, as to part of Mr. Hunt's weekly wage ("the additional cash payments") the appellant made no deduction for income tax. For at least part of Mr. Hunt's period of employment, an unofficial record of the additional cash payments was kept by an employee of the appellant who worked in the appellant's office. The Chief Industrial Magistrate took into account the full amount received each week by Mr. Hunt in calculating whether he had been paid the amounts to which he was entitled under the award.

21. The Chief Industrial Magistrate made a finding that Mr. Hunt worked for seventy-seven hours per week. This finding was based partly on Mr. Hunt's own evidence (which the Chief Industrial Magistrate preferred to that of the appellant) and partly on a document prepared on the appellant's behalf. That document contained a calculation based on seventy-seven hours per week, and purported to show deductions in respect of items such as rent, telephone and electricity. It was prepared after the appellant had received advice from an accountant as to his obligations to pay fringe benefits tax. It was capable of constituting an admission as to the hours worked by Mr. Hunt. There was evidence on which the Chief Industrial Magistrate could properly have arrived at the finding which he made.

22. There was also a finding that, except for two or three days in 1986, Mr. Hunt had not taken any annual leave. He was paid extra in lieu of that leave, at his own request. Similarly, he was paid extra for days off in lieu of public holidays on which he worked. Issues arose as to whether the amounts paid in respect of annual leave and public holidays were sufficient to satisfy the appellant's award obligations.

23. The appellant's chief defence to the allegations of under-payment at the "unsupervised stable foreman" rate was that Mr. Hunt was employed on a "package", which included accommodation, electricity, telephone and some petrol and occasional car repairs. Objection was taken to the description of these items by the Chief Industrial Magistrate as "free", although it is obvious that the Chief Industrial Magistrate was merely making the point that Mr. Hunt had not been called upon to pay rent for his accommodation throughout all but a few weeks of his employment, and that the appellant had paid for electricity, telephone, petrol and car repairs supplied to Mr. Hunt. The appellant argued that there was injustice where parties to a contract of employment had made their bargain on the basis that part of the consideration for the work performed would be the provision of non-monetary benefits, but the employee could thereafter, in reliance on the award, seek extra payments of money whilst not accounting for the other benefits received. The complete answer to this argument is found in clause 13 of the Award. Sub-clause (a) requires that the employer "in each and every week pay to the employee the wages due in cash". Sub-clause (b) provides:

"The employer shall pay in full all wages due

to an employee except where the employer has

been authorised by the employee in writing to

retain any moneys belonging to the employee

either for the employer or for another person."

24. There was no suggestion that the contract of employment between the appellant and Mr. Hunt involved an agreement to pay a larger amount than that which was in fact paid, with a written authorisation to retain some of the money to cover rent or other items. Clause 17 of the Award permits a deduction of "an amount to be mutually agreed upon as the charge for...board and lodging", but it is plain that the appellant did not provide both board and lodging for Mr. Hunt, and no amount had been agreed between them as a deduction. The Award itself therefore required that Mr. Hunt be paid his remuneration each week in cash and in full. It did not permit satisfaction of the appellant's obligations by means of a "package", involving non-cash benefits. The circumstances of the case also provide a complete answer to the appellant's suggestions of injustice. It was never suggested that the appellant was ignorant of the Award. Indeed, on his own evidence, he received regular advice from the Australian Trainers' Association concerning variations to the Award. In choosing to make a bargain with Mr. Hunt which did not comply with the terms of the Award, the appellant took the risk that he might afterwards be compelled to comply with those terms, in addition to the terms of the contract between him and Mr. Hunt.

25. Clause 15 of the Award included the following provisions:-

"15 - Overtime

(a) All work performed in excess of or

outside the ordinary hours prescribed by

clause 14 - Hours of work - shall be paid

for at the rate of time and a half for

the first three hours and double time

thereafter. In lieu of receiving payment

for overtime the employee may elect to

take time off. The overtime payment

otherwise payable to the employee shall

be reduced by an amount calculated at the

ordinary time rate of pay for the

duration of any period the employee

elects to be and is absent.

(b) An employee required to work on a Sunday

shall be paid for all such work at double

rates with a minimum of three hours.

(c) ..."

"14 - Hours of Work

(a) The ordinary hours of work for all

employees shall be 40 hours per week to

be worked within rostered hours in 5 full

days, or 4 full days and 2 half days,

Monday to Saturday.

(b) No employee shall be required to work

after 12 noon as part of his ordinary

hours in any week on the two days

rostered as his two half-days off during

any particular working week.

(c) A roster setting out the 5 days or the 4

days and 2 half-days to be worked in any

one week, Monday to Saturday, by each

employee shall be posted up on Monday of

the preceding week.

(d) By arrangement with the employer,

stablehands may agree to change their

rostered half-days off in any week."

27. The Chief Industrial Magistrate upheld the contention of the respondent to this appeal that "overtime is to be calculated on a weekly basis ... and not on a daily basis as submitted by (the appellant)". Before this Court, the respondent accepted that, on the construction for which he was contending, an employee who worked a 40 hour week, on the basis of three 12 hour days and one 4 hour day would not be entitled to any overtime payment. As will be seen from what is said later, that concession is not correct, in our opinion. We agree with the Chief Industrial Magistrate's opinion that "overtime is to be calculated on a weekly basis" but we consider that overtime can also be calculated on a daily basis.

28. The appellant contended that clause 15, on its true construction, provided that no overtime payment was required unless, on the day under consideration, the employee had already worked 8 hours; he would then be entitled to payment at the rate of time and a half for the next 3 hours (i.e. for the 9th, 10th and 11th hours worked on that day) and to payment at the rate of double time "thereafter" on that day (i.e. for the 12th hour and any additional hours worked on that day).

29. In support of that contention, it was submitted that, for the purpose of calculating overtime, "each day stood alone". No such words appear in the clause. In Re Shipping Officers Award 1963 (1964) 8 FLR 262 (at 264), the Commonwealth Industrial Court, in dealing with a similar submission, said:

"In reality counsel invites the Court to

concentrate on the daily provisions for the

purpose of this interpretation as if the

clause contained what is now almost a standard

industrial prescription that 'for the purpose

of computation of overtime each day shall

stand alone'.

....

(at 266) To accept the claim advanced by the

respondent ... a complete sentence, of great

industrial significance and of common usage,

has to be inserted where the award maker has

left a vacancy. The fact that this well known

and much used sentence has been left out in an

award made as recently as 1963 can only be

construed, we think, as an indication of a

deliberate intention on the part of the award

maker to leave it out."

30. The appellant's counsel submitted that, on the construction of the Award for which he was contending, an employee who was required to work 11 hours per day on each of 5 days per week (a total of 55 hours) would only be entitled to payment at the rate of time and a half in respect of each of the 15 hours of overtime worked by him. On the contention of the respondent to the appeal, such an employee would be entitled to an overtime payment at the rate of time and a half for a period of 3 hours and to payment at the rate of double time for the remaining 12 hours of the 15 hours of overtime worked during that week.

31. It will be noted that clause 15(a) requires the payment of an overtime rate in respect of "work performed in excess of or outside the ordinary hours prescribed by clause 14". Although the only "ordinary hours" expressly "prescribed by clause 14" are "40 hours per week", that clause also requires that those ordinary hours "be worked within rostered hours", which may be rostered in either "5 full days" or in "4 full days and 2 half days". In our opinion the clause, where it refers to "full days" and "half days", must be construed, having regard to its context, as meaning 8 hour days and 4 hour half days respectively.

32. In our opinion, clause 15(a) in providing for payment of an overtime rate in respect of "all work performed in excess of or outside the ordinary hours prescribed by clause 14", requires an employer to pay the appropriate overtime rate to an employee whose work includes either:

(A) more than 40 hours in a week, Monday to Saturday -

because such work is "work performed in excess of ... the ordinary hours prescribed"; or

(B) more than 8 hours on a "full" day or more than 4

hours on a "half" day - because such work is "work performed ... outside the ordinary hours prescribed".

33. In our opinion, clause 15 requires the payment of the appropriate overtime rate whenever the facts fall within the hypothetical situation set out in either (A) or (B) above. An employee who works 11 hours on any "full" day is entitled to payment at the rate of time and a half for the work performed during the 9th, 10th and 11th hours on that day. However, if, by the end of the week ("Monday to Saturday"), that employee's total number of hours worked is in excess of 40 hours, then he becomes entitled to the appropriate overtime rate in respect of the hours in excess of 40 hours for that week. That appropriate rate is "double time" in respect of all hours worked in excess of 43 hours in the week. As to those hours, the rate of double time applies in place of the rate of time and a half which would have been applicable to the 9th, 10th and 11th hours on any day by reason solely of their being "outside the ordinary hours prescribed" of 8 hours on a full day. The employer is not required, of course, to pay both time and a half and also double time in respect of the same hours of overtime which have been worked by the employee - see Re Bank Officials' (Federal) Award 1955 (1959) 1 FLR 305 at 308 per Spicer CJ. The employer is required to pay the higher of the two overtime rates (i.e. double time) in respect of those hours because clause 15(a) prescribes overtime rates which are payable if the hours in question are either "in excess of" the ordinary hours or "outside" the ordinary hours.

34. If an employee worked 11 hours per day on each of 5 days (where the roster set a week of 5 full days) then, looking at the matter only in terms of his entitlement to an overtime rate for each day, he is entitled to payment at the rate of time and a half for the 9th, 10th and 11th hours on each of those days. However, in our opinion he has an entitlement to be paid overtime at the rate of double time in respect of all hours worked in excess of 43 hours. Accordingly, at the end of the week he would have, overall, an entitlement to be paid at the rate of time and a half for 3 hours and at the rate of double time for 12 hours i.e. the 44th to the 55th hours inclusive.

35. This construction of the clause of the award gains some support from the decision, referred to earlier, in Re Shipping Officers Award. There the court said (at 263):

"... a particular member of the applicant

association worked three hours overtime on

five consecutive week days, that is fifteen

hours overtime in one week, in addition to

forty hours of ordinary time. The applicant

claims that, on these figures, the member

should be paid time and one half for the first

four hours of the fifteen and double time for

the remaining eleven hours. The respondents,

on the other hand, contend that time and one

half only should be paid for the whole of the

fifteen hours and that is the rate at which

payment has been made up to this moment."

36. The clause with which the court was dealing in that case was in the following terms:

"13 - Overtime

(a) For all time worked in excess of forty

ordinary hours per week (or eight ordinary

hours on any day) or outside the spread of

hours on any day, payment shall be made at the

rate of time-and-one-half for the first four

hours and double time thereafter."

37. In holding that an employee was entitled to double time for eleven of the hours worked in excess of 40 hours, the court said:

(at 265) "... the fact that, in the instant

case, the "weekly" overtime provisions turn

out to favour the employee more than the

"daily" overtime provisions cannot dictate the

decision ... The objects of overtime

provisions have been said to be two. Firstly,

to compensate the employee for being called

upon to work outside ordinary hours -

Secondly, to subject employers to a penalty

for the purpose of discouraging work beyond

those ordinary hours. A class of persons

intended to be penalized by an award could

hardly be heard to claim the lesser of two

penalties against a person intended to be

compensated by those penalties.

....

The words of the award are plain and

unambiguous on their face. ...

(at 265-6) The fact that they present

alternatives one of which gives a better

result to one party than another does is, in

the absence of any qualification, no reason

why the plain ordinary meaning of the words

should not be followed.

It is true that if the employee claims penalty

rates for time worked in excess of forty hours

per week the financial result is more

favourable to him than if he made a claim for

time worked in excess of eight hours per day,

but cl. 13(a), in its terms, allows this and,

in addition, there is good reason, based on

the principle that one intention of penalty

provisions is to prevent or restrict regular

overtime, why this should be so.

On the facts of this case the employee was, in

truth, called upon to work regular overtime

for the whole of the week and he claims the

superior benefit of the "weekly" overtime provision."

38. For these reasons, we are of the view that the Chief Industrial Magistrate was correct in holding that Mr. Hunt's entitlement to overtime was to be calculated by reference to the number of hours worked by him during each week.

39. The next question concerned the manner in which amounts which had been paid in cash to Mr. Hunt should be credited to the various obligations under the Award. The appellant's case was that he was entitled to aggregate all of the amounts due under the Award and set against the total all of the amounts actually paid. It was submitted that this accorded with principles which have been applied by the Industrial Commission of New South Wales in dealing with similar problems. Those principles were first discussed in Ray v. Radano (1967) AR (NSW) 471. In that case, a chef who had been employed by a restaurateur, working long hours, claimed a sum in respect of overtime, alleging an entitlement to treat all that had been paid to him as payment in respect of ordinary time, so that nothing that he had been paid should be treated as payment in respect of his overtime entitlement. The Industrial Commission held that, to the extent to which the amount paid each week exceeded the rate prescribed by the award in respect of ordinary time, it could be treated as a payment in respect of overtime. The members of the Commission went on to express opinions as to the circumstances in which money paid to an employee for one purpose could be treated as paid for another purpose. In their joint judgment, at p 475, Richards and Sheehy JJ. said:

"If the moneys received by him were not

received for wages but for some other purpose,

for example, for fares or as a uniform

allowance, he would have to prove this fact in

order to establish that such moneys were not

to be taken into account in determining the

correct balance due to him for wages... . For

the purpose of illustration let us imagine the

following hypothetical case: a worker under

his contract of service was promised $60 for

40 hours' work per week when the appropriate

award fixed the price or rate for 40 hours'

work per week at $40; the worker worked 45

hours in a particular week but was still paid

his usual wage of $60. In such a case the

worker, if he so desired, would be entitled to

bring an action in a civil court to recover

for the extra 5 hours worked in the week in

question, but he would not be entitled to

obtain an order under s.92 unless the amount

which would have been due to him under the

award exceeded $60."

40. Sheldon J.'s views were set out at some length in his judgment, at pp 478-479 as follows:

"The position, as I see it, is that where a

complainant has been employed by a defendant

on work covered by an award, he is entitled

under s.92 (2) to claim any balance due to him

between his award entitlement for his work and

any payment made to him by the employer which

is properly attributable to that award

entitlement. If no more appears than that (a)

work was done; (b) the work was covered by an

award; (c) a wage was paid; then the whole of

that wage can be set-off against the award

entitlement for the work whether it arises as

ordinary time, overtime, week-end penalty

rates or any other monetary right under the

award. Prima facie a weekly sum paid by an

employer to his employee is an appropriation

by the employer (the debtor) to the payment

due for that week (Sarris v. Nicholson

(1925) AR 109); and, in my opinion, there is

no legal significance in the mere verbiage by

which the payment is described whether it be

"wages", "remuneration" or the like. It is

perhaps noteworthy that s.92 under a side note

"Recovery of wages" actually deals in its

operative part with the "price or rate fixed

by an award" for "any work" thus covering any

monetary payment due under the award. I see

no logic in a rule that a periodical sum so

paid is deemed to be referable only to

ordinary time worked unless it is specifically

allocated also to other award rights. I agree

that the two cases (cited in the majority

judgment) which suggest the contrary were

wrongly decided. On the other hand, if by

contract, express or implied, the whole or

part of the payment made to the complainant

has been in respect of matters which are

outside the award entitlement, the payment to

that extent cannot be set-off. This may

include amounts allocated, say, for fares or

as a uniform allowance where there is no award

entitlement in respect of such matters. This,

of course, is recognized in the majority

judgment.

But at this stage I must part company from

that judgment because I can see no difference

in principle between an amount promised in

excess of the award requirement whether the

promise is for, say, a uniform allowance or

for a payment confined to ordinary time only.

In each case, the employee works on the basis

that he will receive an extra-award payment

and, in my opinion, it is not to the point

that in one case its subject matter is

clothing and in the other additional

remuneration for a nominated period of work.

If one cannot be set-off, neither can the

other because their essential character is

identical i.e., both are payments in

fulfilment of a promise extraneous to the

award obligation. The award obligation re

clothing may be nil, in regard to ordinary

time it may be $X. The extraneous promise is

to pay $Y and, whether it is in respect of

clothing or ordinary time, it is $Y beyond

what the award requires. To put it in more

concrete terms, if the award rate for 40 hours

work is $40 with overtime payable in addition

but the employer agrees to pay a uniform

allowance of $5 per week, it is common ground

that it is no answer to a claim under s. 92

for $40 ordinary time and $5 overtime worked

to show that in fact $45 went into the

employee's pocket. If this is so, I regard it

as equally no answer if he got $45 only

because the employer agreed to pay him that

amount for no more than 40 hours work. In

each case, as I see it, the employer cannot

allocate to one subject matter what he has

already paid in pursuance of a promise related

to another subject matter. That would be

approbating and reprobating.

From this it follows that, with respect, I

cannot agree with the majority judgment that,

in the hypothetical illustration there given,

the employer, who had contracted to pay $60

for 40 hours work per week, although the award

obliged him to pay only $40, would have a

complete answer to a claim under s.92 (2)

based on $40 for 40 hours work and an

additional sum for 5 hours overtime under the

award as long as the total claim under the

award did not exceed $60. If this were not

so, the majority judgment regards the

complainant as "using s.92 to recover a higher

rate than that provided in the award". I

cannot see it this way. It appears to me that

he would be using s.92 to recover no more than

his award entitlement which is his right under

s.92 (1). In the illustration, his actual

entitlement under his contract and the award

is $60 plus 5 hours overtime. But to get all

this he must rely on the procedures of the

common law. The restrictive effect of s.92 is

to confine his entitlement under that section

to $40 plus 5 hours overtime. This is the

maximum he can recover and if he claims no

more, he remains within the four corners of

the authorities. He is claiming "the full

amount of any balance due in respect of such

price or rate" (s.92 (2)). The word "such"

refers back to the "price or rate" fixed by

the award. So the balance, which is the limit

of his entitlement, is the difference between

the "price or rate" fixed by the award and

what has been paid in respect of that "price

or rate". I regard it as a departure from the

provisions of s.92 and, indeed, a

contradiction in terms if an amount ($20 in

the illustration) promised and paid as an

excess over one part of the award entitlement

can be used as if it had been a payment in

fulfilment of another part of the award

obligation. This involves re-allocating an

amount promised to, and earned by the

complainant, in respect of subject A (40 hours

work) to meet a claim in respect of subject B

(5 hours overtime). This would be striking a

false balance, not a true one, under s. 92,

becuase (sic.) it is not a balance between the

"price or rate" fixed by the award and payment

made in respect thereto. It also involves, as

I see it, a repudiation of the contract in

order to reduce the balance due under the

award. So, in essence, my view is that

because s.92 restricts what can be claimed to

the award obligation, set-offs must also be

restricted to payments which are referable,

expressly or by implication, to the award

obligation. If a complainant cannot enhance

his claim under s.92 because of private

contract, neither can a respondent use private

contract to reduce it. I would only add that

where payments are made to the complainant,

which relate neither to the award nor private

contract, but are purely ex gratia (e.g. a

Christmas bonus), they clearly cannot be

brought into account to meet a claim under

s.92."

41. In Pacific Publications Pty. Ltd. v. Cantlon (1983) 4 IR 415, the Industrial Commission of New South Wales in court session preferred the views of Sheldon J. to those expressed by the majority in Ray v. Radano. In Pacific Publications, the Commission held that an amount of $4,000 paid to an employee on his retrenchment, and specified as a "special gratuity", could not be treated as part satisfaction for the entitlement of the employee under an award to $6,203.20, being sixteen weeks' pay in lieu of notice. At p 421, the Commission said:

"Despite the subsequent allocation and the

suggestions in argument to the contrary, we do

not think the payment designated a "special

gratuity" was intended to be a payment in lieu

of award notice on termination. The company

clearly appropriated the payment, at the time

of making it, as a "special gratuity" in the

special circumstances of the retrenchments

then occuring and not as a payment in respect

of any obligation which had arisen or might

arise under cl. 12. A gratuity labelled as a

"Christmas bonus", (to take the illustration

of Sheldon J.) would clearly be incapable of

subsequent deduction by the payer as part

payment of wages or some other unsatisfied

award entitlement. We are satisfied that this

payment falls into the same category."

42. It is to be noted that there are two separate situations dealt with in the passage from the judgment of Sheldon J. which has been quoted and in the reasoning of the Commission in Pacific Publications. The first situation is that in which the parties to a contract of employment have agreed that a sum or sums of money will be paid and received for specific purposes, over and above or extraneous to award entitlements. In that situation, the contract between the parties prevents the employer afterwards claiming that payments made pursuant to the contractual obligation can be relied on in satisfaction of award entitlements arising outside the agreed purpose of the payments. The second situation is that in which there are outstanding award entitlements, and a sum of money is paid by the employer to the employee. If that sum is designated by the employer as being for a purpose other than the satisfaction of the award entitlements, the employer cannot afterwards claim to have satisfied the award entitlements by means of the payment. The former situation is a question of contract. The latter situation is an application of the common law rules governing payments by a debtor to a creditor. In the absence of a contractual obligation to pay and apply moneys to a particular obligation, where a debtor has more than one obligation to a creditor, it is open to the debtor, either before or at the time of making a payment, to appropriate it to a particular obligation. If no such appropriation is made, then the creditor may apply the payment to whichever obligation or obligations he or she wishes. See Halsbury's Laws of England, 4th ed., vol. 9, paras. 505 and 506.

43. The principles discussed by Sheldon J. in Ray v. Radano and by the Industrial Commission in Pacific Publications do not appear to have been considered in terms in this Court. In Lynch v. Buckley Sawmills Pty. Ltd. (1984) 3 FCR 503, the Court considered whether amounts paid by an employer to employees in some pay periods, which were in excess of the amounts prescribed by the relevant award, could be treated as satisfying the obligations of the employer in respect of pay periods in which the amounts paid had been below those required by that award. At p 509, Keely J. said:

"...none of those payments which were in fact

above the award rate were paid as amounts due

under the award; they were paid as amounts

due under an agreement which patently was not

intended to fulfil the respondent's

obligations to pay wages under the award. Mr.

Strahan (counsel for the respondent in that

case) conceded - correctly in my opinion -

that an employer who has paid, by agreement

with an employee, an over-award payment cannot

later use that over-award payment to offset a

subsequent payment of an amount less than that

prescribed by the award. In my opinion the

present cases, where the payments were made

pursuant to an agreement, are in the same

position."

44. In Poulos v. Waltons Stores (Interstate) Ltd. (1986) 10 FCR 429, an employer attempted to argue that payments made in respect of commission should be treated as satisfaction of an award obligation with respect to wages. The Full Court rejected that argument. Smithers J., at pp 434-435, based his decision on this point on the absence of evidence as to the actual terms on which the commission was paid. Keely J., at p 439, contented himself with saying that there was "no substance" in the employer's contention. Gray J., at p 453, referred to a provision of the relevant award under which payment of wages was to be in addition to any commission, and raised a doubt as to whether, even in the absence of such provision, an employer could plead satisfaction in that way. He said, "It may be that payments made expressly for one purpose cannot be relied upon as having satisfied obligations under another head altogether. It is not necessary finally to decide this point, however, which should await full argument on another occasion."

45. In our view, it is appropriate that this Court should apply the principles discussed by Sheldon J. in Ray v. Radano and by the Industrial Commission in Pacific Publications. There are no significant differences between s.92 of the Industrial Arbitration Act 1940 (NSW) and s. 119(3) of the Act, for this purpose. The principles themselves are, as we have said, specific applications of general principles relating to parties to contracts and to debtors and creditors.

46. In dealing with the application of those principles, counsel for the appellant attempted to challenge the findings of the Chief Industrial Magistrate as to the specific amounts owing to Mr. Hunt. The challenge was based on the argument that the Chief Industrial Magistrate had not given reasons for his findings. Authorities were cited concerning the obligation of an inferior court to give reasons for its decisions. Specific reference was made to Donges v. Ratcliffe (1975) 1 NSWLR 501 and Lawson v. Lee (1978) 19 SASR 442. Those authorities make it clear that a court must do more than merely announce a result of a case; it must make findings of fact and state reasons for conclusions. In the present case, the Chief Industrial Magistrate gave long and detailed reasons, which included findings of fact. Among those findings of fact were the specification of the amounts, which, on the evidence, the Chief Industrial Magistrate found to be due from the appellant to Mr. Hunt. It is true that the precise process by which he arrived at those amounts is not stated. In the course of the trial, however, counsel for the respondent amended each of the claims, so as to substitute for the amounts claimed originally figures which had been calculated by a witness, called on behalf of the appellant, purportedly to give expert evidence as to the correct amounts due under the Award should certain other facts be found. As a result of these amendments, many of the figures became common ground between the parties, and it was unnecessary for the Chief Industrial Magistrate to engage in a lengthy recitation of the calculations that underlay them.

47. The Chief Industrial Magistrate found that all of the additional cash payments to Mr. Hunt were paid in respect of overtime. Accordingly, he deducted the total of those payments from the total amount claimed in respect of overtime, and did not deduct any of those amounts from the claims in respect of wages, annual leave and public holidays. The reasoning of the Chief Industrial Magistrate on this point was as follows:

"The inference drawn by me from the manner in

which the wages records were kept and group

certificates compiled is that the pay slip

reflected the true position in respect of

ordinary time and the extra cash payments were

referrable to overtime.

In my experience, although beyond the ambit

of the taxation laws, employees are often paid

in this fashion, especially in the

construction industry, cash payments to

compensate for overtime worked."

48. In our view, there was nothing in the evidence as to the manner in which wages records were kept or group certificates compiled to enable the drawing of the inference which the Chief Industrial Magistrate drew. There was no evidence to suggest the existence in the industry in which the appellant employed Mr. Hunt, of a custom or practice whereby overtime work was rewarded by cash payments, believed to be "beyond the ambit of the taxation laws". Nor was it open to the Chief Industrial Magistrate, in the circumstances of this case, to rely upon a practice in any other industry, or generally. In reasoning in this manner, the Chief Industrial Magistrate paid insufficient regard to the evidence as to the agreement between the appellant and Mr. Hunt. We have already referred to the manner in which Mr. Hunt's remuneration was fixed at the outset of his employment. The appellant and Mr. Hunt clearly contemplated that the hours to be worked by Mr. Hunt would not be restricted to the ordinary working hours fixed by the Award. Their intention was to fix remuneration for the total number of hours to be worked by Mr. Hunt in each week. Accordingly, as was the case in Ray v. Radano, there was an agreement between the employer and the employee as to the manner in which the amounts paid were to be applied. The Court should give effect to that agreement by permitting part of the additional cash payments to be treated as having satisfied the appellant's obligations in respect of payment of wages for ordinary time worked. This will result in the claim for wages for ordinary time being satisfied completely. The finding that the appellant was in breach of the award in that respect will be set aside, and the $50 penalty imposed for that breach will be set aside. The amount of Mr. Hunt's entitlement with respect to overtime will, however, be increased to the extent of $11,624.97, being the amount appropriated in satisfaction of the wages claim.

49. The appellant also claimed that the evidence showed that some of the additional cash payments had been appropriated specifically to payments for annual leave. On the appellant's case, Mr. Hunt was paid $8,077.50 in respect of annual leave, as against an entitlement of $6,387.63. The Court should recognise the right which the appellant had to appropriate payments to a specific item. Since Mr. Hunt was over-paid for annual leave, the finding that the appellant was in breach of the award in that respect will be set aside, and the $50 penalty for that breach will be quashed. The result, however, is that the appellant must forego having the excess set off against any other claim, particularly overtime. Once appropriated to the payment of annual leave, the money cannot be relied on in satisfaction of any other claim. The amount of overtime owed to Mr. Hunt will therefore be increased further. There was no evidence of any specific appropriation of the additional cash payments with respect to public holidays. The finding of breach in that regard and the penalty for that breach will remain undisturbed.

50. The penalty for the breach in respect of failing to pay overtime will remain undisturbed. The order of the Chief Industrial Magistrate in respect of overtime will be varied, in accordance with the reasons we have given, to require the appellant to pay $116,938.59.