The agency issue
141 Branded Media Holdings was a decision of Black J on an application by the liquidators of Branded Media Holdings and deed administrators of Brand New Media Pty Ltd seeking directions under s 90-15 of the Insolvency Practice Schedule (Corporations), or alternatively s 479(3) of the Corporations Act 2001 (Cth) or in the Court's inherent jurisdiction. The directions raised the question of the identity of the employer of specified employees within the Branded Media group. The liquidators, alternatively liquidators and deed administrators, sought orders to the effect that they were justified in determining that the specified employees were employed by Branded Media Holdings or that they were employed by BNM. The liquidators' primary position was that Branded Media Holdings was the employer, although it was recognised that there was a case for alternative characterisation of BNM as the employer. Black J made a direction that the liquidators and deed administrators were justified in determining that the employer of the specified employees was BNM.
142 The decision of Black J proceeded on 56 assumptions set out at [5] of his Honour's reasons for decision. The application also proceeded on affidavit evidence described in [7]-[17] of his Honour's reasons for decision. Black J referred to and had regard to other decisions in which the question of whether a company was the employer of particular employees was considered for the purposes of s 556 of the Corporations Act. Two of the main decisions considered were Gothard (recs and mgrs of AFG Pty Ltd (in liq) v Davey [2010] FCA 1163; (2010) 80 ACSR 56 and Re Plutus Payroll Australia Pty Ltd (in liq) [2019] NSWSC 1171; (2019) 139 ACSR 536.
143 Black J then considered the assumptions and evidence before him and determined that BNM rather than Branded Media Holdings was a true employer of the specified employees. In reaching that conclusion Black J said (at [31]):
As I have noted in addressing the parties' submissions, a structure by which Holdings was the employing entity, where it had no assets or revenue from which it could meet employees' entitlements, and did not charge for its services, would have had no intelligible business purposes, or at least no proper purpose. The documentation of the relationship is consistent with Holdings being an "employer of record" and is less significant in identifying the true employer than the fact BNM incurred the costs of paying employees for entities across the group and on-charged other subsidiaries in respect of those costs. The question of direction or control is, at best, neutral where the issue arises in respect of a corporate group; and those said to have exercised that control were either employed by BNM (in the case of Mr Smith) or otherwise and involvements with both Holdings and BNM in different capacities. For these reasons, and adopting substantially the same reasons as was adopted in Gothard, it seems to me that BNM rather than Holdings was the trued employer of the Specified Employees.
144 In Gothard v Davey, Edmonds J said (at [52]):
Unsurprisingly, the outcome in cases which have been concerned with identifying an employer of a person or group of persons from two or more possibilities, whether from within the same group of companies or otherwise, has turned on their own facts and, in consequence, the case law in this area is of limited assistance. Nevertheless, it is possible to discern certain general principles that the courts have applied in the identification process. The courts have adopted the position that in undertaking this exercise, they are entitled to take a wide view of the putative relationship, beyond the terms of the contractual documentation, to examine how the parties conducted themselves in practice and whether, where there is contractual documentation, the reality of the situation accords with the terms of that documentation or whether it points to another entity being the employer.
145 After setting out various cases discussing the general principles Edmonds J then said (at [60]):
Aspects of the practical realities of the relationship which have been considered relevant in the cases referred to above, include a consideration of the entity which:
(a) had practical and legal control and direction of the employees;
(b) made decisions about hiring;
(c) made decisions about disciplinary issues;
(d) made decisions about the level of remuneration;
(e) actually paid remuneration;
(f) communicated with employees about leave;
(g) made decisions about termination of employment.
146 Black J also considered the general principles in Re Plutus where he said (at [21]):
In Australian Insurance Employees Union v WP Insurance Services Pty Ltd (1982) 42 ALR 598 at 606, the fact that a person's salary was paid by a particular company and the tax group certificates issued to her showed that company as her employee did not establish that that company was her employer. In Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465, a first company was held to be the employer, notwithstanding that a second company's name was shown on payslips and group certificates, where the first company made the employee's services available to the second company on condition that it pay their wages and attend to relevant tax deductions. In Re C&T Grinter Transport Services Pty Ltd (in liq) [2004] FCA 1148 at [20], Finn J pointed to several considerations that were relevant to identifying which of two or more possible entities was the employing company and noted, inter alia, that the totality of the circumstances surrounding the relationships of the various parties including conduct subsequent to the creation of an alleged employment relationship is relevant to the assessment of that matter and that documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of that relationship. His Honour also emphasised that, in determining the identity of a disputed employer, the Court is entitled to consider "the reality of purported contractual arrangements"; that conversations and conduct at the time of the alleged engagement of the employee is of considerable significance; and the employees' beliefs as to the identity of their employer is admissible and is entitled to weight.
147 These cases are authority for the proposition, at least insofar as s 556 of the Corporations Act is concerned, that the employer of record may not be the employer for the purposes of s 556 and the Court will look to the 'practical realities' to determine which of two or more possible entities is the employer of an employee. In so doing the Court will have regard to the factors referred to by Edmonds J in Gothard v Davey at [60].
148 Burswood Catering concerned an appeal against the Western Australian Industrial Relations Commission in Court Session by which the Commission in Court Session agreed to issue an award to cover the employees of Burswood Catering and Entertainment. The award terms were substantially similar to the terms of an agreement between the relevant union and Burswood Resort (Management) Ltd registered in the Western Australian Industrial Relations Commission (2001 agreement). The evidence demonstrated that before incorporation of BCE staff employed at Burswood Casino who worked in the food and beverage and bar operations were employed by BRML. BRML and the relevant union were involved in a number of industrial disputes which ultimately led to the 2001 agreement. That agreement provided the employees of BRML with wages and conditions that were in excess of those normally applicable to workers in the same industry governed by other applicable awards. BCE was incorporated less than a month after the 2001 agreement was made.
149 The Commission in Court Session made findings, in effect, that BCE was not a catering contractor distinct from the Burswood group of companies. The decision to have BCE employ staff to do work previously performed by employees of BRML within the resort merely reduced the terms and conditions of employment payable for that work. Burswood Limited was effectively contracting to itself. These matters caused an inequity. The inequity resulted in an avoidance of the 2001 agreement and BCE's employees receiving entitlements less than those applicable under the 2001 agreement albeit equivalent to those under the award otherwise applicable. The Commission in Court Session made a new award for BCE's employees on terms equivalent to the 2001 agreement. BCE appealed to the Full Court of the Supreme Court of Western Australia.
150 One of the grounds for the Commission in Court Session reaching the conclusion that a new award should be made was that the corporate veil should be lifted and that BCE should be treated as an agent of BRML as principal. The Commission in Court Session had considered the principles relating to lift a corporate veil. These are set out in Burswood Catering at [34]-[44] in which Scott J (Parker and Hasluck JJ agreeing) said that the Commission in Court Session was not in error in looking behind the corporate veil and determining that BCE was an agent of BRML. The principles were that courts and tribunals are reluctant to lift the corporate veil but will do so in three circumstances:
(a) when a particular law requires it to be done;
(b) when it can be established that the company is an agent of its controllers;
(c) when the court (or tribunal) is satisfied that the company has been created as a mere façade or shame to conceal the true facts.
As to agency, a number of factors may be relevant such as: are profits treated as profits of the controller (putative principal); are the persons conducting the business appointed by the controller; is the controller the 'head and brain' of the business; does the controller govern the business venture, decide what should be done and what capital should be used; were profits made by skill and direction of the controller; and is the controller in effectual and constant control. Scott J then said (at [39]-[40]):
39 … In its conclusions … the Commission in Court Session said:
[68] Having considered all of the evidence it [sic it is] our view that the corporate veil should be lifted. If the question set out by Atkinson J (in Smith, Stone and Knight) are asked, it is apparent from the uncontradicted evidence set out above that each question must be answered in the affirmative. BCE plainly has not [sic] resources of its own. In relation to the internal labour hire arrangements, the structure of that arrangement cannot be described as a contract to effect a transfer of "business" of BRML in the sense of a [sic] obligation contracted to carry out a commercial enterprise as a going concern.
40 In my view, it cannot be said that, taking all of the maters into account, the Commission in Court Session was in error in looking behind the corporate veil and determining that BCE was an agent of BRM. Indeed, in my view, that conclusion was inevitable.
151 One of the authorities to which reference was made in Branded Media Holdings was Fair Work Ombudsman v Ramsey Food Processing Pty Ltd [2011] FCA 1176; (2011) 198 FCR 174. Ramsey Food Processing concerned the identification of the 'true' employer of certain employees within a group of companies. In that group, a labour hire company (Tempus) and Ramsey made an agreement for the hire of certain employees. As a consequence of that arrangement, Tempus was the employer of record, but the services were provided to Ramsey under its instruction and direction. Buchanan J made findings (summarised at [2] - [3]) to the effect that the interposition of Tempus was a sham and that the 'true' employer was Ramsey. Buchanan J discussed the applicable principles that generally apply when determining the identity of the 'employer' (at [44] - [74]) and the application of those principles within a company group where there may be 'shell' companies that are, in effect, the employer of employees as agent for another company in the group which is the 'true' employer (at [75] - [92]). It is evident from his Honour's description of the legal principles and his analysis of the facts of that case that Buchanan J directed his attention and inquiry to the 'substance and reality' of the arrangements within the corporate group.
152 As Bromberg J observes, the approach taken in Ramsey Food Processing and other authorities such as Branded Media Holdings referred to above, may need to be revisited in light of the recent High Court authorities to which his Honour has made reference. For example, in WorkPac Pty Ltd v Rossato [2021] HCA 23; (2021) 271 CLR 456 (at [37], [66], [67]), the High Court expressly rejected approaching an assessment of the character of an employment relationship as casual or otherwise by reference to the 'conduct of the parties to the employment relationship and the real substance, practical reality and true nature of that relationship' (at [37]) which was described in WorkPac Pty Ltd v Skene [2018] FCAFC 131; (2018) 264 FCR 536 (at [180]-[181]) as the 'settled approach' to the question of whether a person was an employee as distinct from an independent contractor. Otherwise, as Bromberg J observes, in each of Construction, Forestry, Maritime, Mining and Energy Union (CFMMEU) v Personnel Contracting Pty Ltd [2022] HCA 1; (2022) 398 ALR 404, ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; (2022) 398 ALR 603 and Rossato, the High Court placed emphasis on the primacy of written contracts, the validity of which is not in dispute, as the source for identifying the terms of the 'employment' contract and the nature of the 'employment' relationship between the parties to that contract.
153 Nonetheless, for the purposes of s 31A of the FCA Act and assessing if there are reasonable prospects of successfully prosecuting a claim, I do not regard the recent High Court authorities as precluding a party from advancing a claim, based upon the facts of that party's particular case, to the effect that the 'true' employer within a corporate group is not the company identified in the group's corporate records as the nominal employer. Nor do I regard the recent authorities as precluding a claim, in accordance with established legal principles, that the 'corporate veil' of the group should be disregarded because the relevant corporate group arrangement is a sham or that the nominal group employer is employer, as agent, for another company within the group, as principal.
154 Each of the authorities upon which Mr Revill relies are examples of decisions that apply facts, as found, to established legal principles of broader application than purely employment relationships. These decisions illustrate that before a court (or other tribunal) is justified in reaching the conclusion that an employer of record is not the true employer there must be facts demonstrating that another entity is the true employer and that the employer of record is agent of the true employer or other circumstances exist that would make it inequitable not to treat the other entity as the true employer.
155 It is necessary for Mr Revill to demonstrate that the primary judge was, or may have been, in error for failing to conclude that Mr Revill has reasonable prospects of demonstrating that in reality JH Group was his employer or that JH Group was his employer and JHPL was JH Group's mere agent for that purpose. Mr Revill must be able to point to material facts, and evidence of material facts, capable of giving rise to a reasonable argument of that practical reality or agency.