Romero v Auty [2000] VSC 462

5. The respondent liquidators also make application under s.511 of the Corporations Law for a determination of the question of the identity of the employer of the former employees of the Westbury Joinery enterprise who are not applicants to this proceeding.

8. The company was registered on 30 November 1979 under the name Vetus Dion Nominees Pty Ltd. On 18 June 1980 the name of the company changed to Westbury Joinery Company Pty Ltd. The directors of the company were Joe Ganci, since deceased, Joe Foxwell, William Strachan and Michael Giurleo. Between 1965 and 1979 the individuals who were ultimately the directors of the company were at various times employed in positions such as a cabinet maker by the businesses that preceded the company.

11. In April 1984 another company, Westbury Holdings Pty Ltd was incorporated. On 11 July 1986 a further company, Westbury Joinery Services Pty Ltd ("Westbury Joinery Services") was incorporated. Each of Westbury Joinery Company Pty Ltd, Westbury Holdings Pty Ltd and Westbury Joinery Services Pty Ltd formed the Westbury group.

14. Prior to the incorporation of Westbury Joinery Services four of the applicants commenced employment, they believed, with the company. The relevant applicants were Sam Garretto the sixth-named applicant, Gordon Stephen the eighth-named applicant, Peter Strong the ninth-named applicant and Dominic Zicconi the thirteenth-named applicant.

17. At various times during the 1980s and 1990s the remaining applicants were employed, again they believed, by the company. The detailed employment history of each of the applicants is dealt with separately together with the relevant industrial history relating to the company.

20. On 24 July 1998 the company entered voluntary administration as did, also, Westbury Joinery Services. On 3 September 1998 the company and Westbury Joinery Services were placed in voluntary liquidation and the respondents, Mr M. Auty and Mr G. Keith were appointed liquidators of the company. In April 1999 proofs of debt were submitted by the applicants to the liquidators and on 12 August 1999 they rejected the proofs of debt lodged in the company. On 22 September 1999 the applicants lodged a notice of appeal against rejection of the proofs of debt and the proceeding comes before me for determination.

23. The issue for determination is the identification of the member of the Westbury Group of Companies who employed the applicants. The controversy concerns whether the applicants were employed by the company as they contend or by the related company Westbury Joinery Services. The assets of Westbury Joinery Services are insufficient to meet the claims of the employees as priority creditors. The total claims of all former employees of the company or Westbury Joinery Services, as the case may be, total approximately $265,000. The assets of the company in March 2000 were $333,000 with creditors totalling $1.508M. I was informed by the parties that the asset position of the company may be sufficient to meet the priority claims of all the employees including the applicants and potential applicants in full.

26. As already stated, the issue before the court is the identity of the corporation with which the employees had a contract of service: see AIEU v WP Insurance Services (1982) 42 ALR 598. The courts have adopted the approach that the indicia relevant to the determination of whether a contract of service or a contract for services exists is of limited assistance in the identification of the relevant employer. The courts have taken the view that the totality of the relationship should be considered: see Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, 23-29, 36-39 and 49; Zuijis v Worth Bros Pty Ltd [1955] HCA 73; (1955) 93 CLR 561. It has been held, further, that the belief of the employees as to the question of their employer is admissible and is entitled to weight by the court: see Pitcher and Anor v Longford and Anor (1991) 37 IR 338.

29. Ultimately, the whole of the circumstances surrounding the employment relationship including the subsequent conduct of the parties is relevant to the assessment to be made by the court. Of course, documents are relevant but not necessarily determinative. Ultimately the decision rests on the nature of the business in which the relevant employee worked and conversations and conduct at the time of the original engagement of that employee: see Textile Footwear and Clothing Union of Australia v Bellechic Pty Ltd & Ors, unreported judgment of Ryan J of the Federal Court of Australia, 19 November 1998, (1998) 1465 FCA 19.

32. I turn, therefore, to consider the totality of the circumstances of the applicants' employment.

37. The company and Westbury Joinery Services had the same registered address being the premises at 26 Williamson Road, Maribyrnong. All the applicants worked at those premises.

42. The terms and conditions of employment of the applicants employed prior to 5 June 1995 were governed by the Furnishing Industry - General - Victoria, South Australia, Tasmania - Consolidated Award ("the award"). At the time of the determination of the award the company was named as a respondent. The award was the relevant award applied for the purpose of the Westbury Joinery Pty Ltd (Enterprise Bargaining) Agreement 1995 ("the 1995 agreement") certified by the Australian Industrial Relations Commission ("the Commission") on 19 June 1995. The parties to the agreement included Westbury Joinery Pty Ltd. As part of the material before the Commission at the time of the application for certification of the 1995 agreement there was included an affidavit by Mr Ganci wherein he deposed that he was a director of the company and authorised by it to approve the 1995 agreement on behalf of the company. In the affidavit, also, Mr Ganci deposed that as director of the company he had approved the agreement with the relevant union. After the certification of the 1995 agreement the terms and conditions of employment of the applicants employed between 5 June 1995 and 15 September 1997 were governed by the 1995 agreement.

45. Subsequently, on 15 September 1997 the Commission certified the "Westbury Joinery Services Pty Ltd trading as Westbury Joinery Co Pty Ltd (Enterprise Bargaining) Agreement 1997" ("the 1997 agreement"). The application to certify that agreement was made by the relevant union and Westbury Joinery Services trading as Westbury Joinery Co Pty Ltd. From 15 September 1997 onwards the terms and conditions of employment of the applicants were governed by the 1997 agreement.

48. It is relevant, also, to consider the circumstances of the provision and preparation of group certificates to the applicants, their superannuation and long service leave entitlements and other matters such as stand down arrangements, payment of bonuses, taxation arrangements, Workcover obligations, payment of holiday pay and the like.

53. Applicants employed prior to and in 1986 received group certificates on which their employer was identified as "Westbury Joinery Company Pty Ltd". Applicants employed between 1987 and 1994 received group certificates on which their employer was identified as "Westbury Joinery Services Pty Ltd". Applicants employed in 1995 received group certificates on which their employer was identified as "Westbury Joinery Company Pty Ltd". Those other applicants employed in 1996 received group certificates on which their employer was identified as "Westbury Joinery Services Pty Ltd" and applicants employed in 1997 and 1998 received two separate group certificates. On one group certificate the ACN number was that for the company and the other certificate identified the employer as "Westbury Employee Pty Ltd".

58. An examination of the relevant superannuation documents revealed that such documents were largely in the name of the company. A number of employees were members of an AMP Masterplan Superannuation Fund identified as the "Westbury Joinery Pty Ltd Staff Superannuation Plan". There was also provision for another superannuation fund being the BUS and CBUS (Building Union Superannuation Fund). The statements of members of the latter fund identified the employer as the company. Some employees were members of both funds. During the years 1987, 1988 and 1990 the employees were provided with outlines of a superannuation plan entitled "Outline of Superannuation Plan - Westbury Joinery Co Pty Ltd".

63. It was agreed between the parties that long service leave was paid in relation to the applicants into the "CoInvest Fund" by the company. The company was named as the employer of the applicants in the relevant documents.

68. Each of the applicants employed in June 1992 were "stood down" by their employer. The applicants received a letter on the letterhead of Westbury Joinery Co Holding Pty Ltd - Westbury Joinery Co. The letter advised that Westbury Joinery Pty Ltd was standing down "our" work force. The letter was signed by the company.

73. Each of the applicants employed in 1995 received a cash bonus together with a letter addressed to the employee and signed by the management at "Westbury Joinery Co Pty Ltd".

78. Various taxation documents were examined by the parties. For the period 1984/1985 the documents were in the name of the company. For the period 1989/1990 the documents were in the name of Westbury Joinery Services. So far as payroll tax was concerned on 10 December 1992 the company paid outstanding payroll tax fines. On a date unknown the company paid the Australian Taxation Office fringe benefit tax and in 1990 and 1991 there were nine employment declaration forms in which the employer was identified as the company.

83. On 25 August 1986 the company advised the Accident Compensation Commission that following the incorporation of Westbury Joinery Services on 11 July 1986 the latter company would thereafter perform the function of the payment of wages and salaries. In August 1995 an employer survey submitted to the Victorian WorkCover Authority identified the insured party as Westbury Joinery Services.

88. In 1992/1993 the calculation of holiday pay entitlements were made on computer print outs bearing the name Westbury Joinery Services.

93. Employee lists produced by the liquidators for 1991 and 1992 were headed by the name "Westbury Joinery Services" but employee payroll summary listings were prepared and entitled "Westbury Joinery Company". Correspondence from the Australian Taxation Office in relation to child support payments were addressed to "Westbury Joinery Services" trading as the company.

96. It appeared to be agreed between the parties that Westbury Joinery Services was the corporate vehicle whereby the company paid moneys to it for the payment of payroll and related matters. Funds to meet the weekly payroll were credited on a weekly basis to the Westbury Joinery Services account from the company accounts. The company provided only sufficient funds to cover the payroll and to maintain a modest account balance. Other payments made from the Westbury Joinery Services account, for example, bonus payments, superannuation payments and employee entitlements were covered by the transfer of funds from the company. Westbury Joinery Services paid the labour and associated costs of the company. It did not have significant assets and made no provision in its accounts for accrued employee entitlements. Such entitlements were uniformly met by the transfer of funds from the company for that purpose. Furthermore, an examination of the accounts of Westbury Joinery Services discloses that for the period 1988 to 1998 inclusive no provision was made for accrued entitlements of employees to annual leave or long service leave, nor was any provision made for sick leave or redundancy entitlements. Furthermore, in the accounts of the company and Westbury Joinery Services "management fees" of the same amount appear both as a cost in the trading statement of the company account and as income in the profit and loss statement of Westbury Joinery Services.

99. Against the administrative background of the company and Westbury Joinery Services it is appropriate to set out the salient features of the employment history of each of the 13 applicants. It is useful to consider the applicants in three distinct groups: First, applicants who were employed before the incorporation of Westbury Joinery Services in July, 1986; second, those who were employed as apprentices after the incorporation of Westbury Joinery Services Pty Ltd in 1986; and, finally, those employed after the incorporation of Westbury Joinery Services Pty Ltd but not as apprentices.

104. There were four applicants that were employed by the business before July, 1986 and who remained with the company after the incorporation of Westbury Joinery Services. Those applicants were Sam Garretto (the sixth-named applicant, who began his employment in 1980), Gordon Stephen (the eighth-named applicant, began in 1974), Peter Strong (the ninth-named applicant, began in May, 1986) and Dominic Zicconi (the thirteenth-named applicant, began in 1981).

107. Each of these applicants completed a number of Income Tax Declaration forms between 1980 and 1986. In each case, the employer was identified as either Westbury Joinery Co Pty Ltd or Westbury Joinery Company Pty Ltd.

110. In each case, between 1992 and 1994 the four applicants were each requested to complete a new employment declaration form. These forms identified the employer as Westbury Joinery Services Pty Ltd in respect of Mr Garretto, Mr Stephen and Mr Strong. The employer identified in the declaration in respect of Mr Zicconi was Westbury Joinery Services Unit Trust.

113. Unlike the declaration signed by Mr Strong, where the identity of the employer was included upon the document the day that it was signed by the employee, in the case of Mr Stephen, the identity of the employer was included on the form some nine days after it was signed by the employee. The identity of the employer was also entered upon the form of Mr Garretto after he signed it.

116. Both Mr Garretto and Mr Zicconi commenced apprenticeships whilst in the employ of Westbury Joinery, in 1980 and 1984 respectively. Mr Garretto received correspondence from the Industrial Training Commission of Victoria and the Indenture of Apprenticeship both of which provided that Mr Garretto's employer was "Westbury Joinery Company Pty Ltd". Mr Zicconi also attended the Industrial Training Commission of Victoria. The relevant documentation received by Mr Zicconi also stated that his employer was Westbury Joinery Company Pty Ltd.

119. In 1992, Mr Zicconi also received a stand down letter dated 30 January, 1992 advising that Westbury Joinery Co Pty Ltd had to stand down its work force for a short period. The letter was signed by the Managing Director on behalf of Westbury Joinery Co Pty Ltd. Further, in 1993, Mr Strong received a letter dated 30 July, 1993 on a Westbury Joinery Co Holding Pty Ltd letterhead. The letter confirmed that Mr Strong had been an employee of that company and confirmed that he had decided to cease employment with the company. The letter was signed "Yours faithfully, Westbury Joinery Co Pty Ltd".

124. The applicants that were employed as apprentices after the incorporation of Westbury Joinery Services Pty Ltd on 11 July, 1986 were the third-named applicant, Paul Clarke (who commenced employment in March, 1993), the fifth-named applicant, Corrado Gallina (who commenced employment in February, 1996) and the tenth-named applicant, Steven Tezak (who commenced employment in January, 1988).

127. Employment Declaration Forms relating to Mr Clarke and Mr Gallina indicated inconsistency in the identity of the employer. In 1993, Mr Clarke signed an employment declaration form in which the employer was subsequently included on the form as Westbury Joinery Services Pty Ltd. Mr Gallina signed an Employment Declaration Form in 1996, in which the identity of the employer was subsequently included on the form as Westbury Joinery Co Pty Ltd.

130. Mr Clarke and Mr Gallina were able to produce documents relating to the apprenticeships they commenced with the business in 1993 and 1996, respectively. In May of 1993, Mr Clarke received a letter from the State Training Board confirming his trade school class details. The letter identified his employer as Westbury Joinery Company Pty Ltd. Mr Clarke also received a letter dated 7 September, 1994 from Westbury Joinery Co Pty Ltd confirming his employment with that company. Mr Gallina received a letter from the Training Operations Bureau dated 5 March, 1996 in which his employer was identified as "Westbury Joinery Company Pty Ltd". His "Contract of Training in a Trade" specified that his employer was "Westbury Joinery Company Pty Ltd".

133. In 1992, Mr Tezak received a stand down letter dated 30 January, 1992 advising that Westbury Joinery Co Pty Ltd had to stand down its work force for a short period. The letter was signed by the Managing Director on behalf of Westbury Joinery Co Pty Ltd.

Applicants employed after incorporation but not as apprentices

138. The remaining six applicants were employed by the business after the incorporation of Westbury Joinery Services Pty Ltd, but not as apprentices. They were the first-named applicant, Jacinto Romero (who began in September, 1991), the second-named applicant, Carlos Almendarez (who began in October, 1987), the fourth-named applicant, Robert De Bono (who began in March, 1996), the seventh-named applicant, Osvaldo Rios (who began in September, 1995), the eleventh-named applicant, Dien Tran (began in April, 1996) and the twelfth-named applicant, John Vella (began in March, 1993).

141. Employment Declaration Forms in respect of each of these applicants were dated between 1991 and 1996 and there was little consistency in the identity of the employer on those forms. In the case of Mr Romero (form dated 1991) and Mr Rios (form dated 1995), the employer was identified as Westbury Joinery Company Pty Ltd. The Employment Declarations of Mr De Bono (form dated 1996), Mr Almendarez (form dated 1993), Mr Tran (form dated 1996) and Mr Vella (form dated 1993) identified the employer as Westbury Joinery Services Pty Ltd.

144. The remaining documentation produced in respect of these applicants identified the employer as Westbury Joinery Co Pty Ltd. Mr Romero also received a letter from Westbury Joinery Co Pty Ltd confirming his employment with that company dated March, 1998.

147. Mr Rios and Mr Vella both entered into Wage Subsidy Agreements during their employment with the business. Mr Rios entered into such an agreement in 1995 and on the relevant application forms the Business Name entered was that of Westbury Joinery & Co Holdings Pty Ltd, the account into which the subsidy was to be paid was Westbury Joinery Co Pty Ltd, and the name of the employer was Westbury Joinery Co Pty Ltd. Mr Vella entered a Wage Subsidy Agreement in 1993. The Schedule to that agreement dated 15 March, 1993, identified the business of the employer as "Westbury Joinery & Co (Holdings) Pty Ltd". The first-named applicant, Mr Romero, entered into a Job Start Agreement in 1993 in which his employer was identified as Westbury Joinery & Co.

152. The appeals proceed as a hearing de novo: see Tanning Research Laboratories Inc v O'Brien 160 CLR 332, 341. The onus lies upon the applicants to show that their proofs of debt ought be allowed. The applicants urged that the test was demonstrable error on the part of the liquidators. However, as this matter proceeds as a hearing de novo the court is in the position of the liquidators at first instance. It was apparent that the evidence before the court was considerably more extensive than the evidence that was available to the liquidators at the time they made their decision. This is a matter to which weight is attached: see In Re Kentwood Constructions Limited (1961) WLR 646, 648; Westpac Banking Corporation and Ors v Totterdell and Anor (1997) 25 ACSR 769, 772.

155. On the basis of the evidence before me it is clear that certain considerations should be taken into account in determining whether it was the company or Westbury Joinery Services that was the employer of the applicants. These considerations are the nature of the business and the work performed, conversations and actions at the time of the engagement of the employees, identification of the terms and conditions of the relationship of employment, the identity of the entity that exercised control and the manner of such exercise with respect to the applicants in their capacities as employees, the identity of the entity that provided the materials, equipment and resources to enable the applicants to perform their work, the identity of the entity to which the applicants as employees had obligations of reporting, the understanding and belief of the parties themselves, the methods and means of payment to the applicants and the matters revealed from the various management and administrative documents relating to the company.

158. It is clear from the history of the proceedings that a number of employees of the company were engaged by the company prior to the incorporation of Westbury Joinery Services. Even so, after the incorporation of the services company the company itself continued to employ individuals particularly in the case of apprentices. Nevertheless the issue arises as to whether there was a transfer of the role of employer from the company to Westbury Joinery Services. The authorities have held that a contract of service cannot be transferred or novated from one employer to another without the consent of the employee. Furthermore, the employees' consent must be the real consent of the employee and not a constructive consent raised by operation of law: see Smith v Blandford Gee Sementation Company Pty Ltd (1970) 3 All ER 154; Denham v Midlan Employers Mutual Assurance Limited (1955) 3 All ER 561. I am satisfied on the evidence before me that the employees engaged by the company did not either expressly or impliedly consent to the transfer of their employment to Westbury Joinery Services at the time of the incorporation of the latter subsequently. Furthermore, it is apparent that no new contract of employment was created or entered into by any employees nominating Westbury Joinery Services as the employer. In addition, it is to be observed that no redundancy payments were made by the company and no accrued entitlements were paid out by it upon purported termination of employment of the employees and the transfer of such employees' contracts of employment to Westbury Joinery Services.

161. Insofar as documents such as pay advice slips, group certificates and superannuation documents may have referred to a new or different employer, namely, Westbury Joinery Services an implied assignment does not arise: see Smith v Blandford, supra; Denham v Midlan Employers, supra; also, TFCUA v Bellechic. Furthermore, a number of the applicants were persons with little or no commercial sophistication and who had limited abilities with respect to the speaking of the English language. Such persons were at a disadvantage. As a matter of mere common sense and fairness it would be iniquitous to impose an implied assignment upon such persons' employment arrangements.

164. Leaving aside the applicants as a group, there was a special category of employees, namely, the apprentices. All apprentices were employed by and indentured with the company after the incorporation of Westbury Joinery Services. During the relevant period up until 1990 apprenticeship training was regulated by the provisions of the Industrial Training Act 1975. The Act provided that parties to an indenture were the employer, apprentice and a parent or guardian (see s.26). The Act regulated, also, the transfer of apprentice employment and the assignment of indentures (see s.35-37). Furthermore, under the provisions of the Industrial Training Act, Westbury Joinery Services would not have been capable of providing an apprenticeship. The company was the employer capable of providing the necessary training in light of the industrial activity of the company.

167. The Industrial Training Act was repealed in 1990 by the Vocational Education and Training Act 1990, the provisions of which assumed the regulation of apprenticeship training. Under the Act, a training agreement must be approved by the State Training Board. The Act also provides that the Board must have regard to the employer's ability to comply with the contract, again, by being capable of providing the necessary training, which Westbury Joinery Services would not have been able to provide. The Act also provides that any variation be made by mutual consent and with the approval of the Board.

170. Taking all these factors into account I am satisfied that at no time did the applicants as employees with the company agree to their employment being transferred to Westbury Joinery Services. Furthermore, I am satisfied that the employees were not split as between the company and Westbury Joinery Services being those who were initially employed with the company and those who were later employed by Westbury Joinery Services after the incorporation of the latter. It is apparent from all the evidence before me that at all times all employees were treated in the same way.

173. An additional matter warrants consideration. Of the applicants who were cross-examined a consistent picture was described of the working environment, the uniform adopted and the signage of the workplace. The applicants portrayed a picture of employment that led me to conclude that they genuinely believed they were employed by the company. I accept that belief and attribute it significant weight in determining that the applicants were employed in fact by the company.

176. I conclude that on the evidence the liquidators incorrectly rejected the proofs of debt of the applicants on the erroneous basis that the applicants were employees of Westbury Joinery Services. It follows that the appeals will be allowed.

179. Pursuant to s.511 of the Corporations Law, I have also been asked to determine the identity of the employer of the former employees of the Westbury Joinery enterprise who are not applicants to this proceeding. In so far as I am able to do so based on the material before me, I determine that the identity of the employer was the company.