Australian Industrial Relations Commission (Full Bench)|2007-07-13

s.120 appeal against a decision ([2007) AIRC 183] by Kitchen Design Systems Pty Ltd - re Appeal re termination of employment - Full Bench [2007] AIRCFB 403 (13 July 2007)

s.120 - Appeal to Full Bench

Appeal by Kitchen Design Systems Pty Ltd and Freedom Kitchen Direct Pty Ltd against a decision made by Commissioner Smith at Melbourne on 8 March 2007 in U No.2006/4655 (PR976383) re: Termination of employment - jurisdiction - contract - intention to create legal relations - consideration - identification of parties to contract - termination of contract by formation of new contract - contrivance to disguise nature of relationship.

[1] This decision relates to applications for leave to appeal against the decision of Commissioner Smith given in Melbourne on 8 March 2007. The applicants are Kitchen Design Systems Pty Ltd (KDS) and Freedom Kitchens Direct Pty Ltd (Freedom Kitchens). In the proceedings at first instance Freedom Kitchens was the named respondent to Sally Moran's application for a remedy in respect of the alleged termination of her employment. KDS filed a notice of appearance to Ms Moran's application asserting that she had wrongly named Freedom Kitchens as the respondent and that it was the proper respondent to Ms Moran's application. Ms Moran was the applicant below and is the respondent to the applications now before us.

[2] The issues at first instance and on appeal are of a jurisdictional nature. By motion, notice of which was given on 30 June 2007, KDS moved for dismissal of Sally Moran's application for a remedy in respect of the termination of her employment on jurisdictional grounds. KDS contended that Ms Moran was a contractor and not an employee employed under a contract of service and asserted that if, contrary to its primary contention, she was an employee, KDS, and not Freedom Kitchens was her employer. It is not disputed that KDS had fewer than 100 employees.

[3] In determining KDS' application the Commissioner found that Ms Moran was an employee and that Freedom Kitchens was, as she had asserted in her application, her employer. KDS seeks leave to appeal as applicant to the motion to dismiss Ms Moran's application and Freedom Kitchens seeks leave to appeal as a person aggrieved by the Commissioner's finding that it was Ms Moran's employer. Ms Moran seeks to defend the Commissioner's findings and to have his decision affirmed.

[4] M Easton of Counsel appeared by leave for KDS and Freedom Kitchens and T Donaghey of Counsel appeared by leave for Ms Moran.

[5] Freedom Kitchens is part of the Enstrom Group of companies comprising Freedom Kitchens Direct Pty Ltd, Kitchen Group Pty Ltd, Sydney Kitchen Group Pty Ltd and Wholesale Joinery Pty Ltd as subsidiaries of Enstrom Pty Ltd (Enstrom). The Group is engaged in the design, manufacture and sale of home kitchens under the retail brand names Freedom Kitchens, Sydney Kitchens and Wholesale Kitchens. Douglas McKewen is and was at the relevant time the sole director of each of these corporate entities.

[6] Between 1994 and 2000 Ms Moran, through her business Salmor Design, provided kitchen design services to Sydney Kitchen Centre Pty Ltd (Sydney Kitchens), which was then a subsidiary of Enstrom. In 2000 Ms Moran ceased providing her services for Sydney Kitchens and moved from Sydney to Melbourne. In 2002 Ms Moran took up full-time employment with Prime Life Corporation (Prime Life) as a sales manager.

[7] In 2003 Mr McKewen began exploring the possibility of expanding the business of Freedom Kitchens into Melbourne. He contacted Ms Moran and had a discussion with her about being part of the planned expansion. Subsequently arrangements were made with Ms Moran to become engaged in the business in Melbourne. The actual terms of the arrangements, which are in dispute, are considered later in these reasons for decision. Suffice to say at this point that subsequent to the agreement for Ms Moran to join the business a further arrangement was made for Ms Moran to provide weekly invoices to KDS for the agreed payments she was to receive for her services. Ms Moran gave up her full-time employment with Prime Life and took up an engagement in the business of kitchen design with Freedom Kitchens. Each week Ms Moran submitted an invoice to KDS for an amount of $1650 inclusive of a GST component of $150. Ms Moran's invoices were issued under the name of Check Lec Pty Ltd (Check Lec).

[8] KDS provided kitchen designer and other services for Freedom Kitchens and the other Enstrom subsidiaries. However, it has no shareholders or directors in common with Enstrom or its subsidiaries. The sole director of KDS is Jennifer Riddoch, who is the sister of Mr McKewen. Neither of Mr McKewen, Freedom Kitchens nor Enstrom holds any financial interest in KDS. Under the arrangements between KDS and the Enstrom group of companies, service providers invoice KDS for their services to the companies in the Enstrom group and KDS aggregates and apportion the costs of the services across the entities in the group. In respect of Ms Moran's services KDS paid on the weekly invoices issued under the name of Check Lec the sum of $1650.

[9] Check Lec is the trustee for the Cant Family Trust. The sole director of Check Lec is Kevin Cant, husband of Ms Moran.

[10] Broadly speaking this was the context in which KDS and Freedom Kitchens have asserted that the arrangements to which reference is made in paragraphs [7] and [8] were arrangements between KDS and Ms Moran or Check Lec and not Freedom Kitchens and Ms Moran, and that the true nature of the arrangements was that of consultancy or a contract for services. Alternatively, if the arrangement was in the nature of a contract of service with anyone other than Check Lec then KDS and not Freedom Kitchens would have been the employer.

[11] We are satisfied that Freedom Kitchens is a person aggrieved within the meaning of those words in s.120(3)(g) of the Workplace Relations Act 1996. Counsel for Ms Moran quite properly conceded as much. We are satisfied also that an appeal may be brought against the Commissioner's decision pursuant to s.120(1)(f).

[12] The applicants' grounds of appeal are identical. In essence the appeal is based on four propositions. First, it is contended that the Commissioner's finding that there was a contract relationship between Ms Moran and Freedom Kitchens is contrary to the facts and the law. Secondly, the applicants contend that the Commissioner failed to identify and take account of the nature of the relationship between Ms Moran and Check Lec. The third proposition is put in the alternative, namely that if there ever was a contractual relationship between Ms Moran and Freedom Kitchens it was replaced by a contract or arrangement between Ms Moran and KDS. Finally, the applicants contend generally that the Commissioner failed to take account of relevant matter, took account of extraneous matter and generally misconceived the true nature of the arrangements between Ms Moran, KDS and Check Lec.

[13] In relation to the first proposition it was argued that proper regard was not given to Ms Moran's:

conduct during the relevant time of engagement;

relationship with Check Lec as a corporate trustee of a family trust that made distributions to her;

[14] It was further argued that the Commissioner ought to have found that Freedom Kitchens did not intend to enter into legal relations with Ms Moran and that no consideration had passed between them.

[15] Turning to the second proposition the applicants argued that the relationship between Ms Moran and Check Lec was crucial to an understanding of the nature of the relationship between her and the putative employer and that the Commissioner ought to have found that Ms Moran was exclusively employed by Check Lec.

[16] In relation to the third proposition it was argued that it was not open on the evidence for the Commissioner to find that the invoicing arrangements that were put in place after Ms Moran's engagement were a contrivance and that the Commissioner had denied them procedural fairness in not alerting them to this possible conclusion. This point and the second point overlap. In essence it is put that the Commissioner ought to have found that the arrangement was one by which Check Lec had entered into a contract for services with KDS and that KDS was not part of Enstrom.

[17] In support of the fourth proposition the applicants made broad ranging assertions as to matters of weight and inferences proper to be drawn from the evidence. We do not pause to repeat all of those matters here. We will however, deal with the matters raised.

[18] Ms Moran lodged in the Commission on 22 June 2006 an application under s.643(1)(a) of the WR Act. That section relevantly provides that, subject to certain conditions, an employee whose employment has been terminated by the employer may apply to the Commission for relief in respect of the termination of that employment on the ground that the termination was harsh, unjust or unreasonable. The section requires that, in order to attract the jurisdiction of the Commission, there must have been a relationship of employer and employee which was terminated by the employer. Assuming such a relationship one of the conditions attaching to the right to bring an action under s.643 is that the employer employs more than 100 employees. [1]

[19] The case for the applicants before the Commissioner and before us was and is that there was no contractual relationship at all between Ms Moran and Freedom Kitchens and, if there was, it was not one of employment. Alternatively, if an employment relationship did exist it was between Ms Moran and KDS and KDS has less than 100 employees.

[20] Whether or not a person fits the description of employee under the WR Act is not a discretionary decision, but rather involves a mixed question of fact and law; the Commission must first ascertain what is meant by the word employee as it appears in s.643 and then make findings of fact and determine whether the facts as found establish whether the person is an employee or not. [2] Relevantly the term employee is defined by sections 5, 6 and 858 of the WR Act and s.3 of the Commonwealth Powers (Industrial Relations) Act 1996 (Vic.). Upon a composite reading of those provisions the term employee has its ordinary meaning, viz a person who performs work or labour for another; that is to say a person who sells their labour and not the product of their labour. It does not, however, include independent contractors or, in the State of Victoria, law officers.

[21] The nature of the Full Bench's power to grant, or refuse leave to appeal was explained in Construction, Forestry, Mining and Energy Union v Australian Industrial Relations Commission: [3]

"It can be seen from s.45(1) that an appeal lies to a Full Bench only with the leave of the Full Bench. Section 45(1) confers a power on the Full Bench to grant leave and s.45(2) requires a Full Bench to grant leave if it forms the opinion that the matter is of such importance that in the public interest leave should be granted. The formation of that opinion dictates that leave be granted. Section 45(2) does not prescribe the test for the grant of leave. It requires the Full Bench to grant leave if the Full Bench forms the requisite opinion. The conventional considerations for the granting of leave including whether, in all the circumstances, the decision is attended with sufficient doubt to warrant its being reconsidered by the Full Bench, or whether substantial injustice would result if leave were refused, supposing the decision to be wrong, are not replaced by a different test: rather, s.45(2) provides a further, and obligatory, basis for the grant of leave."

[22] The Commissioner's first task was to determine whether or not there was in existence a contract and, if so, its nature and who were the parties to it. Essentially that is the course the Commissioner followed. We are satisfied however that, supposing the decision to be wrong, substantial injustice would result if leave was refused. Accordingly we grant leave to appeal. It remains for us to examine the facts and determine for ourselves whether the Commissioner erred in law or in his findings of fact. [4]

[23] In 2003 Mr McEwen visited Melbourne in company with Susan Hasler to explore whether Freedom Kitchens should open in Melbourne. At that time Ms Hasler was a consultant to KDS whose services were then provided to Freedom Kitchens. Mr McEwen spoke with Ms Moran by telephone in early 2004 about his proposal for Freedom Kitchens to open in Melbourne, as he believed that she was interested in working with the business in Melbourne.

[24] According to Ms Moran's evidence Mr McEwen gave her the option of coming on board as an employee or as a contractor. Ms Moran said that she told Mr McEwen that she wanted to work as an employee. Mr McEwen denied discussing with Ms Moran any option as to the nature of the relationship she would have with the business. He did invite her to submit her CV, which she did on 29 April 2004, and asked her to come to Sydney for discussions with Ms Hasler about working in the business.

[25] Ms Moran subsequently met with Ms Hasler at Moore Park in Sydney in the first week of May 2004 and had further discussions with her on 11 and 12 May 2004. During the discussions Ms Hasler talked about the business that was operated by Freedom Kitchens. The Commissioner found that in the course of the meeting and the discussions there was agreement that Ms Moran would work full-time 8.00 a.m. to 6.00 p.m. in the Melbourne head office and receive a salary of $78,000 plus bonuses. It was also agreed that Ms Moran would undertake an on-line personality test to establish her fit with the business. The Commissioner's findings in this regard are not challenged. Ultimately Mr McEwen and Ms Hasler decided to engage Ms Moran.

[26] On 12 May 2004 Ms Hasler telephoned Ms Moran and said words to the effect that she had the job, whereupon Ms Moran tendered her resignation to her then employer, Prime Life. On 21 May 2004, Ms Hasler telephoned Ms Moran and told her that she would have to submit an invoice for her salary.

[27] Ms Moran took up her engagement in early June 2004. She did not know at the time the name of the entity that had engaged her as nothing had been said in the interview about its identity. Subsequently she was issued with a business card bearing the business name Freedom Kitchens Direct, her name, Sally Moran, and describing her as State Sales Manager. The card also carries an address for the office in which Ms Moran was located and telephone numbers for a land line and mobile phone.

[28] Upon requests from Ms Moran for a written offer and her contract, Ms Hasler told Ms Moran to contact Karen Herbert, which she did, about those matters. In response to Ms Moran's request Ms Herbert explained to her that the relevant documentation was not ready and that Ms Moran should use the forms that are used for people engaged as kitchen designers. By and large kitchen designers were engaged as contractors. Ms Herbert sent Ms Moran a suite of designer details forms which she completed and returned, along with an invoice from Check Lec to KDS to be processed for payments. Ms Moran subsequently submitted Check Lec invoices weekly in the amount of $1500 plus $150 for GST. Initially the invoices bore the handwritten words Week and beneath that salary and then the amounts. In mid-December 2005 KDS told Ms Moran to change the word salary to consultancy and all subsequent invoices carried that word.

[29] Under the terms of her engagement, as it subsequently transpired, Ms Moran was entitled to paid annual leave. She was required to keep time sheets and to apply for annual leave as and when it was required. Applications for leave were made on a Sydney Kitchen Group Pty Ltd printed leave application form and the leave was authorised by Ms Hasler. In September 2004, Ms Hasler sent to Ms Moran a job description for her position as State Sales Manager and for the position of area manager. On the same day Ms Hasler sent her a copy of the bonus structure for Freedom Kitchens Melbourne under cover of a note that reads please find you(r) bonus structure below, yearly bonus structure to be confirmed.

[30] Ms Moran was responsible for recruitment, training and supervising office and showroom staff and designers in the Melbourne office. She had authority to hire staff and contractors and to discipline all workers engaged in the office.

[31] The fact that there is a relationship between two parties in a workplace does not necessarily mean that there is a contract between them. It is only after the existence of a contract has been established that its nature may be determined. [5]

[32] There is significant disagreement about what was said in the discussions between Ms Moran and Mr McEwen and Ms Moran and Ms Hasler in negotiations leading up to Ms Moran's engagement. According to Ms Moran's witness statement Mr McEwen, in a telephone discussion early in 2004, had given her an option to work as an employee or under the same conditions as her previous engagement with the group saying she:

". . . could come on board as our sales manager, as a staff member, or be a designer for us, similar to what you did up here."

[33] Ms Moran said that she told Mr McEwen that she wanted the role as sales manager and was not interested in a design role again. Mr McEwen in his witness statement said that he never had a discussion with Ms Moran about entering into an employment relationship and that he never intended to enter such a relationship. In cross-examination Mr McEwen could not recall what was said in his discussion with Ms Moran, but maintained that he did not offer her employment.

[34] The Commissioner found that a contract had been formed on 12 May 2004 and that the contract was between Ms Moran and Freedom Kitchens. We discern no error in the Commissioner's finding in that regard. In making that finding the Commissioner expressed his preference for the evidence of Ms Moran over that of Mr McEwen and Ms Hasler wherever there was conflict in their evidence. An examination of the evidential material, and in particular Mr McEwen's and Ms Hasler's oral evidence, provides no foundation for suggesting otherwise. [6]

[35] It is clear that as at 12 May 2004 Ms Hasler, representing Mr McEwen's interests, intended to create mutual legal obligations between those interests and Ms Moran. The applicants' submissions to the contrary are surprising. According to Ms Moran, Ms Hasler told her that she would be employed to head up Freedom Kitchens in Melbourne. Ms Hasler was equivocal about whether she had told Ms Moran that she was to be engaged as a contractor. The negotiations led to Ms Moran undertaking to provide her labour from 8.00 a.m. to 6.00 p.m. in consideration of Ms Hasler's principal paying to her an annual salary of $78,000 plus bonuses. Upon Ms Moran completing an on-line personality test Ms Hasler offered Ms Moran a job and Ms Moran accepted the offer. There was express offer and acceptance and there was valuable consideration. There was, in the words of the Full Federal Court in Building Workers Industrial Union of Australia v Odco Pty Ltd [7] a promise by the presumptive employer to pay for service as and when the service is rendered.[8] So much is clear enough from the evidence of the discussions between Ms Hasler and Ms Moran. There was a contract, the nature of which is considered more fully below.

[36] The identity of the party that Ms Hasler represented in completing the contract with Ms Moran on 12 May 2004 is not so readily apparent. In early 2004 Mr McEwen had discussed with Ms Moran a proposal for Freedom Kitchens to expand its operations into Melbourne. At the time of making the contract with Ms Moran, Ms Hasler was in a contractual relationship with KDS to provide services for Freedom Kitchens. The personality test that Ms Moran undertook was on account of Sydney Kitchen Centre and the personality test report was prepared by Mr McEwen on behalf of Sydney Kitchen Centre. [9] It is recalled that between 1994 and 2000 Ms Moran's services were provided for Sydney Kitchen Centre Pty Ltd.[10] Whatever else may be said of the contract however, one certainty that can be stated is that the whole of the dealing with Ms Moran, as at 12 May 2004, was associated with entities in the Enstrom Group.

[37] There is no evidence that KDS was disclosed as a party principal or even mentioned in any of the discussions between Ms Moran and Mr McEwen or between Ms Moran and Ms Hasler on or before 12 May 2004. It appears that KDS was not consulted about the engagement of Ms Moran. [11] In the circumstances it is highly improbable that KDS was a party to the agreement that was made with Ms Moran on 12 May 2004.

[38] Ms Moran's previous work with Sydney Kitchen Centre Pty Ltd was discussed between Ms Hasler and Ms Moran at their meeting in Moore Park in Sydney and the personality test was undertaken on its account. We discount it, however, as the other party to the agreement made with Ms Moran on 12 May 2004. The conversation between Ms Hasler and Ms Moran in early May 2004, which specifically dealt with the distinction between Freedom Kitchens' and Sydney Kitchen Centre customers and products, was a conversation about the contrast between products and in the context of Freedom Kitchens setting up in Melbourne. In any event Sydney Kitchen Centre had been deregistered.

[39] We have concluded, as did the Commissioner at first instance, that the entity that Ms Hasler represented in her negotiations with Ms Moran and in concluding the contract on 12 May 2004 was Freedom Kitchens. It was the entity that was discussed between Mr McEwen and Ms Moran when Mr McEwen contacted Ms Moran to ascertain if she was interested in being involved in the business. Ms Hasler was at the time of her negotiations with Ms Moran in April and May 2004, performing services for Freedom Kitchens and that was the entity that was to carry on business in Melbourne. It was the entity in respect of which Ms Moran was to render her services.

[40] Ms Moran's evidence, which, as noted earlier, Commissioner Smith preferred to that of Mr McEwen and Ms Hasler, was to the effect that she and Mr McEwen agreed that she would come on board as an employee. The question is whether Ms Moran was engaged as an independent contractor or an employee and that question is to be decided independent of the words spoken at the time.

[41] The evidence of objective facts going to the nature of the contract that was made between Freedom Kitchens and Ms Moran on 12 May 2004 is unusually brief. The only terms that appear to have been discussed were that Ms Moran was to be engaged as Sales Manager to head up Freedom Kitchens in Melbourne. She was required to work full-time regular hours 8.00 a.m. to 6.00 p.m. for which she was to receive a fixed annual income of $78,000 per annum plus unspecified bonuses. These facts, scant as they are, bear the hallmarks of a contract of employment. We are satisfied that was the nature of the agreement that was reached between Freedom Kitchens and Ms Moran on 12 May 2004 was one of employment.

Was there a change in Moran's contractual arrangement with Freedom Kitchens?

[42] The applicants submitted that the subsequent conduct and arrangements between Ms Moran and the applicants wholly replaced any contract that was formed in May 2004. In this regard the applicants point to the invoicing arrangements made between KDS and Ms Moran, the submission of the invoices in the name of Check Lec for Ms Moran's work, the claim for GST on the invoiced amount, the payments made by KDS to Check Lec and the way in which Check Lec disbursed the funds that KDS paid to it on the invoices for Ms Moran's work.

[43] The Commissioner found that the invoicing arrangement with KDS was a contrivance and did not alter the nature of the oral contract of employment that had been made between Ms Moran and Freedom Kitchens on 12 May 2007. The applicants contend that the Commissioner's finding of a contrivance is a denial of procedural fairness. They argued that no case was advanced before the Commissioner on the basis of a contrivance and the Commissioner did not inform them that he was minded to make such a finding. Consequently, the finding in that respect was said to be made without the applicants being given an opportunity to be heard in relation to it. The applicants contend that, in any event, there was no evidence that could support a finding of contrivance. It is convenient to deal with these contentions conjunctively.

[44] While we accept the major premise of the Applicants' contention about the application of the rules of procedural fairness, we disagree with the Applicants' assertions that they were denied procedural fairness in this case. In this context the relevant issue is the process and not the actual decision. True though it is that a decision maker must give a party in a proceeding an opportunity to be heard in relation to any adverse conclusion to which the decision maker may arrive, there are qualifications to the rule. A conclusion that is open on the known material in the proceedings does not require the decision maker to disclose his or her mental processes or provisional views. In Commissioner for ACT Reference v Alphone Pty Ltd [12] the Full Court of the Federal Court stated the principle thus:

"Where the exercise of a statutory power attracts the requirement for procedural fairness, a person likely to be affected by the decision is entitled to put information and submissions to the decision maker in support of an outcome that supports his or her interests. That entitlement extends to the right to rebut or qualify by further information, and comment by way of submission, upon adverse material from other sources which is put before the decision maker. It also extends to require the decision maker to identify to the person affected any issue critical to the decision which is not apparent from its nature or the terms of the statute under which it is made. The decision maker is required to advise of any adverse conclusion which has been arrived at which would not obviously be open on the known material. Subject to these qualifications however, a decision maker is not obliged to expose his or her mental processes or provisional views to comment before making the decision in question." [13]

[45] In this context it is worth repeating the well known passage of Lord Diplock in Hoffmann-La Roche & Co AG v Secretary of State for Trade and Industry: [14]

"Even in judicial proceedings in a court of law, once a fair hearing has been given to the rival cases presented by the parties the rules of natural justice do not require the decision maker to disclose what he is minded to decide so that the parties may have a further opportunity of criticising his mental processes before he reaches a final decision. If this were a rule of natural justice only the most talkative of judges would satisfy it and trial by jury would have to be abolished."

[46] The Applicants contend that the Commissioner's conclusion that the invoicing arrangement was a contrivance was not open on the known material in the proceedings. We disagree. We find, as did the Commissioner, that there is no evidence that Ms Moran was authorised to contract on behalf of Check Lec. Whatever arrangements Ms Moran had with Check Lec for the disbursement of the funds it received for her services cannot bear on the nature of the relationship she had with Freedom Kitchens or KDS. That may be a matter of some consequence for the Commissioner of Taxation. The critical question is whether there was some contractual relationship between KDS and Check Lec. Important in this regard is the absence of any evidence to establish a contractual link between Check Lec and KDS. There is no evidence that any Check Lec representative or any authorised agent entered into contractual, or any negotiations at all with KDS on its behalf.

[47] An agreement between KDS and Check Lec cannot be inferred from the conduct of those entities. There was no communication between them. The only conduct that could give rise to any inference was that of Ms Moran and KDS. Ms Moran provided invoices with the Check Lec logo and directed the payments into Check Lec's accounts. KDS for its part paid the invoiced amounts to the credit of Check Lec as Ms Moran had directed. Check Lec, as a family trust disbursed the money as it saw fit. It would be mere speculation to infer from these facts that there was a contract between Check Lec and KDS for Check Lec to provide the services of Ms Moran to Freedom Kitchens.

[48] There is no evidence that anyone from Freedom Kitchens or the Enstrom Group consulted KDS in the process of engaging Ms Moran or subsequently for the definition or management of her role. At the time the invoicing arrangement was made an employment agreement had been reached between Ms Moran and Freedom Kitchens. Ms Hasler subsequently told Ms Moran that she would need to submit an invoice for her payments. The further arrangement for submission of the invoice to KDS was made by telephone between Ms Moran and a person who was not called to give evidence and said to be an employee of KDS.

[49] Meanwhile Ms Moran in the conduct of her day to day duties remained subject to direction by Ms Hasler. She was provided with a business card which held her out as State Sales Manager, Freedom Kitchens. She was paid weekly an amount of $1500 as salary and an amount of $150 on the invoiced amount for GST. Ms Hasler provided her with a written job description setting out in great detail the tasks Ms Moran was required to perform with designated key performance indicators. The job description also provided for six-monthly formal appraisals by the Managing Director against the job description and monthly informal appraisals against the key performance indicators. Ms Moran was entitled to a bonus on performance. She was required to keep daily time sheets and she was entitled to paid annual leave.

[50] It is said that the agreement between Ms Moran and Freedom Kitchens must fail for want of consideration. Ms Moran provided services for Freedom Kitchens but it gave no consideration for those services. The consideration for her services was the payments made by KDS and KDS is not a corporation related to Freedom Kitchens. The fact is that the payments made by KDS to Check Lec are levied against Freedom Kitchens as part of the Enstrom Group.

[51] We have considered the nature of the relationship between Ms Moran and Freedom Kitchens in the context of the High Court decision in Stevens v Brodribb Sawmilling Co Pty Ltd as applied by the Full Bench in Abdulla v Viewdaze Pty Ltd t/a Malta Travel [15] and stated in the following terms:

"[18] The traditional approach to characterisation was to apply a control test. In Brodribb Mason J, with whom Brennan J and Deane J relevantly agreed, addressed the factor of control, and issue of characterisation generally, in the following way:

'A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it: Zuijs v Wirth Bros. Pty. Ltd [1955] HCA 73; [(1955) 93 CLR 561, at p 571]; Federal Commissioner of Taxation v Barrett [1973] HCA 49; [(1973) 129 CLR 395, at p 402]; Humberstone v Northern Timber Mills [1949] HCA 49; [(1949) 79 CLR 389, at p 404]. In the last-mentioned case Dixon J said (at p. 404):

"The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions."

But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty. Ltd v Federal Commissioner of Taxation [1945] HCA 13; [(1945) 70 CLR 539, at p. 552]; Zuijs' Case; Federal Commissioner of Taxation v Barrett [1973] HCA 49; [(1973) 129 CLR 395, at p. 401]; Marshall v Whittaker's Building Supply Co [1963] HCA 26; [(1963) 109 CLR 210, at p. 218]. Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.

. . . control is not now regarded as the only relevant factor. Rather it is the totality of the relationship between the parties which must be considered.""

[52] On the application of this approach, the indicia supporting employment by Freedom Kitchens Direct substantially out weigh any other alternative. We have set out the indicia in paragraph [49] above and summarise here the defining factors:

the extent to which Ms Moran was subject to day to day direction by Ms Haslar serving Freedom Kitchens Direct;

the extent to which remuneration arrangements were determined by Freedom Kitchens Direct given that Ms Moran clearly considered that payments made to Check Lec in response to weekly invoices represented payments made to her;

the extent to which weekly hours were set by Freedom Kitchens Direct;

the extent to which Freedom Kitchens Direct provided for and determined Ms Moran's annual leave requests;

the extent to which Mr Moran's performance was managed by periodic reviews.

Whether insufficient weight given to evidence of the conduct of the parties?

[53] The Commissioner weighed all the relevant factors in reaching his conclusion on the contractual arrangements that were put in place, including Ms Hasler's relationship with KDS, the duties performed by Ms Moran, her day to day routine, her nomination of Check Lec as the invoicing entity, and the associated financial arrangements. The applicants contend that the Commissioner did not give sufficient weight to these matters.

[54] The principles applicable to the determination of a complaint about a failure to give adequate weight to issues before a tribunal were summarised recently by the Full Bench in Farquharson v Qantas Airways Ltd. [16] The Full Bench had this to say:[17]

"A failure to give sufficient weight to a relevant consideration may constitute an error that can be corrected on appeal. [18] The relevant principle was stated by Gibbs CJ in Mallet v Mallet. [19] In that case the High Court (Gibbs CJ, Wilson and Dawson JJ; Mason and Deane JJ dissenting) allowed an appeal against the Full Court of the Family Court of Australia who had overturned a decision at first instance on the basis that the trial judge had not given sufficient weight to certain matters. The judgment of the trial judge was restored. Gibbs CJ noted:[20]

'The meaning of the statement which is found in the authorities that an appellate court may interfere with an exercise of discretion when it reaches the clear conclusion that no weight, or no sufficient weight, has been given to relevant considerations was explained by Latham C.J. in Lovell v. Lovell [1950] HCA 52; (1950) 81 CLR 513, at p 519, as follows:

'If completely irrelevant considerations have been taken into account and they have really affected the decision the case is clear, and the order, though made in the exercise of a discretion, should be set aside. Similarly, if relevant considerations are plainly ignored the same result follows. But when the appellate tribunal is considering questions of weight it should not regard itself as being in the same position as the learned trial judge. In the absence of exclusion of relevant considerations or the admission of irrelevant considerations an appellate tribunal should not set aside an order made in the exercise of a judicial discretion ... unless the failure to give adequate weight to relevant considerations really amounts to a failure to exercise the discretion actually entrusted to the court.'

(See also per Kitto J., at pp.533-4.) In Gronow v. Gronow [1979] HCA 63; (1979) 144 CLR 513, the principle was similarly expressed by Stephen J., at pp 519-520, and Aickin J., at pp.534, 537-8; see also per Mason and Wilson JJ., at p.525. In the present case it was clear that Bell J. did not overlook any of the factors to which the Full Court referred. He said nothing to indicate that he did not give them adequate weight. The conclusion reached by the Full Court that he had failed to give them proper weight can only be explained by the fact that their Honours disagreed with his conclusion. However the mere fact that they themselves would have made a more liberal provision for the wife was no justification for substituting their own exercise of discretion for that of the primary judge.' (emphasis added)

As noted by Gibbs CJ, in Gronow v Gronow [21] the principle was similarly expressed by Stephen J who said:[22]

'. . . It will serve little purpose to refer to the numerous authorities which, in varying language but with unvarying emphasis, describe the principles which should be applied by an appellate court in an appeal from a decision founded upon the exercise of a judicial discretion. Both the judgments of the majority and the dissenting judgment of Fogarty J. in the present case refer to appropriate authorities and cite relevant passages. It is not the principles which are in doubt. It is in the application of those principles to particular cases that difficulties arise.

The constant emphasis of the cases is that before reversal an appellate court must be well satisfied that the primary judge was plainly wrong, his decision being no proper exercise of his judicial discretion. While authority teaches that error in the proper weight to be given to particular matters may justify reversal on appeal, it is also well established that it is never enough that an appellate court, left to itself, would have arrived at a different conclusion. When no error of law or mistake of fact is present, to arrive at a different conclusion which does not of itself justify reversal can be due to little else but a difference of view as to weight: it follows that disagreement only on matters of weight by no means necessarily justifies a reversal of the trial judge. Because of this and because the assessment of weight is particularly liable to be affected by seeing and hearing the parties, which only the trial judge can do, an appellate court should be slow to overturn a primary judge's discretionary decision on grounds which only involve conflicting assessments of matters of weight. In the present case it should not have done so at all.' (emphasis added)"

[55] It is not evident to us that the matters to which the Applicants refer as being inadequately weighed by the Commissioner are so exceptional as to warrant greater consideration or weight than the Commissioner gave them. In any event, as we have come to the same conclusion as the Commissioner on the evidence we see no basis for disturbing his finding on the issue of weight.

Was the discretion affected by extraneous considerations?

[56] The complaint of the Applicants in this regard is that the Commissioner should not have taken account of a number of factors including that Ms Moran had the title of State Sales Manager, was issued a business card bearing that title under the logo of Freedom Kitchens and that she carried out those duties. Other factors said to be extraneous are the fact that Ms Moran did not have day to day contact with Ms Riddock, the principal of KDS, the absence of evidence of Ms Moran's husband in the process of formulating her contract, the discussions between Ms Moran and Ms Hasler in May 2004 and matters pertaining to KDS business. The Applicants' contentions in this regard are completely lacking in substance.

[57] Finally the Applicants contend that the Commissioner made errors of fact in his findings that:

there was no direct evidence of a contract between Check Lec and KDS;

there was no evidence that Ms Hasler was authorised to act on behalf of KDS;

there was no contact with any person who was a director or person in authority at Check Lec;

there was no direct evidence of a contract of employment between Ms Moran and Check Lec; and

Ms Moran and Check Lec were not conducting a business of their own.

[58] We see no error in the Commissioner's findings in these regards.

[59] We confirm the Commissioner's decision, dismiss the appeal and direct that the file be referred to Commissioner Smith for conciliation.

M Easton of counsel for Kitchen Design Systems Pty Ltd.

Printed by authority of the Commonwealth Government Printer

[2] Sammartino v Foggo (1999) 93 IR 53, 54.

[5] Advanced Australian Workplace Solutions Pty Ltd (Fox v Kangan Batman TAFE), Print S0253.

[6] cf. Abolos v Australian Postal Commission [1990] HCA 47; (1990) 171 CLR 167.

[10] According to the evidence of Mr McEwen Sydney Kitchen Centre Pty Ltd (SKC) was between 1994 and 2000 a subsidiary of Enstrom. The records indicate that SKC was deregistered on 30 September 2003.

[11] Transcript 26 October 2006, Pn656-658.

s.120 appeal against a decision ([2007) AIRC 183] by Kitchen Design Systems Pty Ltd - re Appeal re termination of employment - Full Bench [2007] AIRCFB 403 (13 July 2007)

At a glance

Court

Decision date

Source

Judgment (109 paragraphs)

s.120 appeal against a decision ([2007) AIRC 183] by Kitchen Design Systems Pty Ltd - re Appeal re termination of employment - Full Bench [2007] AIRCFB 403 (13 July 2007)

Legislation Cited (1)

Cases Cited (14)