Shariati v Commissioner for Fair Trading

BACKGROUND 2Mr Shariati applied for a supervisor certificate on 6 January 2014. 3There is no dispute that Mr Shariati has the required qualifications for a supervisor certificate. 4Mr Shariati stated, in his application for that certificate, that he had had experience from 21 November 2011 to "current" working for Mr Wissam Riman as a building project manager / leading hand. The building sites on which he claimed to have worked were a site in Chester Hill from 21 November 2011 to 8 March 2013 (constructing a granny flat and double storey house) and a site in Ashcroft from 9 March 2013, ongoing (constructing a double storey duplex). 5Mr Riman provided a reference, which was annexed to Mr Shariati's application, stating that Mr Shariati had gained experience at two addresses, one in Chester Hill from 21 November 2011 to 8 March 2013 and one in Ashcroft from 9 March 2013 to "ongoing". The Chester Hill experience was described as constructing a granny flat and new double storey house, and the Ashcroft experience was described as constructing a brick veneer, double storey duplex. The applicant's roles and responsibilities at these locations included, according to the reference, project management, organising tradesmen and materials, negotiating with all relevant bodies, council coordination, supervising and leading hand. 6Mr Riman said when contacted by NSW Fair Trading that Mr Shariati was a subcontractor. 7On 5 February 2014, an officer of NSW Fair Trading wrote to Mr Shariati refusing his application. 8The basis on which Mr Shariati's application was refused was that the delegate of the Commissioner for Fair Trading formed the view that Mr Shariati was engaged by Mr Riman as a subcontractor, and was therefore not lawfully engaged by him (because Mr Shariati did not hold a contractor licence authorising him to do the relevant work). The delegate also rejected Mr Shariati's claim that he was working for Mr Riman from 9 March 2013 to 20 December 2013, as the delegate was satisfied that no building work had commenced on site at Ashcroft at that time. The delegate was therefore not satisfied that Mr Shariati had attained two years acceptable relevant industry experience in a wide range of building construction work. 9On 12 February 2014, Mr Shariati applied for internal review of this decision. He sent with his internal review application a further letter from Mr Riman. The letter explained that, in relation to the Ashcroft site, although the construction did not commence until late May 2013, Mr Shariati liaised with the owner, the private certifier and the architect to finalise the construction certificate documents, and also carried out estimating works, site preparation and schedule of works. In addition, Mr Shariati assisted with applying for demolition approval. 10Mr Riman also said in his letter that Mr Shariati worked for him at Fairfield demolishing an existing granny flat and constructing a new granny flat / garage from 5 March 2013. He said he did not mention the Fairfield site previously as he was of the opinion that the other two sites were sufficient. He also said that he had made an error when he said that Mr Shariati was a subcontractor and that Mr Shariati was in fact an employee. 11On 7 May 2014, a second officer of NSW Fair Trading wrote to Mr Shariati providing an internal review and confirming the original decision.

LEGISLATION 12Section 19(1) of the Home Building Act 1989 provides that the Director General may grant contractor licences for the purposes of that Act. The "Director-General" is the Commissioner for Fair Trading (Home Building Act 1989, s 3(1)). 13Section 24(1)(b) of the Home Building Act 1989 provides that the Director General may grant supervisor certificates for the purposes of that Act. 14The procedure for applying for a licence or supervisor certificate is set out in Part 2 of the Licensing and Registration (Uniform Procedures) Act 2002, which is applied by ss 19(2) and 24(2) of the Home Building Act 1989 respectively. 15Section 25(2) of the Home Building Act 1989 relevantly provides that the regulations may specify or provide for the Director-General to determine additional qualifications that must be held or other requirements that must be met before any supervisor certificate is issued. 16Section 25(3)(a) of the Home Building Act 1989 relevantly provides that the Director-General must refuse an application for a supervisor certificate if the Director-General is not satisfied that any requirement referred to in s 25(2) would be met were the certificate to be issued. 17Clause 28(1) of the Home Building Regulation 2004 provides: 28 Additional requirements for obtaining certificates (1) Before a certificate is issued, the Director-General must be satisfied that the applicant: (a) has such qualifications or has passed such examinations or practical tests, or both, as the Director-General determines to be necessary to enable the applicant to do, or to supervise, the work for which the certificate is required, and (b) has had experience of such a kind and for such a period, as the Director-General considers would enable the applicant to do, or to supervise, the work for which the certificate is required, and (c) is capable of doing or supervising work for which the certificate is required. 18The Commissioner for Fair Trading made an instrument pursuant to clause 28(1) of the Home Building Regulation 2004 on 3 July 2013, entitled "Qualification Requirements for an Endorsed Contractor Licence or Supervisor Certificate for General Building Work" ("Instrument"). The Instrument states, relevantly, that the Commissioner considers the possession of experience specified in the Instrument to be necessary for an applicant for the issue of a Licence or Certificate. 19The experience specified in the Instrument, applicable to Mr Shariati, is "at least two years' relevant industry experience in a wide range of building construction work". 20The term "experience" is defined in the Instrument as follows: "Experience" means experience gained by the applicant as: (a) an employee of; or (b) a person otherwise lawfully engaged by, the holder of a contractor licence authorising the holder to do the class of residential building work in which the experience was gained ("the Work"), where during the relevant period, the applicant was: (c) supervised and directed in the doing of the Work by the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise the Work; and (d) financially remunerated for the Work. 21Section 4(1) of the Home Building Act 1989 makes it an offence for a person to contract to do any residential building work or any specialist work, except as or on behalf of an individual, partnership or corporation that is the holder of a contractor licence authorising its holder to contract to do that work.

Documentary Evidence 22Mr Shariati provided the Tribunal with some documentary evidence. This included: (1)photographs of cheques from Mr Riman to Mr Shariati showing various amounts such as $2,300, $2,000 and $2,200; (2)a "tax computation estimate" for the period 1 July 2012 to 30 June 2013 prepared for taxpayer Mr Shariati on 12 September 2013, showing income for MLS of $18,693 and income for MLS threshold as $20,941, and showing PAYG credits of $1,230; (3)a statement on Mr Riman's letterhead, dated 16 July 2014, that Mr Shariati was paid gross payments of $33,312 in the financial year from 1 July 2013 to 30 June 2014, and that no tax was withheld; (4)an electronic lodgement declaration showing that Mr Shariati received income of $33,312 from Transcivic Engineering and that $3,200 tax was withheld. It also showed that he received $2,580 in income from another company. 23Transcivic Engineering is a company associated with Mr Riman.

Evidence of Mr Riman 24Mr Riman, for whom Mr Shariati worked, gave evidence at the hearing. 25In his evidence, Mr Riman stated that Mr Shariati worked for him every day, on a full time basis, from 11 November 2011 to the present. 26Mr Riman said that when he met Mr Shariati he could not afford to pay him a salary, but made progress payments to Mr Shariati. He made payments to Mr Shariati, in his name. 27Mr Riman said that Mr Shariati's work for him included checking up on contractors such as plumbers and checking that each contractor was licensed and had insurance. He gave examples of the work Mr Shariati carried out for him. This included marking pegs out on a concrete slab and checking waterproofing in bathrooms and kitchens. Mr Riman described Mr Shariati as a site manager or site supervisor. 28When questioned about whether Mr Shariati's role was administrative or organisational in cross examination, Mr Riman maintained that Mr Shariati was an organiser and supervisor. 29Mr Riman emphasised that he supervised Mr Shariati and approved what he was doing every day. He said that he spent about an hour on site where Mr Shariati was working in the morning, and another hour there in the afternoon. In between, Mr Riman carried out work elsewhere. 30Under cross examination, Mr Riman admitted that he did not withhold tax when he paid Mr Shariati. He said that his accountant handled the payments and that he would try to rectify this. He said the failure to withhold tax was a mistake. He agreed that he had assumed that Mr Shariati would pay tax. 31Mr Riman also said that Mr Shariati did not bring his own equipment to work. He said he paid Mr Shariati $600 per week plus GST of $60, and that he also paid this if Mr Shariati was on holidays or sick. Mr Riman further said that Mr Shariati gave him invoices, then corrected himself and said that Mr Shariati gave him notes telling him how much to pay. 32Mr Riman's evidence was that his accountant handled everything.

Evidence of Mr Shariati 33Mr Shariati gave evidence that he was a civil engineer in Iran. He had worked as an engineer there in his own company, doing construction on-site. 34Mr Shariati told the Tribunal that he had come to an agreement with Mr Riman that Mr Riman could pay him out of progress payments. The agreement was to pay Mr Shariati $33,000 per annum, which he said was a weekly sum of $600. Mr Shariati's evidence was that he agreed to this arrangement as he was desperate to get construction experience, and other builders had refused to employ him. 35Mr Shariati said he had to tell Mr Riman how much he was behind in payments, and keep track for him. He would do this by sending Mr Riman an email. He said that Mr Riman was not very good with accounting, so that Mr Shariati emailed Mr Riman's accountant. 36Mr Shariati gave evidence that he had worked for Mr Riman at Chester Hill in late 2011 until March 2013, constructing a granny flat and a two storey dwelling. Between March and May 2013, he said he had worked in Fairfield, travelling between the Fairfield and Chester Hill sites. 37He gave evidence as to how he performed his role. For example, he said he checked that the carpentry work done by carpenters conformed to the Building Code. He also said that Mr Riman supervised him in this, and that he would call Mr Riman on his mobile with questions when Mr Riman was not there. He also produced records of telephone calls he had made to Mr Riman. 38Mr Shariati explained that he asked Mr Riman to provide a group certificate prior to a directions hearing in this Tribunal in July 2014. Mr Riman did this without consulting his accountant, because Mr Shariati needed the group certificate urgently. Mr Shariati gave evidence that, after the directions hearing, Mr Riman's accountant realized that Mr Riman had made an error and issued a new PAYG certificate showing that $3,200 had been withheld in tax from Mr Shariati's wages.

Qualifications 39Mr Shariati has satisfied the approved qualification requirements for a building licence as he has completed CPC40110 Certificate IV in Building and Construction (Building) and CPC50210 Diploma of Building and Construction (Building).

Experience 40In order to determine whether Mr Shariati has the requisite experience, I need to consider: (1)whether the experience gained with Mr Riman was gained as an employee; (2)whether Mr Shariati was supervised and directed in the doing of the work by Mr Riman; and (3)whether he has at least two years' relevant industry experience in a wide range of building construction work, within the meaning of the Instrument.

Was Mr Shariati's experience gained as an employee? 41There is no single test to determine whether an employment relationship exists. Rather, the question of whether a person is employed or engaged as a contractor depends on a consideration of a number of factors. These include the degree of control exercised by the person who engages another person to do work, "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" (Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, Mason J at 24). 42In Hollis v Vabu Pty Ltd (2001) 207 CLR 21, the High Court had to consider whether individual couriers, who delivered parcels by bicycle, were employees or independent contractors. It found, by majority, that the couriers were employees. 43Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ observed that the right to control a person is an important indicium of the employment relationship, but is not determinative of the question (at 41 [44]-[45]). In determining whether the couriers were employees, their Honours had regard to the following factors: (1)the couriers were not providing skilled labour and could not generate "goodwill" (at 42 [48]); (2)the couriers had little control over the manner of performing their work (at 42 [49]); (3)couriers were presented to the public as emanations of the company for which they worked, partly because they wore a company uniform (at 42 [50]); (4)there were good policy reasons for holding the company to be vicariously liable for the wrongs of the couriers (at 43 [53]); (5)the company superintended the couriers' finances (at 43 [54]); and (6)there was considerable scope for the exercise of actual control (at 44 [57]). 44In Zada v Director-General, Department of Finance & Services, NSW Fair Trading [2014] NSWCATOD 16, Frost SM made some comments about the meaning of the word "employee" in the Instrument, including that the word must take its ordinary meaning, being "a person working for another person or a business firm for pay" (Macquarie Online Dictionary) (at [36]). The Senior Member commented (at [35]) that the question of whether the applicant is an employee: is not answered by looking no further than the way the parties have arranged their tax affairs. Even if the parties came to the view that Mr Zada was not an employee, that is not the end of the enquiry. Mr Zada and the licence holder may have been wrong. 45The Senior Member continued (at [37]): ...it may be more instructive to start the enquiry by considering the level of supervision and direction provided by the licence holder rather than to focus on either the label used or the tax arrangements in place. The greater the level of supervision and direction, the more likely it is that an employment relationship exists. And if the worker is not closely supervised and directed, then he or she is not likely to reach the requisite level of "experience" in any event, no matter what label has been applied to the relationship. The proper task is to examine "the totality of the relationship between the parties" [citing Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 29, which the Senior Member noted was cited with approval in Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 41]. 46Some of the factors considered in Hollis v Vabu Pty Ltd (2001) 207 CLR 21 are relevant to the present case. Mr Shariati had a degree of skill relevant to the position, having been a civil engineer in Iran. However, the purpose of working for Mr Riman was to gain a contractor licence and he was largely unable to generate goodwill without a contractor licence. 47Mr Shariati had some control over the manner of performing his work, but the evidence was that he was supervised by Mr Riman and acted on Mr Riman's instructions. Mr Riman was very particular about this in his evidence. It is clear that Mr Shariati attended different sites at Mr Riman's direction. 48Mr Shariati himself communicated with Mr Riman's accountant about what was owed to him, so the degree of superintendence of Mr Shariati's finances is less than that of the employer in Hollis v Vabu Pty Ltd. However, Mr Riman, through his accountant, made the ultimate decisions about payment. 49There was considerable scope for Mr Riman to exercise actual control over the tasks undertaken by Mr Shariati, and the way in which those tasks were undertaken. It appears from the evidence that he did exercise such control. 50Other factors which indicate that the relationship was an employment relationship include that Mr Shariati worked exclusively for Mr Riman for a period of years; that Mr Shariati was paid in his own name, and not in that of his company; the lack of flexibility Mr Shariati had as to when the work was performed; and the payment of Mr Shariati by Mr Riman (or his company) when Mr Shariati was sick or on holidays. 51However, there are indicia pointing towards Mr Shariati being an independent contractor. These include that payments to Mr Shariati were made irregularly, in response to emails from Mr Shariati advising what he was owed; that Mr Shariati rarely took holidays; that no holiday loading was paid; and that Mr Riman did not deduct PAYG tax from Mr Shariati's wages for the financial year 2012-2013, and initially indicated that he had not deducted PAYG tax from Mr Shariati's wages for the financial year 2013-2014. 52On balance, I find that Mr Shariati was an employee of Mr Riman's within the meaning of the Instrument. As is apparent from the case law, the degree of control exercised over an employee, and the right to exercise such control, are key factors in determining whether an employment relationship exists. I am satisfied that Mr Riman had a significant level of control over Mr Shariati. 53Whist the arrangements made by Mr Riman for the payment of tax, and his method of payment of Mr Shariati, are not typical of an employment relationship, this is not determinative. It does not follow from the fact that Mr Riman apparently misunderstood his taxation obligations, and the circumstance that Mr Shariati agreed to be paid at irregular intervals, that the relationship was not one of employment. The evidence clearly established that Mr Riman did not have a good understanding of the financial arrangements with Mr Shariati and that he left these largely to his accountant to manage. 54It is significant that Mr Shariati worked for Mr Riman full time for a number of years at various sites, and that he was paid for the relatively short periods when he took holidays.

Supervision and Direction 55The next issue is whether the applicant was "supervised and directed in the doing of the Work by the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise the Work" within the meaning of the Instrument. 56There is no dispute that Mr Riman was at relevant times "the holder of an endorsed contractor licence or supervisor certificate authorising its holder to supervise the Work". However, the respondent submits that Mr Shariati was not in fact supervised by Mr Riman, due to Mr Riman's evidence that he was generally only on site supervising Mr Shariati for an hour in the morning and an hour in the afternoon. 57I was not directed to any cases considering the meaning of "supervise" in the Instrument, and have not found any in my own researches. The word must take its ordinary meaning which is "to oversee (a process, work, workers, etc.) during execution or performance; superintend; have the oversight and direction of" (Macquarie Dictionary online). 58In Ullrich v Commissioner for Fair Trading [2014] NSWCATOD 11 at [54], Scahill SM commented: The Tribunal interprets the purpose of the requirement of 2 years' experience under supervision and direction prior to the issuing of a licence to be to ensure that consumers can be satisfied that an individual contractor has been appropriately educated in the standards recognised by the building profession by another qualified building professional. 59In my view, having regard to the purpose of the requirement of two years' experience, Mr Shariati was supervised and directed in the doing of the Work to the degree required by the Instrument. Mr Riman oversaw Mr Shariati's work and regularly checked it. He also had the oversight and direction of Mr Shariati's work. Mr Riman was available by telephone when he was away from the building site to answer any questions Mr Shariati might have, and Mr Shariati regularly called him. 60The Instrument does not require constant supervision, but rather supervision which achieves the Instrument's purpose. Given that Mr Shariati was a qualified civil engineer in Iran, and had worked in construction on-site in that country, the level of supervision required was less than would have been required if Mr Shariati had not had previous experience in the building industry. Mr Riman gave evidence that he tested Mr Shariati "many times" and was satisfied with his work. Having formed a view about Mr Shariati's competence, and being confident that Mr Shariati checked any significant matters with Mr Riman, the requirements of the Instrument were fulfilled by Mr Riman supervising Mr Shariati by attendance on site for two hours per day and otherwise by telephone when needed.

At least two years' relevant industry experience 61I accept Mr Shariati's evidence that additional income he received from a company, which is shown on his tax return, was income received when working as a sales clerk on Saturdays for a company he set up. I am satisfied that this did not interfere with his work for Mr Riman or detract from its full time nature. 62I am also satisfied that Mr Shariati worked full time for Mr Riman from 21 November 2011 to 8 March 2013 at Chester Hill constructing a granny flat and a double storey house. This is a period of fifteen and a half months. 63I find that from 9 March 2013, to the date of the hearing on 2 September 2014, Mr Shariati worked for Mr Riman full time either at a site in Ashcroft constructing a double storey duplex or at a site in Fairfield demolishing a granny flat and constructing a new granny flat/garage. This is a period of over seventeen months. 64The combined experience Mr Shariati gained at these three sites is greater than two years' experience in building construction work.

Wide-ranging experience 65I am satisfied that the experience Mr Shariati gained with Mr Riman at the Chester Hill, Ashcroft and Fairfield sites was experience in a wide range of building construction work. Mr Shariati gave confident and authoritative evidence about the range of tasks he carried out and supervised whilst working for Mr Riman. Mr Shariati's evidence in this respect was consistent with Mr Riman's evidence. The evidence did not support the Commissioner's initial view that Mr Shariati's role was essentially an administrative one. Mr Maynard, for the Commissioner, conceded towards the end of the hearing that the oral evidence demonstrated wide-ranging experience. 66In Locking v Department of Finance and Services [2013] NSWADT 239, Magistrate Hennessy DP described the work a building contractor needs to be able to supervise as follows (at [18]-[19]): 18 A building contractor has the overall responsibility for a site and must be able to supervise all of the trades required to complete any type of dwelling. Additionally a builder must be able to determine that all trades have complied with all standards and requirements. There are many gaps in Mr Locking's trade supervisory experience and therefore his understanding of certain trades. Those trades include flooring, bricklaying, stonemasonry, wet plastering, painting, decorating, general concreting, tiling, demolishing, fencing, glazing and waterproofing. 19 A building contractor is also able to contract with the public, and must therefore be able to negotiate a contract, quote for a project and co-ordinate the trades to be able to complete the project on time and within budget. He or she must also be able to negotiate and discuss the jobs with council and private certifiers to ensure that the work is passed fit when appropriate. 67The evidence demonstrates that Mr Shariati has gained the experience necessary to supervise all of the trades required to complete any type of dwelling, to determine that all trades have complied with all standards and requirements, to contract with the public and to deal with council and private certifiers.

CONCLUSION 68It follows from the above that Mr Shariati has "at least two years' relevant industry experience in a wide range of building construction work" as required by the Instrument. The correct and preferable decision, then, is to set aside the Commissioner's decision refusing Mr Shariati's application for a supervisor certificate and to substitute a decision granting his application.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 December 2014