Smith v Aircraft Maintenance Services Australia

RANGIAH J: 1 This is an application for leave to appeal against an interlocutory judgment of the Federal Circuit Court of Australia delivered on 31 July 2017. The primary judge ordered, in effect, that the affidavit of the applicant not be admitted into evidence at trial. 2 As I consider that leave to appeal should be granted and the appeal decided, it is convenient to refer to the applicant as "the appellant". 3 In the principal proceeding before the Federal Circuit Court, the appellant alleges that the respondent contravened ss 44, 45 and 357 of the Fair Work Act 2009 (Cth) and seeks orders for compensation and other relief. 4 The primary judge held that the appellant's affidavit was admissible under s 63 of the Evidence Act 1995 (Cth) as the appellant lacks capacity to give oral evidence, but then excluded the affidavit under s 135 of that Act. The appellant submits that his Honour erred in refusing to admit the affidavit into evidence.

Background 5 In the principal proceeding, the appellant alleges that he worked as an aircraft maintenance engineer for the respondent at the Coolangatta airport from 2003 until 2015. Each year he would execute a document called a "Subcontract Agreement" which set out the terms and conditions of his engagement, including his remuneration. Despite that, the appellant alleges that the totality of the terms, conditions and circumstances of his engagement demonstrates that he was in fact employed by the respondent under a contract of service. 6 The appellant alleges that in the period from 2010 to 2015, the respondent should have paid him the wages required by the relevant Award and provided him with annual leave and long-service leave. He alleges that the respondent contravened ss 44, 45 and 357 of the Fair Work Act by its failure to do so. 7 It may be seen that the main issue in the principal proceeding is whether the appellant was an employee of the respondent or an independent contractor. 8 In February 2015, the appellant suffered a stroke. At that stage he was well enough to instruct solicitors, who commenced the proceeding on 20 May 2015. The appellant's health then declined. Initially, the medical evidence was equivocal as to whether the appellant had capacity to give oral evidence and make decisions as to the conduct of the trial, and the trial was set down for four days commencing on 31 July 2017. However, in the week before the trial, a doctor examined the appellant and formed the view that he no longer had capacity. The primary judge then made an order appointing the appellant's son as his litigation guardian. 9 The appellant had affirmed an affidavit on 19 September 2016, setting out in substantial detail the circumstances under which he came to be engaged by the respondent, the nature, terms and conditions of his engagement thereafter and various other matters relevant to the case.

The application before the primary judge 10 On the first day of the trial, the appellant's litigation guardian applied to the Court for an order that the appellant's affidavit be admitted into evidence at the trial. The application relied on s 63 of the Evidence Act. Under that section, the hearsay rule does not apply to a document so far as it contains a representation if the person who made the representation is "not available to give evidence" because the person is, relevantly, "mentally or physically unable to give the evidence and it is not reasonably practicable to overcome that inability": see cl 4(1)(c) of Pt 2 of the Dictionary for the Evidence Act. 11 It was not in dispute before the primary judge that the appellant was "not available to give evidence" and his Honour decided that the appellant's affidavit was admissible under s 63 of the Evidence Act. That ruling is not in issue in the application for leave to appeal. 12 However, his Honour went onto decide that the affidavit should be excluded under s 135 of the Evidence Act. The trial was then adjourned because of the unavailability of one of the respondent's witnesses. It is the order excluding the appellant's affidavit from evidence at the trial which the appellant seeks to appeal against. 13 The appellant's affidavit was annexed to an affidavit of his solicitor. The appellant's affidavit is lengthy and detailed. It consists of some 635 pages, including annexures. The body of the affidavit itself contains 198 paragraphs. It is not convenient to set out extracts of the affidavit and I will, instead, briefly describe some of the content of the affidavit. 14 The affidavit commences by describing the appellant's qualifications and his employment history. It describes the circumstances of his engagement by the respondent and the content of conversations with two employees of the respondent. 15 The affidavit then refers to the "Subcontractor Agreement" the appellant signed each year from 2003. The appellant deposes that he had only been able to locate the agreements entered since 2009, but the only parts of the agreement that had changed were the rates of pay and minimum number of hours. He deposes that he did not understand the difference between an employee and a contractor and did not understand what getting an ABN meant. 16 The affidavit describes the training the appellant received from time to time and the nature of the work he performed. It annexes various letters, forms and other documents relevant to the appellant's work. 17 The affidavit states that the appellant was unable to delegate his work. It describes the uniform and the equipment that the respondent provided, as well as the equipment that the appellant provided himself. The affidavit describes arrangements for leave he made with the respondent. 18 The affidavit refers to a performance review that described him as an "AMSA employee" and other documents in which the respondent described him as an "employee". It goes on to describe a company called Ultimate Goal Enterprise Pty Ltd which had been incorporated by the appellant and which invoiced the respondent for the appellant's work until it was deregistered. It describes various items for which the respondent was invoiced. 19 The affidavit describes expenses for which the appellant was reimbursed and indicates that he was not paid any superannuation, long service leave, annual leave or sick leave when he resigned in 2014. It indicates that the respondent made a payment of $28,970 to the Australian Taxation Office for the appellant's superannuation and other expenses.

The primary judge's reasons 20 The primary judge delivered ex tempore reasons. His Honour concluded that the affidavit should be excluded from evidence under s 135 of the Evidence Act because its probative value was substantially outweighed by the danger that the evidence might be unfairly prejudicial or misleading or confusing. 21 The primary judge's reasons state, relevantly: 33. There are a number of oddities with regard to the representation made by the Applicant to his solicitor which are contained in the affidavit. The most obvious one is the subcontract agreements. The Applicant has provided four of these agreements, though the 2012 agreement is not signed. 34. The agreements are clearly between Ultimate Goal Enterprises Pty Ltd, and the Respondent company. It does not make sense that if the Applicant had no idea of the difference between a contractor and an employee that his contracts of employment would be between his company and the Respondent company rather than just himself and the Respondent company. 35. It also does not make sense that if the Applicant, as he said, did not know why an ABN was needed or what an ABN was, that he would have actually had an ABN for about 12 months before he began working for the Respondent company. 36. The invoices that the Applicant sent to the company were all from Ultimate Goal Enterprises until November 2011. After 12 November 2011, the invoices are all headed Brian Smith Aircraft Engineering, with exactly the same ABN and bank details. There is no explanation in the affidavit as to why this is so. 37. It becomes even more confusing if one accepts that the final contract, which is not signed, is still between the company of the Applicant and the Respondent company. That contract would have come into existence some eight months after the Applicant started sending invoices in the name of Brian Smith Aircraft Engineering. If the company was deregistered in 2009, why were the contracts and the invoices still bearing the name of a deregistered company? 38. The tax returns also show that the Applicant was paying his tax from money given by the Respondent company to Ultimate Goal Enterprises. The Applicant was claiming business deductions against those payments so as to reduce the amount of tax that he would have to pay. 39. The Applicant claimed that he had visited his accountant every year and lodged tax returns. This is not borne out by what he has annexed to his affidavit. It seems that the tax returns for the 2012, 2013 and 2014 financial years were all lodged on the same day. 40. There is no evidence of the Applicant ever raising the issue of whether he was an employee with the Respondent company until after he had left, and therefore no explanation as to why this was not done. 41. On these issues alone, one can see that the affidavit itself might be misleading or confusing. 42. The evidence contained in other affidavits filed by the Respondent company take issue with a number of matters contained in the representation of the Applicant. For example, the Applicant said that he was given an employee number. The material for the Respondent company suggests that this was not an employee number but was a number given by Air New Zealand so that they knew who was looking at their aircraft at any particular time by looking at the paperwork. 43. There are a number of other such examples of contrary evidence which would need to be put to the Applicant during evidence so as to allow a Court to ascertain what the true state of things actually is. Such material goes to the heart of what was the relationship between the Applicant and the Respondent company, and whether that was one that was truly one of employee and employer, or subcontractor and contractee. 44. The extent of the prejudicial effect is evident when one wonders how the Respondent company can now fully test those matters that the Applicant has affirmed in the affidavit. 45. Therefore, whilst the evidence of the solicitor of the representation given to him by the Applicant is admissible pursuant to s 63 of the Evidence Act 1995 (Cth), I am of the view that, pursuant to s 135 of the Evidence Act 1995 (Cth), I should exclude that evidence from the proceedings because the probative value is substantially outweighed by the danger that the evidence might be unfairly prejudicial to the Respondent company and the danger that the evidence is misleading and confusing.

The application for leave to appeal 22 The order made by the primary judge was interlocutory. Accordingly, the appellant requires leave to appeal pursuant to s 24(1A) of the Federal Court of Australia Act 1976 (Cth). 23 The primary matters to be considered in an application for leave to appeal are whether the decision is attended with sufficient doubt to warrant it being reconsidered, and whether substantial injustice would result if leave were refused, supposing the decision to be wrong: Decor Corporation Pty Ltd v Data Industries Inc (1991) 33 FCR 397 at 398-399; Samsung Electronics Co Limited v Apple Inc [2013] FCAFC 138 at 18. 24 If an order, while interlocutory in its legal effect, has the practical operation of finally determining the rights of the parties, a prima facie case exists for granting leave to appeal: Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (2000) 104 FCR 564 at [43]. The respondent accepts that the appellant's affidavit was likely to be the only witness evidence relied upon at the trial and the exclusion of the entirety of that affidavit may be fatal to the appellant's case. 25 In these circumstances, I consider that leave to appeal should be granted. I will proceed to consider the grounds of appeal.

The appellant's grounds of appeal 26 The appellant relies on the following grounds of appeal: 2. The learned Judge erred in law, in exercising discretion pursuant to s.135 of the Evidence Act 1995 (Cth) to not admit into evidence in the proceedings the representation made by Brian Leigh Chisholm Smith to his solicitor in an affidavit filed 21 September 2016 (the representation), by failing to take into account material considerations contained in the representation which were not is (sic) in dispute, namely: (a) the existence and content of the written agreements made between the Applicant and the Respondent in 2009, 2010, 2011 and 2012 (the agreements); (b) that the Applicant contracted with the Respondent as a sole trader; (c) the remuneration paid to the Applicant by the Respondent under the agreements; (d) that under the agreements, the Applicant was required to follow all of the Respondent's policies and procedures; (e) that the Applicant wore a uniform provided by the Respondent bearing the Respondent's logo; (f) that the Respondent provided the Applicant work tools in the last three years of the Applicant working with the Respondent; (g) that the Respondent reimbursed Applicant's expenses incurred in performing work for the Respondent; (h) the existence and content of the invoices issued by the Applicant to the Respondent; (i) that the Applicant did not have tax deducted from payments made to him by the Respondent; (j) that the Applicant did not pay GST; (k) that the Applicant did not receive paid leave; and (l) that the Applicant claimed certain business expenses as tax deductions. 3. The learned Judge erred in law, in exercising discretion pursuant to s.135 of the Evidence Act 1995 (Cth) to not admit into evidence in the proceedings the representation, by failing to take account the material considerations that: (a) the true nature of the relationship between the Applicant and the Respondent was to be determined by indicia other than just the subjective view of the Applicant; and (b) other relevant indicia of the true nature of the relationship between the Applicant and the Respondent were contained in the representation and were not in dispute. 4. The learned Judge erred in law, in exercising discretion pursuant to s.135 of the Evidence Act 1995 (Cth) to not admit into evidence in the proceedings the representation, by failing to take into account the material consideration that appropriate weight could be given to representation in the absence of the Applicant being available for cross-examination. 4A. Ground 5: The learned Judge erred in fact in finding that the 'Respondent company chose to contract this work out', as such a fact was not the subject of testimony or submission on evidence, and is contentious in the proceedings.

Consideration 27 Section 135 of the Evidence Act provides: 135 General discretion to exclude evidence The court may refuse to admit evidence if its probative value is substantially outweighed by the danger that the evidence might: (a) be unfairly prejudicial to a party; or (b) be misleading or confusing; or (c) cause or result in undue waste of time. 28 The expression "probative value" is defined in the Dictionary for the Evidence Act as meaning "the extent to which the evidence could rationally affect the assessment of the probability of the existence of a fact in issue." 29 Section 192 of the Evidence Act provides: 192 Leave, permission or direction may be given on terms (1) If, because of this Act, a court may give any leave, permission or direction, the leave, permission or direction may be given on such terms as the court thinks fit. (2) Without limiting the matters that the court may take into account in deciding whether to give the leave, permission or direction, it is to take into account: (a) the extent to which to do so would be likely to add unduly to, or to shorten, the length of the hearing; and (b) the extent to which to do so would be unfair to a party or to a witness; and (c) the importance of the evidence in relation to which the leave, permission or direction is sought; and (d) the nature of the proceeding; and (e) the power (if any) of the court to adjourn the hearing or to make another order or to give a direction in relation to the evidence. 30 I understand Ground 2 of the appellant's proposed grounds of appeal to assert that the primary judge erred by excluding the whole of Mr Smith's affidavit from evidence, whereas uncontroversial representations in the affidavit ought not to have been excluded. 31 The difficulty with Ground 2 is that no argument was addressed to the primary judge that s 135 of the Evidence Act ought to be applied to the affidavit on a paragraph by paragraph basis. Rather, counsel who represented the appellant before the primary judge argued only that the affidavit as a whole should not be excluded. His Honour approached his ruling on that basis. There can be no error in his Honour failing to adopt a course which was never contended for by the appellant. Further, as a general rule, a party is bound by the conduct of his or her case and a different case cannot be run on appeal: see, for example, Park v Brothers (2005) 222 ALR 421 at [34]-[35]. Accordingly, Ground 2 cannot succeed. 32 In the course of the hearing, counsel now appearing for the appellant submitted that the primary judge had failed to commence by assessing the affidavit to ascertain its probative value, including by reference to uncontested matters, before weighing that probative value against the danger that the evidence might be unfairly prejudicial or be misleading or confusing. Counsel for the respondent objected to that submission being made on the basis that it was not reflected in the grounds of appeal. Counsel for the appellant argued that Ground 2 should also be understood to encompass the issue, but I rejected that argument. The appellant's Counsel, on instructions, declined to apply for leave to amend Ground 2 to reflect the issue. Accordingly, I ruled that the argument was not one that was able to be raised in the application for leave to appeal. 33 As to Ground 3, the appellant's counsel argued that in order to assess whether there was unfair prejudice, it was necessary for the primary judge to properly understand how the relevant evidence was to be used in the case. Counsel submitted that while the primary judge briefly stated that the ultimate issue was whether the appellant was an employee or independent contractor, his Honour was required to go further and consider whether that issue was to be considered by reference to subjective or objective factors. Counsel submitted that at [34]-[41] of the reasons, his Honour relied on matters concerning the appellant's subjective intention, which were irrelevant. 34 However, the premise of the appellant's application for admission of his affidavit into evidence was that the matters deposed to were relevant to the issues in the case. Therefore, it was never argued before the primary judge that matters the appellant deposed to going to whether the appellant intended to become a contractor were irrelevant. 35 Further, and in any event, there is clear authority that the intention of the parties is relevant, although not determinative: see Hollis v Vabu Pty Limited (2001) 207 CLR 21 at [58]; ACE Insurance Ltd v Trifunovski (2013) 209 FCR 146 at [11], [28]; Fair Work Ombudsman v Ecosway Pty Ltd [2016] FCA 296 at [75]; Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389. The appellant's claims that he did not know the difference between an employee and a contractor and did not know what an ABN was were directed towards demonstrating that he did not have an intention to become a contractor, but, rather, that it was an issue that he had never thought about. Therefore, the primary judge was correct to regard the appellant's subjective evidence as to his intention as being relevant. 36 To the extent that the appellant's argument concerning Ground 3 is that the primary judge ought to have admitted paragraphs of the affidavit that were uncontroversial and which provided objective evidence that the appellant was an employee, the argument again suffers from the defect that it was never argued before his Honour that the affidavit should be considered paragraph by paragraph. 37 As to Ground 4, the appellant's counsel submitted that the primary judge ought to have taken into account whether the prejudicial effect or misleading or confusing nature of the evidence could be limited by the trial judge adjusting the weight given to the evidence. That was an issue that had been squarely raised before the primary judge by counsel then representing the appellant. 38 The use of the word "substantially" in s 135 of the Evidence Act suggests that exclusion will only be justified in a clear case: see Odgers, Uniform Evidence Law (12th edition, Thomson Reuters, 2014). The unfair prejudice of which s 135 speaks is not the simple fact that the evidence may advance one side's case or weaken the other side's case, but means damage to the other side's case in some unacceptable way, for example, by provoking some irrational, emotional or illogical response, or by giving the evidence more weight than it truly deserves: R v Suteski (2002) 56 NSWLR 182 at [116]. In Ordukaya v Hicks [2000] NSWCA 180 at [5]-[6], Mason P (in dissent as to the outcome) quoted from Odgers (3rd edition): Plainly, it is likely that this 'danger' will usually only have significance in a jury trial. Where the trial is by a judge without a jury, it will be an unusual judge or magistrate who is prepared to concede that a danger exists that he or she might be "unfairly prejudiced" by evidence. On the other hand the provision is not limited to misuse of the evidence by the tribunal of fact. Unfair prejudice may arise from procedural considerations. Thus an opposing party may be significantly prejudiced by hearsay evidence if unable to cross-examine on a crucial issue in the litigation. Alternatively, the opposing party may be unfairly prejudiced by evidence if prevented from properly challenging its reliability. 39 Accordingly, whether the trial is to be conducted by a judge without a jury is a relevant factor. a judge will less susceptible to an irrational, emotional or illogical response and is better placed to assess the appropriate weight to give to the evidence. 40 Some allowance must be made for the fact that the primary judge's reasons were given ex tempore: see Maviglia v Maviglia [1999] NSWCA 188 at [1]. However, there is no indication that the primary judge considered whether the prejudicial effect or misleading or confusing nature of the evidence could be limited by the trial judge adjusting the weight given to the evidence in light of the other evidence in the case and the respondent's inability to cross-examine. His Honour discussed (at [33]-[34]) a number of "oddities" and aspects of the evidence which "did not make sense", leading to the conclusion that the affidavit was misleading or confusing. His Honour referred (at [42]-[43]) to affidavits filed by the respondent which took issue with matters contained in the appellant's affidavit and which would need to be put to the appellant in cross-examination. His Honour then asked rhetorically (at [44]) how the respondent company could now fully test those matters. Evidently, his Honour considered that they could not be fully tested in the absence of cross-examination. However, his Honour did not then consider whether there were means by which that prejudice could be overcome. The unavailability of a witness for cross-examination is not necessarily decisive: R v Suteski (2002) 56 NSWLR 182 at [126]. 41 Whether the misleading, confusing and prejudicial effect of the evidence could be overcome by ascribing appropriate weight to evidence that could not be tested by cross-examination was an important and relevant matter for consideration by the primary judge: Ordukaya at [41]; NV Sumatra Trading Co v British America Tobacco Services Ltd (2011) 198 FCR 435 at [320], Citibank Ltd v Liu [2003] NSWSC 569 at [21]. As his Honour failed to consider that matter, the exercise of the evaluative judgment under s 135 of the Evidence Act miscarried. The appeal should be allowed. 42 Ground 5 focuses upon the following passage of the primary judge's reasons: 5. In 2003, there was not a significant amount of air traffic at the Coolangatta Airport. Given that the licensed aircraft maintenance engineer would only need around 90 minutes per transiting aircraft to do their job, it's not surprising that the Respondent company chose to contract this work out. 43 The appellant submits that in this passage, the primary judge made a finding that the work undertaken by the appellant was as a contractor, not as an employee, improperly making a finding as to an ultimate issue in the course of the voir dire. The appellant's counsel submits that this indicates that his Honour approached s 135 of the Evidence Act on the basis of a conclusion reached upon untested evidence that may have affected the ruling. 44 I do not think that the passage extracted above can be read as his Honour as having reached a conclusion as to the ultimate issue for trial. Again, the judgment was given ex tempore and some allowance must be made for infelicity of expression. I consider that his Honour meant no more than that the circumstances explained why the respondent intended to contract the work out. There seems to be no controversy as to what was the respondent's intention, but only whether that intention had been achieved. Further, the proceeding concerns the position in the period from 2010 onwards, so that his Honour's statement about position in 2003 could not have reflected a view as to the position seven years later. In addition, his Honour said later at [31] that "the major question here is whether the applicant was truly an employee or whether he was a contractor". This indicates that his Honour was well aware that this question fell to be determined following a trial. For these reasons, the appellant's fifth ground cannot succeed.

Conclusion 45 For the reasons I have given, the appellant should be granted leave to appeal and the appeal should be allowed. The judgment of the primary judge should be set aside. 46 The parties did not submit that I should proceed to decide whether the affidavit should be excluded under s 135 of the Evidence Act in the event that I allowed the appeal. The matter should therefore be remitted to the Federal Circuit Court for determination. 47 As the primary judge has already expressed a firm view as to the admissibility of the affidavit, it would be preferable for the application to admit the evidence to be considered by a different judge. 48 The jurisdiction of the Court to award costs is limited by s 570 of the Fair Work Act. There will be no order as to the costs of the application for leave to appeal and the appeal. I certify that the preceding forty-eight (48) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rangiah.