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T11508

 

TASMANIAN INDUSTRIAL COMMISSION

Industrial Relations Act 1984
s.29 application for hearing of industrial dispute

Clive Anthony Robertson
(T11508 of 2004)

and

K W McCulloch Pty Ltd

 

COMMISSIONER T J ABEY

HOBART, 7 March 2005

Industrial dispute - alleged unfair termination - severance pay - long service leave - annual leave - employee or independent contractor relationship - jurisdiction - order

REASONS FOR DECISION

[1] On 21 May 2004, Clive Anthony Robertson (the applicant) applied to the President, pursuant to Section 29(1A) of the Industrial Relations Act 1984, for a hearing before a Commissioner in respect of an industrial dispute with K W McCulloch Pty Ltd arising out of the alleged unfair termination of his employment, severance pay in respect of termination of employment as a result of redundancy and a dispute over the entitlement to long service leave, or payment instead of any such leave.

[2] This matter was listed for a conciliation conference before McAlpine C on 19 July 2004. The file was subsequently referred to myself and listed for hearing on 11, 12 and 13 October 2004 and 16 and 22 December 2004. Mr J Zeeman, solicitor, appeared for the applicant. Ms T Badenach, together with Mrs A Burrows-Cheng, solicitors, appeared for the respondent.

Overview

[3] Mr Robertson, in partnership with his then wife, purchased the business of K W McCulloch Pty Limited in November 1983. Mr Robertson stated that he was managing director of the company, directly responsible for sales and marketing.

[4] In 1985 Mr Robertson's wife died. Subsequently Mr Ronald Easther purchased Mr Robertson's deceased wife's shares in the company. Mr Robertson and Mr Easther had a friendship extending back to school days.

[5] Mr Easther and Mr Robertson continued to manage the business as joint managing directors. It would seem that Mr Robertson concentrated on sales and installation whereas Mr Easther's role was predominately administrative and financial.

[6] In November 1999, at the initiative of Mr Robertson, the parties entered into an arrangement that purported to be a relationship of principal/contractor, rather than employer/employee. It was common ground that up to this point both Mr Robertson and Mr Easther were employees of the company, notwithstanding their 50% shareholding and director status.

[7] In November 2000 Mr Robertson was declared bankrupt.

[8] Mr Easther purchased Mr Robertson's 50% shareholding for $2000. Mr Easther's evidence was that the shares were "worthless" at the time in that the company was essentially insolvent. There was a "gentleman's agreement" that Mr Robertson could purchase the shareholding back at the same price at some point in the future.

[9] Mr Robertson continued to "work" for the company up until May 2004.

[10] In July 2002 Mr George Mamacas purchased a one third shareholding from Mr Easther and became a director of the company. Mr Easther continued to hold two thirds of the shares.

[11] In August 2003 an incident occurred in the workplace involving Mr Robertson and another employee. Following that incident it was agreed that Mr Robertson would not attend the company office and would concentrate on the promotion and marketing of a particular product [the Hills project]. The financial arrangements in place after August 2003 are in dispute.

[12] In late April 2004 the Hills project collapsed.

[13] Mr Easther terminated the arrangement with Mr Robertson with effect from 3 May 2004.

[14] The applicant claims that at all material times he was an employee of the company. The arrangement entered into in November 1999 was a "sham" designed for other purposes. In any event the arrangement ended in September 2000.

[15] The applicant claims payment for accumulated annual leave and long service leave up to 3 May 2004.

[16] The applicant further claims a redundancy payment calculated on the basis of two weeks' pay for each year of service.

[17] The respondent contends that the employment relationship ended in November 1999. Accumulated leave entitlements were, with the consent of the applicant, offset against Mr Robertson's loan account with the company.

[18] Thereafter Mr Robertson provided consultancy services to the company in the nature of an independent contractor. The consultancy arrangement further "evolved" with the events of August 2003.

[19] The respondent, as a consequence, rejects any liability for accumulated leave entitlements or redundancy pay.

Evidence

[20] Sworn evidence was taken from Mr Robertson, Mr Easther and Mr Mamacas.

[21] An unsigned statement from a Mr Joe Bilac was tendered.

[22] Counsel for both the applicant and respondent invited the Commission to make an adverse finding as to witness credit against Mr Easther and Mr Robertson respectively. I have not found it necessary to make such a finding in a global sense of preferring the evidence of one over the other, to the extent of any inconsistency. Nonetheless there was significant conflict in some important aspects of the evidence, and where necessary I have made findings based on the balance of probabilities.

[23] Mr Mamacas presented as a reliable witness who gave his evidence in a straightforward and honest manner, notwithstanding that he had difficulty in understanding certain questions.

The 1999 Agreement

[24] In August 1999 Mr Robertson initiated discussions with Mr Easther concerning a change in the relationship between Mr Robertson and the company. The following exchange of e-mails provides some insight as to the nature of these discussions:1

"From: Ron Easther
Sent: Friday, 20 August 1999 12:17
To: Robertson Clive
Subject: CAR Trust Account

Are we talking about a Trust account as in a family type trust? I have no problems paying your wage into a trust account account (sic) but can you do it?

My limited understanding of how KWMC's relationship with CAR Trust would work is as follows:-

The company would need to enter into a contractural (sic) arrangement with the Trust for the Trust to provide a service. In your capacity as say the Sales Manager this would be an intellectual contract to provide xyz I guess? I've never seen this done before as basically you are an employee of the company but I'm no expert and it may be possible.

To do this you could no longer be an employee of the company. The company would need to pay out your LSL and H Pay and teminate (sic) your services. You would then be responsible for providing for these benefits in the Trust plus the Trust would need to provide for your workers comp, public liability insurance, superannuation and any other benefit that escapes me now. You would also need to take over your car payments.

Your relationship with the company would need to be very clear cut. You would still be a shareholder but not a Managing Director. Can you still be a Director? I wouldn't have thought so the Trust can't be a director of a company it must be an individual and your relationship with the company would now be.

I guess you could still sign cheques in your capacity as a shareholder of the company. I don't think you can could (sic) sign letters and quotations as Managing Director though. How this would effect (sic) the Bank I am not sure as you would need to resign as a Director as the relationship would now be seen as arm's length and non-related to the company.

How does your accountant see how this will work? Far beyond me.

I do know that you need to distribute all profits from the Trust as any undistributed profits attract a 48.5% tax.

From: Clive Robertson
Sent: Monday, 23 August 1999 9:28
To: reasther@kwmc.com.au
Subject: RE: CAR Trust Account

According to Macquarie Accounting it is legal and very common as of recent times. I contract myself to KWMC as I currently have the status of an employee. The critical test for this to happen according to John is that there has to be a master servant relationship between KWMC and myself and he advises this exists. It is his opinion that I can contract myself to KWMC as an employee and still be a Director due to my share holding. I've got a meeting with him tomorrow and will ask him about the questions you have raised. He advises it has been raised with the ATO and given their blessing."

[25] On 5 November 1999 Mr Robertson, under the letterhead of Careb Consulting, wrote to K W McCulloch Pty Limited in the following terms:2

"We have pleasure in submitting our quotation to undertake the following work on a contractor basis.

TASKS

1) Manage KWMC Hobart office.
2) Promote products and effect sales to general market.
3) Prepare and manage tenders/contracts as required.
4) Work on product marketing activities, in particular for southern area of state.
5) Represent KWMC at sales conferences and trade shows.
6) Be involved in development of company business and achieving of sales and profit budgets.

DURATION

Commence 7/11/99 and valid to 30/6/2002.

QUOTATION

Our price to undertake this work is $1170 per week plus supply of a fully maintained vehicle, plus insurance as detailed in contract.

PAYMENT

Weekly invoices will be submitted."

[26] Attached to this letter was a document set out in full below:

"This agreement is made the 7th day of November 1999.

Between KW McCulloch P/L 009482115 of 28 Thistle St, Launceston
("the Principal")

And Careb Consulting, PO Box 364, Moonah, Hobart
("the Contractor")

RECITALS

A. The Principal hereby engages the contractor to carry out the work detailed in Attachment A subject to the terms and contained in this Agreement.

B. It is the intention of both parties to create a relationship between them of Principal and Contractor and the relationship of Employee/Employer is specifically excluded.

OPERATIVE PART

1      Contractor's works

The Contractor shall undertake functions detailed in Attachment A in a conscientious, expeditious and workmanlike fashion. The Principal agrees to make office space and equipment available for the use of the Contractor for the duration of the Contract period.

2.     Contractor's warranty

The Contractor warrants that it is competent and has the necessary skills to carry out the work.

3.     Determination of this Agreement by either party

Either party may determine this Agreement upon either party giving 3 months notice to the other party.

4.     Assignment of Agreement

This agreement is personal to the Contractor and shall not be assigned without the consent of the principal.

5.     Contractor's remuneration

The principal shall make payments to the Contractor on the basis as is set out in the Schedule to this Agreement.

6.     Insurance

The Contractor shall effect all insurance required to be effected by it by law.

Without limiting the generality hereof, the Contractor shall arrange all:

(a) necessary insurance in relation to, sickness, accident, public liability;

(b) Necessary insurance under the provisions of any relevant workers' compensation legislation;

And shall if required by the Principal provide evidence of such insurance from time to time.

7.     Loss, damage or injury

The Contractor shall be responsible for and shall indemnify the Principal against liability for all loss, damage or injury to persons or property caused by the Contractor, and the amount of all claims, damages, costs and expenses which may be paid, suffered or incurred by the Principal in respect of any such loss, damage or injury shall be made good at the Contractor's expense and may be deducted from any moneys due or becoming to the Contractor.

8.     Non-exclusivity

The parties acknowledge that this is a non-exclusive contract and that the Principal may engage other contractors, and the Contractor may engage in other work.

9.     Relationship between parties

(a) Nothing contained in this agreement shall constitute the relationship of partnership; or employer and employee between the parties hereto, and it is the express intention of the parties that any such relationships are denied and the Contractor declares and warrants its business under the terms of this Agreement and for the purpose of undertaking other work as a Contractor.

(c) The Principal and the Contractor acknowledge that the Contractor has a non-exclusive right to contract with the Principal and may engage in other work with other Principals.

10.    Interpretation

In this Agreement unless there is something in the subject or context inconsistent the following meanings shall apply:

(a) "Principal" means in the case of corporation its successors and permitted assigns and in the case of a natural person or persons their and each of their respective heirs executors administrators and permitted assigns.

(b) "Contractor" means in the case of a person their respective heirs executors administrators and permitted assigns.

(c) Statutes and Regulations:

Reference to statutes regulations ordinances or by-laws shall be deemed to include all amendments and revisions made from time to tome (sic) to that statute regulation ordinance or by-law unless specifically excluded in the particular clause.

(d) Implied Covenants:

Any covenants implied by law (statutory or otherwise) are not negatived but shall be deemed to have been modified (where so permitted) to the extent of inconsistency with the provisions hereof.

11.    Entire Agreement

This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and extinguishes all prior agreements and understandings between those parties with respect to the matters covered hereby and all representations or warranties covenants or agreements previously given or made.

12.    Amendments

This Agreement may not be amended, modified or supplemented except by a written instrument executed by persons duly authorised on behalf of the respective parties.

13.    Waiver

No waiver by any party of any default in the strict or literal performance or compliance with any other provision, condition or requirement herein shall be deemed to be a waiver of the strict and literal performance of or compliance with any other any other (sic) provision, condition or requirement herein not be a waiver of or in any manner release any other party from strict compliance with any provision, conditions or requirement in the future nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

14. Execution of necessary documents

Each of the parties hereto shall respectively sign and execute such further documents and do such deeds act and things as the other parties shall reasonably require for completely effecting the intention of the parties under this agreement.

15.    Governing Law

This agreement shall be governed by and construed in accordance with the law of Tasmania and the Commonwealth of Australia and each of the parties hereby submits to the jurisdiction of the Courts of the State of Tasmania an (sic) the Courts of the Commonwealth of Australia."

[27] It would appear that this agreement was executed on 7 November 1999.

[28] Asked as to the purpose of this agreement, Mr Robertson responded:3

"What was the purpose of doing that?---It was two-fold. My marriage, second marriage, had just broken up and my wife was trying to obtain a 25 per cent shareholding in the company which she believes she's entitled to. I discussed it with Mr Easther and he believed that by being at arm's lengths it would protect the shareholding in the company from my ex-wife."

[29] It is not entirely clear what the second reason was although it may well have been a requirement of a major K W McCulloch Pty Limited client to separate the functions of consultant and supplier.4

[30] Mr Easther said that he assumed Mr Robertson wished to enter into this arrangement so that he could earn more money through external consulting.5

[31] Mr Easther said whilst he was aware that Mr Robertson had separated from his wife, he denied that Mr Robertson had told him this was the primary motivation for the contract.6

[32] On 8 February 2000 Mr Robertson sent the following handwritten note to Mr Easther:7

"Ron

Re Careb Contract

I attest this is a draft contract and is only offerred (sic) to suffice Family Court requirements.

It is not binding on KWMC or Careb and can be changed by negotiation between you and I.

Please fax to ... at ...

Thanks

Clive
8/2/2000"

[33] Mr Robertson's evidence was:8

"Why did you write that note?---Ronald Easther asked me to put a disclaimer in saying that it would not be a binding contract."

[34] Mr Easther denied that he instigated the memorandum.9 He also said that he did not understand why it had been sent, and "probably didn't take any notice of it".10

[35] I found Mr Easther's evidence on this question to be both evasive and unsatisfactory. It beggars belief that Mr Easther could accept a document purporting to nullify a legally binding contract entered into three months earlier, without either knowing the background behind it, or seeking an explanation as to what it meant. And further, to fax the contract to a firm of solicitors without being aware of whom they represent.

[36] I am satisfied that Mr Easther was fully aware that the primary motivation behind the contract related to a claim from Mr Robertson's wife for 25% of the company shares. I am fortified in this conclusion by the following evidence:

  • Mr Easther's less than ideal relationship with Mr Robertson's former wife.11
  • E-mails from Mr Easther to Mr Robertson dated 6 and 18 February 2004.12
  • The evidence of Mr Mamacas as to his understanding of Mr Robertson's status.13

Period November 1999 to August 2003

Duties Performed by Mr Robertson:

[37] Mr Robertson said that the "Tasks" outlined in the letter of 5 November 1999 were the same as the duties he was performing prior to the agreement coming into effect. His further evidence was that he continued to perform this same work following the execution of the agreement.

[38] Mr Easther was extensively cross-examined on the duties performed by Mr Robertson in the post agreement time frame.14

[39] Having reviewed the evidence I am satisfied that whilst there were some changes, they were not a consequence of the agreement being executed. I refer, for example, to the fact that for a period of time all Hobart staff worked from home as a cost saving measure. It would also seem that Mr Robertson focussed on a small number of major projects. I am satisfied that these are changes which would have occurred in any event as part of an evolving business environment.

[40] I am also satisfied on the evidence that the level of supervision applied to Mr Robertson's work did not alter as a consequence of the agreement.15 Mr Robertson performed his duties in a largely autonomous manner, with occasional discussions with Mr Easther. Given Mr Robertson's level of seniority within the company, such an arrangement would not be unusual.

[41] Mr Robertson continued to use the title of managing director. He had business cards styled as such, which he continued to use up until the time of termination.16

[42] Mr Easther initially said that he was unaware that Mr Robertson held himself out as managing director, pointing out that following the sale of his shares, Mr Robertson was no longer a director.

[43] Subsequently Mr Easther agreed that Mr Robertson may have used the business card with his authorisation, and may have signed letters and quotations with the managing director title.

Financial Arrangements:

[44] It would seem [although the evidence is not entirely clear]17 that prior to 7 November 1999, Mr Robertson was paid a wage of $1170 per week. In the period immediately following the execution of the agreement, Careb Consulting [Careb] was paid an amount of $1170 per week. From 18 July 2000 to 1 April 2003, the amount paid was $1320 per week. Thereafter the amount became $1500 per week.

[45] At all material times, the amount paid as a wage to Mr Easther and as a "Consulting and Retainer Fee" [the fee] to Mr Robertson, was the same.18

[46] The fee was paid to Careb on a weekly basis as part of the staff payroll.19

[47] Throughout the relevant period the fee was paid irrespective of absence on leave or otherwise [see Leave Entitlements below]. The fee was the same each week and did not on its face have any profit/risk component.

[48] K W McCulloch Pty Limited continued to provide Mr Robertson with a fully maintained vehicle, petrol card, cab charge card, mobile phone and home telephone following the execution of the agreement.20

Workers' Compensation

[49] The agreement clearly requires the Contractor to provide workers' compensation insurance.

[50] Mr Robertson said that he did not take out such insurance, because, with the agreement of Mr Easther, such cover was provided on a continuing basis by K W McCulloch Pty Limited.21

[51] Mr Easther said that following the execution of the agreement, Mr Robertson was not covered by the company workers' compensation insurance policy. 22

[52] A workers' compensation quotation from GIO for Careb was tendered.23 This quotation had the following handwritten note on it:

"Ron For info, is this cheaper? CR 14/2/2000"

[53] It is difficult to draw any meaningful conclusions in relation to this document.

External Consulting:

[54] The agreement contained a Non Exclusivity clause, which allowed the contractor to engage in other work.

[55] Mr Robertson's evidence was that he did not work for anyone else.24

[56] Two invoices and a quotation from Careb were tendered. On reviewing the evidence I am satisfied that one invoice dated 3 October 2000, for $759 was a genuine external consultancy from which Mr Robertson, through Careb, personally profited. There were circumstances surrounding the other two documents which sets them apart.25

Company Clothing:

[57] Mr Robertson's evidence was that he on occasions wore company provided clothing with a K W McCulloch Pty Limited logo. Mr Easther said the wearing of company clothing was not compulsory.

Taxation:

[58] K W McCulloch Pty Limited did not deduct PAYE tax nor provide Group Certificates for payments made after the execution of the agreement.

Superannuation:

[59] K W McCulloch Pty Limited did not make superannuation contributions on behalf of Mr Robertson following the execution of the agreement. This however was the subject of a subsequent ATO audit [see Invoices below].

Invoices:

[60] It would seem that Mr Robertson raised invoices on a weekly basis for the period November 1999 to September 2000. Mr Robertson's evidence was that the arrangement came to an end at that point. He said:26

"Did it remain in force for the entire period?---No, it did not.

When did it cease?---It ceased after the first BAS statement return that was required in September 2000.

Why did it cease after that event?---I spoke to Ronald Easther and explained that I found it far too hard to conduct the necessary accounting requirements and I wished to go back onto salary.

And there was no difficulty with that?---No difficulty at all."

[61] Mr Easther denied that this conversation occurred.27 Nonetheless, K W McCulloch Pty Limited continued to make weekly payments to Mr Robertson for the next three and a half years, despite the absence of invoices.

[62] On 6 February 2004 Mr Easther sent Mr Robertson an e-mail relating to a tax audit in respect of superannuation payments. This part of the evidence was tendered in closed hearing pursuant to a s.26 application. As such the text is not reproduced in this decision. It has however been fully taken into account in the decision.

[63] In summary, as a consequence of an ATO audit, Mr Easther requested Mr Robertson to retrospectively reconstruct weekly invoices for the previous three years. He made suggestions as to how this might be done and offered certain observations as to a possible outcome.

[64] Mr Robertson said that he initially objected to this request and complied only because he was told that no more payments would be made until the invoices were completed.

[65] Mr Easther said he had always assumed the invoices had been put in and only became aware that this was not the case through the ATO audit.

[66] Under cross-examination [in open hearing], Mr Easther said:28

"Just going back to, you will have to raise 39 invoices at $1300 and $20 - at 13 at $1500. Miss a few numbers every now and then just to be on the safe side. What did you mean by that?---Okay. I made mention of it yesterday. Mr Robertson started - or Careb Consulting started - raising invoices on the company from 1999 when he started as a consultant through Careb Consulting. When I went to Jan Dickens, our person who was the paymaster and did all the accounts and I asked could she copy me - or get a copy of all the Careb Consulting invoices, she said I just don't - I don't have the invoices, and that was talked about yesterday. I said, "What do you mean we don't have any invoices for Careb Consulting?" She said, "Well, Clive has stopped sending them," and because it's just a retainer fee, she's thought about it and just included it as the general wage and I said, "Well, this is impossible." I said, "The man is a consultant for the company, we have to have invoices." I mean, we're talking about now, 2004. I'd seen all the invoices from Careb Consulting when it first started - the arrangement started and I'd certainly seen them all since September or August 2003 because they all come over my desk. But I didn't pay all the accounts and most of the staff was done by EFT. Careb Consultings was paid on a weekly basis.

What did you mean by miss a few numbers?---Yes, well, I thought that - I wasn't sure how Mr - or Careb Consultings had raised their invoices but I'm sure if they'd got - and I only said that in the context that if they'd got a lot of - 52 invoices straight, that he probably wasn't doing any other consulting work, or he may not have been doing any other consulting work.

Why is that relevant?---Well, then, I would've thought they'd look at it and say that he was an employee of the company, which he wasn't, and make us pay payroll tax on his - on the consultancy fees. I'd already pointed out in a previous letter that Mr Robertson had to look after his own payroll tax - all his taxes, that was part of the contract that we were involved with. I didn't see why the company should be up to pay payroll tax on consultancy fees that was nothing to do with the company."

Period August 2003 to May 2004

[67] In August 2003 there was an incident in the workplace involving Mr Robertson and another employee. Notwithstanding Mr Zeeman's objection I allowed evidence to be taken in relation to the circumstances surrounding this incident.

[68] Having reviewed the evidence I am satisfied that the circumstances of the incident are not relevant to the primary question of whether or not an employment relationship existed. Suffice to say that the incident did lead to a significant change in the relationship between the parties.

[69] The evidence in relation to what followed is confusing and in some respects contradictory.

[70] It is clear that Messrs Easther, Mamacas and Robertson had a meeting sometime in August at which time the future of Mr Robertson was discussed.

[71] It was agreed that Mr Robertson would no longer work from the Hobart office. In fact it would be fair to say that he was barred from attending the office.

[72] It would seem that three options were discussed. The first option, involving the dismissal of a staff member and possible litigation, was not pursued.

[73] The second option was described as a $75000 "walk away" payment.

[74] The third option was a payment of $50000 plus 10% of the net profit resulting from the Hills project, should it materialize. Inherent in this proposal was the forfeiture on Mr Robertson's part of the right to buy back his shareholding. It was also a common expectation that Mr Robertson would ultimately move to Melbourne and work for Hills. It would also seem likely that it was agreed that the payment would be made in instalments, although the detail of such arrangement was anything but clear.

[75] Both Mr Easther and Mr Mamacas were adamant that a "gentlemen's agreement" was reached at this meeting. Mr Easther said:29

"So he agreed to option number 3?---He agreed to option number 3.

Set in concrete?---Well, a gentlemens' agreement, yes.

And that option again was?---That Mr Robertson get paid out $50,000 for not being able to buy a share back into McCullochs, and that would be paid in $1500 a week amounts and that he would receive 10 per cent of the nett profit of Hills.

I will ask you again: there is no doubt in your mind that agreement was set in concrete?---That was the gentlemens' agreement we reached on that night."

[76] Mr Robertson acknowledged that discussions took place but denied that agreement was reached. Further, he said that it was not agreed that he would cease to be an employee of the company.

[77] On 26 August 2003 Mr Robertson sent a handwritten note to Messrs Easther and Mamacas. The note read in part as follows:30

"Thanks for your settlement offer - I have thought it over and think it is a little light on for the following reasons.

After 20 years and assisting in growing KWMC from a 365K a year company with two agencies to a $4M a year company with in excess of 20 agencies I think I am entitled to more than $50K.

I am happy about taking the money in weekly amounts, grateful for your offer on the car and petrol costs.

I would like to keep my mobile phone number as it will make life much easier. I can be trusted to refer any business that comes via this number back to Ron.

I appreciate the consulting work and you know any thing I work on will always be 100% KWMC products."

[78] The note went on to outline why he considered the $50000 to be inadequate. His rationale is not material to the matter before the Commission. Suffice to say that Mr Robertson considered he was entitled to an amount considerably in excess of $50000.

[79] Cross-examined on this letter, Mr Robertson said:31

"So it is correct that there was an offer, and an acceptance by you of that offer of $50,000?---No, there wasn't. There was never an acceptance of $50,000, and there were subsequent meetings after this about it, and it was never accepted.

Wouldn't you say that the previous two paragraphs are saying that you think it is a little bit light on, but you are happy about taking it?---No. I'm saying I was happy - Easther said he could not pay anything out in a lump sum. Would I be happy to take it in instalments once we agreed on an amount, and I said, "Yes, I could live with that." "

[80] On 25 September 2003 the following note was sent on K W McCulloch Pty Limited letterhead to key customers:32

"I wish to advise that I am no longer working out of KWMC's Hobart office but I will continue to be involved in designing, quoting, tendering and project management of projects for KWMC.

My new contact details are set out below. Please do not hesitate to contact me if you require assistance or information on any project you may be working on. The service we offer has not changed. We believe this change will improve our ability to offer assistance at the design stage and through out the project.

Regards

Clive Robertson"

[81] By letter dated 30 September 2003 Mr Easther responded to Mr Robertson's note of 26 August. This letter covered a range of issues including bank security; private expenditure charged by Mr Robertson to the company; shareholder value and the Hills project.

[82] The letter was inconclusive and concluded with the following:33

"Against the above issues of course there is an obvious benefit from your 20 year involvement within the company. George insisted that we remain honourable and fair in these dealings as he doesn't want to compromise his personal standards.

How do we weigh up the positive and negatives - they are quite complex but need to be addressed before we can move on."

[83] By letter of same date Mr Easther wrote to Mr Robertson seeking to clarify internal arrangements as Mr Robertson's consulting activities.

[84] The letter included the following comment:34

"KWMC will issue a letter to our customers and suppliers informing them you are now self employed in Careb Consulting. Please find copy attached."

[85] The attached letter read as follows:

"I am writing to advise that on the 11 August 2003 after 20 years involvement with KWMC Mr Clive Robertson terminated his services with the company to commence his own consulting business, Careb Consulting.

To assist you with any information or queries you may have please find following a list of the KWMC staff members who are your contacts for areas that you may have previously liaised directly with Clive."

[86] There is no evidence that this undated draft letter was actually sent to customers, nor was it put to Mr Robertson for comment.

[87] Mr Robertson's evidence on his duties post August 2003 was as follows:35

"MR ZEEMAN: Mr Robertson, after you moved your office from the business premises of the company to your home was there any change in your duties?---Slight changes.

What were those slight changes?---I spent less - far less time on day-to-day tasks and concentrated more on a specific project that we were working on.

And what was that project?---It was a project where we were trying to come to an agreement with Hills Industries to distribute and market a product nationally and through New Zealand that we had developed.

And why did you spend more time on that project?---Because it was going to make us a very large amount of money.

And was that you decision, to spend more time on that project?---I was requested by Easther and Mamacas to.

Easther and Mamacas - - -?---And Mamacas.

- - being who?---Directors.

Directors of the company?---Of K.W. McCulloch.

Was it ever agreed at that time that you would cease being an employee of the company?---No, it wasn't.

There was a change in duties in that you would spend more time on the Hills project. Was there any arrangement in respect to your employment associated with that project?---I was still paid the same wage and I was recompensed for doing additional work over and above the Hills project.

Was there any discussion in respect to the future of your employment when discussions were had in respect to the Hills project?---It was always my aim, ambition, to bring the project to fruition and to go and work for Hills in Melbourne."

[88] And later:36

"Now, during the course of the Hills project did you perform any other work?---Yes, I did.

And who did you perform that for?---I performed it for K.W. McCulloch.

Nobody else?---Nobody else.

In respect to that work, that other work that you did for K.W. McCulloch, how were you paid?---I was paid - I raised invoices through Carob Consulting and forwarded them under separate cover.

And was that in addition to your work that you did on the Hills project?---It was.

Did that require working outside of say 40 hours a week?---It did."

[89] Mr Easther's evidence was:37

"Mr Robertson was still able to do some work on the side. There was contracts that he was still involved with, that he could no longer come into the office but, you know, he still was involved with some contracts that we wanted him to finish off, so from that point on - from when this finished in August, we paid $1500 a week up to the $50,000 and we - and then Mr Robertson then would send us accounts for - from Carob Consulting for the other work he was consulting on at any time - "

[90] And later:38

"Now, how did his duties change, apart from the fact that he wasn't in the office?---In which way?

Well, how were they different from when he was working in the office to when he was working from home?---It was - I think we had a letter today that was - outlined what Mr Robertson was, you know, his involvement - he was going to finish off the contracts that he was involved with while he was in the office. He was going to be working on the Hills deal so we could get the Hills deal up and running.

So it was agreed that he would be working, what, full time on the Hills deal?---Not full time, as his hours demanded. There was a lot of negotiating between the two companies.

Did he put in invoices for all his work for Hills?---Yes, he did."

Mr Easther said Mr Robertson only worked on the Hills project when he was away from his home base, and that "he certainly wasn't working full-time on it".

[91] The evidence of Mr Mamacas on this issue was:39

"And did he continue to consult for KWMC after August 2003?---Yes.

And what was his involvement as a consultant from thereon in?---Well, basically it was no different to what it was previously, you know, he would seek work on behalf of us and to do with Avid.

Avid being the Hills?---Yes, yes, he was basically concentrating on Avid because that was the thing at the time that we wanted to get through."

[92] In January 2004 Messrs Easther and Robertson made a presentation to Hills management. Tendered in evidence was an extract from a Powerpoint presentation, which read in part:40

"In November 2003 KWMC allocates Clive Robertson full-time to work with Hills to develop marketing plan for AVIT."

[93] On 3 February 2004 Mr Easther wrote to Hills concerning the project. The letter said in part:41

"KWMC Support

Refer presentation slide 41, KWMC have already allocated Clive Robertson to the marketing of AVIT and training of preferred integrators and Hills Technical Solutions Group.

It was raised by Tony Colicchia and agreed by David Simmons that Clive would transfer to Melbourne for an unspecified period to establish AVIT."

[94] Mr Easther's evidence on this point under cross-examination was confusing, but it would seem that Mr Easther intended this as a futuristic commitment, to be funded by Hills.42 Given the sequence of dates and the words used, Mr Easther's evidence was not entirely convincing.

[95] In late April 2004 the Hills project collapsed. On 3 May Mr Easther sent an e-mail to Mr Robertson which read in part:43

"Everything stops from today. As I said George is not back until next Wednesday. Just think of these people working fulltime on Hills, Brett, Travers, Al, Me, You for the past 4 months ..."

[96] It would appear that at least three staff were made redundant in addition to ending the arrangement with Mr Robertson.

[97] At the time of termination Mr Robertson had been paid a total of $52500 in $1500 instalments. Mr Easther said this was an extra two weeks' payment because he thought the Hills deal was going ahead. He went on to say:44

"Okay. If Hills had not contacted you for another four weeks, would you have kept paying $1500 a week to Mr Robertson?---If they hadn't? Probably.

Why?---Because the Hills deal was a very big deal.

Did you talk to Mr Robertson about continuing the payments?---No, not until - no, not - no, we didn't.

So he would have thought when he received this money, what a bonus, I have just received $1500, you know, that must be a gift from the company for the fact that I am doing such a great job?---He probably thought that, yes.

And because that was precisely what you intended, that it was just an ongoing gift?---No, that was not right. There was a $50,000 deal on the table and that was it.

Well, I put it to you, Mr Easther, the reason that you continued and the company continued paying $1500 was that there was no agreement about the $50,000 and the $1500 was a weekly wage paid to Mr Robertson?---That is quite incorrect. Mr Robertson - or Careb Consultings invoiced us for the work they'd done for McCulloch's in that period from 18 August to 28 April 2004."

[98] There was evidence that Mr Robertson, albeit to a limited extent, continued to perform a management/supervisory role for K W McCulloch Pty Limited.45

[99] There can be no doubt that Mr Robertson did perform some consulting work for K W McCulloch Pty Limited. Between August 2003 and May 2004, Careb submitted invoices for $13308. There was no evidence of Mr Robertson performing consultancy work external to K W McCulloch Pty Limited.

[100] Mr Easther's evidence was that invoices were produced for all work on the Hills project. Save for a $231 component of one invoice in January 2004,46 this documentation was not tendered. Given the potential significance of such documentation, this was most surprising.

[101] From the confusing evidence, I have reached the following conclusions:

[102] Mr Robertson did receive regular payments of $1500 each week. This was precisely the weekly payment that he was receiving prior to the August 2003 arrangement. The payment also continued beyond the purported "agreement" of $50000. The arrangements in relation to his car and mobile phone continued.

[103] Mr Robertson did perform a substantial amount of work on the Hills project. I am unable to determine whether or not this amounted to a full-time workload.

[104] Mr Robertson did, to a limited extent, continue to perform a management role for K W McCulloch Pty Limited.

[105] Mr Robertson did perform some specific consultancy work for K W McCulloch Pty Limited, and for which he rendered specific invoices. This can be contrasted with the position prior to August 2003.

[106] Mr Robertson did not attend the Hobart office of K W McCulloch Pty Limited.

[107] I am unable to determine with certainty whether the $1500 was in the nature of salary, consultancy retainer, or an agreed "settlement" paid in instalments.

Accrued Leave Entitlements

[108] Mr Robertson said that his contract of employment provided for the following:

  • Four weeks' paid leave per annum plus a 17.5% loading.
  • Three months' long service leave after 10 years' service.

[109] He said that Mr Easther was aware of these arrangements prior to becoming a director, in that he was providing accounting services to the company. The respondent did not contest this evidence.

[110] As at 9 November 1999, the accrued entitlements were as follows:47

  • Annual leave 684.8 hours
  • Long service leave 565.6 hours

[111] Mr Easther acknowledged that these accrued entitlements were due at the time the 1999 agreement was entered into. They were not paid out, as the amount was offset against Mr Robertson's "loan account", which according to Mr Easther, was greater than the accrued entitlements.

[112] There was a considerable amount of evidence in relation to expenditure of a private nature incurred by Mr Robertson and charged to the company. Examples of such expenditure include private travel, accommodation and entertainment; household goods; cash advances; legal fees; rent for private dwelling; wedding reception; goods borrowed from stock and not returned. The position of the respondent is summarised in the letter of 30 September 2003.48

[113] Mr Robertson admitted that some debt was owed to the company but certainly not to the extent asserted by the respondent. He rejected the suggestion that he accepted an offset against accrued entitlements.49

[114] I note that the notion of charging private expenditure to the company was not unknown to Mr Easther, and to a minor extent, Mr Mamacas. The level of Mr Robertson's expenditure was, however, of a quite different order.

[115] Mr Robertson's evidence was that he had not taken any annual or long service leave since November 1998.50

Mr Easther's evidence on this point was:51

"Right. And from November 1999, did he have any periods where he had a break, went away, holiday, as far as you are aware?---Yes, yes, there was - certainly. I can't recall them, but yes, he certainly took holidays.

No. Would that have been - - -?---Took holidays or wasn't there for a period of time.

And we are talking about days during the week when he wouldn't have been - - -?---In fact in December 1999, he went to America.

For how long was he in America?---Two or three weeks.

And was that work - was that related to working as a consultant for KWMC?---No.

And in the years following that, would he have had a holiday each year?---Yes.

And would that have involved days of the week, being unavailable to work as a consultant?---Pre 19 - pre - - - 

After November 1999, each year?---Yes, he certainly took days off.

He didn't just go on a Saturday and come back on a Sunday?---No, no, he took other time off during the week.

And he wasn't paid any holiday pay for - - -?---No, not at all."

[116] Mr Easther said the company continued to pay the consultancy retainer when Mr Robertson was absent52; that Mr Robertson did not seek permission before he went on leave53 and that he could take as much leave as he wanted.54

[117] The evidence of Mr Mamacas on the leave issue was:55

"And over the period that you are a director, are you aware that he had any periods of time away? Did he go away for holidays?---Yes, everyone goes away, yes.

So what can you recollect in that respect from July 2002?---Look, I didn't take notes.

So would it have been once a year that he was away?---I couldn't say.

Did he take any time off to your knowledge when he got married?---Yes, he did actually, I think he went on a honeymoon to Queensland or something, from memory."

Authorities

[118] Counsel for both the applicant and respondent acknowledged that the leading authorities in this heavily litigated area are Hollis v Vabu56 and Stevens v Brodribb Sawmilling Company Pty Ltd.57

[119] Ms Badenach also relied upon Global Plant Ltd v Secretary of State For Social Services58 and Connelly v Wells.59

[120] In Connelly Gleeson CJ said:

"Where the relationship between two persons is founded in contract, the character of the relationship depends upon the meaning and effect of the contract. In the absence of a suggestion that a contract was varied after it was originally made, its meaning and effect must be determined as at the time it was entered into. If the contract is in writing, then the court which is considering the nature of the relationship between the parties is directed to an examination of the terms of the written agreement in the light of the circumstances surrounding its making. (Narich Pty Ltd v Commissioner of Pay-Roll Tax (1983) 2 NSWLR 597 at 601)."

[121] More recently the law was discussed in Bedelph v Protective Security Pty Ltd60 by Underwood J and by the Full Court on appeal.61

[122] In the judgement at first instance Underwood J overturned a decision of the Workers Rehabilitation and Compensation Tribunal which had found the existence of a contractor/principal relationship. A major issue in this judgement was the relative weight to be given to the terms of the written contract when balanced against the facts of the relationship. Underwood J observed:

"31. It is settled law that a consideration of whether a person is working under a contract of service or a contract for services requires the Tribunal of fact to take into account all the circumstances of the case. See Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539, at 552; Zuijs' Case; Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395 at 401; Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210, at 218. In Stevens v Brodribb Sawmilling Co Pty Ltd (1985) 160 CLR 16, at 24, Mason J (as he then was) referred to the control test, but made it clear that this was but one of many matters to be taken into account, cited the cases to which I have just referred, and said:

`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.'

...

35 The authorities establish that where the parties have made express terms, either written or oral, those terms are not necessarily the primary evidence of the legal relationship. They constitute but one of the many factors that have to be taken into account. The weight to be given to the express terms depends on all the circumstances of the case."

[123] On appeal Crawford J said:

"30. A consideration of whether a person was working under a contract of service or a contract for services requires the tribunal of fact to take into account all the factual circumstances of the case. Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552; Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210 at 218; Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395 at 401.

31. 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 is entitled to exercise over the latter, not merely in regard to what the latter will do, but also in regard to how it is to be done. But the existence of control, whilst significant, is not the sole criterion by which to gauge the matter. It is merely one of a number of indicia. `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 of 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 at 24. It is the totality of the relationship between the parties which must be considered. Op cit at 29. Criteria `suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or distinct calling on the part of the person engaged, the provision of him by his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of the remuneration without deduction for income tax. None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance.' Op cit at 36 - 37. However, having regard to a variety of criteria `is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances.' Op cit at 35. `Any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance.' Op cit at 37.

32. It is obvious that the signed agreement between the parties required careful consideration because it expressly provided that the deceased was an independent contractor and it denied the existence of a relationship of master and servant. It was couched generally on that basis and many of its terms were consistent with that. The Tribunal determined that it was not persuaded that the deceased was performing his duties consequent upon a contract of service so as to be a worker within the meaning of the Act, largely because of what the agreement provided, although at the same time it found that the material provisions of the agreement to that effect were supported by other circumstances.

33. The learned judge referred to a number of authorities concerning the influence that an express agreement may have on the question that arose in this case. In Ferguson v John Dawson & Partners (Contractors) Ltd [1976] 1 WLR 1213 it was made clear by Megaw LJ at 1222 - 1223, upon reference to authorities, that the nature of the relationship is determined by the law and not by the label which parties choose to put on it, and it is not necessary to go so far as to find the contractual document containing the label to be a sham. The expression of the parties' intention will be a relevant factor, but is certainly not a conclusive factor, in deciding what is the true nature of the contract. In Global Plant Ltd v Secretary of State for Social Services [1972] 1 QB 139, Lord Widgery said at 152: `One must not overlook that the intention of the parties was that the relationship should be that of an independent contractor, and although the parties cannot by intention make a transaction into something which it is not, yet it is recognised that such intention is a factor for consideration in these cases.' That principle was applied at first instance in this State in Johns Perry Hayward Pty Ltd v Greaves A72/1990 at 17 - 18 and Thompson v Cooee Point Abattoirs Pty Ltd (2002) 10 Tas R 412 at 419.

34. That circumstances other than the express provisions of the written agreement should be considered in this case, is also supported by what was said by Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ in Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at 33: `It should be added that the relationship between the parties, for the purposes of this litigation, is to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed by Vabu go to establishing 'the totality of the relationship' between the parties; it is this which is to be considered. Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 29.' "

[124] The full court dismissed the appeal.

Jurisdiction

[125] Towards the end of the hearing I raised with the parties the question of whether the Commission had jurisdiction to determine the annual leave question, given that there was no suggestion of an alleged award breach, which would in turn give rise to jurisdiction pursuant to s.29[1A][c] of the Act.

[126] Section 29[1A][a] reads:

"(1A) A former employee may apply to the President for a hearing before a Commissioner in respect of an industrial dispute relating to -

(a) the termination of employment of the former employee; or"

[127] In Section [3][1] "industrial matter" is defined as:

"'industrial matter' means any matter pertaining to the relations of employers and employees and, without limiting the generality of the foregoing, includes -

(a) a matter relating to -

(i) the mode, terms and conditions of employment; or"

[128] Mr Zeeman contended that annual leave clearly falls within the specific terms of subclause (i), or failing that, the generality of the opening terms of the definition.

[129] It follows that there is an "industrial dispute relating to ... the termination of employment of the former employee" in that the question of annual leave only arose as a consequence of the termination. But for the termination, there would be no dispute.

[130] I agree with the submissions of Mr Zeeman. I am satisfied that the Commission has jurisdiction to determine the annual leave question.

Findings

Was there an employment relationship?

[131] The respondent submitted that the relationship of contractor/principal was established with the execution of the agreement in November 1999. The events of August 2004 amounted to an "evolution" of this relationship. It was not advanced as an alternative argument of changing the status of the relationship at that point, in the event that the Commission was against the respondent insofar as the agreement was concerned.

[132] A review of the authorities points to the following conclusions:

[133] The existence of control, whilst significant, is not the sole criterion.

[134] There exists a number of indicia, none of which by itself is necessarily determinative.

[135] The existence of express terms in a contract is a matter to be considered and given due weight, but such a contract cannot purport to create something which it is clearly not.

[136] I turn now to the question of control.

[137] It was common ground that on a day-to-day basis, Mr Robertson was largely autonomous. Direction from Mr Easther, and later Mr Mamacas, was probably limited to an identification of the projects upon which Mr Robertson should concentrate. Mr Robertson was however a senior manager, and this level of autonomy would be expected. Importantly, the level of control did not alter following the execution of the agreement. If Mr Robertson was an employee prior to November 1999, then in terms of control, nothing changed as a consequence of the agreement that would alter this status.

[138] As to the intention of the parties, the plain words of the agreement clearly point to an intention to create a contractor/principal relationship. Indeed Clause 9 specifically denies an employee/employer relationship. The question to be determined is whether on the facts of what actually happened, the agreement should be viewed as labelling the relationship as something that it was clearly not.

[139] The non payment of superannuation and absence of PAYE taxation deductions are indicia of a contractor relationship. The provision in the agreement requiring the contractor to take out workers' compensation insurance is in the same category. The evidence as to what actually happened in relation to workers' compensation is in conflict and I am unable to decide where the truth lies.

[140] The submission of invoices, on its face, points to a contractor relationship. Against that, the invoices that were submitted were identical in style and quantum. For three and a half years no invoices at all were submitted, yet Mr Robertson [Careb] was still paid on a weekly basis. It is difficult to give any serious credence to invoices submitted with such extensive retrospectivity, and for a purpose unrelated to gaining payment for services rendered by Mr Robertson.

[141] Invoices rendered between November 1999 and September 2000 were not tendered. It is however a reasonable assumption that they would have been similar in style to those subsequently submitted retrospectively.

[142] The invoices did not identify any services provided. The quantum was identical for extended periods of time and equated precisely with the amount Mr Easther was paid as a weekly wage. There was no element of risk/profit attaching to the weekly payment.

[143] Mr Robertson received the same payment every week, irrespective of what he actually did. Indeed he continued to receive the same payment even when he was absent.

[144] The respondent submitted that GST was paid on the payments made to Mr Robertson. I doubt whether that was the case. The GST did not come into effect until 1 July 2000. Mr Robertson said that he ended the arrangement in September 2000, because of difficulties in complying with BAS requirements, the first of which would have fallen due at that point. Given the circumstances in which the retrospective invoices were submitted in February 2004, I would be highly surprised if Mr Robertson remitted to the ATO 10% of his earnings for the previous three and a half years.

[145] The duties performed by Mr Robertson did not change as a consequence of the agreement.

[146] There was evidence that Mr Robertson performed some consulting work external to K W McCulloch Pty Limited, albeit to an extremely limited extent. Given its limited nature, this is not necessarily inconsistent with an employment relationship. Indeed Mr Easther, on the evidence, provided external consulting services, yet continued to consider himself an employee of K W McCulloch Pty Limited.

[147] Mr Robertson presented to the outside world as an employee of K W McCulloch Pty Limited. I instance the use of his business card styled as managing director together with wearing of company clothing with logo.

[148] Perhaps the most telling point is that the level of remuneration did not change as a consequence of the agreement. Mr Robertson, who was at the time a 50% shareholder and director of the company, initiated the agreement. Why then would he accept the same level of remuneration and at the same time assume liability for insurance, annual and long service leave and potentially GST. It simply does not make sense.

[149] Mr Robertson continued to receive the benefits of an employer provided car, mobile and home telephone and cab charge etc. Indeed there was no evidence of Mr Robertson making any capital investment in his business.

[150] In my view the evidence points overwhelmingly to an employment relationship. The agreement was clearly a device designed for other purposes. I have already found that the parties were fully aware of the reason the agreement was entered into.

[151] I have previously expressed misgivings about the creation of agreements for the sole purpose of avoiding obligations in one area, only to spurn the arrangement to gain an advantage when it suits [Taylor v Cedar Packaging62]. However in this instant matter there was no evidence that the agreement was actually used in another jurisdiction to avoid an obligation. Rather it seems that Mr Robertson felt that the agreement might provide him with a defence in matrimonial proceedings, but it has not been actually tested. In the circumstances I must determine the question on the facts as they present.

[152] I should say that the events of August 2003 substantially altered the nature of the relationship, particularly the level of consulting undertaken by Mr Robertson, the genuine nature of the invoices submitted and the fact he no longer worked from the K W McCulloch Pty Limited office. Against that, Mr Robertson continued to work for the company for which he continued to be paid the same regular weekly payment. Had I been required to determine this question in isolation, then I would observe that there would be a much stronger arguable case for the existence of a contractor relationship. I put it no higher than that.

[153] In any event it is unlikely that much would change even if I was against the applicant at that point. It would then come down to an "extension of time" application, and given the confused nature of the evidence, which could only be definitively decided by a decision of the Commission or a court, there would be a strong argument as to the existence of "exceptional circumstances".

[154] I find that Mr Robertson was an employee of K W McCulloch Pty Limited on a continuous basis from November 1983 until 3 May 2004.

Long Service Leave:

[155] Mr Robertson's evidence was that he was entitled to three months' long service leave after 10 years' service. This was not contested by the respondent.

[156] The accumulated entitlement as at 9 November 1999 seems more consistent with an entitlement based on 13 weeks' leave after 15 years' service.63 This of course is consistent with the Long Service Leave Act 1976.

[157] The Commission has no jurisdiction to enforce common law contracts. It can however take into account the terms of any such contract when making an order to settle an industrial dispute. If Mr Robertson's evidence is correct, then the contract was made at the time when Mr Robertson and his then wife were the sole owners of the business. It was effectively an agreement with himself. It would seem to me to be manifestly unfair to foist the liability for what amounts to an entitlement well in excess of prevailing statutory standards on the remaining shareholder/s who was not party to the original agreement. In the circumstances I would not be prepared to endorse the agreement, if that is what it was.

[158] A simpler explanation would be that Mr Robertson was simply mistaken in his evidence.

[159] Cleary there is an entitlement to long service leave. I propose to accept as correct the accrued entitlement as at November 1999 and calculate the balance based on the 1976 Act for the period up until 3 May 2004.

Annual Leave:

[160] It is common ground that Mr Robertson had accumulated 684.8 hours annual leave as at November 1999.64

[161] Mr Robertson's evidence is that he did not take any annual leave between November 1999 and May 2004. This was contradicted by both Mr Easther and Mr Mamacas in their uncontested evidence.

[162] It is disappointing that Mr Robertson gave the evidence he did on this point without qualification. It defies credulity that anyone would not have at least one day off in four and a half years. On the available evidence I am quite satisfied that Mr Robertson did take leave on a reasonably regular basis. It is not possible on the evidence to determine whether this amounted to four weeks each year and I would be surprised if records exist.

[163] Mr Robertson was in a position to take leave as and when it fell due and I am satisfied he did so, either in whole or in part. Either way, he has failed to satisfy the onus falling to the applicant to prove his case for leave accruing after November 1999.

Offsetting:

[164] The respondent submitted that the accrued entitlements were determined at the time the agreement was executed, and with Mr Robertson's knowledge and consent, offset against his loan account at the time. Mr Robertson denies that he consented to this arrangement. Further there is no satisfactory evidence that the accrued entitlements were actually determined and agreed at the time. It would seem that "employee inquiry" shown in Exhibit R6 was made on 30 June 2004. In any event, the so called loan account was still a matter of discussion in September 2003.65

[165] Absent a specific agreement, it is not open to the company to unilaterally offset accrued entitlements against amounts allegedly owed by Mr Robertson.

Redundancy:

[166] I am satisfied that Mr Robertson was made redundant as a consequence of the collapse of the Hills project.

[167] The applicant claims a redundancy payment calculated on the basis of two weeks' pay for each year of service, claiming that this is a standard of this Commission.

[168] Whilst it is true that a so called standard may be seen to have emerged as a consequence of a number of Commission decisions, it is equally true that the Commission has consistently maintained a case-by-case approach since the TCR decision66.

[169] In my view there are circumstances surrounding this case which demand a departure from the norm.

[170] From 1983 until 2000, Mr Robertson was either a 100% or 50% owner of the business. If we accept the notion that redundancy payments are in the nature of contingent liability accruing on a yearly basis, then it would seem to me quite unfair that the entirety of this possible liability should be foisted on the shareholder/s who happens to be there at the end.

[171] Secondly there was a considerable amount of evidence as to expenditure of a private nature incurred by Mr Robertson and charged to the company. Whilst the quantum is in dispute, Mr Robertson acknowledged that there was a significant amount which was duly owed.

[172] Taking into account these two factors, I have concluded that a fair and equitable redundancy payment would be an amount calculated on the basis of 0.5 of a week's pay for each completed year of service.

ORDER

Pursuant to section 31 of the Industrial Relations Act 1984, I hereby order that K W McCulloch Pty Ltd, 28 Thistle Street, Launceston, Tasmania 7250 pay to Mr Clive Anthony Robertson the following:

  • twenty eight thousand one hundred and seventy four dollars ($28174) by way of accrued long service leave
  • thirty one thousand two hundred and twenty nine dollars ($31229) by way of accrued annual leave
  • fifteen thousand dollars ($15000) by way of a redundancy payment.

Such payments are to be made not later than 5.00pm 4 April 2005.

Details of the above calculations are shown at Appendix 1.

There was some evidence relating to a change in the company structure/shareholding which occurred during the course of the hearing. In the event that the above order is not satisfied, leave is reserved to the applicant to reapply for different orders.

Leave is reserved generally to the parties to reapply in the event of an error/s in calculation being detected.

In the meantime the file shall remain open.

Tim Abey
COMMISSIONER

Appearances:
Mr J Zeeman, solicitor, Dobson Mitchell & Allport, for Mr C A Robertson
Ms T Badenach, together with Mrs A Burrows-Cheng, solicitors, Murdoch Clarke, for K W McCulloch Pty Ltd

Date and Place of Hearing:
2004
July 19 (McAlpine C)
October 11, 12, 13
December 16, 22
Hobart

APPENDIX 1

 

   
Weekly wage rate at time of termination $1500
Hourly rate at 38 hours per week $39.47
   
Long service leave  
   
Accumulation as at 9/11/99 565.6 hours
November 99 to May 2004 4.5 years
4.5 x 13/15 = 3.9 weeks = 148.2 hours
Total accrued LSL 713.8 hours
   
713.8 hours @ $39.47 ph = $28174
   
Annual Leave  
   
Accumulation as at 9/11/99 684.8 hours
684.8 hours @ $39.47 ph = $27029
   
17.5% annual leave loading  
18.02 weeks leave equates to 4 x 4 weeks

Note: Leave loading not payable on pro rata element

 
16 weeks @ $15000 pw x 0.175 $4200
   
Total annual leave payment $31229
   
Redundancy  
   
20 years' service @ 0.5 weeks for each year of service = 10 weeks
10 weeks @ $1500 pw = $15000

1 Exhibit R1
2 Exhibit A1
3 Transcript PN 109
4 Transcript PN 124
5 Transcript PN 1525/6
6 Supra PN 1533 and following
7 Exhibit A2
8 Transcript PN 150
9 Transcript PN 1573, 1601
10 Supra PN 1596
11 Supra PN 1540
12 Exhibit A7
13 Transcript PN 3189
14 Supra PN 1464 to 1523
15 Supra PN 1065/66
16 Exhibit A8
17 Transcript PN 162 to 166
18 Supra PN 1369 to 1374
19 Supra PN 1444
20 Supra 164 to 166, 400, 413
21 Supra PN 115 to 119.
22 Supra PN 897, 1602 to 1622
23 Exhibit R2
24 Transcript PN 125
25 Transcript PN 537 to 562
26 Transcript PN 158 to 161
27 Supra PN 2483/4
28 Supra PN 1306 to 1308
29 Supra 2051 to 2054
30 Exhibit R7
31 Supra PN 695/6
32 Exhibit A4
33 Exhibit R8
34 Exhibit R10
35 Transcript PN 193 and following
36 Supra PN 233 to 238
37 Supra 979
38 Supra PN 2129 and following
39 Supra PN 2697 to 2699
40 Exhibit A5
41 Exhibit A6
42 Transcript PN 1191 to 2046
43 Exhibit A15
44 Transcript PN 2474 and following
45 Exhibit A10
46 Exhibit R13
47 Exhibit R6
48 Exhibit R8
49 Transcript PN 773 and following
50 Transcript PN 448
51 Supra PN 1067 and following
52 Supra PN 2183
53 Supra PN 2186
54 Supra PN 2187
55 Supra PN 2693 and following
56 [2001] 207 CLR 21
57 [1985-1986] 160 CLR 16
58 [1972] 1 QB 139
59 [1993] 55 IR 73
60 LCA 122/2003 Underwood J 22/4/2004
61 FCA 30/2004 11/11/2004
62 T11179 of 2004
63 Exhibit R6
64 Supra
65 Exhibit R8
66 T125 of 1985