T10535
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TASMANIAN INDUSTRIAL COMMISSION Industrial Relations Act 1984 Christopher Mark McVilly and Marksman Machine & Tool Co Pty Ltd ACN 067304161
Industrial dispute - termination of employment - breach of award - preliminary matter - employer/employee relationship found to exist REASONS FOR PRELIMINARY DECISION [1] On 13 November 2002, Christopher Mark McVilly (the applicant) applied to the President, pursuant to s.29(1A) of the Industrial Relations Act 1984 (the Act), for a hearing before a Commissioner in respect of a dispute with Marksman Machine & Tool Co Pty Ltd ACN 067304161 (the respondent) arising out of the alleged unfair termination of his employment and an alleged breach of award or registered agreement. [2] During a conciliation conference, convened for the purpose of identifying the issues in dispute, it became evident that the Commission was required to determine, as the threshold matter, whether or not there was an employer/employee relationship. I intend dealing with that issue only in this preliminary decision. BACKGROUND [3] The applicant owned and operated a metal fabrication business under the name of Chris McVilly Welding. [4] Whilst operating that business, the applicant had business dealings with Mr J Leslie of Marksman Machine & Tool Co Proprietary Limited (the respondent). The applicant agreed to manufacture punch and shearing machines for the respondent. [5] Towards the end of calendar year 2001, the applicant agreed the respondent would acquire and take over the applicant's business. The business agreement was verbal. [6] The applicant's understanding of the business agreement was that: 1. the respondent would pay out all existing debts of the applicant's business; 2. the respondent would employ all of the applicant's workers (including himself) and pay their salaries and entitlements; 3. the ownership of all assets (including work in progress) of the applicant was to be transferred to the respondent and the respondent would take over all and any payments to financiers and creditors etc. [7] According to the applicant, the existence of a goodwill component was also acknowledged by the respondent. [8] There was no disagreement between the respondent and the applicant in respect to points 1 and 3 in [7] above. However, their understanding differed when it came to point 2. [9] The stated position of the respondent was that he agreed to only employ the applicant's former employees and not the applicant. With respect to the applicant, the respondent contended that he had accepted an offer to receive a net payment of $800.00 per week for a period of twelve months (with a review after six months) being payments strictly for the acquisition of the applicant's business by the respondent. [10] Therefore, it was argued, there was no termination at the initiative of the employer because there was no employer/employee relationship. [11] The commencement date for the respondent's acquisition of the applicant's business was 15 February 2002. [12] It was the applicant's contention that his employment commenced with the respondent on and from that date until terminated on 31 October 2002. WITNESS EVIDENCE [13] Evidence was adduced from seven witnesses and is summarised as follows: Mr Christopher McVilly [14] The applicant owned and operated a metal fabrication business under the name of Chris McVilly Welding. [15] He first met Mr Leslie of Brevtex Machine Tools Pty Ltd (Brevtex) when he bought a second hand machine from a Brevtex supplier namely, Weldequip. [16] On occasions Mr Leslie visited the workshop of Chris McVilly Welding. [17] Brevtex was interested in having machinery made in Tasmania and the applicant agreed to make machines for them. [18] When Brevtex placed an order with Chris McVilly Welding, and because the logistics and costs associated with that venture, the applicant sought assistance from the State Government through the Department of State Development. [19] The applicant informed Mr Leslie of the possibility the State Government would provide him with some assistance. [20] The applicant had approximately three meetings with the Department of State Development before the respondent became involved in those discussions. [21] Towards the end of calendar year 2001 Mr Leslie, representing the respondent, and the applicant agreed the respondent would acquire and take over the applicant's business. This business agreement was verbal. [22] The applicant's accountant, Mr Jason Darko, of Prescott Business Services, sought on a number of occasions, to finalise the sale of the business, however, he could never get the respondent to commit to the process. [23] The applicant's understanding of the business agreement was that: 1. the respondent would pay out all existing debts of the applicant's business; 2. the respondent would employ all of the applicant's workers (including himself) and pay their salaries and entitlements; 3. the ownership of all assets (including work in progress) of the applicant was to be transferred to the respondent and the respondent would take over all and any payments to financiers and creditors etc. [24] According to the applicant, the existence of a goodwill component was also acknowledged by the respondent. [25] In view of the agreement, the applicant, in January/February 2002, sold his workshop at Geilston Bay and all plant and equipment owned by Chris McVilly Welding was relocated to the headquarters of the respondent at Cambridge. [26] The applicant stated that he had a meeting with the respondent on 9 February 2002, to discuss an appropriate weekly wage rate. As a result of that meeting he was satisfied that he was to be employed as a full time employee of the respondent on wage of $800.00 net per week and be entitled to four weeks annual leave. [27] The respondent agreed to pay the applicant's telephone calls and service fees and provided him with a vehicle. [28] The applicant said, from 15 February 2002, he worked for the respondent, at the Cambridge site, between the hours of 8 a.m. and 5 p.m. Monday to Friday and performed work on some weekends. He stated that he worked approximately 45 hours a week and it was part of the agreement that he not be entitled to rostered days off or receive overtime payments. [29] His duties included (a) making contact with subcontractors and suppliers; (b) undertaking manual work; and (c) office work including obtaining quotations on component parts. [30] He also submitted that he was offered a 10% shareholding in the respondents company, however, this never came to fruition. [31] The applicant, in a further attempt to establish he was an employee of the respondent, tendered exhibit A10. This stated: "Date 30 May 2002 To whom it may concern, Christopher McVilly of 44 Surf Road, Seven Mile Beach is employed as Works Manager, with a net income of $800 per week. Alan Lee [32] He conceded, under cross-examination, the title of "Works Manager" just evolved and was given to him by Mr Alan Lee when he put his signature to exhibit A10. He also conceded the title was not given to him by Mr Leslie. [33] The applicant acknowledged that he had not completed an income Tax Employment Declaration Form. He was unaware if tax was deducted from his pay or superannuation payments had been made on his behalf. [34] In respect to workers compensation, the applicant stated that Mr Leslie, in response to his question, indicated that employees of the respondent were covered by workers compensation. At the time he asked that question he included himself as one of the employees although he did not specifically ask in respect of himself personally. Mr Glen Newstead [35] Mr Newstead is a self-employed painter decorator. He worked as a sub contractor to Chris McVilly Welding, painting steelwork. [36] It was his understanding that Chris McVilly Welding was taken over by the respondent. [37] He said he got the impression the applicant was in charge of the workshop because there was no one else there apart from a couple people who did the bulk of the welding in the workshop. [38] It was his evidence that the applicant told him that he (the applicant) was employed by the respondent, and he was told this "right from the beginning". Mr Christopher John Lamprey [39] Mr Lamprey is self-employed, however, he was the Manager of Advanced Industries when he had dealings with the applicant. [40] Whilst working for Advanced Industries, Mr Lamprey visited the applicant at the respondent's premises approximately twice a month. [41] He was of the view that the applicant was a "partner in the business, in the running of the business and ownership of it." Mr Jason Charles Darko [42] Mr Darko is a qualified accountant and for the past three years has been the Partner-in-Charge of Prescott Business Services. [43] He had dealings with the applicant whilst conducting the business of Chris McVilly Welding and direct involvement, on a consistent basis, in regard to the proposed sale and transfer of Chris McVilly Welding to the respondent. [44] Mr Darko gave evidence in respect to many issues associated with the sale of Chris McVilly Welding to the respondent, however, as I am required to determine the threshold matter, it is my intention to deal only with that part of his evidence which relates to the alleged employment relationship between the applicant and the respondent. [45] On that issue Mr Darko's evidence is summarised as follows:
[46] Mr Darko stated that he completed the personal taxation return for the applicant for the year ending in June 2002. A component of that tax return showed $14,400 being a gross wage receive from the respondent with no tax paid. The date for lodging the taxation return was 15 May 2002. Mrs Clare Marie McVilly [47] It was her evidence that she attended the home of Mr Leslie at 369 Sandy Bay Road, on 9 February 2002, accompanied by her husband, the applicant. [48] She said just prior to her departure from the premises she had a conversation with Mr Leslie where he stated "it will be nice to have Chris bringing in a regular wage." Mr Jeffrey Francis Leslie [49] Like Mr Darko, a significant proportion of Mr Leslie's evidence centered on the acquisition of Chris McVilly Welding. However, it is my intention to deal only with that part of his evidence that relates to the alleged employment relationship between the applicant and the respondent. Mr Leslie's evidence is summarised as follows: [50] Mr Leslie is a Director of Marksman Machine and Tool Co Pty Ltd (the respondent). [51] He, on behalf of the respondent, and the applicant agreed that the respondent would acquire and take over the applicant's business which traded as Chris McVilly Welding. [52] It was his evidence that a verbal business agreement was entered into which included: the respondent paying out all existing debts of the applicant's business; the ownership of all assets of the applicant being transferred to the respondent; the respondent taking over all and any payments to financiers and creditors; and the respondent employing two of the applicant's employees. [53] Mr Leslie stated that the applicant was offered an arrangement whereby the respondent would pay $800 net per week strictly on the basis that it was payment towards the purchase of Chris McVilly Welding. That amount, Mr Leslie said, was to be paid for a period of 12 months, being reviewable after six months. At that time there was no purchase price agreed for the acquisition of Chris McVilly Welding, but the respondent was paying the $800 per week as a consideration and to demonstrate good faith. Later in his evidence Mr Leslie said there was no agreement to pay an amount for goodwill for Chris McVilly Welding. [54] Mr Leslie said he offered the applicant a 10% shareholding in the respondent company, however, that was never issued because the applicant said he needed $800 per week just to survive and Mr Leslie said "well you can't have that - I can't organise that plus shares - its just not fair". [55] The agreed changeover date was 15 February 2002. From that date, Mr Leslie said he expected the applicant to obtain quotes and to undertake fabrication work for the respondent for the $800 a week which he called a "commercial arrangement" [56] The respondent engaged Mr Alan Lee to oversee the takeover and to review the work and ensure the respondent's machines were completed. [57] Mr Leslie conceded that:
[58] Mr Leslie was of the view that the applicant was not an employee nor an independent contractor - he was in transition - he was working with the respondent to manufacture machines and the respondent was paying him $800 per week for his business during the transition. [59] In answer to the question "if he's not an employee what do you say he was?" Mr Leslie responded "okay, it's good question it would be like in a consulting position in what he was doing for our company". [60] When suggested to him that the consultant was no different to an independent contractor, Mr Leslie responded by saying he did not know. [61] Mr Leslie challenged the applicant's evidence that he worked from 8 a.m. to 5 p.m. however, he agreed under cross-examination that he was not always in attendance at the Cambridge site. [62] On that issue the following exchange taken from transcript is instructive: Mr Boland: - I want to suggest to you that McVilly was there every day, 9 to 5, five days a week and went in some days on Saturdays. Now, if you don't know don't say? Mr Leslie: - I want to get this clear. Are you saying that he stopped in the premises all the time? Mr Boland: - I am saying as working for Marksman? Mr Leslie: - He was not at those premises all the time though. Mr Boland: - No, but he was out there either consulting, delivering steel, doing pricing, but he was working for Marksman? Mr Leslie: - He was working for - yes. Mr Boland: - He was working for Marksman? Mr Leslie: - Yes, for Marksman. [63] In respect to Clare McVilly's evidence, Mr Leslie said no intending arrangements were ever discussed with Mr McVilly or persons on his behalf at 369 Sandy Bay Rd, however, he acknowledged that, on one occasion, he did say to Clare McVilly "it will be nice to have a regular income". He was adamant that the reference to "income" should not be interpreted as meaning "wages". It was his view that it meant income from the sale of Chris McVilly Welding. [64] In respect to Mr Darko's evidence Mr Leslie said:
Gregory Wayne Branch [65] Mr Branch was an employee of the respondent. He was one of the two employees who took up a position with the respondent when it acquired Chris McVilly Welding. He took up his position on or about 15 February 2002. [66] It was his evidence that the applicant did not spend a great deal of time in the workshop. Whilst he could not be precise in his estimate he did, however, suggest it could be more accurately established by checking the time cards, as they were all required to make out time cards for the work they did. [67] He said, from his observation, Mr Alan Lee marketed the machines and the applicant was involved in the fabrication side of the business. He was not certain who did the invoicing and costing. [68] In addition, he said the applicant, who was at a higher managerial level than himself, also provided quotes. [69] He said he assumed the fabricating and quoting work carried out by the applicant was for the respondent. THE APPLICANT'S CLOSING SUBMISSIONS [70] Mr Boland, for the applicant, submitted that the matter for determination was whether or not the applicant was an employee or sub-contractor or something else. He relied on the following authorities: Stevens v Brodribb (1986) 160 CLR; Humberstone v Northern Timber Mills (1949) 79 CLR 389; Burke v Reander Pty Limited 960454 AIRC; Montreal v Montreal Locomotive Works (1947) 1 DLR 161 at 169; and Hollis v Vabu (2001) HCA. [71] He contended the applicant could not have operated as an independent contractor as he had sold his business to the respondent. His work in progress, accumulated before 15 February 2002, all went to the benefit of the respondent. [72] He submitted that Mr Leslie acknowledged that he had bought the business as a going concern and that he had taken over the applicant's employees, but unfortunately was not prepared to concede that the applicant was also an employee. [73] He said it could be inferred from Mr Darko's evidence that the applicant's tax return for the period ending 30 June 2002 was only the $800 per week payment, which was taken as income. He added that all parties had acknowledged that the payment was a net payment, albeit Mr Darko had stated that it had to be a gross payment because the applicant did not have a group certificate, and the Taxation Department had to be furnish with a statutory declaration. [74] Mr Boland said, Mr Darko, the accountant for the applicant, had tried to conclude the accounting and legal issues with the respondent's accountant, Synergy, and was warned off pursuing that course of action by Mr Leslie. [75] Furthermore, Mr Boland submitted that in the tax year the applicant had no business expenses to offset against. This was not indicative of a person running his business as an independent contractor to the respondent. Mr Boland submitted that even the car was furnished by the respondent who was paying the repayments on it. [76] He said that if Mr Leslie's position is that the payment was made for the acquisition of the business, then the only inference capable of being drawn is that the applicant worked from 15 February 2002 to 31 October 2002 for nothing. [77] Mr Boland contended:
[78] Mr Boland whilst acknowledging the parties arrangement was unusual, nevertheless, it was his submission that the Commission had no alternative but to accept the applicant was an employee of the respondent. THE RESPONDENT'S CLOSING SUBMISSIONS [79] Mr Leslie, for the respondent, outlined the structure of the Company and what took place in respect to certain commercial transactions prior to the takeover date. [80] He said it was the respondent's idea to create a company in Tasmania that would be involved in metal processing and manufacturing. [81] Simply stated, he saw himself and the applicant working together to grow that Company and for that reason he was "clear on the fact that he was not employed". This, he said was to the benefit of the applicant. FINDING [82] This case has been made all the more difficult due to the absence of any formal written contract relating to the respondent's acquisition of the business of Chris McVilly Welding. This has led to a heavy reliance on witness evidence. [83] I deal firstly with the question of witness credit. [84] I had great difficulty with Mr Leslie's evidence. I found, on numerous occasions, when giving his evidence he was evasive and had difficulty responding to direct questions. His evidence also displayed the element of certainty when it came to matters that were beneficial to his argument and vagueness when it came to the other side of the argument. For those reason I have discounted his evidence to the extent that, where there is an inconsistency between his evidence and that of other witnesses, I would prefer the evidence of those other witnesses. [85] Mr Darko impressed as an honest witness who gave his evidence clearly and without hesitation. His evidence was not seriously challenged under cross-examination. [86] Similarly I have no reason to doubt the veracity of the evidence given by the applicant, Mrs McVilly, Mr Newstead, Mr Lamprey, and Mr Branch. [87] The fact that the applicant undertook work for and on behalf of the respondent was not contested. That work included, among other things, general fabrication; making contact with subcontractors and suppliers; section rolling; general office work; quoting; purchasing. [88] The work performed by the applicant generated income, all of which, during the period of 15 February to 31 October 2002, went to the respondent. [89] Whilst Mr Leslie conceded the applicant was not engaged as an independent contractor I would also make the observation there was no evidence to suggest that he was engaged on that expressed understanding. [90] Although the applicant undertook his day-to-day duties with a significant degree of autonomy, Mr Leslie said that "Mr Alan Lee was in charge to run and make sure the machines were made". (transcript pn 2244) and "Mr Alan Lee was engaged by my company to oversee the Marksman/McVilly takeover and it was Lee's job to review the work and make sure that the Marksman machines were completed." and further "l brought Alan Lee down to run the business in Hobart" (transcript pn 2389) [91] I would have to conclude that the ultimate authority over the applicant, when it came to the performance of his work, resided in the respondent. [92] Mr Leslie contended the applicant was neither an independent contractor nor an employee as the nature of the relationship was a "commercial arrangement" that would see the applicant working with the respondent to manufacture machines and receive $800 per week for the acquisition of his business. [93] If I were to accept that proposition, this would mean the applicant had agreed to provide his labour to the respondent without receiving any payment. I am unable to establish the existence of any written or verbal agreement to that effect. [94] Indeed, the evidence of the applicant and Mr Darko, which I accept, indicated an expectation that the applicant would be employed by the respondent and receive a wage for the work he performed. [95] Having considered the authorities relied on by Mr Boland and the witness evidence I would have to conclude that, on the balance of probabilities, the arrangement the applicant had with the respondent is consistent with being a contract of employment. Therefore it must follow that an employer/employee existed between the applicant and the respondent from 15 February and 31 October 2002, and I so Order. [96] This matter will be relisted in due course to enable the parties to complete their submissions on the other aspects of the application.
R J Watling Appearances: Date and place of hearing: |