Cunningham & ors who are currently trading as, or who have traded as, Flower & Hart (A Firm) v Hart [2009] ICQ 41 (2009) 190 QGIG 126

[Extract from Queensland Government Industrial Gazette, dated 20 February, 2009, Vol. 190, No. 7, pages 126-130] INDUSTRIAL COURT OF QUEENSLAND Industrial Relations Act 1999 - s. 341(1) - appeal against decision of commission Robert James Cunningham, Michael John Douglas Meadows, David John Herbert Watt, Brian Walter Smith, Warren Grant Denny, Robyn Gay Lyons, Stephen John Tonge, Brian Francis Ward, James William Alley, Sharon Ann Winn, who are currently trading as, or who have traded as, Flower & Hart (A Firm) AND William Hamilton Hart (C/2008/45) PRESIDENT HALL 10 February 2009 DECISION By an amended application filed in the Queensland Industrial Relations Commission on 5 February 2008, the Respondent to this Appeal named as respondents to the amended application, the present Appellants and sought each of the following Declarations from the Commission: (a) a declaration under s. 274A of the Industrial Relations Act 1999 (the Act) that the remuneration paid to William Hamilton Hart as an employee of Robert James Cunningham, Michael John Douglas Meadows, David John Herbert Watt, Brian Walter Smith, Warren Grant Denny, Robyn Gay Lyons, Stephen John Tonge, Brian Francis Ward, James William Alley, Sharon Ann Winn (the Appellants) should have been paid without deduction of superannuation contributions; (b) a declaration under s. 274A of the Act that remuneration should have been paid to William Hamilton Hart by the Appellants for periods of annual leave taken during his employment at the rate specified in the Act; and (c) a declaration under s. 274A of the Act that remuneration should have been paid to William Hamilton Hart by the Appellants for periods of accrued but unused leave as at the termination of his employment at the rate specified by the Act. Some 16 days earlier, the Respondent had filed proceedings in the Industrial Magistrate's Court at Brisbane claiming certain monies from the Appellants as unpaid wages. The Declarations were sought in order that they might be relied upon in the proceedings in the Industrial Magistrate's Court. In due course, the Appellants sought an order dismissing the Application for Declarations or, in the alternative, an order that the Commission refrain until further order from hearing or deciding the application. The Appellants were unsuccessful. The Commission dismissed their application, see 189 QGIG 10. By a decision now reported at 188 QGIG 303, this Court dismissed an appeal against that decision of the Commission. The Application for Declarations was heard by the Commission in early October 2008. By a decision of 28 October 2008 now reported at 189 QGIG 753, the Commission decided that the Respondent had made out his case for grant of each of the Declarations sought and adjourned the matter (Matter No. B/2007/79) to permit formal Orders to be drawn up. This Appeal is against the decision of the Commission given 28 October 2008. The issues before the Commission had their origin in discussions between Mr Hart, then an equity partner in the firm of Flower & Hart, and other equity partners in the firm about Mr Hart's retirement. Ultimately, Mr Hart accepted an invitation to sell his interest in the firm to other equity partners and to transmogrify to a salaried consultant to the firm. The invitation which was accepted by Mr Hart, was reduced to writing. It is common ground that the document was contractual in nature. It is convenient to reproduce the document (details of the share of Mr Hart's interest acquired by each then equity partner omitted): "PROPOSAL FOR RETIREMENT FROM PARTNERSHIP OF WHH 1. WHH to retire as an equity partner at 31 December 2001. 2. WHH to become a consultant at 1 January 2002. 3. Consideration for the purchase of WHH partnership interest to be paid by 31 March 2002. 4. Consideration on sale to be calculated as for SJT. 5. Firm to pay WHH's registration and insurance as a solicitor and Notary Public. 6. WHH to be paid one third of cash received for professional fees for which he is responsible from 1 January 2002 in respect of bills raised after 1 January 2002 to be calculated and paid at the end of each month but with a minimum payment of $100,000.00 per annum during the year to 31 December 2002 to be paid monthly. 7. WHH to retain his car space until this agreement is terminated. -- 1 of 5 -- 2 8. Either party may terminate paragraphs 2, 5, 6 (so far as it is to operate after 31 December 2002) and 7 on 6 months notice in writing to the other.". The "proposal" is a very basic "proposal". In particular, as the Commissioner who dealt with the matter at first instance noted, the proposal "… made no mention of holiday pay or superannuation.". Each of those omissions was to prove a source of angst. It was not that superannuation was not paid on behalf of Mr Hart. Indeed, the firm was (understandably) assiduous to make the payments required by the Superannuation Guarantee (Administration) Act 1992 (Cth) and to avoid the levy imposed by the Superannuation Guarantee Charge Act 1992 (Cth). The point of difficulty is that the firm contends that the superannuation payments made on behalf of Mr Hart were in part discharge of the firm's obligation to pay Mr Hart one-third of fees received. Mr Hart's contention is that the superannuation payments made on his behalf were benefits additional to the entitlement to one-third of fees received. Neither was it the case that Mr Hart did not take annual leave. He did. The monthly instalment of fees received was paid in the ordinary way despite his absence from duty. However, he was not (save in respect of one occasion) paid in advance of taking annual leave a sum of money calculated under s. 13 of the Industrial Relations Act 1999. Declarations (b) and (c) set out above, are sought as steps in the resolution of that grievance. By s. 341(1) of the Act, the Appellants are restricted to an appeal on the grounds of error of law and excess or want of jurisdiction. The error alleged is that the Commissioner's published reasons were inadequate. In Q-COMP v Foote (2008) 189 QGIG 539, this Court relied upon the observations of McMurdo P in Martin v Rowling and Anor (2005) QCA 128 at paragraph [3], viz.: "In giving reasons for decisions, a judicial officer is obliged to adequately disclose the process of judicial reasoning so that justice is not only done but seen to be done. A judge should refer to relevant evidence; set out any material findings of fact and any conclusions or ultimate findings of fact reached; give reasons for making the relevant findings of fact and conclusions or for preferring one conclusion to another and explain how the law has been applied to the facts found. This is because the reasons must place the parties in a position to understand why the decision was made sufficiently to allow the exercise of any right of appeal and so that any appellate court considering the decision can understand the reasoning process. The obligation to give adequate reasons does not require the reasons to necessarily be lengthy or elaborate but they should articulate the essential ground or grounds upon which the decision rests.". Earlier, in Banditt v Department of Corrective Services (2005) 180 QGIG 97 at 99 to 100, this Court had said: "Whilst there may be some argument about whether in hearing the reinstatement application the Queensland Industrial Relations Commission is exercising arbitral power or judicial power, it is clear that the Commissioner is required to act judicially. It is now established that the judicial officer is required to provide reasons for making any relevant findings and conclusions and, where evidence has been rejected, to explain the basis for doing so, in order to limit any sense of grievance or injustice on the part of the party adversely affected and to ensure that such party may properly evaluate the prospects of success on appeal: Beale v Government Insurance Office NSW (1997) 48 NSWLR 430 at 431 per Mason P and 443-444 per Meagher JA; Wiki v Atlantis Relocations (NSW) Pty Ltd (2004) 60 NSWLR 127 at 135-136 per Ipp JA; and Martin v Rolling and Anor (2005) QCA 128 at [80] per Mullins J. Failure to discharge the obligation is an error of law, compare Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 281 per McHugh JA.". [Emphasis added]. I do not resile from that approach. However, I accept that the Court should not be overly enthusiastic to seek out error. Cases abound in which the need for caution and restraint have been emphasised. It is convenient to commence with the observations of Meagher JA in Beale v Government Insurance Office of NSW (1997) 48 NSWLR 430 at 444: "It does not automatically follow that because the reasons for decision are inadequate then an appealable error has occurred. Examination of nearly any statement of reasons with a fine-tooth comb would throw up some inadequacies. Indeed, an appeal court will reserve any intervention to those situations in which it is left with no choice: where no reasons have been given in circumstances where a statement of reasons is so inadequate as to constitute a miscarriage of justice. In other words, the statement of reasons must be looked at as a whole and the material inadequacies identified and considered.". Over twenty years later, the nuances of meaning carried by the colourful phrase, "miscarriage of justice", render the passage less helpful than it once was. However, the more moderate formulation in Collector of Customs v Pozzolanic (1993) 43 FCR 280 at 287, viz.: "This translates to a practical as well as principled restraint. The Court will not be concerned with looseness in the language of the Tribunal nor with unhappy phrasing of the Tribunal's thoughts: Lennell v Repatriation Commission -- 2 of 5 -- 3 (1982) 4 ALN N 54 (Northrop and Sheppard JJ); Freeman v Defence Force Retirement and Death Benefits Authority (1985) 5 AAR 156 at 164 (Sheppard J); Repatriation Commission v Bushell (1991) 13 AAR 176 at 183 (Morling and Neaves JJ). The reasons for the decision under review are not to be construed minutely and finely with an eye keenly attuned to the perception of error: Politis v Commissioner of Taxation (Cth) (1988) 16 ALD 707 at 708 (Lockhart J).", continues to be helpful. The observations of Brennan CJ, Toohey, Mchugh and Gummow JJ in Minister for Immigration and Ethnic Affairs v Wu Shan Liang and Ors (1990) 185 CLR at 273, are to the same effect. Footnotes omitted, the passage is: "These propositions are well settled. They recognise the reality that the reasons of an administrative decision-maker are meant to inform and not be scrutinised upon over zealous judicial review by seeking to discern whether some inadequacy may be gleaned from the way in which the reasons are expressed. In the present context, any court reviewing a decision upon refugee status must beware of turning a review of the reasons of the decision-maker upon proper principles into a reconsideration of the merits of the decision.". See also Fisse v Secretary, Department of the Treasury [2008] FCAFC 188 at 36 per Buchanan J and Queensland Teachers Union of Employees v Department of Education (2000) 165 QGIG 767 at 769. The first difficulty with the submission that the Commissioner's published reasons are inadequate is that the reasons span some sixteen pages in the Gazette. One may accept that verbosity is not enlightenment. Here, though the sentences are many in number, they are short and pithily expressed. The language is that of the Commissioner. There is no mere turgid recitation of the evidence and the submissions. Importantly, it follows that contrary to the submissions for the Appellants, one may be satisfied that the Commissioner understood the evidence and understood the submissions that were being put to the Commission. One may accept that the reasons for decision might have been differently written. The various submissions might have been discussed seriatim with the competing arguments marshalled up in a paragraph. Yet, even if that course had been adopted, the Commission would at some point have been required to indicate which argument was preferred. In a case which was not about competing bodies of evidence and which was fundamentally about inference and about construction of documents, there would always have been a point at which the Commissioner would have been required to move from reasoning to evaluation and judgment. It would seem to me, not to be consistent with the authorities to which I have referred for this Court to intervene on the ground of inadequacy because the Commissioner chose to summarise the submissions for each of the parties separately and in full and then to indicate which body of submissions had been found to be persuasive. A particular matter of complaint on behalf of the Appellants is that the Commissioner did not indicate why one particular submission advanced on behalf of the Appellants was put aside. The submission was that having regard to the negotiations which preceded the agreement, and the way in which the contract (which required annual renewal) was implemented, the Commission should proceed on the view that the purpose of the arrangement was to permit Mr Hart to enjoy the conditions of a partner, though no longer holding an interest in the firm. There seems to me to be two difficulties with the submission. To begin with, it seems to me not to be factually correct. Mr Hart had no tenure at all. The agreement required annual renewal. Additionally, though the matter has not been argued, one might legitimately anticipate that the old learning about contracts from year to year has fallen into desuetude and the contract might have been terminated by reasonable notice within any particular twelve month period. Certainly the Commissioner, who was perfectly well aware of the object that the agreement was to deal with the purchase of Mr Hart's interest in the firm and to regulate his re-emergence as a consultant, was also aware of Mr Hart's insecurity, at page 756 the Commissioner said: "No further complaints were raised in respect of annual leave or superannuation for the duration of the employment as the applicant did not believe the outcome would alter and he held concerns that the partners might give him notice of termination of employment if further complaints were made.". The second difficulty with the submission is that it seems to me that it drifts from construction of the words used by the parties to arbitration of a new agreement which better suited their objectives. In fairness, I should stress that Counsel for the Appellants does not suggest that what the parties say or do after a contract was made, is a legitimate aid to its interpretation. Indeed, on the current state of the authorities it would be very difficult to maintain such a submission, compare Agricultural and Rural Finance Pty Ltd v Gardiner and Anor (2008) 251 ALR 322 at 330 per Gummow, Hayne and Kiefell JJ. The distinguishing feature here is said to be that the agreement was renewed annually on the same terms by parties each of whom had full knowledge of how it had been implemented in the past. Put aside that after the sale of his interest in the firm Mr Hart had little with which to bargain at the time of the renewals, it seems to me that the submission gives undue weight to the purpose and intention and too little weight to the words used. The Commissioner's approach, developed at p. 767 in the third paragraph under the heading "Meaning of paragraphs 6 [of the document reproduced above]", was: "The author of the document was a qualified legal practitioner as was the applicant, so there is some safety in assuming that each of the parties understood the importance of the document.". -- 3 of 5 -- 4 That paragraph was penned in circumstances in which the Commissioner had been taken to the decision of the High Court in Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd and Ors (2004) 219 CLR 165 at paragraph [40] and to the decision of the Court of Final Appeal of Hong Kong in, Jumbo King Ltd v Faithful Properties Ltd and Ors (FACV) No. 7 of 1999 where (at page 13) Litton (Permanent Judge) and Lord Hoffmann (Non-permanent Judge) said: " … Of course in serious utterances such as legal documents, in which people may be supposed to have chosen their words with care, one does not readily accept that they have used the wrong words. If the ordinary meaning of the words makes sense in relation to the rest of the document and the factual background, then the court will give effect to that language, even though the consequences may appear hard for one side or the other. The court is not privy to the negotiation of the agreement - evidence of such is inadmissible – and has no way of knowing whether a clause which appears to have an onerous effect was a quid pro quo for some other concession. Or one of the parties may simply have made a bad bargain. The only escape from the language is an action for rectification, in which the previous negotiations can be examined. But the overriding objective in construction is to give effect to what a reasonable person rather than a pedantic lawyer would have understood the parties to mean. Therefore, if in spite of linguistic problems the meaning is clear, it is that meaning which must prevail.". I can understand why the Commissioner adopted that approach to construction of the document. Indeed, I consider it to be the correct approach. I am not prepared to find the reasons of the Commissioner to be inadequate for failure to specifically deal with the submission about "purpose and object" in circumstances in which the Commissioner articulated, in his own language and not in words which had been put to him, propositions of fact and of law which were incompatible with the submission made and (in my view) implicitly rejected. Since the matter has been fully argued, I should add that had I accepted the Appellants' argument about inadequacy of reasons, I should have reheard the matter on the record (s. 348(1) of the Act) and confirmed the decision of the Commission. It is common ground that once Mr Hart became a consultant to the firm he became an employee of the firm. At that point the Commonwealth legislative scheme commenced to operate. The firm was required to pay by way of superannuation contributions an amount calculated in accordance with the Superannuation Guarantee (Administration) Act 1992 (Cth) or, alternatively, to pay any short fall as a tax levy under the Superannuation Guarantee Charge Act 1992 (Cth). There was no necessity for the agreement to deal expressly with the matter of superannuation. The case is not one in which it is necessary to consider the allowable scope of clauses declaring the total amount of salary payable to be inclusive of the employers superannuation obligations. Here, there was no such clause. Paragraph 6 of the document set out above required one-third of cash received for professional fees to be "paid" to Mr Hart (not on his behalf) and "received" by him. In Commander Australia Ltd v Kerr (2004) 134 IR 160 at 173 the New South Wales Industrial Commission in Court session observed: "The ordinary meaning of 'paid' and 'received' refers to the amount or sum in question having actually been paid and accepted rather than to an entitlement to receive at some future time.". [The Commissioner who dealt with the matter at first instance had, I should add, been taken to that decision.] The only legitimate construction of the words used that the one-third of fees paid were to be actually paid to Mr Hart and were to be actually received by him. Both at first instance and on the Appeal it has been the contention of the Appellants that Mr Hart was not entitled to annual leave in accordance with s. 13 of the Act because, by s. 11 of the Act "piece workers" are excluded from the benefits of s. 13. At page 768 the Commissioner concluded: "The applicant, in the course of performing work, 'charged out' his services at a standard billing rate system that operated within the firm. Other employees required to work on files in the custody of the applicant had their time billed under the standard billing rate system. The firm, on behalf of the applicant, would issue accounts to the clients and the applicant would be remunerated by the payment of one third of cash received. Evidence before the Commission was that discounting and bad debts meant, at times, the applicant received less than one third of the account total. Under this scenario it could hardly be argued that he was paid totally on the results of his labour. In terms of being paid for each unit or article produced, as might be the case in the shearing of sheep or slaughter of cattle, the work undertaken by the applicant is a far cry from such a comparison. -- 4 of 5 -- 5 The Commission accepts the submissions of Mr Watson that the Act does not go to payment by results but is linked to a 'piece'. The 'tag' piecework is not one that fits the applicant's work arrangement.". The Commissioner was quite correct to find that Mr Hart was not a piece worker because he was not paid to produce a "piece". The Commissioner might also have said, as in fact the Commissioner had found, that Mr Hart was not employed at a "rate". Mr Hart prepared bills for services rendered by himself and by staff under his supervision by going to the records and (initially) charging out on a time basis. Mr Hart was required to and in fact did exercise a discretion as to whether to discount for any particular reason. A client receiving such a bill was entitled to approach the firm for a full or partial waiver. It was quite impossible to identify a "rate" for Mr Hart or his subordinates. Identification of a "rate" was important because by Schedule 5 to the Act: "Piece worker means a person employed in a calling at piece work rates.". Counsel for the Appellants relies upon a decision of this Court in Trovas Holdings Pty Ltd v Gannon (1999) 162 QGIG 337 at 338: "It is true that in its primary sense 'piecework' is directed to a system of work in which work is remunerated, at least in part, by reference to units of output or production, compare Macquarie Concise Dictionary, 2nd Ed and CCh Macquarie Dictionary of Employment of Industrial Relations. However, as the later publication makes plain, 'piecework' is sometimes used as the equivalent of 'payment by results'. In the case of beneficial legislation, the overriding purpose of which is to ensure that all workers receive long service leave on full pay or payment in lieu on termination, I should have thought that 'piecework rates' might have been read broadly to cover a system of payment by results. In any event, it is plain that the current proceedings were instituted in the wrong form.". With respect, it seems to me that the reliance is misplaced. First, on the material facts the passage was not relevant to the decision. Second, although the Appeal was an appeal under the Industrial Relations Act 1999 it concerned transactions which had taken place whilst the Workplace Relations Act 1997 was operative. The substantive law to be applied was the law as stated by the Workplace Relations Act 1997. That Act did not provide a statutory definition of "piece worker". Arguments about the same word bearing the same meaning wherever used in a statute were irrelevant. The scheme at ss. 11 and 13 of the present Act did not appear. Third, the decision concerned a beneficial scheme to enable an employee, who could not reach agreement with its employer about long service leave payments, to seek assistance from the Commission. "Piece worker" was given a broad meaning to enhance the inclusionary reach of the beneficial legislation. Here, "piece worker" is used to exclude persons from the benefit of the annual leave provisions of the Act. Fourth, prior to the Industrial Relations Act 1999, statutory provisions about annual leave were provisions about annual leave pursuant to industrial instruments. Sections 11 and 13 of the Act cannot escape their history. "Piece workers" were traditionally denied the benefit of the legislative provisions about annual leave in the context of an arbitral scheme in which "piece work rates" were consciously set on the basis that the recipients would not have entitlements by way of annual leave, compare Re: Sugar Industry Award - State (1958) 43 QGIG 943 at 944. Fifth, the basis upon which Mr Hart's remuneration was calculated has been explained above. He was not paid by results. I dismiss the Appeal. I reserve all questions as to costs. Dated 10 February 2009. D. R. HALL, President. Released: 10 February 2009 Appearances: Mr A.K. Herbert, instructed by Flower & Hart, Solicitors for the Appellants. Mr K.F. Watson, instructed by Milner Lawyers, for the Respondent. Government Printer, Queensland The State of Queensland 2009. -- 5 of 5 --