Australian Security Company Pty Ltd v Bullock; Bullock v Australian Security Company Pty Ltd [2006] ICQ 1 (2006) 181 QGIG 138

[Extract from Queensland Government Industrial Gazette, dated 3 February, 2006, Vol. 181, No. 5, pages 138-141] INDUSTRIAL COURT OF QUEENSLAND Industrial Relations Act 1999 – s. 341(2) – appeal against decision of industrial magistrate Australian Security Company Pty Ltd AND Gary John Bullock (C/2005/45) and Australian Security Company Pty Ltd AND Gary John Bullock (C/2005/46) and Australian Security Company Pty Ltd AND Gary John Bullock (No C/2005/47) and Gary John Bullock AND Australian Security Company Pty Ltd (No C/2005/43) and Gary John Bullock AND Australian Security Company Pty Ltd (C/2005/44) PRESIDENT HALL 23 January 2006 DECISION The Australian Security Company Pty Ltd (ASC) is a company duly incorporated under the law. It carries on the business of providing a variety of products and services, including: (but not limited to) mobile security patrol services; security response services; guard services; alarm installation and servicing; alarm monitoring; access control systems; and security consulting. Materially, being an artificial person, the company is required to provide mobile security patrol services, security alarm response services and other security services through the agency (hopefully a neutral word) of natural persons appropriately licensed under the Security Providers Act 1993. The five Appeals before the Court arise out of the labour systems which ASC has put in place. It is the practice of ASC to license what have been described in the proceedings as “primary contractors” to carry out mobile security patrol services, security alarm response services and other security services as directed by ASC to patrolled premises particularised in a schedule to the written contract which grants the licence. The patrolled premises within the licensed area are, of course, the customers of ASC within the area. A principal issue is whether the primary contractors are employees of ASC. The starting point is, as always each of the written agreements. Acknowledging that the standard form agreement has varied a little over time, it is (I think) possible to nominate the critical provisions. To begin with, there is clause 1.4 which provides: “Both parties agree that this Sub-Contractor and Licence Agreement does not constitute employment between Australian Security Company Pty Ltd, and the Sub-Contractor between the company and any employee or agent of the contractor engaged in the provision of services.”. Putting aside that the clause might have been better written if the comma had been deleted and “or” inserted after “Sub- Contractor” where the noun second occurs, the clause clearly manifests an intention that the primary contractors are not to be employees of ASC. Plainly enough, clause 1.4 may not receive effect according to its terms if the terms contradict the effect of the agreement as a whole. But the law has moved beyond the formulation of Lord Denning MR in Massey v Crown Life Insurance Co [1978] 1 WLR 676 at 679 to the effect that regard may be had such a clause to determine the true nature of an ambiguous relationship. In Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at 390 the Privy Council put the matter thus: “In the present case, where there is no reason to think that the clause is a sham, or that it is not a genuine statement of the parties’ intentions, it must be given its proper weight in relation to other clauses in the agreement. It is particularly important in relation to cl 5, where the obligation to conduct the agency in accordance with practices ‘as laid down by the Society … from time to time’ is capable of being read as giving the Society complete control over the work of the respondent. If cl 5 stood alone it would be a strong indication of a relationship of master and servant. But in the opinion of their Lordships the effect of reading the clauses together is that cl 5 is coloured by cl 3 and ought to be read as applying only to such practices as could be laid down by the principal for his agent. That is in no way a forced -- 1 of 6 -- 2 reading of cl 5, and it consists with the provision in the first part of the clause that the practices in accordance with which the representative is to conduct his agency include observing the rates of commission payable by the Society from time to time; these rates must clearly be laid down by the Society for its representatives even if they are not its servants.” (emphasis added) And it is perhaps useful to add that earlier on in its advice (at 388) the Privy Council observed: “The written agreement is the principal, though not the only, source of information as to the nature of the contractual relationship between the parties.” The second matter to note is the extent of the power of delegation vested in the primary contractor. Both in Australian Mutual Provident Society v Chaplin and Anor (1978) 18 ALR 385 at 391 and in Stevens v Brodribb Sawmilling Company Pty Ltd (1985-1986) 160 CLR 16 at 26 per Mason J and 38 per Wilson and Dawson JJ an unlimited power of delegation was viewed as being almost conclusive against a contract being a contract of service. Here, significant delegation is contemplated by clause 3.1 which provides: “That the Sub-Contractor shall provide the Licensed Services to the Patrolled Premises from 1800 hours to 0600 hours seven nights per week (including gazetted Public Holidays) in such a manner and following such procedures as the Company may from time to time direct. In the case of Day Patrol the hours to be 0600 hours to 1800 hours.”. It is entirely unlikely that a principal would seek to wring such daily hours from a primary contractor over such an extended period. Provision for delegation is made at clause 4. At clause 4.1 subject to grammatical corrections, the primary contractor appears to promise: “To employ efficient, competent and licensed employees in such numbers and in such manner as to ensure to the satisfaction of the Company at all times the observance and strict compliance with the Covenants, Agreements, Conditions, Restrictions, Provisos and Reservations contained herein.”. and clause 4.3 it is agreed, “That all employees of the Sub-Contractor shall be the sole responsibility of the Sub-Contractor and the Sub- Contractor shall be liable for all costs involved in engaging such employees including but not limited to wages, PAYE or other tax deductions, holiday pay, sickness benefits, superannuation payments, long service leave, payroll tax and workers’ compensation payments.”. And for fullness, without anticipating the detail of the evidence overly much, it should be noted that on occasion primary contractors were themselves bodies corporate under the law. Such primary contractors and had no option but to utilise employees and/or independent contractors to render to ASC’s customers the services which the primary contractor had agreed to render, further in all cases the primary contractor was paid (on invoice) by ASC whether the primary contractor or some other person had rendered the service and the primary contractor was left to find the wherewithal to remunerate that other person. Clause 7.1 is of importance also. Clause 7.1 provides: “That the Sub-Contractor shall at its own cost and expense supply, maintain and run all motor vehicles used by the Sub-Contractor, its employees and/or agents in or in connection with this agreement and the provision of the Licensed Services.”. It is not necessary to reproduce the clauses burdening the primary contractor with roadworthiness and insurance obligations with respect to the vehicles. Neither is it useful to reproduce provisions giving ASC a measure of control over the type and presentation of the vehicle. “Even the most independent of independent contractors is subject to some direction in the performance of his work…”: Stevens v Brodribb Sawmilling Co Pty Ltd (1985-1986) 160 CLR 16 at 38 per Wilson and Dawson JJ. It is the obligation to provide the motor vehicle which is important that obligation is important because, notwithstanding the decision in Hollis v Vabu Pty Ltd (2001) 207 CLR 21 the conventional view continues to be that a person who has to provide expensive items of equipment such as a motor vehicle is not an employee, compare Hollis v Vabu Pty Ltd, ibid, at paragraphs 22 and 47 per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ and paragraph 50 per McHugh and Australian Air Express Pty Ltd v Langford [2005] NSWCA 96 at paragraph 31. In short, the document points decisively at a relationship other than that of employer and employee. That said, the situation of each primary contractor must be separately evaluated. As mentioned, some are corporations. Others were partnerships. It is very easy to come to the view that as a “practical matter” corporations and partnerships are running their own business or enterprise, compare Hollis v Vabu Pty Ltd (2000-2001) 207 CLR 21 at para 47 per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ. But some primary contractors were both natural persons and sole contractors. It is much -- 2 of 6 -- 3 less difficult to conclude that a natural person is an employee. Further, the scale of operation of each of the primary contractors was not the same. Some Licensed Areas contained more customers of ASC than did others. Additionally, some primary contractors held more than one Licence. In consequence, the cash flow of the primary contractors varied considerably. It is easier to perceive an independent business where the transactions are many and the cash flow substantial than where the infrequency of opportunities to service ASC’s customers left a primary contractor struggling to achieve a reasonable level of remuneration. The important caution, of course, is that in employing the “control test” in an endeavour to ascertain the nature of the relationship between ASC and a particular primary contractor one must seek for control of the sort which a master asserts in respect of a servant, see Re Entertainers Award – State (1985) 119 QGIG 103 at 104 per Matthews, P. One must avoid distraction by control borne of a struggling primary contractor’s attempts to ingratiate himself or sourced in the dominant personalities of the officers of ASC. To return to the matter of delegation, it is clear from the evidence to which I have been taken that whilst primary contractors charged out the work of delegates (usefully described in argument as “relief drivers”) as if the work had been performed by the primary contractor himself, the whole of the fee paid by ASC was not passed on to the relief driver. One witness, a Mr Easton, attributed the partial withholding of moneys to the circumstance that the relief driver used his (Mr Easton’s) vehicle and petrol. But on the whole of the evidence, it seems to me to be tolerably clear that the dominant reason for the withholding of funds was not a desire to profit from the sweat of others – and I notice that in McKenzie v Taratu Coal Co [1919] NZLR 756 at 758 Sim J said that a servant “is not a person who makes a profit out of the labour of others. He earns his wage by the sweat of his brow…” – but because of difficulties which the primary contractors experienced in living on the earnings derived from their arrangements with ASC. And because the whole of the money was not passed on to the relief drivers – and I hasten to add that some primary contractors (at times) worked as relief drivers for other primary contractors – the position of the relief drivers must have been even more parlous. Quite simply, and I have not the least basis for attributing blame and neither expressly nor impliedly do so, the cloud over the labour structures put in place by ASC lay in the inadequacy of the sums pumped into the system by way of remuneration. Over time dissent bubbled. It boiled over into five matters fought in the Industrial Magistrates Court at Southport. All five matters were by way of complaint alleging a contravention of s. 666 of the Industrial Relations Act 1999 in that ASC had failed to pay wages due and payable (to an employee) under an industrial instrument. It was common ground that the relevant industrial instrument was the Security Industry (Contractors) Award – State 1991 and (later) the Security Industry (Contractors) Award – State 2000. It was also common ground that the work performed by the person nominated as the relevant employee in each particular complaint was work which satisfied the definition of “security services” in each of the Awards. What was not common ground was the nature of the relationship (if any) between ASC and the person nominated as an employee of ASC in each particular complaint. Because each of the matters was before the Industrial Magistrates Court by way of a complaint pursuant to s. 666 instead of an application pursuant to s. 399, the complainant (Gary John Bullock) was obliged to establish the elements of the complaint beyond reasonable doubt. Each of two of the complaints wholly failed. A complaint relating to wages said to have been owing to Mr David Hart for work performed whilst he was a primary contractor was dismissed. Mr Hart, I should add, was a primary contractor who initially took a licence as a natural person and later took a licence by way of a corporate body of which he was the alter ego. A complaint about wages said to have been owing to Mr Hohepa Pene both for work performed as a relief driver and later as a primary contractor was also dismissed. The gentleman was, I should add, at all material times a member of a business partnership through whose accounts all moneys received as a relief driver and/or primary contractor were channelled. Two complaints were partially successful. A complaint about wages said to have been due to a Mr Robert Evans for work performed as a primary contractor and for work performed as a relief driver was amended during the course of the hearing so as to relate only to work performed by Mr Evans as a relief driver. On that complaint ASC was convicted though (properly) no conviction was recorded. A complaint relating to wages said to be due to a Mr Peter Kidd in respect of work performed as a primary contractor and in respect of work performed as a relief driver failed as to the period of time during which Mr Kidd had worked as a primary contractor but succeeded as to the period of time during which Mr Kidd worked as a relief driver. Once again (properly) the conviction was not recorded. One complaint was wholly successful. On a complaint that Mr Ronnen Easton had not been paid wages due and payable in respect of a period during which he had been a primary contractor and in respect of periods during which he had worked as a relief driver, Mr Bullock was wholly successful. Once again (properly) the conviction was not recorded. The trial was a lengthy trial. Whilst there were but seven witnesses, cross-examination was lengthy. The trial took nine days for evidence and for submissions. There were almost a thousand pages of transcript. There were 90 exhibits, many involving business records. The observations of Kirby J in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq) and Others (1999) 160 ALR 588 at paragraph 90 are apposite: “These considerations (about the advantage of a trial Judge over an appellate court) acquire added force where, as in the present case, the trial was a very long one, the exhibits are most numerous, the issues are multiple and the oral and written submissions were detailed and protracted. In such cases, the reasons given by the trial Judge, however conscientious he or she may be, may omit attention to peripheral issues. They are designed to explain conclusions to -- 3 of 6 -- 4 which the Judge has been driven by the overall impressions and considerations, some of which may, quite properly, not be expressly specified.”. Regrettably in this case, there is an obvious error. It appears most clearly at paragraph (14) of the decision about the complaint relating to Mr Kidd. Paragraph (14) is in the following terms: “After considering the evidence and having heard from Mr Kidd, the view I have adopted with respect to the relief period is that it points to the relationship between the parties then, as being one of employer/employee. With respect to the period the subject of the written contract it points to a relationship of principal/independent contractor.”. With respect, the complainant was permitted to jump the stile. It was (and is) common ground that whilst performing work as a primary contractor Mr Kidd had a legal relationship with ASC. That the question for decision was whether the relationship was that of employer and employee or principal and independent contractor. But it was not common ground that there was any relationship at all between ASC and Mr Kidd during the periods when Mr Kidd worked as a relief driver. In respect of that period, the issue was not whether Mr Kidd was an employee but whether Mr Kidd was an employee of ASC. If ASC had no relationship with him it mattered not that he was an employee. And the same point was (and is) on each of the complaints raising an issue about work performed by the gentleman to whom it relates as a relief driver. With the greatest benefit of hindsight, the only stage at which the critical issue casts a shadow on proceedings is at paragraph (30) of the decision relating to Mr Evans whereat it is recorded: “It might be said Mr Evans was once removed from the defendant by the existence of the subcontractor – but it is important to approach each case individually having regard to a complicated line of authority and differently weighted criteria.”. And that is but the shadow of the issue; not the nub of the issue. The inquiry made at paragraph (30) was whether the presence of the primary contractor severed the relationship between Mr Evans and ASC. The critical issue was always whether there was a relationship with ASC. The issue whether each of Messrs Evans, Kidd and Easton was, when working as a relief driver, employed by the primary contractor or by ASC was not a matter of formality. The primary contractor who had employed Mr Evans was Mr Hart. The primary contractor who had employed Mr Kidd was Mr Evans. The primary contractor who had employed Mr Easton was Mr Hart. I accept the submission of counsel for Mr Bullock that in dismissing the complaint about wages said to have been due to Mr Hart, the Industrial Magistrate did not “uphold” the formal contractual relationship between ASC and Mr Hart and the principal/independent contractor relationship which it evidenced. But one has to concede that the Industrial Magistrate was not satisfied beyond a reasonable doubt that Mr Hart was an employee of ASC. One has to concede also that on the Industrial Magistrate’s findings and reasoning ASC and Mr Hart stood in the relationship of principal/independent contractor. Once one accepts that Mr Hart (the primary contractor) was running an independent business pursuant to the licensing agreement it is difficult to resist the conclusion that in taking steps apparently authorised by the agreement in order to carry on that business Mr Hart reached the objectives contemplated by the agreement. Importantly, it is difficult to resist the conclusion that Mr Hart employed Mr Evans. Yet notwithstanding that the five complaints were heard together on the explicit basis that there was much similar fact evidence and on the explicit basis that the evidence was cross-admissible, on the complaint relating to the work performed by Mr Evans as a relief driver Mr Evans has been held to be the employee, not of Mr Hart, but of ASC. Exactly the same criticisms may be developed about the decisions relating to Mr Hart and to Mr Easton. The matter relating to the work performed by Mr Kidd as a relief driver is marginally different. Because the complaint about the wages said to be due to Mr Evans was amended in the course of proceedings one has no finding about the relationship between Mr Evans and ASC at the time when Mr Evans was the primary contractor “engaging” (hopefully a neutral word) Mr Kidd. But the question was one which required an answer. It was not to the point that Mr Kidd (as a relief driver) conducted himself as an employee, if he was an employee of Mr Evans. The decision on Mr Bullock’s complaint relating to wages said to be owing to Mr Easton in respect of the period during which Mr Easton was a primary contractor is also bedevilled by inconsistency. Whilst the licensing agreement was the principal guide to the relationship between the prime contractors and ASC, the Industrial Magistrate was correct to go to factual matters bearing upon the relationship between Mr Easton and ASC in order to establish the true nature of the relationship. Conduct may sometimes be a better guide than words. Words which are a true manifestation of the relationship between other principal contractors and ASC might well, in the case of Mr Easton, have been a cloud designed to disguise the true nature of the relationship, compare The Haggarty Group Pty Ltd v Justin Wallace (2001) 166 QGIG 417 at 418 and the cases there cited. I am content to leave for another day the issue whether terms of such documents as the licensing agreement may be gone behind only where the document is shown to be a “sham” in the sense explained in Re Willow Fashions (Australia) Pty Ltd (in liq); Leveque v Downey as Liquidator of Willow Fashions (Australia) Pty Ltd) (in liq) unreported (BC9507250), 7678 -- 4 of 6 -- 5 of 1994, Hayne J, Supreme Court of Victoria and the cases there cited. But having found on the complaint relating to Hart, the complaint relating to Hoepa Pene and the complaint relating to Kidd that the relationship evidenced by the documentation was in truth the relationship between the prime contractor and ASC, it behoved the Industrial Magistrate to explain why the situation of Mr Easton was different. On the face of the decision, the distinguishing feature was to be found in the provision of a firearm to Mr Easton by ASC when Mr Easton was a prime contractor and in a transaction about a “fictitious” firearm when Mr Easton was working as a relief driver. (Mr Easton worked as a relief driver before he became a prime contractor, while he was a prime contractor and after he ceased to be a prime contractor). The decision of the Industrial Magistrate records: “(32) Other Indicia Not Referred To Above Viewed as a practical matter was Mr Easton running his own business or enterprise with independence in the conduct of his operation as distinct from operating as a representative of another business? The issue is evenly balanced thus far. However, there is one further matter which must be considered. From about 28 May 2001 onwards, (Exhibit 78), Mr Easton personally carried a weapon during zone ‘11’ runs. Whether it was in fact zone 11 or zone 10 (as per the contract), it seems that the zone in question had special requirements of close escort. A Mr Chan was mentioned. He was a restaurateur who was attacked three or four times and as a consequence asked the defendant to arrange an armed escort. (33) The weapon was owned and provided by the defendant. The bullets were owned and provided by the defendant. There was a check-in and check-out register provided by the defendant with respect to the subject weapon. It was a requirement of the owner of the weapon (the defendant) for the carrier (Mr Easton) to expose himself to the possibility of danger (if the need arose) and in circumstances where the person being protected was a fee-paying client of the defendant. (34) Mr Easton did not always have weapon’s licence when he did work as a relief driver. (T527) (35) It seems that prior to Mr Easton obtaining his licence on those occasions as a relief driver that he was required to have a weapon he was sent out with an empty gun holster inserted into which was a mobile telephone which he described as a ‘look-alike’. (T554) (36) I find it impossible to imagine that the defendant would not at all material times be aware of this situation. The requirement to provide an armed escort preceded in time the actual physical provision of a weapon by the defendant to Mr Easton. (37) It must be remembered that Mr Easton was desperate for work. In my view, he was simply used by the defendant in a way that I find utterly appalling. (T554-555) (38) The provision of a gun is not to be treated in the same way as the provision of say a uniform or a wand or a torch. It is an instrument that kills Ownership and licensing are important factors…”. In evaluating the incidents it must be squarely borne in mind that Mr Bullock chose doubtless because of a need to ensure that he might be legally represented in a difficult matter – to proceed by way of a complaint. The consequence was that he accepted the burden of proving all elements of the contravention beyond a reasonable doubt. Clause 11 of the Licence Agreement, though bearing the heading “Uniforms”, also dealt with the supply of equipment to the contractor including “any other items that the company considers reasonable.”. As to the incident in which Mr Easton, as a relief driver, was required to “bluff” with a mobile phone contained within his holster, the only issue is whether an inference may be drawn that during a period when he worked for ASC (apparently) as a principal contractor Mr Easton was subject to such control that he was (in truth) an employee. No-one could reasonably dispute that the incident found to have occurred was not “best practice”. But the references to Mr Easton being desperate for work and being “used”, which I might say featured on the Appeal as well as at first instance, are really references to warning signs that all may not be as it seems. There was evidence by Mr Easton that he was keen to grow his licence area. The incident is just as consistent with an attempt to ingratiate as to control by ASC as an employer. The evidence is also explicable on the basis that the dominant personalities lay within the offices of ASC. I do not accept that the evidence tilted the balance. On a criminal prosecution one is concerned with the defendant and whether accusations have been established beyond a reasonable doubt. No influence can be allowed to allegations or even perceptions of inequitable or unfair treatment within the workplace. Further, I have been taken to the transcript. Given that counsel for the Appellant puts aside the criticisms of Mr Easton’s credibility advanced at first instance and has asked the Court to proceed on the basis that Mr Easton’s evidence is correct, the Court is not inhibited in doing so. The evidence shows that Mr Easton, a relatively recent arrival within these shores, was very keen to develop the opportunity which the licence agreement gave to him. When his vehicle proved inadequate -- 5 of 6 -- 6 he took a loan to purchase a new vehicle. In his dealings with relief drivers, he conducted himself as a business man. The whole of the moneys paid to him in respect of the task by ASC were not handed over. As previously mentioned, the (understandable) reason was that Mr Easton was providing the vehicle and the petrol. But the practice also ensured that the capital tied up in the vehicle was always being used. The imaginative arrangements about delayed payment and banked leave which he developed with one of the relief drivers were quite entrepreneurial. Mr Easton at no stage thought that he was an employee. Indeed, it was his explicit complaint that he should have been employed. Taking that evidence with the clear indication from the licence agreement, which had prevailed in the case of three complaints, it seems to me that the Industrial Magistrate could not have been satisfied beyond reasonable doubt that Mr Easton was an employee of ASC whilst working as a prime contractor. Even on the now discredited approach to appeals by way of rehearing developed in Da Costa v Cockburn Salvage and Trading Pty Ltd (1970) 124 CLR 192 and Edwards v Noble (1971) 125 CLR 296 the decision was not reasonably open on the evidence. It follows that all Appeals must be allowed and all convictions set aside. I reserve all questions as to costs. There is an issue about whether, on any of the complaints the untested provision which is s. 666(6)(b) of the Industrial Relations Act 1999 may be availed of by Mr Bullock on each of the complaints either in this Court or on remitter to the Industrial Magistrates Court. The argument upon those matters has yet to be developed. I reserve my decision on those matters. My associate will arrange a mention in order that the hearing of the argument, on each of the complaints, may be programmed. There was an appeal by Mr Bullock about the calculation of the amount owing to each of Messrs Kidd and Easton. I adjourn each of those appeals. It seems to me that the Court should not enter upon the matter of calculation until it is determined that there is something to calculate. Dated 23 January 2006. D.R. Hall, President Appearances: Released: 23 January 2006 Mr A. Horneman-Wren, instructed by Livingstones (Australia), for Australian Security Company Pty Ltd in all matters. Mr M. Plunkett, instructed by Hall Payne, for Gary John Bullock in all matters. Government Printer, Queensland The State of Queensland 2006. -- 6 of 6 --