Burgess v Hunstman Chemicals Pty Ltd [2003] QIRC 172 (2003) 174 QGIG 377

3 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 377 QUEENSLAND INDUSTRIAL RELATIONS COMMISSION Industrial Relations Act 1999 – s. 276 – application to amend or vary a contract Scott Burgess AND Hunstman Chemicals Pty Ltd (No. B 245 of 2003) COMMISSIONER FISHER 22 September 2003 Application to amend or vary contract – s. 276 – Industrial Relations Act 1999 – Background – Nature of Engagement – Engagement varied between employee and contractor – Position terminated while engaged under a contract for services – Applicant signed contracts – Terms of agreement – Legal principles – Applicant does not meet the test of unfairness – Applicant dismissed. DECISION Scott Burgess has filed an application seeking orders under s. 276 of the Industrial Relations Act 1999 (the Act) against Huntsman Chemical Company Australia Pty Ltd (Huntsman) in respect of the contract of service or the contract for services between himself and Huntsman. The applicant sought a variation to his contract to add terms in relation to notice, severance, redundancy and long service leave. In total the applicant sought orders that Huntsman pay to him an amount of $63,695.48 plus interest at the rate of 9% per annum from 24 June 2002 (the date the contract was terminated) until the date of payment. Background Mr Burgess was engaged by Futuretec Australia (Futuretec) from 2 February 1994. Initially Mr Burgess was engaged as an Installer and was paid by the metre. He then moved into the factory where he was paid by the hour. In or about November 1994 Mr Burgess was engaged as a Sales Representative. Mr Burgess was remunerated at first on a retainer plus commission basis. This changed in 1996 to a commission only basis and although the rates of commission changed over time, he continued to be paid commission only until the termination of his contract. Futuretec was a business founded by Mr Burgess’ father and two other persons. In or about October 1994 Futuretec was sold to RMAX Rigid Cellular Plastics (RMAX). In 1996 RMAX was acquired by Huntsman. The purchase of RMAX included the Futuretec business. From the time of the sale of Futuretec until December 2000 Mr Burgess Senior provided managerial services (with others) through their company Foamtec Services Pty Ltd to Futuretec. Mr Burgess’ engagement was terminated on 24 June 2002 as a consequence of the closure of the Futuretec business. It is common ground that Mr Burgess’ engagement was continuous through the changes of ownership of Futuretec. In total he was engaged for a period of almost 8 years and 5 months. Nature of the Engagement Mr Burgess’ engagement varied from contractor to employee to contractor. The earliest taxation records Mr Burgess was able to provide from the 1995 financial year indicate that he was engaged under a contract for services. For the period 1 July 1995 to 30 June 1997 Mr Burgess paid tax as if he was an employee. From 1 July 1998 until his engagement was terminated, it is accepted by both parties that Mr Burgess was engaged under a contract for services. In or about October 1998 Mr Burgess signed two written Agreements with Huntsman: an Agreement for Sales and Marketing Services and an Agreement for Additional Services (the contracts). In his initial affidavit Mr Burgess stated that he had not signed a written contract for services with Futuretec or any of its owners, including Huntsman. In his oral evidence Mr Burgess admitted that his signature appeared on the documents but said that he could not recall signing them. He also said in evidence that he could not recall any of the negotiations about the contracts or receiving a copy of the contracts from Futuretec. I accept Mr Burgess’ evidence that he could not recall signing the contracts or receiving a copy from Futuretec. The contracts were never executed by Futuretec and on that basis it is unlikely that a copy was returned to him. On the matter of his lack of recall about signing the contracts and negotiations about them, I am of the view this was because Mr Burgess did not find anything objectionable about them. He said in evidence that his father was involved in drawing up and putting the 1998 Agreements to him. At that time Mr Burgess Senior was responsible for the day to day operations of Futuretec. In response to a question form the Commission as to whether he thought the contracts must have been acceptable given his father’s involvement with them, Mr Burgess said that he was not a “naïve kid”. From this and other similar evidence I have reached the view that Mr Burgess was not blindly accepting of his father’s position. He retained an accountant and a financial adviser so was not unfamiliar with the notion of seeking professional advice on matters affecting his affairs. However, he did not seek such advice nor advice from a solicitor about the contract. His lack of concern is highly suggestive of Mr Burgess not being an unwilling party to the Agreements. I am also of the view that had any of the terms of the contracts been objectionable then Mr Burgess would have recalled that period when the contracts were presented. The fact that he does not have any such recall together with the presence of his signature on each page of the contracts suggests that he was prepared to freely enter into them. Although the contracts were not executed by Huntsman, it is clear that the terms of the contracts were applied. A couple of salient terms of the Agreements were that: • an employment relationship was inappropriate and nothing in the Agreements would operate so as to constitute any relationship of employer and employee between the parties and Futuretec and any person providing the services on behalf of Mr Burgess; -- 1 of 3 -- 378 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 3 October, 2003 • Mr Burgess was able to employ or engage other persons at his risk and expense to assist him in providing the services; • Mr Burgess was paid on a commission only basis; • Mr Burgess would be responsible for his workers’ compensation cover; • the agreements were terminable forthwith, by either party providing written notice to the other. For the financial years ending 1995, 1998, 1999 and 2000 Mr Burgess was taxed according to the prescribed payments system. Leading up to the introduction of the GST in 2000 Futuretec requested all of its contractors and sub-contractors supply their ABN. Although Mr Burgess could not recall attending any of the information sessions conducted by Futuretec about the changes that would result from the introduction of the GST, he recalled Futuretec indicating that contractors could seek advice about their position before an ABN was obtained. Without seeking such advice Mr Burgess supplied to Futuretec a copy of the registration of his ABN. After the introduction of the GST Mr Burgess received payment of his commission by submitting recipient created tax invoices. There are however some features of the relationship between Mr Burgess and Huntsman that point to it being a contract of service. These include Mr Burgess being placed on a roster to attend the office, providing call sheets and periodically reporting his activities. Despite the presence of these indicia I am satisfied that at the time his services were terminated Mr Burgess was engaged under a contract for services and had been willingly so engaged. Legal Principles In deciding this application the Commission is required to apply the provisions of s. 276 of the Act. The applicant has the onus of proving the contract was unfair or became unfair. Section 276(4) of the Act provides that: “(4) The Commission may consider a contract to be an unfair contract if it considers the contract - (a) was an unfair contract when it was entered into; or (b) became an unfair contract after it was entered into because of the conduct of the parties, or a variation to the contract or for any other reason it considers sufficient.”. Section 276(7) defines an “unfair contract” and includes at (a) a contract that is harsh, unconscionable or unfair. In deciding applications under s. 276 of the Act, this Commission has adopted and applied a number of legal principles developed in relation to similar provisions as they have appeared in the New South Wales industrial relations legislation. In particular, this Commission has adopted and applied the test of unfairness developed by Sheldon J in Davies v General Transport Development Pty Ltd (1967) AR (NSW) 371. In that matter Sheldon J said (at 374) that unfairness of a contract was to be determined according to “the common sense approach characteristic of the ordinary juryman. . . It is a plain matter of morals not law.”. He also said (at 374, 375) that the (NSW) section’s “massive power makes it imperative that it should be exercised with proper restraint . . . it should not permit itself to become a refuge for those who are merely disgruntled with a bargain entered into on even terms. . . the discretion should be exercised to protect victims of wrong dealings not to prescribe anodynes.”. These principles have been adopted in various matters in this Commission including Reilly v TDG Logistics Pty Ltd (2001) 166 QGIG 430; P & J Trucking Pty Ltd ats Toll Transport Pty Ltd t/as Toll Logistics (2000) 166 QGIG 434 and Kevin Gleeson and Gold Coast Bakeries (Queensland) Pty Ltd (2001) 166 QGIG 354. Both parties also referred to these principles in their written submissions. Was the Contract Unfair? The applicant argued that the position of each of the parties at the time the contract was made or amended was of particular significance. It was submitted that Mr Burgess’ status changed from employee to contractor to employee and back to contractor at the whim of the controllers of the Huntsman business. In addition, it was submitted that various changes to the terms of Mr Burgess’ engagement were imposed on him and that he accepted them because he wanted to continue his engagement. The applicant also submitted that even after he had signed a written contract Huntsman unilaterally made changes to his remuneration and issued directions about the places and hours he was to work. All of these contentions were rejected by Huntsman. In relation to the submission regarding the change of status, Huntsman noted that Mr Burgess signed a contract stating that an employment relationship between himself and Huntsman was inappropriate. My views about Mr Burgess’ signing the contracts have already been expressed. Two particular matters are being alluded to in respect of the complaints about changes to remuneration. One concerns a deal brokered by Mr Burgess Senior regarding payments to be made by Mr Burgess to another person. While Mr Burgess was not happy about the arrangement, he was consulted about it and agreed to it. Moreover, he claimed the payments as a tax deduction. The second matter concerned the withdrawal of the 1% pooled commission in addition to the normal commissions earned. The withdrawal of this commission resulted in about a 15% pay cut. This matter did not only affect Mr Burgess. The evidence shows that all sales representatives were affected but were consulted and agreement, albeit grudging, was reached on the change. Mr Burgess was also able to approach Huntsman regarding changes to his benefits. For example, Mr Burgess negotiated the introduction of a $10 per lost quote fee for himself and other sales representatives and the payment of $75 for travel to the Sunshine Coast despite his contract providing that there would be no travel allowance paid. His representations also led to the 1% pooled commissions being reinstated in June and July 2002. I am not satisfied on the evidence that Mr Burgess was in a relatively disadvantageous position in respect of his bargaining position. Neither am I satisfied that Mr Burgess was subjected to any undue influence or pressure in relation to signing the contracts or the changes that were subsequently made. Mr Burgess was not “a babe in the woods” in relation to the matters affecting his position or business generally. The evidence clearly showed that Mr Burgess was familiar with financial and taxation matters. He regularly consulted an accountant and had easy access to his father, who until 2 December 2000, held a position of influence in the business. In my view had Mr Burgess been concerned about the change of his status or any changes to the terms of his engagement then the evidence supports the view that he had the capacity to seek to alter the outcome. He accepted the changes, and although he has now expressed dissatisfaction about them, the evidence does not support a conclusion that the contract was unfair because of uneven bargaining power or because undue pressure or influence was brought to bear. In fact, except for the final year of his engagement Mr Burgess’ income did not decrease as a result of the changes to his conditions. In the written submissions, the applicant raised for the first time the matter of unfairness in relation to an industrial instrument. One of the types of contracts defined to be an “unfair contract” at s. 276(7) of the Act is one that “is designed to, or does avoid the provisions of an industrial instrument.”. The applicant contended that had Mr Burgess been engaged as an employee, the Commercial Travellers’ Award – State would have applied, at least in part. -- 2 of 3 -- 3 October, 2003 QUEENSLAND GOVERNMENT INDUSTRIAL GAZETTE 379 The types of benefits under the Award that Mr Burgess, as an employee, would have been entitled to included, relevantly for this application, notice, severance pay, long service leave, consultation over redundancy and “the right for Mr Burgess to become an employee of the ‘transmittee’ of the Huntsman business.”. The applicant argued that a contract for services that did not include these types of benefits was sufficient to render it an unfair contract. Further, the applicant submitted, that even if it were not expressly an unfair contract, the removal of his status as an employee had the effect of “stripping” him of the abovementioned award entitlements and others. The absence of any equivalent entitlement in the contract for services was sufficient evidence, it was contended, that the contract was “harsh, unconscionable or unfair”. Huntsman took issue with the attempt to argue unfairness on these grounds, submitting, correctly, that neither matter was pleaded in the application nor were they raised during the hearing. Huntsman requested that the Commission disregard both arguments. While it is the case that in his application Mr Burgess sought orders for award-type payments, it was not until final submissions were received that either Huntsman or the Commission were made aware that a limb of the argument being relied on was that the contract was unfair in that it was designed to or does avoid the provisions of an industrial instrument, viz, the Commercial Travellers’ Award – State. Moreover, no evidence was led in connection with this contention nor were any calculations submitted nor any documentary material produced by the applicant to support this belated argument. Given the significance of the argument, it is highly questionable as to why it was only raised in the final stages of proceedings. It seems to be that the applicant, perhaps realising that his other arguments were not having the desired effect, decided to advance a case that might have a greater prospect of success. Had the issues been raised during the hearing I may have been inclined to allow an amendment to the application and evidence to be led, given the significance of the argument. This would have been consistent with the decisions in TDG Logistics Pty Ltd v Peter William Reilly (2001) 167 QGIG 247 and Graham Mather v Toll Transport (2002) 170 QGIG 344. However, as I have mentioned, the arguments were only raised in final submissions and I believe I am entitled to disregard them. I record however that the argument would not have found favour with me in any event. In this regard I note the following submissions of Huntsman: • Mr Burgess’ remuneration was not reduced by entering into the Agreements; • according to tables produced by Huntsman as part of their final submissions, Mr Burgess’ earnings under the Agreements were considerably more than the minimum wage rates prescribed by the Award; • he was able to claim tax deductions not available to PAYE/PAYG earners; • there was no evidence of loss of bereavement leave or benefits under the Family Leave Award; • there was no “transmittee” of the Futuretec business; • the 1% commission was paid for jobs accepted while Mr Burgess was on leave. All of these matters would need to be taken into account when considering whether the contract was designed to or does avoid the provisions of an industrial instrument. Because of the paucity of information presented by the applicant in this respect compared to the weight of information provided by Huntsman I am not satisfied that this limb of unfairness has been substantiated by the applicant. In addition and as previously expressed it is my view that Mr Burgess voluntarily accepted engagement under a contract for services which was the subject of two written agreements, both of which he signed without hesitation, query or protest. The applicant has raised under the heading of s.276(2)(d) of the Act a number of other matters considered to be relevant. These were the conduct of Huntsman in deciding to defend the claim, the disposal of the assets of Futuretec, the provision of information to the possible acquirer of the assets and the non-payment of the lost contract fee for quotes that did not proceed as a result of the closure of the Futuretec business. In relation to the latter three issues I have considered each of these submissions but believe that each of them is part and parcel of normal business transactions. There is nothing unusual about them that would persuade me that the contract should be found to be unfair. Huntsman were entitled to take a decision to defend the application. This was a reasonable position given the nature of the Agreements that were signed by Mr Burgess. It is entirely different to a respondent defending an unwinnable case. In this case it was the evidence of the applicant himself that persuaded me that the contract was not unfair. He clearly realised the taxation benefits that flowed to him from being a contractor and was prepared to accept those benefits when they provided an advantage to him financially. It was not until the future of Futuretec became uncertain that Mr Burgess raised any concerns about the nature of his engagement and sought severance benefits. From the time the contracts were signed until then he had not sought to obtain or queried the absence of such benefits as sick leave, annual leave or family leave. His failure to do so until this very late stage together with the fact that he signed the two Agreements without question demonstrate that he was comfortable with the arrangements that were in place. It was only when the business was about to close that any concern emerged. He then sought to claim the benefits that an employee might enjoy. In Davies, Sheldon J said that the NSW Act provision should not become a refuge for those who are merely disgruntled with a bargain entered into on even terms. In my view that is what Mr Burgess seeks to do and that approach should not be accepted. It follows from what I have said that I am not satisfied that the applicant has met the tests of unfairness established by s. 276 of the Act or case law. The application is dismissed. G.K. FISHER, Commissioner. Hearing Details: 2003 26, 27 June 23 July Appearances: Mr T. Bradley (Counsel) instructed by Mr R. Johnson (Johnsons Solicitors) for the applicant. Mr C. J. Murdoch (Counsel) instructed by Mr C. Lynoon and Ms S. McCrostie (Minter Ellison) for the respondent. -- 3 of 3 --