WESTERN AUSTRALIAN INDUSTRIAL MAGISTRATES’ COURT

PARTIES KEITH LEONARD WATKINS

CLAIMANT

-v-

J CORP PTY LTD

RESPONDENT

CORAM INDUSTRIAL MAGISTRATE G. CICCHINI

DATE THURSDAY, 7 APRIL 2005

FILE NO. M 203 OF 2004

CITATION NO. 2005 WAIRC 01281

Representation 

CLAIMANT Mr R W Clohessy of Union Industrial Advisory Services

RESPONDENT Mr J Park (of Counsel) instructed by Valenti Lawyers

Reasons for Decision

(Given orally at the conclusion of the hearing, extracted from the transcript of proceedings and edited by His Worship)

Claim and Response

1         On 27 July 2004 the Claimant filed his claim in this Court, alleging that the Respondent failed to comply with the Building Trades Award and was therefore in breach of the Workplace Relations Act 1996.  The Claimant sought in the claim the payment of $24,942.66 plus costs and penalties.

2         By its response filed 17 August 2004, the Respondent denied that claim and stated that the Claimant was not an employee of the Respondent pursuant to the Building Trades (Construction) Award 1987.  The Respondent contended that the Claimant was a subcontractor pursuant to an agreement made between the parties on 20 November 1999.

3         In his particulars and outline of claim filed 1 December 2004, the Claimant asserted that he was employed by the Respondent to clean houses.  The employment relationship it is said was commenced by verbal arrangement.  The Claimant says that between July 1999 and 30 June 2000 he worked on 72 houses and was paid for each job.  Travelling expenses were not paid, notwithstanding that Richard Bray, a supervisor employed by the Respondent, undertook that the Respondent would pay to him 50 cents per kilometre travelled to do each job.  The Claimant asserts that he travelled 34,165 kilometres to do the work but was not paid for such travel.  Further he was not supplied with any means of transport.

4         The Claimant in his particulars and outline of claim contends that his work was governed by the Building Trades (Construction) Award, which also binds the Respondent by virtue of common rule.  There has been a shift in the claim from that indicated on the claim form to that which is now stated in the outline of claim.  It is noted that the Claimant changed the basis of his claim from one of an alleged breach of a federal award to one which alleges a breach of a state award.  It is on that basis that the Claimant says that he is entitled to 73 cents per kilometre travelled, amounting to $24,942.64.

5         It seems also that the Respondent has from the outset misapprehended the claim to be one under the state award, and proceeded on that footing throughout.  In its outline of case in defence, the Respondent reaffirmed its contention that the Claimant was not employed by the Respondent and that the Claimant was at all times engaged as a subcontractor.  Further the Respondent contends in its outline of defence that from time to time on specific jobs where the Claimant was required to re-attend at a property that the Respondent would pay the Claimant’s travelling expenses claimed in his invoices.  In all other circumstances or instances the Claimant did not include a claim for travelling expenses, as it was not agreed between the parties that he would be paid for such travelling.  The Respondent denies that Richard Bray, on its behalf, entered into an agreement that the Claimant be paid travelling expenses at the rate of 50 cents per kilometre.  The Respondent says that the work carried out by the Claimant for the Respondent was carried out pursuant to the subcontract agreement, and was not subject to any award.  The Respondent says that the claim has been frivolously or vexatiously instituted.

 Application of Award.

6         I proceed on the basis that the claim is made pursuant to the state award. The parties have argued the matter upon that basis, notwithstanding that the initial claim was made pursuant to the Workplace Relations Act 1996 alleging a breach of the federal award.  To establish a breach of the state award the Claimant must, on the balance of probabilities, prove the following:

 The existence of an award; and

 That the employer was bound by the award; and

 He was employed in a classification under the award; and

  That the Claimant was an employee within the meaning of section 7(1) of the Industrial  Relations Act 1979.

7         In this matter the threshold and pivotal issue to be determined is whether the Claimant was at the material times an employee of the Respondent.  The parties at the commencement of the hearing agreed that this Court should determine the issue of liability first and quantum later.  There is now dispute as to what was meant by that.  I will return later, if necessary, to consider that issue but it simply demonstrates the difficulty associated with splitting issues and why the High Court of Australia has repeatedly stated that where possible issues ought not to be split.

 The Evidence

8         I now consider the evidence.  The Claimant, prior to 1999, had worked for the Respondent for a period of between six months and a year.  It appears from the evidentiary material before me that that may have occurred in about 1995.  The nature of the relationship between the parties at that time was not explored in evidence.  The parties re-engaged in about July of 1999.  At that time the Claimant’s daughter was building a house at Gidgegannup.  The Respondent was the builder.  Given that the house was nearing completion and the necessary brick clean and house clean had not been performed, the Claimant’s daughter asked Richard Bray, the Respondent’s supervisor, who had responsibility for the construction of her home, whether her father could do the job.  It transpires that the Claimant had done this type of work previously and had extensive experience in the cleaning industry.  Mr Bray agreed.  Consequently the Claimant and Mr Bray discussed the matter, and it was agreed that the Claimant would be paid for the clean of the house that was being built for his daughter.  Whilst carrying out that particular job, Mr Bray spoke to the Claimant.  He asked the Claimant whether he wanted to do another job, also at Gidgegannup.  The Claimant agreed.  Although Mr Bray wanted him to do that job immediately, Mr Watkins was not in a position to do so and subsequently did the job some time later.  It transpired that the Claimant then carried out a further two or three job for the Respondent.  It is important to note that the Claimant was, at all material times, a resident of, or at Cervantes, and further, that he held other jobs within or near that particular locality.  He testified that he was a gatekeeper for CALM at the Pinnacles and that he cleaned the local tavern.  He also testified that he did other paid work.

9         On a date unknown following the first two or three cleaning jobs Mr Bray telephoned the Claimant at his home.  He was not there at the time. Mr Bray spoke to the Claimant’s wife about the issue of travelling.  As a consequence of that conversation Mr Watkins later spoke to Mr Bray concerning the issue of the payment of travelling fees or expenses.  Mr Bray told him that a travel fee or expense would be paid but the quantum would be worked out by head office.  It was not until November of 1999 that he was asked to sign a subcontract agreement.  That was subsequent to the conversation relating to the payment of travelling fees.

10      The subcontract agreement is dated 20 November 1999.  The actual date of signing is unclear from the document itself.  It suffices to say that the agreement evidences the fact that the relationship between the parties was one of contractor and subcontractor.  The relationship was recorded as being a subcontract relationship.  Nothing really changed by the signing of the subcontract agreement.  The Claimant continued to work in the same manner and under the same circumstances that had existed from the start in July of 1999.

11      The Claimant carried out various brick cleaning, floor scraping and house cleaning jobs for the Respondent.  In each instance he did not negotiate a price for those jobs and simply accepted what he was paid.  The arrangement was clearly an informal one.  The evidence dictates that either Mr Bray or some other person from the Respondent would telephone the Claimant to see if he could do a job, and the necessary arrangements would then be made with respect to that job.  The Claimant would be told of the particular time frame and other material details, and thereafter he would attend the job and carry out the work.  On occasions he would not see the supervisor whilst carrying out his work.  On other occasions the supervisor would attend.  Often he would carry out the work without a purchase order being given to him prior to commencement.  Purchase orders were on those occasions received retrospectively.  Upon completion of the work Mr Watkins would submit a docket or invoice statement to the Respondent for payment.  All that was stated on such document addressed to the Respondent was the address of the site at which the Claimant worked, and the description of the work that he did.  He did not provide any other information.  He did not therein specify any order number or the quantum of payment sought.  In some instances he claimed travel, but did not quantify the amount that he claimed in that regard.  However travel was not always claimed.  The Respondent paid him its pre-determined rates.  Where travel was paid, it seems that payment was paid at a flat rate.  It seems that the Claimant did not take issue with either the quantum of payment for each specific job or the fact that his travel claims were paid at a flat rate.

12      At the end of June 2000 the Claimant was overpaid $1283.23 because of a computer system error within the Respondent’s accounts department.  Upon the error being discovered the Respondent sought to recover the amount overpaid.  It accordingly wrote a letter to the Claimant seeking repayment of the same, but the Claimant refused to pay the money back.  That led to the Respondent suing the Claimant in the Local Court at Perth for the recovery of that money.  In turn the Claimant counterclaimed.  In the end, that matter in the Local Court was settled on the basis that the Claimant pay the Respondent $2500 inclusive of costs and that the counterclaim be dismissed.  These proceedings were instituted after the commencement of the Local Court action but before the resolution of the same.

13      The Claimant acknowledged during evidence in chief that the Respondent was well aware of the fact that he worked for others.  He also acknowledged that the Respondent throughout deducted tax according to the Prescribed Payments System.  He said that he never refused to carry out any of the work that he was asked to do by the Respondent.  He agreed also that there was never any discussion between the parties concerning the application of the Building Trades (Construction) Award.  The parties did not contemplate the application of any award.

14      Mr Watkins was asked in cross-examination whether he was, at the material time, an employee of the Respondent.  In response to that question he refused to assert that he was, only saying that he did not know what the law was.  At no time when he was given the opportunity to do so did he assert that he was an employee.  He agreed that he was paid on a job-by-job basis.  He also agreed that he took his wife with him to do the work that he did for the Respondent and that he paid her for such work.  He conceded that in his 1999/2000 tax return he declared having paid her wages.  He also claimed therein other expenses incurred in carrying out his work.  He agreed that he was not paid sick leave, annual leave, or any other entitlement that would normally be paid to an employee under an award.  He conceded also that he did not claim the same.  He was not told when to start work or when to finish work or how to do his job.  He was not supplied with tools or materials.  He used his own tools.  He was free to do other jobs and was unrestricted in that regard.

15      The Claimant did not call any other witness and his case rests solely on his own evidence.

16      The Respondent called two witnesses, namely Alan Clarke, its building manager, and Sally Hellier, its former accounts clerk.  It suffices to say that much of Mr Clarke’s evidence related to the Respondent’s operations, its general procedure with respect to the hiring of subcontractors, and its procedure with respect to the payment of invoices received from subcontractors.  It will not, having regard to such, be necessary for me to review Mr Clarke’s evidence in its entirety.  It suffices to say I will refer to only the pertinent aspects of his evidence.

17      Mr Clarke was Mr Bray’s supervisor.  All payments to subcontractors had to be sanctioned by Mr Clarke.  He testified that the Respondent in carrying out the construction of homes, only ever engaged and dealt with subcontractors.  He said that the Respondent did not employ anyone to carry out construction work.  The system by which the Respondent operated was one where a subcontractor would, following his initial job, be asked to sign a subcontract agreement which was usually sent out to the subcontractor, completed by the subcontractor and returned.  Such agreement reflected the arrangement between the parties.  He said that was what occurred with Mr Watkins.  The subcontract agreement before the Court (exhibit 1) reflects that.  He said that Mr Watkins and other subcontractors were only paid on a job-by-job basis upon the production of invoices.  They were free to work elsewhere.  Subcontractors had tax deducted according to the PPS system that then applied which required the Respondent to deduct tax at the rate of 20% unless varied.

18      With respect to the payment of a flat rate fee for travel paid to Mr Watkins he agreed that the same was, indeed, paid.  He said that the same was paid as an incentive so that Mr Watson would continue working for the Respondent.  He said that the industry is affected by supply and demand.  When the supply of subcontractors is short, then incentives are used to ensure that those people continue to work for the Respondent.  He said that in this particular instance the payment made to the Claimant was an incentive payment in recognition of the fact that cleaners were in short supply and that was the sole basis for acquiescing to the payment for travel at a flat rate.  Market forces drove such payments.  There was no agreement to pay Mr Watkins a set rate per kilometre.  That was particularly so having regard to the fact that

19      Mr Watkins resided at Cervantes.  The costs of having him drive from Cervantes to clean were considered to be prohibitive.

20      The cross-examination of Mr Clarke was uneventful and I need not comment upon it.  It suffices to say that Mr Clarke was, in my view, an excellent witness.  He was a truthful witness and a person upon whose testimony I can rely.  I accept his evidence in totality.

21      Ms Hellier was called to testify about certain matters and particularly about the letter that she wrote on 11 July 2000 addressed to the Claimant in which she sought to recover from the Claimant the overpayment made.  In that letter she described it to relate to wages payment.  She testified that the terminology “wages” used in the letter was just a general one.  She was not intending to categorise the overpayment received by the Claimant as an overpayment of wages.  I accept her evidence.

22      The Claimant has attempted to utilise the letter as evidence of an employer/employee relationship.  In my view it does not evidence that relationship at all.  It cannot assist the Claimant.  The fact that the accounts clerk in seeking to recover the overpayment used loose terminology cannot be evidence of the intention of the parties in entering into their agreement or evidence of the relationship itself.  The use of the word “wages” in that context is not material.  The use of the word in that context appears to be an aberration on the part of the accounts clerk.  It will not therefore be necessary to comment further upon the other evidence given by Ms Hellier.  Ms Hellier's evidence is accepted.

 Determination

23      In determining this matter I start by considering whether the Claimant has been able to establish, on the balance of probabilities, that he is an employee of the Respondent within the meaning of section 7(1) of the Industrial Relations Act 1979.  Interestingly, the Claimant did not assert within his own evidence that he was an employee.  Indeed at no stage during the currency of the relationship did the Claimant assert that he was an employee or make any claim for the usual entitlements such as leave and so forth.

24      I will now consider whether the Claimant has been able to establish by reference to the well known indicia, that he was at all material times an employee of the Respondent.

 Control

25      An examination of his conduct reveals that he was not controlled.  He could refuse to work.  He was not controlled as to how the work was done.  He was permitted to unilaterally choose how and when he carried out his work subject of course, to the Respondent’s overriding time frame.  Other than setting the parameters as to the time frame and the nature of the work to be done, the Claimant was not otherwise controlled in any way.

 Start and Finish Times

26      I move to consider starting and finishing times, which, in itself, is a subset of the control indicia.  In that regard it is clear that the Claimant was not told what time he should start work, when to take his breaks, or how many hours he should work in a given day.  He chose his work times, and he did so quite unilaterally subject to the Respondent’s overall requirements.

 Business

27      I now move to the business indicia.  The Claimant did conduct his own business as is reflected in his tax return for 1999/2000.  Therein it shows that he paid others wages and he also sought deductions for expenses incurred.  His tax return is reflective of a business operation and is also reflective of the type of deduction claims made by business operators.

 Obligation to Work

28      It will be self-evident from the evidence that I have reviewed that the Claimant had no obligation to work for the Respondent.  He could choose which jobs he did and which ones he did not want to do.  He could refuse to do any particular job.  He could work for others and was not expected, nor was he required to work for the Respondent at the Respondent’s command.

 Remuneration

29      The Claimant was paid on a job-by-job basis upon completion of the work carried out.  Although he did not quote for jobs and did not discuss his remuneration, he nevertheless was happy to accept the going price for the job, which was paid by the Respondent.  He had the ability to negotiate if he wanted to, but did not do so.  He only negotiated his claim for travel and was paid at flat rate for that.  His remuneration was achieved only when he presented an invoice and was paid for what he did.  He was paid like a subcontractor normally would be paid.  The method of his remuneration is not reflective of that of an employee, but rather that of a subcontractor.

 Taxation

30      Taxation was deducted using the PPS method as is reflected in the documents before me.  That too is reflective of the fact that he was a subcontractor.  He did not take issue with the mode of tax deduction made during the course of his engagement.

 Termination

31      If one looks then to the indicia of termination, it can be seen that the Claimant was not terminated; he left of his own accord, upon his own terms.  He did not have to provide any letter of resignation, or provide notice to the Respondent.  He simply, as a matter of courtesy, informed the Respondent of his unavailability due to the fact that he acquired work in the city.

 Equipment and Materials

32      It suffices to say that the Respondent did not supply any equipment or materials.  Indeed, the Claimant supplied his own tools and materials.

 Organisation Test

33      I move to consider the organisation test.  The Claimant was not part of the Respondent’s business.  He was simply one of the numerous subcontractors that it had on its list who, if called, may or may not have been able to carry out the work required to be carried out.  There was no continuing obligation on the part of either party.

 Conclusion

34      When one considers the indicia to which I have referred and which are discussed in decisions such as The Western Australian Builders’ Labourers, Painters and Plasterers Union of Workers V RB Exclusive Pools Pty Ltd trading as Florida Exclusive Pools 77 WAIG 4 and other authorities, it becomes apparent that the Claimant was, right from the inception of the relationship in July of 1999, never an employee.  Indeed, he was at all material times a subcontractor.  He confirmed his position of subcontractor in the subcontract agreement, which he signed, dated 20 November 1999.  The subcontract agreement signed at that time reflects the then existing situation and the intention of the parties for the future.  The agreement was not a sham.  It correctly described the relationship between the parties.  There can be no question of the written agreement attempting to label the relationship as being different to the one that it actually was.  The Claimant’s situation, in my view, is no different to the situation of Dr Sinclair in the matter of Sinclair v Startune Holdings Pty Ltd 84 WAIG 3590.  It is most difficult for the Claimant to argue that the agreement was a sham because there is no evidentiary basis for supporting such an assertion.

35      The Claimant’s claim is and has always been, in my view, without merit.  The evidence even on the Claimant’s own case establishes, and quite clearly so, if I might say, that he was at all material times a subcontractor.  Quite frankly, there is not a scintilla of evidence supporting the claim that the Claimant was an employee.  Indeed he did not even assert that in his own testimony.  The Claimant cannot succeed in this claim for the reasons stated.  The Claimant has failed to establish that he was an employee.  On that basis alone the claim must fail.

 (After having heard from the parties as to costs His Worship went on to say the following:)

36      The Respondent seeks that this Court makes a declaration that the proceedings have been frivolously or vexatiously instituted.  The Claimant opposes the making of such a declaration.

37      I have found that the claim was without merit.  There is no evidentiary basis to support the fact that the Claimant was an employee.  He did not meet any of the well-known indicia, which are to be considered in the determination of that issue.  There was, with respect, not one scintilla of evidence supporting his claim.  On his own evidence his claim could not succeed.  Further not only did his evidence fail to support his own case but rather supported the Respondent’s case that he was in a subcontract relationship.  In those circumstances, given that an agent represented the Claimant, his making of and pursuance of the claim without any prospect of success can only be categorised as both frivolous and vexatious, particularly when viewed in the light of the Local Court proceedings to which I have referred earlier.

38      It will only be in rare circumstances that this Court will make an order or a declaration that the proceedings have been instituted frivolously or vexatiously.  However, this will be one such occasion. The Respondent will have suffered the considerable expense of defending a claim which the Claimant, even on his own evidence, had no reasonable prospect of proving.  Therefore it would be appropriate that I make the declaration sought.  I declare that the claim has been frivolously or vexatiously instituted.

39      (After having heard further from the parties with respect to quantum of costs His Worship went on to say the following)

40      The sole remaining matter to be resolved is the quantum of costs payable to the Respondent.  The Respondent seeks indemnity costs.  In my view, indemnity costs are not payable in relation to this matter.  The quantum of costs to be awarded is a matter very much at the discretion of this Court and although the Local Court scale could be used as a guide, there is no particular scale of costs applying to this particular jurisdiction.

41      In determining quantum the Court must have regard to the nature of the jurisdiction and to the particular conduct of the hearing.  Although this matter has proceeded for two days, it must be recognised that the pre-trial procedures of this Court are uncomplicated, and are not ones, which would normally draw any great expense to the parties.  Having said that I appreciate that expense has nevertheless been incurred.  In the end this Court is required to determine in all the circumstances what the proper and just amount to be awarded should be.  The amount that is sought by the Respondent is certainly far too high and inappropriate, having regard to the nature of the matter.  I would have thought that the award of $5000.00 to the Respondent is appropriate having regard to the nature of this matter.

42      I accordingly order that the Claimant pay to the Respondent costs fixed at $5000.00.

 G Cicchini

 Industrial Magistrate