WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES MURRAY ROSS HIGGINS

CLAIMANT

-v-

PAUL ANDREW BENNETT AND CRAIG BRADLEY DIX TRADING AS FINESSE PAINTING & PROPERTY MAINTENANCE, REGISTRATION NO. BN09367846

RESPONDENT

CORAM INDUSTRIAL MAGISTRATE G. CICCHINI

DATE THURSDAY, 24 FEBRUARY 2005

FILE NO. M 287 OF 2004

CITATION NO. 2005 WAIRC 01507

Representation 

Claimant Ms K Scoble (of Counsel) of the Construction, Forestry, Mining and Energy Union of Workers

Respondent MR G McCORRY OF LABOURLINE

Reasons for Decision

Background

1         On 19 March 2004 Commissioner Gregor (as he then was) of the Western Australian Industrial Relations Commission (WAIRC) made orders with respect to Application 1251 of 2003 between Murray Ross Higgins as Applicant (hereinafter referred to as the Claimant) and Paul Andrew Bennett and Craig Bradley Dix trading as Finesse Painting & Property Maintenance as Respondent.  He ordered that:

2         The Applicant was unfairly dismissed.

3         Reinstatement would be unavailing.

4         The Applicant be paid compensation of $2006.40.

5         It is noted from the Reasons for Decision delivered by Commissioner Gregor (exhibit 1) that the pivotal issue requiring determination in the matter before him was one of whether the Claimant was at the material times an employee of the Respondent or alternatively a subcontractor engaged by the Respondent.  It suffices to say that the Claimant successfully contended that he was at all material times an employee of the Respondent.

6         By letter dated 21 March 2004 the Respondent’s agent, Mr McCorry, wrote to the Claimant’s solicitors stating inter alia:

The finding that your client was an employee at the material time has tax implications for our client.

In addition to the obligation to deduct as an eligible termination payment 47.5 percent of the compensation ordered, a total of $950.00, our client is also obliged to deduct the PAYG instalments due in respect of your client’s earnings of $2588.80 in July 2003.  That tax liability amounts to $1229.68.

Those deductions leave nothing to pay to your client.

Our client will also be taking up the Australian Taxation Office you (sic) client’s claiming as a tax deduction, so called business expenses of $3279 in respect of the period he was found to be an employee of our client and GST input credits of $2577 in respect of the same period.

7         On 24 March 2004 Messrs Slater and Gordon Lawyers acting on behalf of the Claimant responded to Mr McCorry stating inter alia:

Mr Higgins does not authorise your client to make any deduction from the amount your client has been ordered to pay under any circumstance.

8         The Respondent was invited to pay the amount ordered under threat of enforcement in this Court.

9         That letter drew the following response from Mr McCorry contained in his letter to Messrs Slater and Gordon dated 28 March 2004;

I refer to your letter of 24 March 2004.

Mr Higgins is not in a position to authorize or not authorize the deduction of monies from the compensation ordered by the Commission to be paid to him.  The Respondent is obliged by Australian taxation legislation to deduct tax from this sum and remit it to the ATO and is exposed to a penalty if this is not done.

This should be self evident to any legal practitioner.  If it is not I suggest you look it up or seek professional advice.

Should your client be misguided enough to challenge the obligation of the Respondent to deduct tax from the compensation sum by instituting proceedings in the magistrate’s court to enforce the order for payment of the full $2000, this letter will be relied upon as the basis of a claim for costs for instituting frivolous and vexatious proceedings and a complaint for unprofessional conduct.

10      Messrs Slater and Gordon responded by letter dated 1 April 2004 by continuing to demand payment and suggesting that Mr McCorry was erroneous as to his view on the law.

11      On 19 April 2004 Mr Bennett wrote directly to Mr Higgins.  He said in his letter:

12       APPLICATION 1251 OF 2003

On 19 March 2004 Commissioner Gregor made an order that you be paid $2006.40 compensation in respect of your so called unfair dismissal from our firm.

As you have been found to be an employee and not the contractor that you at all times represented to us that you were, we are obliged to tax you as an employee.  Accordingly tax is required to be deducted from all payments made to you.

Of the $2006.40 ordered to be paid, tax at the rate of 48.5 percent is required to be deducted, leaving a balance of $1033.30.

You also received from our firm in this financial year payments totalling $2566.08 in respect of which you rendered invoices numbered 57 and 58 and claimed GST.  These must now be considered as monies earned as an employee and we are obliged to deduct tax in respect of them.  As you never represented yourself to be an employee and did not provide a tax file number or seek to claim the general exemption, the tax to be levied on these payments is also 48.5 percent amounting to $1244.55.  This is more than the balance owing to you therefore no payments will be made to you.

In due course the tax deducted will be remitted to the ATO along with a detailed account of how you may have defrauded the Commonwealth by claiming tax deductions and GST credits that you are not entitled to do if you are an employee.

13      Mr Bennett’s letter drew a response from Messrs Slater and Gordon by letter dated 24 May 2004.  Messrs Slater and Gordon demanded payment of $2006.40 as ordered by WAIRC within 7 days failing which it was indicated that enforcement proceedings would be commenced.  The Respondent was also put on notice that the Claimant would in any enforcement proceedings be seeking costs and the imposition of a penalty.

14      On 27 May 2004, Mr McCorry again wrote to Messrs Slater and Gordon.  In his letter he said:

I refer to your letter of 24 May 2004 to Mr Bennett.

Neither Mr Higgins nor yourself on his behalf are entitled to direct our client not to deduct tax from any monies that are due to him.  Our client is complying with its obligations under the tax laws.

I consider your letter to amount to demanding money with menaces (sic) in circumstances where you know or should reasonably be expected to know that there is no lawful basis for you to do so.

A complaint about your behaviour has been made to the Legal Practitioners Complaints Committee.

15      Mr Bennett did not subsequently pay to the Claimant that which he was ordered to pay by the WAIRC.  Instead the Respondent remitted the sum of $2006.40 to the Australian Taxation Office in purported compliance of his alleged obligations under Commonwealth taxation legislation.

Determination

16      A review of the correspondence passing between the parties and/or their representatives establishes that the Respondent is extremely unhappy with the finding that the Claimant was at the material times an employee.  The initial unhappiness has now developed into a high degree of bitterness.  Such is quite apparent from the correspondence and from what Mr Bennett said in evidence.  The Respondent has embarked on a course of action, which has had the effect of circumventing the decision of the WAIRC that the Claimant be paid compensation.  The Respondent’s stance also undermines the Claimant’s successful award by denying him the fruits of the judgment in his favour.  Mr Bennett for the Respondent justifies his position by saying he has acted on advice from his accountant and his “counsel”.

17      Mr McCorry argues that the Respondent’s tax obligations were such that he was required to deduct the tax that he did and remit the same to the Australian Taxation Office.  The requirement to comply with Commonwealth taxation laws is paramount.  Accordingly in this instance the Respondent’s obligation to comply with the Commonwealth taxation legislation takes precedence over any requirement to pay the Claimant.

18      I reject such contention.  In the present matter it is not a case of Commonwealth legislation overriding State legislation.  What is being suggested is that an order of the WAIRC can be rendered nugatory.  However that cannot be so.  The WAIRC, in its determination of the matter, acted judicially.  The order it made is a judicial pronouncement and cannot be overridden or rendered nugatory.  The order is clear and specific.  It makes no reference to any amount being deducted from the sum of $2006.40 by reason of tax or for any other reason.  This court is required to enforce the order.  It cannot go behind the order.  If the Respondent had an issue concerning the WAIRC’s ability to make the order that it did, then it could have appealed the decision; however it did not do so.  The order of the Commission is clear in its terms and must be strictly complied with.  The Respondent’s approach has been to render the order nugatory.

19      I find that the Respondent has failed to comply with the order of Commissioner Gregor, made 19 March 2004, that the Claimant be paid $2006.40.  I find the failure to comply was wilful and aimed at rendering the order nugatory so as to deny the Claimant the fruits of his judgment.

20      I will now hear the parties as to the orders to be made.

G Cicchini

Industrial Magistrate