Dalgety Farmers Ltd t/a Grazcos v Bruce and Anor

(1995) 12 NSWCCR 36
BC9505124

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(Judgment by: Kirby ACJ)

Dalgety Farmers Ltd t/a Grazcos
v Bruce and Anor - BC9505124; CA 40620 of 1994

Court:

Judges:
Kirby ACJClarke JA
Cole JA

Hearing date: 21 July 1995
Judgment date: 3 August 1995

New South Wales

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Judgment by:
Kirby ACJ

This is another case in which the Court is asked to reverse a determination of the Compensation Court of New South Wales on a finding of employment. The case is unusual in that it was agreed by all parties at the trial, and eventually in this Court, that Mr Stephen Bruce (the worker) (the first respondent) was a worker of somebody. The question in issue was whether he was employed by Dalgety Farmers Ltd, trading as Grazcos (the appellant) (Grazcos), or by Mr John Ferris Kirkpatrick and Ms Margaret Ferns Kirkpatrick, trading as Cleveland Pastoral Co (the second respondents) (Cleveland). In the Compensation Court, Manser CCJ found that Grazcos was the true employer of the worker. He dismissed the claim against Cleveland. From his Honour's award, Grazcos has appealed to this Court.

FACTS RELEVANT TO THE EMPLOYMENT RELATIONSHIP

Disputes concerning the employment of shearers are not uncommon. Specifically, disputes have quite frequently arisen out of "paper" arrangements designed to settle the assignment of employment to a particular organisation, whether the pastoralist or the contractor provided the shearing teams. See eg Pitcher and Anor v Langford and Anor (1991) 23 NSWLR 142 (CA); WorkCover Authority of New South Wales v Billpat Holdings Pty Ltd and Ors, Court of Appeal (NSW), unreported, 14 July 1995. There is no alternative in such cases but to examine the detailed evidence. In the present appeal, that task was made somewhat simpler. The parties had agreed upon a narrative of facts which substantially sets out an accurate summary of the uncontested arrangements which existed between the worker, on the one hand, and Grazcos and Cleveland, on the other. What immediately follows is that narrative.

The worker was a shearer. He sustained injury in the course of his employment as a shearer on 14 January 1991. At the time of his injury, he was working on a property owned by Cleveland. The principal of that company was Mr Kirkpatrick.

The worker's employment history began in early 1990, when he came into contact with Mr Bill Stewart, referred to as the Area Manager in the Moree District for Grazcos. Thereafter, with interruptions, the worker performed work for Grazcos as directed by Mr Stewart. The evidence shows that sometimes he was paid directly by Grazcos. Sometimes, he was paid by the pastoralists to whose property Grazcos had assigned him. When he was paid by the pastoralists, the worker typically signed a shearing agreement, provided in accordance with the Pastoral Industry Award. A sample of such an agreement was in evidence. It showed the name of the property owner as employer. It was required to be signed before the shearer started work on that property owner's station. In such cases, the worker later received either a group certificate or tax stamps from the assigned employer for submission by the worker with his income tax return. In the financial year ended 30 June 1990, ie prior to his work injury, the worker received a group certificate from Grazcos. He also received either group certificates or tax stamps from fourteen other employers. Before the subject engagement for Cleveland, he had not worked for Cleveland before.

In respect of the financial year ended 30 June 1991 (the year of the work injury), the worker was employed by six employers other than Grazcos. His income tax return included a return in respect of income received whilst "employed" by Cleveland. The income derived in that financial year accrued in the six and a half months during which the worker was employed before the subject injury.

Shortly before 14 January 1991, the worker was asked by Mr Stewart to go to Cleveland's property. It was common ground that this is a very large property. Some evidence suggested that it was actually the second largest such property in New South Wales. The worker complied with Mr Stewart's instruction. He checked into the shearers' quarters on the property. These were about 200 metres from the shearing shed. He there met Mr Don Bennett. He was the Overseer for the shearing shed. The worker knew Mr Bennett to be an Area Manager of Grazcos from "down South somewhere".

On Monday morning, 14 January 1991, the first day of his engagement at Cleveland's property, having written out two copies of the standard shearing agreement for each shearer in the team, Mr Bennett secured the worker's signature to each copy relating to him. He then had Mr Priest, Cleveland's Manager, sign the agreement on behalf of Cleveland. This document clearly nominated Cleveland as the worker's employer. The document was destroyed. However, Manser CCJ made a finding that a document, in the terms of the pro forma in evidence, had been signed by the worker, and for Cleveland. That fact was not in dispute before this Court. The worker then commenced work as a shearer in Cleveland's shearing shed. Very shortly afterwards he sustained his injuries.

Mr Bennett, the Overseer, obtained a claim form and a report injury form from Mr Kirkpatrick of Cleveland. The forms were duly completed by Mr Bennett and by the worker. Mr Bennett, although employed by Grazcos, signed the form "on behalf of" Cleveland. He then returned the form to Mr Kirkpatrick. He lodged it with his insurer, under the Workers Compensation Act 1987 (the Act). Cleveland's insurer was different from the workers' compensation insurer of Grazcos.

The worker telephoned Mr Kirkpatrick on a number of occasions before receiving his first payment of compensation. This arrived in March 1991. It was paid by Cleveland's insurer. Indeed, weekly compensation and other benefits continued to be paid by Cleveland's insurer until the award of the Compensation Court following Manser CCJ's assignment of Grazcos as the employer. It was the worker's action in initiating a claim for lump sum compensation, originally against Grazcos alone, and later against Grazcos and Cleveland, that brought to the fore the controversy as to whether the true employer of the worker was Cleveland (as accepted to that date) or Grazcos (as later found).

The worker, after injury, received a group certificate from Cleveland in respect of the financial year ended 30 June 1991. This indicated that at least the first cheque for his remuneration was drawn on Cleveland's account. An excess of $500 provided in Cleveland's workers' compensation policy (conforming to the Act) resulted in the first payment of $500 for compensation being made by Cleveland itself from its own bank account.

The worker lodged his group certificate from Cleveland, with other group certificates and tax stamp sheets, as an annexure to his income tax return. Payment of weekly compensation was made by or on behalf of Cleveland, from 14 January 1991 until 28 September 1994, when Manser CCJ's award handed down. The award contained a provision (later deleted by consent of the parties) purportedly ordering the worker to repay to Cleveland all weekly compensation which he had received from it, ie from its insurer.

ARRANGEMENTS BETWEEN CONTRACTOR AND PASTORALIST

At the time of the worker's injury, Grazcos was involved in the organisation and provision of shearing teams to pastoral properties. It made arrangements for shearers to shear sheep on properties of all sizes. It had a variety of flexible arrangements with the proprietors of those properties. The arrangements differed as to the provision of shearers and overseers. There were differing price scales according to the particular arrangement which was entered with the pastoralist. From 1980 to 1990, Grazcos and Cleveland had an arrangement concerning the supply by Grazcos of shearers for the shear.ing of Cleveland's sheep. Under this arrangement, Grazcos provided the team of shearers; employed them itself; and charged Cleveland on the basis of the cost of the shearing operation. This charge included a component for a share of the workers' compensation premium payable by Grazcos for its workers, a share of the payroll tax required to be paid by Grazcos in respect of the shearing team, and certain other costs. This arrangement was called "costs plus". Typically, Mr Brian Clark, Manager of Grazcos, talked to Mr Kirkpatrick of Cleveland before the shearing season, both to ascertain Cleveland's needs, and to settle the arrangements and costs applicable. Mr Clark would usually do this on a visit to Cleveland's property. On 13 November 1990 Mr Clark went to the property. He saw Mr Kirkpatrick. They had a discussion concerning how the shearing was to be carried out in the coming season. At this discussion, when Mr Kirkpatrick asked about costs, Mr Clark explained that Grazcos' workers' compensation premiums had risen quite significantly because of claims experience. He pointed out that most of Grazcos' clients were now employing shearers for themselves. There is no explicit evidence that savings in payroll tax were spoken of. However, later evidence suggests that this subject, which potentially involved considerable savings to the pastoralist, was probably raised.

Mr Clark explained to Mr Kirkpatrick that a difference in the price structure, and a difference in the cost, could be secured by adopting a different employment arrangement for the shearers. He explained how Grazcos would open a cheque account for Cleveland. Cleveland would then deposit monies into that account. The signatories to the account would be Grazcos' overseer (Mr Bennett), Mr Kirkpatrick (of Cleveland) and Mr Kirkpatrick's secretary. It was suggested that, in this way, the employment of the shearers would be accepted by Cleveland which could secure financial savings by adopting this procedure rather than employing shearers who were workers of Grazcos.

Mr Kirkpatrick stated that so long as the proposed arrangement was honest, clear and above board, he would accept it for Cleveland. Mr Clark stated that he explained to Mr Kirkpatrick that he would have to let his workers' compensation agent know of the added wages which he was assuming, so that Cleveland would be responsible for the additional premiums for workers' compensation cover for the shearers which it would in future employ. Cleveland would also be liable for the relevant payments for superannuation for the shearers. In the year preceding the worker's injury, Cleveland had a wages bill of $250,000 for its own employees. This bill would have nearly doubled for the additional sum payable for the short term employment of the shearers assigned by Grazcos, including the worker.

Mr Clark and Mr Kirkpatrick discussed the shearers to be assigned. Mr Kirkpatrick refused to have improvers (ie learning shearers). He stated that he wanted ten experienced shearers. There was no suggestion that Cleveland had anything to do with the selection of the actual shearers sent to the property. The selection of the shearers was left to Grazcos. Pursuant to the foregoing arrangement, the shearing account was opened in the name of Cleveland with the ANZ Bank at Dubbo. Money was provided from the main account maintained at that bank by Cleveland. No money was put into this account by Grazcos. It is from that account that the payment to the team of shearers, which included the worker, was made.

One of the clear reasons for adopting the arrangement just described was the saving that would thereby be procured in payroll tax. Because of its large employment numbers, Grazcos was undoubtedly liable to payroll tax. Having regard to the threshold at the relevant time ($1 million aggregate wages) Cleveland was not liable to such tax. Accordingly, there were real inducements in the way of financial savings, which advantaged Cleveland in the arrangement put to it for Grazcos by Mr Clark and accepted by Mr Kirkpatrick.

Grazcos subsequently arranged for the team of shearers to travel to Cleveland. Grazcos notified Cleveland of the full details of the wages payment made from the special banking account established at Dubbo. In a letter containing the notification of gross wages, tax deductions and superannuation contributions, Grazcos informed Cleveland (described as "employer") that its obligations included to pay the tax deductions to the Taxation Department, or purchase tax stamps to arrange for payment of superannuation contributions and: "you are also required to declare the gross wages shown above in your Workers' Compensation Declaration".

The foregoing arrangement excepted the overseer, Mr Bennett. He continued to be employed by Grazcos. When he arrived, he was given a list of instructions by Mr Kirkpatrick. These included a demand that no shearers should hit sheep with their hand pieces, and a requirement that anyone doing so would be sacked immediately. Mr Kirkpatrick insisted that no overtime, and no weekend work, should be performed, presumably because of the costs which would be involved. He gave specific directions as to some of his particular shearing requirements, so that these would be conveyed by Mr Bennett to the shearers.

During the course of the shearing, Mr Bennett asked Mr Kirkpatrick for permission to increase the shearing workforce. This request was refused, again by inference, because it would have resulted in increased expenditure by Cleveland. As Mr Kirkpatrick by then knew, the shearers were paid for by Cleveland. This was not a case of a fixed price for the shearing services undertaking to Grazcos.

In accordance with convention, the shearers supplied their own hand pieces which were temporarily "hired" by Cleveland. Mr Kirkpatrick and Mr Priest visited the shearing shed from time to time, observing the work of the shearers. When workers were injured in the course of their employment, they were provided with claim forms directed to Cleveland's workers' compensation insurer. Apart from the worker, two other shearers were injured in the course of shearing work during this engagement. They made claims for compensation on Cleveland's insurer. The inference is that they were paid. As I have stated, group certificates were ultimately issued by Cleveland to all of the shearing crew, including the worker. Superannuation was paid. It would be reasonable to infer that the income tax deductions in respect of the shearers, including the worker, were paid by Cleveland to the Australian Taxation Office. Cleveland certainly made a return to its workers' compensation insurer in respect of the shearing workforce's wages. It paid its premium to that insurer by reference to this return.

These were facts which had to be interpreted when the dispute came for decision before Manser CCJ. For Grazcos it was argued that the formal arrangements, and the reality, were that the worker had been engaged, and was employed, by Cleveland at the time he was injured. For Cleveland it was put that the prudent payment of premiums, and even the payment of weekly compensation over a long time, could not foreclose the legal characterisation of the arrangement between the worker and his putative employers. That was a task for the Court. In approaching that task, the Court would look at the reality of the continuing Grazcos' control, rather than the "paper arrangements" made between Grazcos and Cleveland for other purposes.

THE PRIMARY JUDGE'S FINDINGS

In a very detailed and careful opinion, analysing the evidence, Manser CCJ reminded himself of the decision of this Court in Pitcher, in which he had been the primary judge. He referred to the well known authorities of Zuijs v Wirth Bros Pty Ltd (1955) 93 CLR 561 ; Humberstone v Northern Timber Mills (1949) 79 CLR 389 , and Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 . He then examined at some length the facts and holding of the High Court of Australia in Accident Compensation Commission v Odco Pty Ltd (1990) 64 ALJR 606 (HC). After extensive citation of this authority, and comparison between the facts in Odco and in this case, he concluded: "If indicia of employment, such as referred to in the leading cases, are to be the sole determinants of employment then clearly the following matters in respect of Mr Bruce's relationship with Cleveland are relevant; the existence of the written contract, the payment of wages, the deduction of taxation, the assumed payment of taxation liabilities and superannuation liabilities by Cleveland, the use of Cleveland shearing shed and machinery. I regard the list of "do's and dont's" to be neutral in terms of directions given to the overseer.

So far as control is concerned, the fact of control clearly resided in the overseer and the legal authority to control was vested in the employer, whoever that might be. For reasons which I have already given, because control is but one of the indicia, and because this case is different from [Pitcher], the ultimate repository of the right to control follows from a determination of the identity of the employer and is not a determinant of it.

Against the indicia of employment by Cleveland, the indicia of employment by Grazcos appeared to me to be these. Bruce had no relationship with Cleveland prior to being directed to attend there by Grazcos; he had no knowledge of the basis on which he would be employed until he got to the shed and signed the form; he formed part of the pool of shearers who would perform shearing services at the direction of Grazcos; he was under the immediate direction of an overseer who was an Area Manager of Grazcos, and a permanent employee of that company. If it could be said that Bruce was a part of any "organisation" then he was a part of the organisation of Grazcos ... In the instant case there are indicia of employment on both sides. In the case of Cleveland, the indicia are more traditional. In the case of Grazcos, the indicia are more consistent with modern perceptions ... ... If the exercise of control as a fact is relevant to determining the ultimate issue of employment, then in my respectful opinion it is relevant to the question of whether the right to exercise it exists ... Cleveland had reserved to it by virtue of the written document and the other indicia the control of Mr Bruce ... whilst affording to more traditional criteria the full respect that they deserve, it nevertheless seems to be that the more modern criteria of employment which Stevens revealed, but which were developed in Odco, should prevail"

His Honour then proceeded to find that the worker was employed by Grazcos.

APPLICABLE LEGAL PRINCIPLES

The legal principles applicable to the case were not really in doubt:

(1) It was common ground that the case was one in which an appeal lay both against factual and legal findings. To this extent, the role of this Court is different from that illustrated in Pitcher, where the appeal was limited to a point of law;

(2) Determining whether employment exists, and if so with which person or organisation, is often a difficult task. It involves the characterisation of the essence of a relationship by reference to given criteria. It frequently results (as cases both in Australia and elsewhere illustrate) in borderline decisions upon which different legal minds, properly instructed, can reach different conclusions.

See Connelly v Wells (1994) 55 IR 86 (NSWCA); Articulate Restorations and Development Pty Ltd v Crawford (1994) 57 IR 371 (NSWCA), 378. Lee Ting Sang v Chung Chi-Keung and Anor [1990] 2 AC 374 (PC) 385; O'Kelly and Ors v Trust House Forte plc [1984] 1 QB 90 (CA).

In borderline cases, it is proper that this Court should have a proper sense of modesty when it comes to the task of classification. See Connelly, 86. Otherwise, effective decision-making in the many cases which raise the characterisation and assignment of employment will effectively be shifted from the specialist Compensation Court to this Court. It must never be forgotten that the process in which we are involved is one of appeal. The appellant has to show error in order to succeed. It is not enough, in a finely balanced case, that this Court might, if approaching the matter for the first time, have come to a different conclusion.

(3) Nevertheless, Parliament has provided a wider ambit of appeals to this Court by the amendments to s32 of the Compensation Court Act 1984.

The Court is duty bound to review findings of fact. In doing so, it is not bound to the findings of fact made by the primary judge, unless such findings rest upon the advantages which the judge is conventionally taken to enjoy in determining the credit of witnesses whom he or she sees. This Court is entitled to draw inferences from the facts. See Connelly, 91. It should do so paying respect to the findings of fact made by the primary judge.

(4) In disputes concerning the existence of employment-type arrangements, and the characterisation of those arrangements, the proof of paper documentation, although relevant, will not necessarily be determinative. This was the point of the opinions of Priestley JA and Handley JA in Pitcher, see ibid, 154, 163. Their Honours made it plain that, in determining the identity of a disputed employer, the Court is entitled to consider the reality of the purported contractual arrangements. It may do so even though it was not argued that the arrangements were a sham. Documentation of a relationship for such practical purposes, in the minimisation of tax or the reduction of insurance premiums, may be legitimate for those purposes, but may not truly determine the relationship between a person claimed to be a worker, and another claimed to be an employer. In Billpat (above), I pointed out (with the concurrence of Priestley JA and Clarke JA on this point), that the paper arrangements were not irrelevant, and should not be ignored. See Scerri v Cahill and Anor, Court of Appeal (NSW), unreported, 1 August 1995, per Bainton AJA. They may demonstrate, as they did in that case, that the worker has acknowledged that he has been told of a change in arrangements previously existing; that a discreet new arrangement had been entered into for the particular work in hand; and that this was illustrated and confirmed by the paper arrangement which followed: cheques from a different source, workers' compensation payments from a different insurer, and group certificates showing a different employer. See ibid, 25. (5) In determining whether a contract of service has been entered, and if so with whom, it is necessary to look to the circumstances of the engagement and to ascertain who it was that offered employment, and whether the worker accepted that offer. To determine whether what then ensued was indeed employment (in the sense of a contract of service) it is necessary to look to the whole of the relationship. Whilst the existence of the right of control remains highly significant, as the High Court pointed out in Stevens, (see at 24, 28, 36), it is no longer regarded as the sole criterion. Indeed, it has not been such for a very long time. In Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552, also a case involving a droving contract, Dixon J observed that reserving a right to direct or superintend the performance of work could not transform into a contract of service what was in essence an independent contract. Thus the search which is on is for the essence of the relationship, not the simple touchstone of actual control, or the right of control. The duty to look to the "totality of the relationship" is emphasised both by the High Court (see Zuijs, 571; Stevens, 29) and by this Court (see Connelly, 74, 82; Articulate Restorations, 379).

However convenient it would be to return to the simple test of control it does not represent the present law, for since it was formulated the nature and incidents of the employment relationship have moved beyond control simpliciter to a more complex notion. A consideration which has helped to shit. she focus away from a simple enquiry as to control, or right of control, has been the changing nature of employment in Australian society today. This was acknowledged by Mason J in Stevens, at 24. It was elaborated by me in Connelly, at 84, and in Articulate Restorations, at 375, and Billpat, tspt 24. These considerations are not reasons for ignoring either the right or actuality of control or the search for the "essence" or "totality" of the relationship properly understood. They are simply explanations of the fact that, in modern circumstances, the actual exertion of control will be rarer and more subtly applied.

CONCLUSION - THE WORKER WAS EMPLOYED BY THE PASTORALIST

Manser CCJ seems to have been greatly affected, in the final conclusion which he reached, by the decision of the High Court in Odco. With respect, I do not believe that that case throws much light upon the resolution of the present. It was mainly concerned with the interpretation of a provision in the Accident Compensation Act 1985 (Vic), s8, s9. The facts were rather special. I see little analogy to assist in the determination of who was the worker's employer in this case. His Honour was correct to recognise that his obligation was to keep in mind the variety of changing employment relationships that can exist in Australian society today. As many shearing and droving cases demonstrate, most recently Billpat, those relationships can be quite unusual with features far distant from the ordinary engagement for weekly wages with which the courts were once so familiar.

I differ with great hesitation from the conclusion which Manser CCJ reached after his exhaustive analysis. But having come to a view that the characterisation arrived at by his Honour is wrong, it is the duty of this Court to perform its function. It "must not abdicate its responsibility". See Lee Ting Sang, above, 385.

There is no suggestion in the present case that the paper arrangements made for the engagement of the worker were a sham. On the contrary, they had a very real and practical consequence for Cleveland. It was not as if the worker was a long term employee of Grazcos, whose employment was interrupted by an extraordinary arrangement with a particular pastoralist, for reasons in which he had no interest. This worker had worked for many employers including six in as many months of the financial year prior to his injury. He was thus no stranger to particular employment arrangements with particular pastoralists. He was not kept in the dark about such arrangements. He signed on. He later secured group certificates or tax-stamps. He was given the employer's workers' compensation form by it. He was paid by the employer's workers' compensation insurer for a very long time.

It cannot be determinative as to who he had in his mind his employer was at the relevant time. As Gleeson CJ pointed out in Connelly v Wells, at 74:

"In the present case ... the respondent a young man whose occupation was that of a farm labourer mechanic was cross-examined at some length as to whether he believed he was an employee of the appellant. Since he had probably not made a close study of the relevant authorities, his personal opinions on that issue of law were unlikely to have been of assistance to the trial judge".

So here. In a general way, the worker might have still regarded himself as employed by Grazcos and directed by Grazcos' overseer. But properly analysed, the right of control had clearly shifted by the arrangements put in place from Grazcos to Cleveland. If Mr Kirkpatrick had not liked the way in which the worker was performing his work, and if it had been contrary to any rule of his, there is little doubt that his ultimate control would have been exerted and enforced. Had Mr Bennett, or anyone else from Grazcos, sought to intervene, Mr Kirkpatrick would have been perfectly entitled to rely (amongst other things) upon the fact that the shearers were Cleveland's workers, that Cleveland was paying their wages and superannuation and insurance premiums for them. Cleveland was entitled to have the last word. Grazcos found the workers and assigned them to Cleveland for its fee. But employment belonged to Cleveland.

I accept that there are some countervailing indicia, as argued for Cleveland. Thus, to some extent, Grazcos retained control of the financial relationship with the shearers whom it supplied. Grazcos, and not Cleveland, originally set up the accounts from which the pay was drawn for the shearers. Grazcos' overseer, Mr Bennett, was a necessary signature to that account. Mr Bennett signed the claim form in the employer declaration, although purportedly for Cleveland.

As in all such cases there are indications which point both ways. But with respect to the experienced primary judge, I consider that in this case the evidence strongly preponderates to employment by Cleveland. It is little wonder that Cleveland initially accepted liability, paid the first payment of compensation, and thereafter was indemnified by its insurer for a very long time before this dispute arose.

Orders

I favour the following orders:

1. Appeal allowed;

2. Set aside the award of the Compensation Court (his Honour Judge Manser) whereby that Court ordered that Dalgety Farmers Ltd, trading as Grazcos, should pay weekly compensation, lump sum compensation under s66 and s67, interest, s60 expenses and costs against Dalgety Farmers Ltd, trading as Grazcos, to Steven Edward Bruce;

3. In lieu thereof, order that there be substituted in the award for "first respondent", wherever appearing, "second respondent" being John Ferris Kirkpatrick and Margaret Ferris Kirkpatrick, trading as Cleveland Pastoral Co;

4. In lieu of the provision in the award, order that the application for determination against Dalgety Farmers Ltd, trading as Grazcos, be dismissed;

5. Order that Cleveland Pastoral Co pay the worker's costs in the Compensation Court;

6. Order that the second respondent in the Court of Appeal pay the costs of the appellant and of the first respondent of the appeal but have, in respect thereof, if otherwise so qualified, a certificate under the Suitors Fund Act 1951.

7. Reserve liberty to apply to the Compensation Court for any further consequential orders.