Construction, Forestry, Maritime and Energy Union & Anor v Personnel Contracting Pty Ltd [2021] HCATrans 30 (12 February 2021)

Last Updated: 19 February 2021

[2021] HCATrans 030

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Perth No P40 of 2020

B e t w e e n -

CONSTRUCTION, FORESTRY, MARITIME, MINING AND ENERGY UNION

First Applicant

DANIEL McCOURT

Second Applicant

and

PERSONNEL CONTRACTING PTY LTD

Respondent

Application for special leave to appeal

BELL J
KEANE J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 12 FEBRUARY 2021, AT 1.17 PM

Copyright in the High Court of Australia
MR B.W. WALKER, SC with MR M.A. IRVING, QC appears for the applicants. (instructed by Construction, Forestry, Maritime, Mining and Energy Union (WA))

MR J.B. BLACKBURN, SC with MR A.K. SHARPE appears for the respondent. (instructed by Hotchkin Hanly Lawyers)

BELL J: Just before we continue further, I might mention that earlier this morning special leave was granted in a matter that raises a similar issue concerning the status of employee vis-à-vis independent contractor, and this might be thought in some respects to be the mirror image of the facts raised by that successful application. So, against that background, I think, Mr Blackburn, we might be assisted by hearing from you first.

MR BLACKBURN: Yes, thank you, your Honour. We say special leave should be refused for two reasons: firstly, the applicants’ special leave questions in any appeal have insufficient prospects of success and, secondly, the case is not a suitable vehicle for the determination of the special leave question. I will deal with Jamsek as well and why we say that is a different case and does not raise the question that arises here.

The first special leave question is a very narrow one. It is set out at paragraph 3 of the application book. It asks in a triangular arrangement is the control test satisfied if the worker is subject to day‑to‑day control by the client. That proposition was rejected by the Full Court, paragraph 86 of the decision, Justice Lee noting it was inconsistent with the authorities which focus on the right of the employer to exercise control over the employee.

Among the authorities cited by Justice Lee were several decisions of this Court, including Stevens v Brodribb, and in Stevens there are several passages in the decisions of Justice Mason, with whom Justices Brennan and Deane agreed, and also the decisions of Justices Wilson and Dawson, which emphasise that in considering the control test the question is the degree of control which the party engaging the other person to perform the work exercises over that person.

The importance of the control test lies now not so much in the actual exercise, although clearly that is relevant, as in the right of the employer to exercise it, and those passages appear, for example, in the judgment of Justice Mason at page 24. Justice Mason also refers to the decision of Justice Dixon in Humberstone where Justice Dixon said the question is whether ultimate authority resided in the employer so that the employee was subject to the employer’s order and directions. Similarly, to the same effect, Justices Wilson and Dawson at page 35, when talking about the control test, said that the answer depends on whether the engagement suggests the person engaged is in command of the person engaging him.

In Hollis, the joint judgment discussed the meaning to be given to the control test, at paragraph 43, and their Honours concluded at paragraph 44 by referring to what Justice Mason had said in Stevens, that the emphasis in the control test had shifted:

from the actual exercise of control to the right to exercise it –

So we say it is clear, as Justice Lee concluded in the Full Court, that:

the notion of control in its legal sense refers to the identification of a right deriving from the employer –

The contrary position, which is the substance of the first special leave ground is, in our submission, simply not arguable. The control test is not satisfied by the worker being controlled by someone other than the putative employer and the applicants say that the Australian courts have reached inconsistent outcomes on this issue in the context of.....relationships.

The only case in which the proposition that it is enough that the work is controlled by someone else finds support is the 2003 decision of the South Australian Workers’ Compensation Tribunal.....and that part of the judgment does not appear to have been followed by anyone in the 18 years since. So, in summary, we would say the first special leave question is contrary to well‑established authority and, in our submission, is not arguable.

The second special leave question which now touches in one respect upon the Jamsek point which is raised by the applicants is whether the guiding principle ought be that an independent contractor is in business on their own account and an employee is not. I will refer to that as the “own business” test.

When one looks at the applicants’ submissions at paragraphs 15 to 16, it can be seen that the applicant accepts that that is not the existing law. What they say in their submissions is that would be a better approach and that should be the guiding principle. But that is contrary to the approach mandated in both Stevens and Hollis. The significance of the “own business” test was considered in Stevens and we say the question is asked and answered.

May I take your Honours to the report in Stevens, and it can be seen on page 19 of the Commonwealth Law Reports at about point 7 of the page, that one of the arguments that was put was that the concept of a person carrying on business on their own account is more useful than the control test or other indicia in determining the servant/independent contractor issue. That is at 19, point 7 of the Commonwealth Law Reports.

Now, one of the cases cited in support of that proposition was a passage from the judgment of Lord Wright in Montreal v Montreal Locomotive Works. Justice Mason, with whom Justices Brennan and Deane agreed, Justice Deane dissented only on the question of whether there was a breach of care - that there was a duty of care, Justice Mason considered this argument at page 26 of the Law Report, at about point 8 of the page. I will refer your Honours to what is said there because he indicates that the point being discussed is the very point we are talking about here. It is the “own business” test. What Lord Wright had said was that:

it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business . . . for himself or on his own behalf and not merely for a superior.

Justice Mason then noted at page 27 at about point 7 of the page that Justice Starke in the court below had treated that:

simply as a further factor to be weighed, along with –

the control test, and Justice Mason said, well, that is probably:

what Lord Wright had in mind in Montreal –

Justice Mason then concluded, at about point 7 on the page on page 27, by saying:

For my part I am unable to accept that the organization –

if we look at the passage from Lord Wright that says the same, it is the “own business” test we are talking about now, Justice Mason says:

could result in an affirmative finding that the contract is one of service when the control test either on its own or with other indicia yields the conclusion that it is a contract for services. Of the two concepts, legal authority to control is the more relevant and the more cogent in determining the nature of the relationship.

Now, it is also apparent from the observations of Justices Wilson and Dawson at pages 36 to 37 that they saw the question of whether a person is acting in their own business or as the servant of another or on their own behalf as a restatement of the problem but not, in itself, offering any new tests.

In Hollis, the Court applied the multifactorial test. The joint judgment identified seven considerations, of which the fact that the couriers were not running their own enterprise was one, and the joint judgment in Hollis emphasised that no new principle was being created, and said the decision.....vicarious liability. So they identified vicarious liability as the guiding principle.

We say the Full Court was correct in the way that it approached this question by saying that the weight to be afforded to whether the workers conducting their own business would vary on a case‑by‑case basis and that the question is not to be approached by asking whether the worker is conducting their own business because that has the potential to detract from the central question which is whether the worker is an employee. To ask whether the worker is conducting their own business is still.....

Now that brings us to Jamsek. Jamsek, we say is a very different case. In Jamsek, as we understand it and have read the application, the question is whether, if the worker has their own business, they can still be an employee of the other party. That is a very narrow question and it is not a question that arises in this case.

The facts in Jamsek are also very different from this case. In Jamsek the workers had worked for eight years as employees and were then told that they could either convert to contractors or that basically they would not have a job. They converted and they bought their trucks at a price determined by the company and from then on, apart from the fact that they maintained their trucks, nothing else changed. They wore the company’s livery. Their truck bore the company’s logo. They did the very work that the company contracted to do.

None of those factors apply in this case. The company in that case continued to direct the workers – this is a very different case. So, in this case, we have not only a different principle. No one is asserting here that.....had their own business. There is no question here of whether if, one has a business, one can also be an employee. That is not the principle, that is not the question in this case and the facts are very different as well.

BELL J: You do face, Mr Blackburn, the slight difficulty in resisting the grant that the Chief Justice, with whom, in this respect, Justice Jagot agreed, indicated in clear terms that unconstrained by authority he would have favoured a differing result.

MR BLACKBURN: Yes, your Honour, but that is based largely on the third special question which is whether the categorisation terms ought to be given weight or could, decisive with other factors.....balanced. What we say about that is that there ought be nothing controversial about that. There is a long line of authority.....the principle stated by the Privy Council in AMP v Chaplin and again in Narich, referring to what Lord Denning said in Massey and Crown Life Insurance has been applied many times since, including by intermediate appellate courts.

Some of those decisions were referred to by Justice Lee in the decision below at paragraphs 108 and 115. In our response we have also included the 2010 decision of the Full Court of the Federal Court in Roy Morgan and there are many more – Eastern Van Services only a few months ago, a decision of the Victorian Supreme Court, at paragraphs 168 to 172 repeated the same principle. So this proposition has been endorsed and applied many, many times since it was expounded in cases such as AMP v Chaplin and Narich.

It does not make the written terms determinative per se. They only become determinative because all other matters are evenly balanced, and the relationship is otherwise ambiguous. In that circumstance, we say there can be no error, having regard to the written terms of that.....controversial. So, the primary judge did not err in his treatment of that point. In paragraph 98 of the Full Court decision, Justice Lee said that the primary judge had:

approached the evaluative assessment on the basis that, since any suggestion of a sham or pretence had been disavowed, “there is no sufficient reason not to find the parties’ agreement . . . means, and was intended to mean, what it says” –

But the primary judge prefaced that statement, at paragraph [177] of its reasons, with the words:

where the question might be seen to be reasonably evenly balanced –

So, the primary judge was not saying there is no suggestion of sham or pretence, therefore I can just rely on the written words. The primary judge said where the question might be seen to be reasonably evenly balanced – and only a couple paragraphs before, at paragraph 175, the primary judge had said:

the proper (objective) classification of a contractual relationship must be determined by the rights and obligations which the contracts creates, not the label the parties put on it –

which would:

include an examination of the reality of the relationship in practice.

So, the primary judge was aware of the proper test, having regard to all of the circumstances, and it was only when he found that the question was “reasonably evenly balanced” on the other indicia that he then had regard to the contractual terms and that is consistent with the long line of authority. The other question which is built in to the applicants’ third special leave question is whether so‑called categorisation terms.....

BELL J: We appear to have lost the connection to Mr Blackburn. The Court will adjourn shortly whilst we endeavour to reconnect.

AT 1.30 PM SHORT ADJOURNMENT

UPON RESUMING AT 1.32 PM:

BELL J: Mr Blackburn, we have you back with us now.

MR BLACKBURN: Yes, your Honour. I do not know what point I cut out, though.

BELL J: We adjourned almost immediately upon you cutting out, Mr Blackburn. I confess I cannot precisely tell you the ‑ ‑ ‑

MR WALKER: May I assist, your Honour? My friend was just embarking on reference to what I think he called characterisation clauses in contracts.

BELL J: Yes. Did you hear that, Mr Blackburn? Mr Walker says that you were just commencing on your submission respecting characterisation in employment contracts.

MR BLACKBURN: Yes, thank you, your Honour. If I repeat part of what I have already said that is because I do not know ‑ ‑ ‑

BELL J: We will understand.

MR BLACKBURN: Yes, thank you. So your Honour had asked about Justice Allsop’s observations and I mentioned that was the first special leave question.

BELL J: Yes.

MR BLACKBURN: There will be nothing controversial about that and the principles in AMP v Chaplin and Narich have been heard many times, most recently in Eastern Van Services. But the second part of the special leave question on this point asks whether the categorisation terms are to be weighed having regard to the extent which there is inequality of bargaining power.

We say that the position there is also clear. In a totality test, all relevant circumstances must be taken into account. Where there is some reason to think that the terms do not reflect what was actually agreed the written terms may be read down or disregarded, and that is what happens. There are plenty of Australian cases to that effect and Quest and Damevski are two leading examples involving triangular arrangements where the written terms were disregarded.

In both cases, the workforce was told if they did not convert from employees to contractors they would not have any work – any further work. In both cases, after conversion, nothing changed. They continued to work their original..... There was good reason to conclude that the written terms did not reflect the parties’ actual agreement and in both cases the Full Court of the Federal Court, having regard to all the circumstances, disregarded the written terms.

Then Jamsek in fact was another recent example, where the workers were told after being employed for eight years that they had a choice between entering into contract agreements and being made redundant. So there is nothing new in the proposition that categorisation terms should be read down or disregarded where they do not reflect the reality, or where there is reason to doubt the genuineness of the agreement.

The proper approach is to have regard to the totality of circumstances and if there are other factors, whether they be other terms of the contract or work practices or a weak bargaining position or something else, which favours a different conclusion, then the categorisation terms will not be given effect.

But, we say, it would be wrong and contrary to authority to disregard the characterisation terms or give them very little weight simply because of an inequality of bargaining power. There will almost always be an inequality of bargaining power. Again, as Justices Wilson and Dawson said in Stevens at page 37:

the actual terms and terminology of the contract will always be of considerable importance.

If the contractual term is to be treated as having little or no significance simply because the parties have unequal bargaining power, which in a work context would be in almost every case, it would cause considerable uncertainty. There is no reason why such a principle would not extend to other commercial transactions in which parties also have unequal bargaining powers.

BELL J: Mr Blackburn, these submissions may all ultimately be proved successful, but the real issue with which we are concerned on this application, in circumstances in which the Full Federal Court expressed disquiet with the outcome but felt constrained by authority - why we would not consider it an appropriate matter to take up, particularly as it does in some respects raise mirror considerations to those in ZG Operations v Jamsek.

MR BLACKBURN: Your Honour, if I can move then to that question. Quite apart from the fact that the four special leave points, we say, have insufficient prospects, we say that this Court should not entertain the application for the same reason that the Full Court decided the matter as it did. We say that on a conventional test the primary judge was correct to find as he did and leave to appeal – if special leave was granted the respondent will file a notice of contention contending, among other things, the result below can be supported on the conventional tests and in particular that the absence of any sufficient degree of practical legal control by Construct, the fact that the court was not a representative of Construct sitting in its place, categorisation terms, ought to have led to the conclusion that the court was not.....Construct.

While the facts are not in dispute, there are also a number of inferences which the Full Court drew from those facts which will also be challenged, particularly as to whether in the extent to which Construct had any legal or practical control over authority - over the court.

But, going back to why the Full Court decided the matter as it did – and this also goes to why this case is not a suitable vehicle for determination of the special leave question, the case does not raise any novel or new way of working. The result below is consistent with a long line of authority in which labourers and others engaged by a labour hire company to perform work for a builder, under the supervision and direction of the builder had been found not to be employees. In Australia those cases started with Odco in 1991, Personnel Contracting in 2004 and Young in 2012 and the outcome of those cases has been consistent.

In particular, the facts of this case are not materially distinguishable to Personnel Contracting involving the very same respondent, which is why the Full Court reached the decision it did. In other cases, where Odco‑style arrangements have not been upheld, and the workers have been found to be employees, there has been some distinguishable feature such as an existing workforce being forced to convert to employment, nothing else changes.

Now, given the length of time those decisions have stood and that Construct and others have relied on them in arranging their affairs, we say the Full Court was right not to disturb them. As the Full Court recognised, to now depart from those decisions would be to throw Construct’s whole enterprise, as well as that of any other entity that has been operating in reliance on those decisions and on the assumptions that its arrangements are lawful, into jeopardy.

For the same reasons it is submitted that those authorities should not be disturbed by this Court. Those authorities do not bear on the Jamsek case. Jamsek is not a triangular labour hire arrangement. We rely on this Court’s decision in Babaniaris. In Babaniaris this Court had to consider whether to depart from the decision of the Workers’ Compensation Board on the proper construction of the Workers’ Compensation Act which had stood for 30 years. In that case each of the five Justices endorsed the general principle:

that a decision of long‑standing, on the basis of which many persons will have arranged their affairs, should not be lightly disturbed by a superior court –

though it was said the principle would not apply where the appellate court was convinced the previous interpretation was plainly wrong. Justice Mason also noted:

The argument in favour of applying stare decisis is weaker when the earlier decision . . . is that of an inferior court or specialist tribunal –

But that is not this case. I refer the Court to the observations of Justice Mason at pages 13 and 14 of Babaniaris, Justices Wilson and Dawson at pages 22 point 9 to 23 point 8, and Justices Brennan and Deane at pages 28 point 9 to 31 point 2 and 33. Justice Mason said at page 13:

Adherence to this approach promotes the certainty of the law and protects the integrity of acts and transactions which have taken place in the faith of the law as it has been previously declared.

Now, the majority in Babaniaris were prepared to depart from the Workers’ Compensation Board’s decision, but only because they considered it was plainly wrong. Justices Brennan and Deane dissented because they
considered it could not be said the Board’s decision was positively wrong and the:

case is one where intervention to correct an error is likely to create serious embarrassment –

Their Honours also observed that:

Parliament’s omission to disturb that determination is a factor which . . . would make it mischievous for the courts now to disturb a long‑settled view of the law.

Now, for the same reasons we say that the line of authority should not be disturbed in this case. It would be unfair to Personnel Contracting, who was acting in good faith on reliance of the decision in Personnel.....did not seek special leave to appeal that decision. It is also relevant that Parliament has not sought to amend the definition of “employee” in the Fair Work Act or the Workplace Relations Act in response to the decisions of Odco, Personnel Contracting and Young.

The reference in section 15(1)(a) to the definition of “employee” including a person who is usually employed, being in the Fair Work Act predecessors since 1910, does not effect the ordinary meaning of “employee”. So Parliament has not amended the definition as it could have, for example, the Superannuation Guarantee Act, which contains an extended definition of “employee” to include work under a contract.....person’s labour. What Parliament has done instead is introduce an independent contractor ‑ ‑ ‑

BELL J: Mr Blackburn, I think you have the light against you. We have the point. We do not need to hear from you, thank you Mr Walker. There will be a grant of special leave in this matter. The sensible course is for this appeal to proceed in tandem with the appeal in ZG Operations Australia v Jamsek. I understand the estimate given in that matter was one day. Mr Walker, would two days see the two of them see them heard seriatim out. Yes. Mr Blackburn, you would agree?

MR BLACKBURN: Two days for both matters, your Honour?

BELL J: Yes.

MR BLACKBURN: No, I would have thought it would have taken more than two days because – I would have thought two days would be our matter alone.

MR WALKER: I disagree with that.

BELL J: I see.

MR BLACKBURN: One is a notice of contention ‑ ‑ ‑

BELL J: I will note your reservations, Mr Blackburn, in relation to the time estimate, and can I invite those who instruct both of you to collect the directions for progressing the matter from the Registry.

We will adjourn briefly in order to set up the next video link.

AT 1.43 PM THE MATTER WAS CONCLUDED