Case: Damevski v Giudice and Others [2003] FCAFC 252 ; (2003) 133 FCR 438
Outcome: cited
The applicants cited extensively from the Full Federal Court judgments in Damevski v Giudice and Others [2003] FCAFC 252 ; (2003) 133 FCR 438, where the unanimous conclusion of Marshall, Wilcox and Merkel JJ was to the effect that the purported restructure of a cleaning operation from that of former employees to their ongoing provision of cleaning services as contractors, but nevertheless still engaged by their former employer as a principal to the ongoing controversial relationship, did not operate to terminate the pre-existing contracts of employment for the purpose of the operation of the WR Act, no change having occurred in any physical sense to the work activities of the purported contractors from what had previously been undertaken by them as employees. I would interpolate to observe that no such restructure of any existing employment relationship of relevance took place in the present context, and care therefore needs to be taken in relation to any application to the principled approach there taken. The extensive reasons for judgment of Marshall J (with whom Wilcox J agreed whilst adding observations of his own) included emphasis at [86] upon the practical difficulty of locating or demonstrating an offer and acceptance in the traditional sense in the kind of context for instance there involved, his Honour pointing to what was further observed by McHugh JA in Integrated Computer Services concerning the difficulty of fitting 'a commercial arrangement into the common lawyers analysis of a contractual arrangement' , and moreover as to the need to distil 'the precise moment when the legal criteria of a contract have been fulfilled' , given that '[i] n a dynamic commercial relationship new terms will be added or will supersede older terms. ' As McHugh JA had also emphasised, it is necessary '... to look at the whole relationship and not only at what was said and done when the relationship was first formed' . In the present case, however, the framework of the relationship between the applicants and CAO stood still relevantly from the outset, as it were. 33 At 456-7 of Damevski , Marshall J made the following findings within [92], [96], [101] and [102], to which counsel for Messrs Wilton and Cumberland drew attention with emphasis, and which I will further reproduce below: '[92] Counsel for Endoxos relied upon the requirement for an intention to create legal relations to assert that there was no evidence of a legally enforceable contract. Subject to a rebuttal, it will be presumed in commercial agreements that the parties intend to create legal relations. Although the hiring agreement indicates Endoxos set about making arrangements to obtain its labour through MLC, this is not a clear rebuttal. Relationships can be established outside the hiring agreement. The hiring agreement cannot be determinative of the intentions of Endoxos and Mr Damevski to create legal relations. ... [96] Endoxos may have set about making arrangements for the provision of labour through a third party, but ultimately it acted in a way that showed that it in fact intended to create legal relations. The evidence indicates that Endoxos wanted to maintain control of Mr Damevski, expected him to use their equipment and clothing emblazoned with Endoxos livery and, ultimately, wanted to be able to dismiss Mr Damevski. ... [101] Although Endoxos had an intention to remove costs related to its role as an employer (such as increases in public liability insurance premiums), through its actions it also displayed an intention to establish a contractual relationship with Mr Damevski after his "resignation" on 19 August 2001. Endoxos directed Mr Damevski to worksites, called Mr Damevski to its offices for further instructions when necessary, gave Mr Damevski attire and equipment to enable him to perform work, and received pay slips from him. Mr Damevski also showed an intention to re-enter the legal relationship with Endoxos, by once again taking up the role he held with Endoxos before 19 August 2001. [102] The facts of this case also reveal that the contractual relationship that existed between Mr Damevski and Endoxos was one of employee and employer. As previously pointed out, the only difference between the relationship before and after 19 August 2001 was that MLC was given the role of paymaster.' In the present case, the applicants did indeed use only CAO machinery, but as I have also pointed out, it was MES which issued each of them with both clothing and protective equipment. 34 The reasons of Merkel J for concurrence with Wilcox and Marshall JJ in the outcome in Damevski revealed a varied approach from that of Marshall J undertaken at length, albeit variations which Wilcox J doubted to involve any 'difference [that] matters very much' (see [2] at 441). Nevertheless as his Honour also explained, care needs to be taken in applying principles along the lines of re-structured existing employment relationships from those of the purported hiring of employees from the outset. After pointing out in his conclusions at [173] that '[i] n general, the Courts have held that the interposition of a labour hiring agency between its clients and the workers it hires out to them does not result in an employee-employer relationship' , Merkel J reached the following conclusions at [174]: 'However, the present case differs in significant respects from those cases. In those cases, in general, the hiring agency interviewed and selected the workers, and determined their remuneration, without reference to the client. Usually, a client requesting a worker with particular skills was provided with one, who may or may not have been "on the books" of the hiring agency at the time the order was placed. The workers of such hiring agencies were usually meant to keep the agency informed of their availability to work, and in many cases were not to agree to undertake work for the client which had not been arranged or directed by the hiring agency. Equipment was either supplied by the worker themselves [sic] or by the hiring agency, except for specialist safety equipment which the client often supplied. Dismissal of a worker was only able to be effected by the hiring agency. The client can only advise the hiring agency that the particular worker is no longer required by it. Had AICA/MLC acted as a labour hiring agency for Damevski to contract his services to other cleaning companies, as suggested in the chart and in the information pack, then the decisions in the above cases may have been applicable to this situation. However, that did not eventuate in the present case.' In the present case however, the business of MES was indeed (and presumably remains) in the nature of a 'hiring agency' , and MES retained its personnel on its own employment books of record when hiring them to third parties at arm's length, and had done so apparently for some time in the context of mining operations in particular in the Hunter Valley such as those undertaken by CAO. The MES arrangements did not of course arise out of internally restructured employment arrangements, whether designed to obviate employment regulation, such as occurred for instance in Damevski . 117 The next segment of written submissions of CAO may be summarised to the effect that there is no evidence which established that either of the applicants perceived himself to have been in a contractual relationship with CAO, for the following reasons: (i) the applicants did not assert in evidence that they were employed by CAO during the course of their encounter with CAO; (ii) the applicants did not describe themselves in their respective applications to MES for employment in November 2004 as having been previously employed by CAO, but rather as each having been a 'contractor' at the HVO with 'the contracting company' (thereby referring to MES); I refer in that regard to their respective job application forms for permanent employment with CAO at the HVO appearing at pp 1045 and 1414 of Exhibit 1; (iii) the applicants did not describe themselves in their respective curriculum vitae as having been employed by CAO, but referred merely to their 'employment history', in the case of Mr Wilton as 'Mining Earth Moving Services 2001', and in the case of Mr Cumberland as 'Plant Operator Mining Earthmoving Services Muswellbrook...'; (iv) Mr Wilton did not describe himself in his taxation returns as having been employed by CAO, but he identified MES as the payer of his salary and wages in each of the years 2001 to 2005. In relation to that documentary material, it was pointed out by CAO that regard may be paid to subsequent conduct in order to ascertain whether a contract had or still existed (citing Brambles at [25] and Damevski at [85]), just as it is permissible to have regard to subsequent conduct in order to determine whether an intention to contract existed ( Australian Broadcasting Corporation v XIVTH Commonwealth Games Ltd (1988) 18 NSWLR 540 at 550, Gleeson CJ with whose reasons Hope and Mahoney JJA agreed and Damevski at [141] and [147]). 126 CAO acknowledged that the concept of a contract existing by mutual assent has been recognised in circumstances where the traditional analysis of offer and acceptance is inappropriate. I have earlier cited dicta (see [31] to [34]) in that regard appearing in Brambles, Integrated Computer Services and Damevski . In his concurring judgment in Brambles , Mason P referred to 'the difficulties of pressing too far classical theory of contract formation based upon offer and acceptance' . At the bottom line there must be satisfied at least the notion or test of mutual assent, viewed objectively from the point of view of reasonable persons on both sides to the objective candidature for establishment of a concluded bargain. Further in Brambles at [81], Heydon JA observed that '[i] n the light of the above cases, it is relevant to ask: in all the circumstances can an agreement be inferred? Has mutual assent been manifested? What would a reasonable person in the position of the Council and a reasonable person in the position of the defendant think as to whether there was a concluded bargain?' Merely because some dealings have occurred between the prospective parties to a bargain does not necessarily mean that a contract exists. As McHugh JA said further in Integrated Computer Services at 11,117, '[t] he question in this class of case is whether the conduct of the parties, viewed in the light of the surrounding circumstances, shows a tacit understanding or agreement' , to which his Honour added '[t] he conduct of the parties, however, must be capable of proving all the essential elements of an express contract '. 133 There is a body of authority bearing on the foregoing subject to which I have already made reference starting at [26] of these reasons, for instance Stevens, Hollis and Damevski. Attention was drawn by CAO also to ACT Visiting Medical Officers Association v Australian Industrial Relations Commission (2006) 153 IR 228 and BHP Billiton Iron Ore Pty Ltd v Construction, Forestry, Mining and Energy Union of Workers (2006) 151 IR 361, which will shortly be discussed. The majority of those decisions were made in the broader context of determining whether a particular worker was an employee or else an independent contractor of the beneficiary of his or her work. 141 CAO submitted that the extent of control in a labour hire context is of less significance than in the normal employment context, and my attention was further drawn to the reasons for judgment of Merkel J in Damevski at [162], where his Honour referred briefly to Mason &amp; Cox at [24]-[29] and Drake Personnel at [55] and observed that the entitlement of an employer to direct a purported contractor is '... relevant in determining whether an employment relationship exists although it is not as important as it may once have been, particularly in a labour hiring agency context'. In such a context, the fact that the client determines the hours of work should not preclude the existence of a contract of employment between a labour hire company and the worker, CAO thus contended and in my opinion rightly. CAO submitted moreover that '[s]ignificantly, the test for whether or not a contract is one of employment is not the "organisation test", which was identified by Mason J in Stevens at 26-29 and Wilson and Dawson JJ at 35-36, and where his Honour indicated at [27]-[28] that he was '... unable to accept that the organisation test 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', because '[that] test does no more than shift the focus of attention to the equally difficult question of determining when a person is part of an organisation such that his wrongs may be imputed to that organisation'. Again of course as I have earlier emphasised, his Honour's consideration did occur in an immediate context of vicarious liability in tort, but nevertheless that dictum provides a measure of guidance in contexts involving issues as to the existence or otherwise of an employment relationship in an industrial setting. 173 The concluding observations of the United Kingdom Court of Appeal in Cable &amp; Wireless at [54] may therefore be conceivably pertinent to the approach which the courts may take in Australia in circumstances involving an employer's endeavour to alter an originally established relationship from that of a conventional contract of employment of a natural person to that of some form of principal and agent, such as was sought unsuccessfully to be achieved in Damevski ( ante ), but they have no sufficient connection to the circumstances of the present case, which involve no such alteration to the status quo of an employment relationship in favour of a natural person established in the conventional way, but rather the structure of genuine labour hire arrangements undertaken from the outset at arm's length. 183 It follows therefore, from what I have thus far concluded in relation to the applicants' submissions, that there are doctrinal obstacles of significant judicial precedent cognisable by the general law of Australia which stand in the way of recognition of any entitlement to the grant of the relief sought in the present proceedings. That is not to say of course that a contract of employment, whether oral or in writing, may not contain implied terms, and indeed such would I imagine normally or often be the case. Where the difficulty largely lies, as exposed by the traditional approach taken by the third judgment in Brook Street , is in imputing any implied contract of employment in circumstances of labour hire, that being a transaction which inherently constitutes dual contractual arrangements, one being between the provider of the hired worker and the hired worker, and the other being between that provider of the hired worker and a third person who hires the second-mentioned person from the labour hire provider in order to obtain the performance of work from such hired person. The implications relevantly of labour hire postulated in the reasons for judgment of Merkel J in Damevski at [174], as outlined in what is extracted in [34] above, are in my opinion apposite to the present context.