WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

PARTIES PAUL ERNEST DALLASTON

APPLICANT

-v-

CANON FOODS

RESPONDENT

CORAM COMMISSIONER S  J KENNER

DATE TUESDAY, 9 NOVEMBER 2004

FILE NO. APPL 52 OF 2004

CITATION NO. 2004 WAIRC 13246

Catchwords  Industrial law – Termination of employment – Harsh, oppressive and unfair dismissal – Whether applicant an employee or independent contractor – Principles applied – Applicant not an employee – Application dismissed – Order issued – Industrial Relations Act 1979 (WA) s 7(1), meaning of “employee”, s 29(1)(b)

Result Order issued

Representation 

Applicant Mr K Trainer as agent

Respondent Mr D Clarke as agent

Reasons for Decision

1         The applicant brings this claim pursuant to s 29(1)(b)(i) of the Industrial Relations Act 1979 (“the Act”) seeking orders pursuant to s 23A of the Act.  The applicant alleges that on or about 19 December 2003 he was harshly, oppressively or unfairly dismissed by the respondent. The respondent denies the applicant’s claim and moreover says the applicant was not at any material time an employee of the respondent and therefore the matter is beyond the jurisdiction of the Commission.

Factual Background

2                 The applicant first had an association with the respondent as a sales person in 1984.  The respondent is a business engaged in the manufacture and distribution of food products primarily in this State.  The applicant testified that he subsequently left the respondent but later in December 1997, after replying to an advertisement in the newspaper, again commenced with the respondent.  The applicant was paid on a commission only basis on sales.  He provided his own motor vehicle in the form of a van which was to be used for the purposes of delivering the respondent’s product to its customers.  Tendered as exhibit A4, were copies of photographs of the applicant's vehicle, which is a utility type with an enclosed back section, containing a refrigeration unit.  The applicant said that whilst the respondent arranged for the sign writing on his van and the insurance on the vehicle, he was invoiced for this cost, copies of which were exhibits A2 and A3 respectively.  The applicant's evidence was that there was no reference to him on any of the livery on the vehicle, as borne out by the photographs.   The applicant also wore a shirt with the respondent’s name on it.

3                 The applicant testified that he was not originally required to obtain an Australian Business Number but did so at the request of the respondent in November 1999.  The applicant also received a goods and services tax registration number in July 2000.  He said that these were obtained following requests by the respondent after the introduction of the goods and services tax.  The applicant said that he complied with these requests until July 2002, when he was “de-registered”, because he said that he was not earning enough income to warrant his continued registration.

4                 The applicant gave evidence about what he was required to do at the respondent.  In essence, he said he was required to prospect, sell and deliver all of the respondent’s products to customers.  He was limited to only selling those products and no other products could be sold without the express approval of the respondent’s owner and chief executive Mr Pace.  The applicant had a business card, tendered as exhibit A14, which described him as “Area Manager Food Service”.  Additionally, in a document entitled “Canon Foods Profile”, tendered as exhibit A18, the applicant appears on an organisational chart under the heading “Food Service”, as one of three “sales representatives”.  He is noted on this chart as reporting to the WA sales manager.

5                 Additionally, the applicant appears in other promotional material, tendered in evidence, as a “part of the Cannon Food's team”.  The applicant testified that when he commenced in 1997, he was told by Mr Pace, that he was to have the status of some sort of sole trader, and Mr Pace was of the view that he and some of the applicant’s colleagues, were responsible for building up their own businesses.

6                 A considerable amount of the applicant's evidence both oral and documentary, was devoted to describing the processes he engaged acquiring and servicing new customers.  As the Commission understands it, the applicant was each day given delivery documents prepared by the respondent setting out what products were to be delivered to which customers.  The customer would then be given an invoice for the goods and the applicant would receive payment from the customer.  The applicant would keep a running sheet detailing the customer's name, invoice number, total cost and how the account was paid.  The applicant said he was required by the respondent to compile an end of month summary of his sales performance.  All monies received from customers were given by the applicant to the respondent with his running sheets.  The applicant's commission, which was ten percent of sales, was then subsequently paid to him by the respondent.  From time to time there were adjustments made to the applicant's commission, reflecting over payments made in error.  A copy of such a document was tendered as exhibit A10.

7                 The applicant also said that from time to time he secured new customers who were required to complete a customer application.  Those customers seeking credit from the respondent, were required to complete a credit application, all of which documents were then given to the respondent.  The respondent also controlled the pricing and the allocation of customers.  The applicant gave evidence that on some occasions, customers were taken from his round and given to other sales personnel.  The applicant was also required to produce a food service sales report, and give that to the respondent.  This seemed to record the client name and the quantity and regularity of sales to that particular customer.  Some reference was also made to an internal telephone contact document, tendered as exhibit A17, which the applicant described as a staff list.  On this, both the applicant and another person are described as “Food Service” in the sales department.  There are three other persons described as “Sales Rep”.  Other employees are listed on this document, as is a business called “Rand Transport” under the heading “Dispatch”.  I do not consider this document as being particularly relevant to the issue to be determined.

8                 Additionally, the applicant was regularly given lists of debtors and inactive customers, that he was required by the respondent to follow up.  If the applicant wanted samples of products to show to customers, he was required to obtain these from the respondent with its approval in writing. Customer complaints were entered on to a complaint form, which were then given to the respondent.

9                 The applicant said he was also required to attend regular food service meetings.  Copies of minutes of these meetings were tendered in evidence as exhibit A27.  Additionally, exhibit A26 was a memorandum from the WA sales manager to the applicant and others, referring to these meetings to be held every fortnight at a predetermined time.  The applicant's evidence was there was a clear expectation that these meetings be attended.  A number of copies of minutes of these meetings contained reference to various directions given by various management personnel to the sales staff.  One in particular, refers to the requirement imposed on the applicant and at least one other in the food service area, that they should be at “dispatch” ready for loading their vehicles by 5.00am each day, and were allocated one half an hour for this purpose. 

10              Additionally, it seemed on the applicant's evidence, that there was an expectation that orders for the following day would be collected in the late afternoon of the previous day.  The applicant testified that at the regular food service meetings various matters were discussed.  These included production ideas, sales performance, customer complaints and production and dispatch issues.

11              Additionally, there was also evidence given by the applicant in relation to various exhibitions run by associations and schools that he was expected to attend with some of his colleagues, to set up and man display stands for the respondent’s products.  The respondent was responsible for all costs associated with these displays, as it was for all other publicity and promotions for products.  The applicant said he made no financial contribution to these events.  Additionally, all gifts etc. such as diaries to customers were produced by the respondent and given to customers at no cost to the applicant.

12              In terms of major customers, the applicant testified that he was requested by the respondent to produce general reports on servicing of major customers from time to time.  In terms of stock control, the applicant testified that he held none personally, and was required to comply with the respondent's stock control requirements.  The applicant was also informed by the respondent, that he was required to keep his mobile telephone on at all times, in order to respond to delivery requests.  There were also specified requirements for certain customers, advised by the respondent to the applicant, as to the delivery times and specific locations.  It was the applicant's evidence that he had no control over the respondent's customers at all, as indicated by the fact that the respondent from time to time, moved customers from the applicant to other sales personnel.

13              The applicant testified that some time in 2002, he attempted to “buy” clients from one of the other representatives who was leaving the respondent.  Apparently, this other person wanted to “sell” his round.  In the evidence of Mr Pace, he seemed to suggest that he saw the applicant as having ownership in the delivery rights to the particular customers, for which he was paid a commission payment.  There was no doubt however, that the customers themselves, on Mr Pace's evidence, were customers of the respondent and not the applicant.  The applicant was not provided with workers’ compensation or other insurance cover.  He was responsible for his own taxation arrangements it seems. 

14              In 2003, the applicant also “purchased” in conjunction with another food service colleague, half of another round for $6,000.  Additionally, and quite significantly, in about October 2003, it emerged in cross-examination, that the applicant placed an advertisement in the newspaper to sell his “business” for $50,000.  Apparently, this advertisement, which was not in evidence, was described as “Food Services Sales and Delivery”.  The core of the business was described by the applicant as “Commission based sales activity” and he was selling the goodwill from the income to be derived with the vehicle as an additional component.  Apparently, the applicant was not successful in selling the business.

15              The applicant gave evidence about how his relationship with the respondent ended.  He said that on 19 December 2003 he received a telephone call in the early afternoon from Mr Dickerson who was apparently a manager with the respondent.  He was asked to see Mr Dickerson in the office when he returned.  On his arrival at the office, he and Mr Dickinson were in the respondent's car park, where Mr Dickinson gave the applicant a letter dated 18 December 2003, a copy of which was tendered as exhibit A39.  This letter referred to a “restructuring of the respondent's operations”, and as a consequence, the respondent was no longer able to engage the applicant services “as a contractor with Canon Foods Services.”  The arrangement was terminated effective that day.  The applicant testified that he had no prior warning that the arrangement between himself and the respondent was in jeopardy.

16              Since the termination of the arrangement, the applicant said he had sought other employment and tendered as exhibit A40, was a list of organisations that the applicant had pursued for employment.  As at the date of the hearing of this matter, the applicant had secured employment and was to commence shortly thereafter.  The applicant testified that as at the time he commenced these proceedings, he was simply not sure whether he was an employee or an independent contractor.  In terms of all of his expenses, the applicant testified that his fuel, maintenance and phone expenses were his responsibility, presumably in relation to which taxation deductions were made.  However, no taxation returns or other such documents were tendered in evidence.  No other evidence was called by the applicant.

17              The only witness called for the respondent was Mr Pace, the respondent's chief executive and chairman.  In all, the applicant's evidence was not really controverted.  Mr Pace was the founder of the respondent's business.  He testified generally in relation to its operation and said that much of the documentary evidence tendered by the applicant, in terms of systems, was in large part, to support the operations of the applicant and some others who were contractors to the business.  Mr Pace testified that initially in 1984, the applicant started as a contractor and worked for a couple of years.  At this time, the applicant was given the option of participating in the establishment of a new distribution business.  In this connection, the applicant was offered a quarter share.  Apparently, the applicant declined this proposal according to Mr Pace.  However, the respondent gave the applicant some $10,000.00 worth of stock to set up his distribution business but that failed.  Mr Pace testified that the respondent was still owed some $8,000.00 as a consequence.  It was Mr Pace's evidence that the terms of the relationship between the respondent and the applicant, were never reduced to writing because the parties always understood the basis of the arrangement, being as it was previously in about 1984.  It was Mr Pace's view that the applicant, in effect conducted the delivery business through the structure provided by the respondent, and the applicant had property rights in relation to the product delivery component of the business.

18              As to how the applicant made his deliveries, it was Mr Pace's evidence that the respondent did not control or tell the applicant where to go to deliver products.  That was up to him in accordance with his customer lists.  He was responsible for selling and delivering products that he sold.  Mr Pace agreed that the respondent provided much of the infrastructure in terms of management systems etc. which were used by the applicant and others in a similar position, to conduct their affairs.  This included for example, the processing of applications for credit and other such facilities, which the applicant did not have.  Whilst Mr Pace accepted that the applicant could be regarded as integrated into the respondent's business that was no different in his view to other cases where owner drivers had provided services to businesses in similar circumstances.  In terms of the debtors list, Mr Pace testified that this was given to the applicant, because if customers did not make payments to the respondent, then the applicant would not be paid his commission.  He therefore saw it in the interests of the applicant, for these debtors to be followed up.  Mr Pace also said that the respondent at some stage introduced new product lines at the request of contractors, to support them and to improve their prospects of increased business income.

19              In terms of controlling the applicant's operation, Mr Pace said that the role of the sales manager is to be responsible for daily sales activity in Western Australia.  He said that the only real requirement imposed on the applicant was how he presented to customers and the production of sales reports, was for the purpose of developing the contractor’s customer base.

20              It was Mr Pace's evidence that overall, the relationship between the respondent and the applicant was no different to the relationship the respondent had with other contractors who provided transport and refrigeration services to the respondent.  He also met regularly with those operators, as the respondent did with the applicant on the applicant's own evidence.  In terms of other arrangements, Mr Pace said that the applicant did not need to consult with the respondent about taking leave as that was a matter for him.

Consideration

21              A preliminary issue to be determined by the Commission is whether the applicant was an “employee” for the purposes of s 7 of the Act. This is an essential ingredient of the referral of the present claim to the Commission pursuant to s 29(1)(b) of the Act, as the only person who may refer such a claim to the Commission, is an “employee”, and the matter must be an “industrial matter” for the purposes of s 7 of the Act.  Section 7 relevantly defines “employee” as follows:

 “ “employee” means — 

 (a) any person employed by an employer to do work for hire or reward including an apprentice or trainee;

 (b) any person whose usual status is that of an employee;

 (c) any person employed as a canvasser whose services are remunerated wholly or partly by commission or percentage reward; or

 (d) any person who is the lessee of any tools or other implements of production or of any vehicle used in the delivery of goods or who is the owner, whether wholly or partly, of any vehicle used in the transport of goods or passengers if he is in all other respects an employee,

  but does not include any person engaged in domestic service in a private home unless — 

 (e) more than 6 boarders or lodgers are therein received for pay or reward; or

 (f) the person so engaged is employed by an employer, who is not the owner or occupier of the private home, but who provides that owner or occupier with the services of the person so engaged;”

22              Significantly for present purposes, par (d) of the definition of “employee” refers to “any person... who is the owner, whether wholly or partly, of any vehicle used in the transport of goods or passengers if he is in all other respects an employee,”.  The meaning of a provision in very similar terms was considered by the Industrial Appeal Court in Transport Workers Union of Australia, Industrial Union of Workers, Western Australian Branch v Readymix Group (WA) and Ors (1981) 61 WAIG 1705.  In issue in that case, was whether owner drivers engaged by the employers in those proceedings, were employees or independent contractors and hence beyond the jurisdiction of the Commission.  At the time the Court considered this issue, the definition of “employee” in the Act was somewhat different to the present definition.  At that time the definition of “employee” provided as follows:

“ “employee” means any person employed by an employer to do work for hire or reward and includes-

(a)              any person whose usual status is that of an employee;

(b)              an apprentice;

(c)              any person employed as a canvasser whose services are remunerated wholly or partly by commission or percentage reward;

(d)              any person who is the lessee of any tools or other implements of production or of any vehicle used in the delivery of goods or who is the owner whether wholly sic or partly, of any vehicle used in the transport  of goods or passengers if he is in all other respects an employee,”

23              In the judgement, both Wallace and Brinsden JJ took the view that the approach of the then President of the Commission was correct in that in order to determine the status of a person as an employee requires first whether that person is an employee within the general part of the definition, in accordance with the accepted common law tests.  The terms of par (d) in the definition at that time, were held not take that person out of the category of an employee, simply because that person leased or owned a vehicle for the purposes set out in that paragraph.  Another way of looking at the matter was that the effect of par (d) was to neutralise the effect of the leasing or ownership of a vehicle for the purposes of transporting goods or passengers, if the person satisfies the common law test of an employee.  In other words, the possession of such a vehicle was not determinative of the issue.  The particular part of par (d) referring to “if he is in all other respects an employee,” was considered by Brinsden J at 1708.  In this regard, Brinsden J said:

“The question being posited however, solely in relation to paragraph (d) I must now turn my attention more closely to that sub paragraph.  The relevant portion is:

Any person… who is the owner, whether wholly [sic] or partly, of any vehicle used in the transport of goods or passengers if he is in all other respects an employee.

I accept the contention of counsel for the appellant that the only owner spoken of is an owner of a vehicle who uses that vehicle in the execution of the contract with the employer.  In this regard I differ from the view expressed by the President.  Without implying that the vehicle must be one used in the contract with the employer the subsection would be in a form where ownership per se of a vehicle is a relevant factor which I think is not a very sensible conclusion.

The subsection speaks of a person who is “in all other respects an employee”.  It has been argued that cannot possibly mean all the relevant indicia should point, and only point, to the person concerned being an employee, for otherwise if there were 10 relevant indicia (other than ownership of the vehicle) of which nine pointed to a contract of service then the subsection would not apply because of the one indicia which pointed against a contract of service.  But in my view the weighing up of the pros and cons as expressed by Bray C. J. takes place when one is considering whether an employee comes within the first part of the definition, namely whether he is a person employed by an employer to do work for hire or reward.  Subsection (d) makes for a special class of person, being a person who is in all other respects, that is other respects other than being the owner of the vehicle concerned, an employee, and in which case ownership is disregarded.  I think the subsection has no application where the circumstances are that one or more of the indicia point to a contract for services for in that case it is not possible to say that the person concerned is “in all other respects an employee”.

24              Kennedy J in the same case took a somewhat different view of the meaning of par (d).  His Honour was of the opinion that a literal interpretation should not be applied.  After considering provisions of a similar kind in other jurisdictions, Kennedy J observed at 1710:

“It follows that I am unable to accept that the words “in all other respects an employee” are to be read absolutely literally.  In reaching a determination as to whether a person is an employee or an independent contractor, a multitude of factors have to be considered, some pointing in one direction and some in another.  Even in an obvious case of employment, there may be one or more minor factors which are suggestive of a principal/independent contractor relationship.  The purported expanded definition would be stultified if the presence of one minor factor would prevent its application, and I cannot regard this as the effect of the words used.”

25              Wallace J in a separate judgment, did not confront the interpretation of par (d) as squarely as did Brinsden and Kennedy JJ, but referred to and agreed with the observations of O’Dea P in the decision of the Full Bench and said at 1706:

“The learned President of the Full Bench had regard to the words underlined when construing the section.  He concluded “that in order to determine whether a driver is an employee within the meaning of the section, it is first necessary to ascertain whether he is an ‘employee’ within the ordinary notion of that term, namely, ‘any person employed by an employer to do work for hire or reward”.  I agree with the learned President’s opinion.  I further agree with respect that the only part played by the vehicle  referred to in inclusion (d) is that its use by an “employee” determined by ordinary notions does not take the person out of the classification of employee any more than his ownership of implements of production.”

26              In the decision of the Full Bench in Readymix Group (WA) and Ors v TWU (1981) 61 WAIG 855, O’Dea P expressed the following view about the meaning of the definition of “employee” at the time at 857:

“It is seen that the definition uses two expressions, one is “means” and the other “includes”.  When an inclusive interpretation provision of this kind is in an Act it has the effect of enlarging the ordinary meaning of the word in the body of the statute to the extent only provided by the further words used and without altering that ordinary meaning.  See Lawton LJ in R v Crayden (1978) 2 All ER 700 at 702.  Subsection (d) is an inclusive interpretation provision and therefore extends the definition of employee but does not alter the ordinary meaning of the term “employee”.  Furthermore the words “if he is in all other respects an “employee” qualify the words that precede it.  I think, therefore, that in order to determine whether a driver is an employee within the meaning of the section it is first necessary to ascertain whether he is an “employee” within the ordinary notion of that term, namely, “any person employed by an employer to do work for hire or reward”.

Before leaving the section it is to be noted that at first instance, words were imported therein by the parties and the Commission to the effect that the vehicle owned was used in the relevant contract.  That is contrary to the rules of construction and on the approach I have taken it is not necessary.

However, the parties each took a different approach to the question of how paragraph (d) operated.  The appellants contended that in order to show that the driver was “in all other respects an employee” you must find that there is nothing in the relationship that is contrary to a contract of service.  I do not accept that; you would in such a case have discovered an employee without reference to paragraph (d) at all.  It seems to me that what was intended was rather that you find a person to be an employee in all respects other than that characteristic which involves ownership of the vehicle which is then set aside.”

27              The change to the definition “employee” as it now appears in s 7(1) of the Act is not insignificant.  The definition formerly used both expressions “means” and “includes”, with the latter expression having the effect of enlarging the ordinary meaning of the introductory part to the section, without altering that meaning: R v Crayden.

28              The present definition of “employee” in s 7(1) contains a number of exclusive definitions expressed disjunctively.  The exclusions in the definition are not relevant for present purposes.  The definition in paragraph (d) is an alternative but exclusive definition of “employee”.  That is, in the case of a person who satisfies the terms of the paragraph, by leasing or owning tools or a vehicle as there set out, that person can only fall within the statutory definition, if, “in all other respects”, that person is an employee. 

29              However, in the absence of the former inclusive definition, it still seems to me preferable to adopt the same approach to the construction of par (d) as it now is, to that adopted by Wallace and Kennedy JJ in Readymix.  That is, even though par (d) now is a stand alone category of employee defined in s 7 of the Act, the reference to “if in all other respects an employee” means one applies the common law test and if the person is found to be an employee on this basis, then the ownership of a vehicle etc is to be disregarded.  This construction of the paragraph is not inconsistent with the structure of the definition as a whole and does not lead, in my view, to any absurdity or repugnance with any other provision of the Act.   

30              Therefore, for present purposes, applying the accepted tests as set out for example, in the decision of the Full Bench of this Commission in United Construction Pty Ltd v Birighitti (2002) 82 WAIG 2409 and further considered by the Industrial Appeal Court in United Construction Pty Ltd v Birighitti (2003) 83 WAIG 434, if, looking at the relationship in its totality, the indicia are against the applicant then his claim must fail as he would not be an employee as defined by par (d) of the definition in s 7(1) of the Act. 

31              The relevant principles in relation to whether a person is an employee or not is set out at par 70 of the Full Bench decision in Birighitti at 2414.   I apply those relevant principles.  It is settled that the question of control whilst important, is no longer the only test.  The approach to be adopted is to assess all aspects of the relationship in their totality. 

32              At the outset, there are in my opinion, a number of factors against the proposition that the applicant was an employee.  The applicant was responsible for his own taxation arrangements and the respondent did not provide workers’ compensation or any other insurance cover for him.  Most importantly however, is the fact that the applicant purchased, for valuable consideration, part of the round of another person, who had a contractual relationship with the respondent. The applicant also was offered this on another occasion.  Furthermore, and very importantly, the applicant advertised for sale his “business” for some $50,000.00 or thereabouts, in late 2003.  The applicant at the time clearly considered it was his business to sell and presumably, would have done so if a buyer was willing and able to purchase it.  The applicant was in my opinion, on all of the evidence, conducting a business and he saw it as such.

33              These two factors, that is the offer and acceptance for the purchase of part of a round and the attempted sale of the applicant’s business alone in my opinion, are of great weight and are completely irreconcilable with any notion of employment in the accepted sense.  Of themselves in my opinion, these factors take the applicant outside of the definition of “employee” for the purposes of par (d) of the definition, as it should be interpreted.   The applicant of course, also owned and operated his vehicle at his own expense and paid for the livery on it.

34              There are of course indicia which also point in the other direction towards employment.  These include the obvious degree of integration of the applicant into the respondent's business.  However, this factor alone is not at all conclusive and in many cases such as in Readymix, this factor was present.  The representation by the respondent as to the status of the applicant from his business card as an “area manager” and the respondent’s profile document portrayed the applicant as “part and parcel” of the respondent’s business.   The fact that the applicant was paid by commission is not determinative: FCT v Barrett (1973) CLR 395.

35              As to control, whilst the applicant was required to observe the “systems” in place at the respondent, as in Readymix, this is not determinative either way.  In an industry such as food manufacturing and distribution, there are many requirements imposed including for health and safety reasons that mean all persons involved, whether employees or independent contractors, have to observe them.   In terms of the actual reservation of the right to control the manner of the performance of the applicant’s daily tasks, I am not of the view that there was such a right in existence.  It was up to the applicant how he serviced the customers and in what order he performed his “round”.  It was ultimately up to him the hours he worked. Although there was a requirement that he load the day’s deliveries at a certain time in the morning, again, in terms of running a business such as the respondent’s, that is not surprising as there would need to be a degree of coordination between the manufacture, loading and delivery of food products to customers as there was for pre-mixed concrete in Readymix. 

36              The only conclusion the Commission can come to, within the four corners of the definition contained in definition of “employee” in paragraph (d) of the definition, is that the applicant as a matter of fact and law, is not to be characterised as an employee. Therefore the applicant's claim is beyond the jurisdiction of the Commission.

37              The application is dismissed.