REFERRAL OF DISPUTE RE BREACH OF CONTRACT BY EMPLOYER

IN THE WESTERN AUSTRALIAN INDUSTRIAL RELATIONS COMMISSION

SITTING AS

THE ROAD FREIGHT TRANSPORT INDUSTRY TRIBUNAL

CITATION : 2012 WAIRC 00235

DELIVERED : WEDNESDAY, 18 ApRIL 2012

FILE NO. : RFT 23 OF 2011

Applicant

AND

Sims Metal Management Ltd

Respondent

Catchwords : Owner-driver contract - Whether owner-driver contract existed - Whether contract contained an express term as to use of a substitute driver - Whether contract contained an implied term as to termination on notice - Princples applied - Assessment of damages - Order issued.

Legislation : Owner-Drivers (Contracts and Disputes) Act 2007 ss 4, 5, 47.

Result : Application upheld in part. Order issued

Representation:

Applicant : Mr A Dzieciol of counsel and with him Ms J Philips

Respondent : Mr S Mayne

Case(s) referred to in reasons:

BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266;

Crawford Fitting Co v Sydney Valve and Fittings Pty Ltd (1988) 14 NSWLR 438;

Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523;

Gibson v Manchester City Council [1978] 1 WLR 520; [1979] 1 WLR 294;

Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11110;

Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32.

Reasons for Decision

1          Mr Hajje operates a business as an owner-driver under the name AMJ Metal Recyclers.  In about July 2007 AMJ started performing work for Sims Metal Management Ltd.  The work involved the collection of scrap metal, mainly in the form of car bodies, for recycling at Sims premises.  This work continued for about four years, when, in August 2011 following a period of illness, Mr Hajje says Sims wrongfully and unlawfully terminated the arrangement he had with Sims.

2          Mr Hajje contends that the arrangement his business had with Sims was an owner-driver contract for the purposes of the Owner-Drivers (Contracts and Disputes) Act 2007.  In the absence of any agreement as to notice to terminate the contract, Mr Hajje says that the law should imply a period of three months’ notice.  He also says because of certain representations made to him by Sims, he lost the opportunity to have his business continue to perform services while he was ill.  Mr Hajje claims damages for breach of contract on both grounds.

3          On the other hand, Sims says it is not liable to Mr Hajje.  This is for the reason that it says there was no ongoing contract between Sims and AMJ.  The work performed was sporadic and on an “as required” basis.  Whilst Sims was sympathetic and helpful to Mr Hajje when he was ill, there was no commitment to provide ongoing work once Mr Hajje was well enough to resume performing services.

4          A number of issues need to be considered in this case.  They are:

(a) Was there an owner-driver contract in existence between Mr Hajje and Sims?;

(b) If there was an owner-driver contract:

(i) Was reasonable notice required to terminate the contract and what, in the circumstances of the present case, would be a reasonable period of notice?;

(ii) Was Sims liable for losses incurred by Mr Hajje for the period of his illness when he could not provide services to Sims?; and

(iii) How should any damages be assessed if Mr Hajje makes out any of his claims?

Was there an owner-driver contract?

5          An owner-driver contract for the purposes of s 5 of the OD Act is a contract, whether written or oral or partly written or partly oral, by which an owner-driver, in the course of business, agrees with another person to transport goods in a heavy vehicle.

6          Sims says that there was no owner-driver contract in this case with Mr Hajje.  It contended that there was just an ad hoc arrangement whereby Mr Hajje provided contracting services as may be required.  Sims contended that this arrangement reflects the cyclical nature of the scrap metal industry.  Further, it is only the “regular” owner-drivers engaged by Sims that have written terms and conditions of appointment and in particular in this case, there was no obligation on Mr Hajje to provide a relief driver when he was ill.  These were submissions made by Sims from the bar table, as it did not call any evidence. This was so despite the Tribunal warning Sims of the possible consequences of adopting this course.

7          Mr Hajje testified that he relocated from Sydney to Perth in about April 2005.  In Sydney he had his own scrap metal business and he owned three trucks. His intention was to establish a similar business in Perth but he found this more difficult than he anticipated. Mr Hajje testified that in early 2007 he was approached by a person from Sims who told him that Sims were in need of a driver. As a result of this contact, Mr Hajje started driving for a contractor to Sims on a sub-contract basis.  Later, in about June 2007, Mr Hajje purchased the truck he had been driving and from 1 July 2007 he commenced performing services as an owner-driver for Sims. Mr Hajje testified that at the time he started, he discussed with Ms Mutch, the Transport Manager for Sims, whether he could continue to do some of his own work when time permitted.  This was agreed. 

8          The arrangement with Sims, according to Mr Hajje, was that Sims would provide him with work on the basis that he provide a suitable vehicle and make himself available in relation to scrap metal work. The truck that Mr Hajje purchased at the time was painted in the Sims blue colours and he was also required to wear a Sims uniform.

9          In terms of the arrangement, Mr Hajje testified that he spent 99% of his time working for Sims which involved generally five days per week at least 10 hours per day: 6, 25T.  He acknowledged that there was some reduction in the workload at the time of the global financial crisis, where the drivers agreed to work on a reduced four day basis.  Mr Hajje described the method of work operation.  At the end of each day, he said he would hand in his run-sheet for that particular day and he would then receive a run-sheet for the following day which specified the jobs that he was required to do.  This entailed him picking up scrap metal, mostly motor vehicle bodies, in accordance with the run-sheet, and returning the load to the Sims yard.  Once delivered, the scrap metal would be unloaded onto the pre-sort pile, and it would then be sorted and be shredded. 

10       According to Mr Hajje, he would normally do three to four jobs a day.  Sims paid Mr Hajje on an hourly rate basis, and at the end of each week he would tender an invoice to Sims which Sims then paid.  For the period of his engagement, to the year ending 30 June 2008, Mr Hajje earned $150,000 gross.  For the year ending 30 June 2009, the sum was $130,000 gross.  For the year ending 30 June 2010, the amount earned was $125,000 gross.  Between 1 July 2010 and April 2011, Mr Hajje’s earnings were $115,000 gross.

11       In late 2009, Mr Hajje purchased a new truck so he could more effectively undertake the work he was doing for Sims.  To assist him in the purchase, Sims gave Mr Hajje a letter confirming that he was working for them which he provided to the finance company.  The letter, as annexure AH1 to Mr Hajje’s witness statement, said, in part “Allan Hajje is a subcontractor for Simsmetal and has been since 2007, supplying a flat top/hiab crane truck.”  Mr Hajje’s earnings to 17 December 2009 were set out.  The letter also said that “we do anticipate that the work for this vehicle is expected to continue in the near future”.  Mr Hajje purchased a new Isuzu FVR 1000 Long truck which had an eight tonne carrying capacity.  Mr Hajje said that he reinforced the tray of the truck to avoid damage when car bodies were unloaded by machinery at the Sims yard.  Mr Hajje took delivery of the truck, with the modified tray and crane installed in April 2010.  The total capital cost of the truck was some $200,000 inclusive of on-road charges.

12       In contractual parlance, not all commercial transactions fit neatly within the traditional rules of offer and acceptance. To ascertain whether an enforceable agreement has been reached in a particular case, courts and tribunals often need to consider whether the conduct of the parties, with or without the spoken word, considered objectively, evinces an intention that the parties intended to be contractually bound:  Integrated Computer Services Pty Ltd v Digital Equipment Corp (Australia) Pty Ltd (1988) 5 BPR 11110; Gibson v Manchester City Council [1978] 1 WLR 520; [1979] 1 WLR 294.  Also, an agreement may be inferred from the conduct of the parties where an offer and acceptance cannot be immediately identified:  Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523; Vroon BV v Fosters Brewing Group Ltd [1994] 2 VR 32.

13       In this case the only evidence in relation to the question of formation of an owner-driver contract is from Mr Hajje.  In my view, it is open to find on balance that from in or about July 2007 Mr Hajje and Sims entered into an agreement for the provision by Mr Hajje of services to Sims to transport scrap metal in his vehicle.  Mr Hajje spent most of his time engaged in this activity and by agreement with Sims, was able to perform some limited work on his own account.  It is clear from the evidence that Sims expected Mr Hajje to be available to perform the services. Mr Hajje not only purchased an appropriate truck to perform the services, and upgraded it in 2009, but he was also required to ensure it conformed to the specifications required by Sims.  Mr Hajje also wore a Sims uniform. He was paid the rates per tonne in accordance with the Sims payment scheme and complied with Sims requirements as to terms and conditions generally for services performed for Sims clients. Mr Hajje received his allocation of daily work in the same way as all other drivers of Sims and he performed services for Sims over a period of approximately four years.

14       I am also satisfied on the evidence that there existed mutual obligations under the agreement. On the one hand Mr Hajje was expected to render satisfactory services to Sims and to be available to work when required on the basis that Sims would provide available work to Mr Hajje. The fact that at various times the levels of available work may have fluctuated, for example during the global financial crisis, does not materially alter the finding of the existence of an ongoing agreement. In any event, on the evidence, the work performed by Mr Hajje was largely continuous, except for Mr Hajje’s absence because of illness, which issue I will come to shortly.  The work was certainly not sporadic or intermittent, as may be the case with casual employment for example.

15       Accordingly, I am satisfied on the evidence that Mr Hajje was an owner-driver for the purposes of s 4(2) of the OD Act.  I am also satisfied that he and Sims operated under an owner-driver contract in accordance with s 5 of the OD Act until it came to an end in August 2011.

Liability for losses during Mr Hajje’s illness

16       In March 2011 Mr Hajje became ill. He discussed this with the then Acting General Manager of Sims Mr Skinner in early April 2011.  Mr Hajje informed Mr Skinner of his illness and his need to be absent for some time in the Eastern States to undertake tests.  Mr Hajje testified that he was told by Mr Skinner “not to worry and to take time off as was needed”.  Mr Hajje suggested, as was the usual practice, that he get someone else to drive his truck.  However, Mr Hajje was informed that this was not necessary at that time.

17       Mr Hajje was back at work for a short time in May 2011 but required a further absence as he was still not well. Mr Hajje testified that he spoke to Ms Manigodich the Transport Supervisor for Sims.  As Mr Hajje was required to be absent for some time, he proposed to put another driver in the truck and he said that Ms Manigodich agreed. Accordingly, Mr Hajje testified that he arranged for a substitute driver and obtained the necessary insurances.  However, a few days later, Mr Hajje said that Ms Manigodich informed him that Sims no longer saw a need for a driver for Mr Hajje’s truck as she could not guarantee any more than eight hours a week.  According to Mr Hajje, he then asked about “his job”, and Ms Manigodich told him to the effect that “he should get better and that his job would still be there and that Sims would not replace him”. Over the course of Mr Hajje’s absence, until early August 2011, Mr Hajje testified that he kept in regular contact with Ms Manigodich about his medical condition and prognosis for a return to work.

18       Mr Hajje said that it was the usual practice at Sims that where an owner-driver was going to be absent for any period of time, that a replacement driver would be arranged so that the truck could continue to operate.

19       The question of any compensation to cover the period during Mr Hajje’s absence from work due to his illness depends upon the existence of a term in the owner-driver contract to that effect. Whilst Mr Hajje made reference to what was described as a “custom and practice” in relation to this issue, the evidence as to it is somewhat scant.  However, that is not the end of the matter.  In most contracts, there may be terms implied on a number of bases.  Obligations may be implied on the basis of the “business efficacy test”.  That is, a term may be implied into a contract if it is necessary for its effective operation. The major statement of principle in this regard, is found in BP Refinery (Westernport) Pty Ltd v Shire of Hastings (1977) 180 CLR 266 where at 283 it was said:

“For a term to be implied, the following conditions (which may overlap) must be satisfied: (1) it must be reasonable and equitable; (2) it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) it must be so obvious that “it goes without saying”; (4) it must be capable of clear expression; (5) it must not contradict any express term of the contract.”

In my view, the implication of a term into the owner-driver contract to the effect that during any reasonably lengthy absence, a substitute driver would be used to drive the truck and ensure the continued provision of services where required, would satisfy such a test.  It enables the agreement to effectively operate.  It would be, in my view, obvious to a reasonable bystander and in all the circumstances satisfies the requirements of the business efficacy test.

20       Mr Hajje said in his evidence that he lost income as a result of Sims not allowing him to put a driver in his truck from June 2011.  He said that if they had done so, then he would have earned approximately $2,000 per month. This is calculated on the basis of net earnings of approximately $6,000 per month less costs of a substitute driver of approximately $4,000 per month. This leaves a loss over a period of approximately two and a half months of $5,000 in nett earnings.

21       However, Mr Hajje’s belief as to the amount of work and profit and projected earnings in his evidence was inconsistent with other evidence he gave as to what the Sims Transport Manager said to him in relation to a shortage of work over this period.  That evidence was to the effect that she could “not guarantee more than eight hours per week” at that time.  Therefore on the basis of all of the evidence, the Tribunal cannot confidently find on balance any compensable loss for this period.

Reasonable notice to terminate the contract

22       In early August 2011 when Mr Hajje had recovered from his illness he advised Sims that he was fit to return to work. He had email exchanges with Ms Manigodich.  She informed Mr Hajje that the company no longer had work for him.  Mr Hajje also spoke to Mr Mayne the General Manager who confirmed that this was the position.  On the basis of the previous representations to him, and the performance of the services to that time, Mr Hajje testified that he had an expectation of ongoing work with Sims.  He said he regarded the responses of Sims as a termination of the arrangement he had with the company.

23       There being no evidence as to how the parties may have contemplated the termination of the owner-driver contract between Mr Hajje and Sims, the law is that commercial agreements of this kind contain an implied term that the agreement may be terminated on notice:  Crawford Fitting Co v Sydney Valve and Fittings Pty Ltd (1988) 14 NSWLR 438.  What is reasonable notice will be a question of fact in each case, depending upon each particular circumstance. Cases from employment law as to the implication of a term of reasonable notice in a contract of employment may be of some assistance.

24       In the case of commercial agreements of the present kind, McHugh JA (Priestly JA agreeing) in Crawford Fitting, in referring to the purposes of reasonable notice, observed that it would be of “sufficiently long to enable the recipient to deploy his labour and equipment in alternative employment, to carry out his commitments, to bring current negotiations to fruition and to wind up the association in a businesslike manner”:  at 444.

25       The facts relevant to the determination of reasonable notice in this case are that Mr Hajje has undertaken the work for Sims for some four and a half years.  In 2007 purchased a truck and in late 2009 Mr Hajje expended some $200,000 in capital expenditure on the purchase and configuration of another truck. Mr Hajje had it configured in accordance with Sims’ requirements. The configuration included a minimum tray length, it being able to carry at least four cars and be fitted with a hiab crane with a six tonne lifting capacity.  Also Sims, on the evidence, is the dominant operator in the scrap metal industry therefore there may be limited opportunities for other work of this kind to be undertaken by Mr Hajje.  The limited alternative work Mt Hajje has found since he left Sims is some evidence of this. In this case there was no evidence of any other contracting arrangements that Mr Hajje was required to wind up.

26       Having regard to these factors and the acceptance by Mr Hajje that other contract drivers engaged by Sims are seemingly required to receive one months’ notice of termination of contract, I consider that applying the principles in Crawford Fittings, a reasonable period of notice would be two months.

Assessment of damages

27       The powers of the Tribunal under s 47(4) of the OD Act to grant a remedy are very broad. In terms of damages, the Tribunal may order the payment of damages, including exemplary damages and damages in the nature of interest.  Given that owner-driver contracts are in the nature of commercial contracts, the general principles in assessing contractual damages are of assistance. The essence of that approach is to restore the innocent party, as far as money may do, to the position they would have been in, had the contract been performed. 

28       Mr Hajje says that in the nine months that he undertook work for Sims until he became ill in the 2011 calendar year, he earned on average $12,500 per month.  His overheads, including truck repayments, registration, insurance, fuel and truck maintenance and repairs, amounted to approximately $6,500 per month.  On that basis, Mr Hajje’s nett earnings were approximately $6,000 per month.  After the agreement was terminated, between 19 August 2011 and 30 November 2011 Mr Hajje, consistent with his obligation to mitigate his loss, obtained work from other sources.  He was not able to earn any income between 19 August 2011 and 30 September 2011. Between 1 October and 30 November 2011, Mr Hajje earned gross income of $13,312.88.  From the gross income figure, must be deducted Mr Hajje’s operating costs which were some $11,700. These costs included $6,630 for truck repayments; $1,432 for insurance; $338 for truck registration; $1,300 for fuel; and approximately $2,000 for truck maintenance.  Therefore over the period from August to the end of November 2011, Mr Hajje’s nett earnings amounted to approximately $1,600.

Conclusion

29       On the basis of my earlier finding that in all of the circumstances a period of two months’ notice would be reasonable, Mr Hajje’s nett earnings over such a period would be $12,000.  From this figure, is to be deducted Mr Hajje’s nett income from other work of $1,600.  Therefore there will be an award of damages in the sum of $10,400 plus interest.

30       The Tribunal orders accordingly.