FEDERAL COURT OF AUSTRALIA

Fair Work Ombudsman v Ramsey Food Processing Pty Ltd [2011] FCA 1176

THE COURT ORDERS THAT:

1.    The proceedings be adjourned to a date to be fixed, to make orders in accordance with the accompanying Reasons for Judgment.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Introduction

1        The issue in this case is whether the first respondent (“Ramsey Food Processing”), as employer of 11 persons (“the complainant employees”) at the abattoir whose operations it managed at South Grafton in New South Wales, failed to pay those employees amounts of money due on account of the termination of their employment in November 2008. The amounts in question are referable to obligations to make payment in lieu of notice, for severance pay and for untaken annual leave under the provisions of the Federal Meat Industry (Processing) Award 2000 and s 235 of the Workplace Relations Act 1996 (Cth) (as it then stood). A related question is whether the second respondent (“Mr Ramsey”) was knowingly concerned in the conduct of Ramsey Food Processing. The principal question which requires examination to decide those issues is whether Ramsey Food Processing was the employer of the complainant employees or whether, as the respondents contended, those persons (and many others) were employed by Tempus Holdings Pty Ltd (“Tempus”), a company inter-positioned between Ramsey Food Processing and the employees.

2        I have had no difficulty in concluding that the arrangements made for the inter-positioning of Tempus between Ramsey Food Processing and the employees who performed work in the operations of Ramsey Food Processing were legally irrelevant to the identification of their true employer. In the relevant period, the employer was, in my view, Ramsey Food Processing. Furthermore, although the conclusion just stated rests upon an independent footing, the purported inter-positioning of Tempus was a sham, intended to disguise the true position.

3        The creation of those arrangements (so far as they involved Tempus) was conceived as part of arrangements made to avoid payment of penalties ordered by this Court, in other proceedings, to be paid by companies associated with Mr Ramsey and under his direct control. The arrangements were also intended, I am satisfied, for the purpose of avoiding direct legal responsibility by Ramsey Food Processing for the wages and entitlements of employees at the abattoir. A purpose of that kind does not mean, necessarily, that arrangements are ineffective, much less illegal. The arrangements appear to have been put in place on the basis of legal advice and certainly with legal assistance. However, in my view, on the facts of the present case, for the reasons I will explain, the arrangements made by the respondents were wholly ineffective to deflect responsibility from Ramsey Food Processing with respect to payments due to the complainant employees. Mr Ramsey was not only an active participant in those events, but was a key decision-maker. Responsibility for them, and their consequences, is to be attributed to him equally with Ramsey Food Processing.

Factual findings

4        Mr Ramsey has been the person in effective control of the management and operation of the South Grafton Abattoir since 1998. He has exercised that control through companies established by him, or at his request. Mr Ramsey refers to the companies which he established as the Ramsey Group of Companies. Those companies include Ramsey Food Processing, which was the operating company for the abattoir in the period with which the present proceedings are most directly concerned.

5        In 1998, the abattoir and some associated assets were acquired from R J Gilbertson Pty Ltd by companies within the Ramsey Group. Brugold Pty Ltd purchased the land and buildings upon which the abattoir was located. Ramsey Pastoral Company Pty Ltd (“Ramsey Pastoral”) acquired some surrounding pastoral land. Ramsey Food Processing obtained various assets by way of lease. It was intended that the abattoir would process beef cattle for Ramsey Meats Pty Ltd (“Ramsey Meats”).

6        In his oral evidence Mr Ramsey accepted that “the way the abattoir was set up was that it was a single business … being run by a group of companies controlled by [him]”.

7        The statement of claim in the present proceedings asserted that Mr Ramsey had a controlling interest in Ramsey Food Processing, particularised by reference to the following further assertions:

All shares in the First Respondent were owned by Ramsey Wholesale Meats Pty Ltd (ACN 003163022)

All shares in Ramsey Wholesale Meats Pty Ltd were owned by Ramsey Holdings Pty Ltd (ACN 003498628),

All shares in Ramsey Holdings Pty Ltd were owned by Ramsey Pastoral Pty Limited (ACN 118319467),

All shares in Ramsey Pastoral Pty Limited were owned by the Second Respondent.

8        In his defence filed electronically on 5 October 2010, Mr Ramsey did not admit those particulars but accepted in substance that he did ultimately have a personal controlling interest in Ramsey Food Processing. He also admitted in his defence that he was, and at that time remained, a director of Ramsey Food Processing, was its company secretary and was involved in management of the abattoir by Ramsey Food Processing. In a later affidavit sworn on 2 June 2011, Mr Ramsey stated that he was a director of Ramsey Food Processing from 23 March 1998 until 29 October 2010, when he ceased to be a director. A company search dated 26 November 2010 showed that, at that date, the sole director of Ramsey Food Processing was Patricia Ann Ramsey, Mr Ramsey’s wife, and no other director was shown. The sole shareholder of Ramsey Food Processing was shown as Ramsey Wholesale Meats Pty Ltd. In both his affidavit and his oral evidence, Mr Ramsey accepted that he was the “manager” of Ramsey Food Processing and the abattoir. I am satisfied that at the time of the events which require attention in the present proceedings Mr Ramsey had a controlling interest in Ramsey Food Processing and was a director of that company. I shall mention a little later the potential significance of changes made to the corporate arrangements after the present proceedings were commenced.

9        For the purpose of the present proceedings I am satisfied, on the whole of the evidence including, in particular, the evidence of Mr Ramsey himself, that he was the person effectively in overall charge of operations at the abattoir. In addition, I am satisfied that he was intimately involved in the management and control of the companies in the Ramsey Group and was the “guiding mind” of all those companies. He was the effective decision-maker concerning all aspects of their activities.

10        As part of the operational arrangements decided by Mr Ramsey, separate companies were established to play the role of “employer” of staff at the abattoir. In light of matters which emerged in the present proceedings I doubt that those arrangements were ever legally effective, but that is not a matter which requires a decision in the present proceedings. Initially those companies were: Ramsey Food Services Pty Ltd, Ramsey Butchering Services Pty Ltd and Ramsey Food Packaging Pty Ltd. In about September 2001 it seems that Ramsey Butchering Services Pty Ltd ceased to be an “employer” at the abattoir and employees of that company purportedly became employees of Ramsey Food Packaging Pty Ltd. In January 2002, Ramsey Food Packaging No. 2 Pty Ltd also became such an “employer”. In the case of each of the Ramsey employing companies the financial arrangements may be understood from the following exchanges in the oral evidence of Mr Ramsey:

MS HOWELL: The only income the labour hire companies had – and here I am referring to the Ramsey labour hire companies – was payments made from other companies in the group with respect to labour that those companies – the labour hire companies – engaged?---Only from one other company.

HIS HONOUR: Which company was that?---Ramsey Food Processing.

…

HIS HONOUR: Of the companies that did employ labour, was the only money that went in to their account money that was necessary to pay [their] expenses?---That’s correct.

And it all went in from Ramsey Food Processing?---That’s correct.

and:

HIS HONOUR: I take it that any capacity any of the [employing] companies had to pay any money to anybody was dependent upon being provided with that money by some other company within the group?---That’s correct, your Honour.

11        In August 2002, Mr Ramsey decided to close the abattoir for a short time. He directed that all employees be terminated. Shortly thereafter the abattoir was reopened. When the abattoir reopened 11 former employees sought, but were refused, employment. Proceedings were commenced in this Court against all four employing companies mentioned earlier alleging contraventions of s 298K of the Workplace Relations Act then in force. Greenwood J, who heard the proceedings, traced in some detail the industrial history at the abattoir under Mr Ramsey’s superintendence. In a judgment published on 30 June 2006 (McIlwain v Ramsey Food Packaging Pty Ltd [2006] FCA 828; 154 IR 111) Greenwood J found that contraventions had been established against the four employing companies, namely Ramsey Food Packaging Pty Ltd, Ramsey Food Packaging No. 2 Pty Ltd, Ramsey Butchering Services Pty Ltd and Ramsey Food Services Pty Ltd. In a subsequent judgment (McIlwain v Ramsey Food Packaging Pty Ltd (No. 4) [2006] FCA 1302; 158 IR 181) Greenwood J directed amounts of compensation to be paid to each of the 11 employees who were not re-employed and to a twelfth employee who was also found to have been dismissed in contravention of the Workplace Relations Act. In addition, the four employing companies who had been found to have employed the employees in question were ordered to pay penalties totalling $84,000 (70% of the maximum total penalties of $120,000). The orders were made on 4 October 2006. It is worth noting that, in those proceedings, it was not disputed that employees were employed by one or other of the Ramsey employing companies and it was not contended that Ramsey Food Processing was the true employer, as it has been in the present proceedings. That question was not examined in those proceedings.

12        Mr Ramsey’s response to the orders made by this Court was to send the three then employing companies (Ramsey Food Packaging Pty Ltd, Ramsey Food Packaging No. 2 Pty Ltd and Ramsey Food Services Pty Ltd) into liquidation. Mr Ramsey’s explanation appears from the following exchange:

MS HOWELL: The only way that those labour hire companies which we’ve been talking about could receive any income or payment whatsoever was if you decided to maintain arrangements where they were used to engage labour?---That’s correct.

And what I suggest to you, Mr Ramsey, is you made a decision that the fines imposed and the penalties imposed on those companies would not be paid?---Well, as – as soon as the fines were imposed, the companies weren’t liquid and, under the federal law, you can’t trade so they had to stop immediately.

HIS HONOUR: They were never liquid, were they, unless you put money in, unless - - -?---That’s correct, yes.

13        On 16 October 2006, Mr Ramsey caused a letter to be sent to all employees of those companies in the following terms:

On the 4th October last the Federal Court of Australia made orders against your employer. These orders fined, penalised and awarded costs against your employer causing it to be insolvent and accordingly, your employer cannot continue to incur wage commitments whilst insolvent. Accordingly, your employment with your employer is at an end.

You are at liberty to approach Tempus Holdings Pty Limited who may have a position for you, and who may be willing to honour your entitlements.

14        The ability of the three companies to pay debts or meet obligations incurred in their name, whether to employees or statutory authorities, depended always and in every respect upon the provision of funds to them by Ramsey Food Processing, with the approval of Mr Ramsey. The reality of the position is that Mr Ramsey decided, in response to the orders made by Greenwood J, to set each of those companies on a path to extinction, the orders being thought to be thereby rendered ineffective. The explanation Mr Ramsey gave in the present proceedings was that payment in accordance with the orders of the Court would have stretched the financial resources of Ramsey Food Processing to the point where the abattoir would need to be closed. The evidence in the present proceedings is insufficient to permit an evaluation of the accuracy or honesty of that explanation.

15        The letter to employees dated 16 October 2006 was signed by Mr Paul Marshall. I shall return shortly to say something about the suggested availability of employment by Tempus, to which the letter referred. It is convenient first to say something about Mr Marshall’s responsibilities. Mr Marshall became employed as the Personnel Officer at the abattoir in 1998. His employment continued until 30 June 2009. He was initially employed by Ramsey Meats but subsequently became employed by Mortimer Administration Service Pty Ltd (“Mortimer Administration”). Mortimer Administration was registered on 9 October 2001. Mr Ramsey’s evidence was that it was established as a service company to provide administrative and clerical services to the abattoir. Its sole shareholder, director and company secretary, until 4 October 2010, was Ms Renee Park (née Mortimer) who lived at “Turangga Farm” a property owned by or on behalf of Mr Ramsey. The services provided to the abattoir were Ms Park’s services and those of Mr Marshall. On 4 October 2010, the day before the respondents’ defences were electronically filed in the present proceedings, Mrs Ramsey became the sole shareholder, director and company secretary of Mortimer Administration.

16        It is also convenient at this point to mention that another “service company” to the abattoir was Paul Allen Contracting Services Pty Ltd (“Paul Allen Contracting”) which was also registered on 9 October 2001. Paul Allen was the livestock manager at the abattoir. In his oral evidence Mr Ramsey agreed that the establishment of this company also occurred at his initiative.

17        So far as the relationship between Ramsey Food Processing and the service companies was concerned, the same pattern was followed as had been established for the Ramsey employing companies. The fact that the service companies had external directors did nothing to disrupt this pattern. Money was passed through a bank account at the minimum level to pay debts or meet obligations incurred in the name of the service company. The same arrangements came to apply to Tempus. Those arrangements were all administered by Ms Park. Associated functions on the personnel side were performed by Mr Marshall. Mr Ramsey had control and ultimate oversight of every aspect.

18        Pursuant to those arrangements, Mr Marshall recruited all of the general workforce at the abattoir and he was responsible for inducting all such persons. Mr Marshall reported, for some matters only, to the Plant Manager, Mr Michael Considine. I shall mention the circumstances of Mr Considine’s engagement in a short while. Mr Ramsey was directly involved in selection of personnel with a management, administration or engineering role. Mr Marshall carried out his function as Personnel Officer for any and all of the companies who employed general labour at the abattoir. He signed letters on the letterhead of those companies as the Personnel Officer for the company in question.

19        Ms Park was involved in the day to day administration of the abattoir’s affairs. In that role she raised invoices for payment, dealt with payment of accounts (including statutory obligations like taxation, workers compensation insurance and superannuation) and attended to banking, particularly transfers between the accounts of the various companies, whether Ramsey Group companies or so-called service or labour hire companies. On the evidence in the present case, all those matters were under her direct control, subject only to the directions of Mr Ramsey.

20        Mr Considine was engaged to work at the abattoir in about August 2005 as the Plant Manager. He remained in that position until 7 November 2008. Prior to his engagement, he had known Mr Ramsey for about 30 years. At the time of his engagement Mr Considine suggested that he should be engaged at the abattoir through his family company, Drama Pty Ltd (“Drama”). It is not necessary in the present case to evaluate the legal effectiveness of that method of engagement. Mr Ramsey agreed to obtain Mr Considine’s services in this way. Initially, the arrangement was oral but on 1 July 2006 a formal contract was executed between Ramsey Food Processing and Drama for the provision of Mr Considine’s services. From the time of his engagement, Mr Considine was second in charge at the abattoir under Mr Ramsey. He was in charge of the daily operations at the abattoir and would ring Mr Ramsey at about 6.00 am every day, having himself arrived at work at about 5.20 am. Mr Considine gave evidence that Mr Ramsey generally attended the abattoir one to two days a week and was almost always there on Tuesdays when he would scrutinise the wages records and all accounts. Although he was second in charge of the abattoir, Mr Considine’s duties were operational in nature and, with rare exceptions, he did not become involved directly in hiring or dismissing employees. That was Mr Marshall’s role, subject to Mr Ramsey’s overall control as manager of Ramsey Food Processing.

21        As noted earlier, Mr Marshall’s letter to employees dated 16 October 2006 referred to the possibility of engagement by Tempus. Mr Considine’s evidence included the following:

23.    In early October 2006, whilst I was at the abattoir, Mr Ramsey came up to me and asked me to step outside with him. We walked out and stood leaning on a boot of car just outside his office. Words to the following effect were spoken:

SR: there is a Federal Court case that I have lost and I need to acquire a shelf company to provide labour to Ramsey Food Processing so the business can continue. Otherwise I don’t know if I can continue running the abattoir. Are you interested to take on the labour hire company and take over the employees currently employed on the same terms and conditions of employment, still being the Plant Manager.

Me: Will you give me an undertaking that I as sole director of this company will not be responsible for any debt or wages or workers compensation and such?

SR: yes I will get Frank (Hannigan) to draw it up.

Me: OK I will do it.

SR: Frank will organise for you to be director of the shelf company.

22        I accept Mr Considine’s evidence about this and other matters. He gave his evidence in a straightforward way without embellishment and made no attempt to minimise his own role in the events with which I am concerned or to deflect criticism for his own conduct. Where his evidence conflicts with Mr Ramsey’s account I prefer Mr Considine’s evidence.

23        Mr Frank Hannigan was Mr Ramsey’s solicitor. He was a principal of Hannigans, a firm of solicitors with an office in Casino, New South Wales (as well as elsewhere), which has acted for Mr Ramsey throughout the events already referred to and those to which reference will later be made, including the present proceedings. Tempus had been registered as a shelf company on 21 August 2006. Hannigans arranged for Drama to become the sole shareholder of Tempus and for Mr Considine to be its director and secretary effective from 17 October 2006. The relevant documents were signed by Mr Considine on 24 October 2006.

24        Part of the arrangements agreed between Mr Ramsey and Mr Considine was that Tempus would be indemnified for all liabilities. Mr Ramsey accepted that was so in his oral evidence. Apart from his acceptance of that fact, and the content of the conversation set out above, there were two documents in evidence which reflected this arrangement. One was a deed dated 16 October 2006 executed by Mr Ramsey on behalf of Ramsey Food Processing and Mr Considine on behalf of Tempus. Their signatures were witnessed by Mr Marshall and the seal of each company was affixed. The second was a document in the same terms dated 19 May 2007. It was also executed by Mr Ramsey and Mr Considine and witnessed by Mr Marshall. It bears no sign of the seal of either company. It was evidently executed and witnessed separately from the first document. Both Mr Considine and Mr Ramsey proceeded in their own evidence upon the basis that a deed in the terms of the two documents was in place. The operative provisions of the deed were as follows:

BETWEEN the Party described in the First Schedule (hereinafter called “Ramsey”) of the One Part AND the Party described in the Second Schedule (hereinafter called “Tempus”) of the Second Part.

WHEREAS:-

1.    Ramsey conducts and manages a food processing business.

2.    Ramsey requires labour.

3.    Tempus has appropriate labour available to man the business managed by Ramsey.

4.    The parties have agreed that Tempus shall supply labour on the terms and conditions provided herein.

NOW THIS DEED WITNESSES that in consideration of mutual promises between the parties the following is agreed:-

1.    Tempus shall supply appropriate staff to Ramsey on a day to day basis.

2.    Ramsey shall pay Tempus all outgoings associated with the supply of labour which shall include wages, staff entitlements, administration and workers compensation.

3.    Ramsey hereby indemnifies Tempus for all suits, claims, actions and damages in respect of any liability whatsoever which Tempus may incur in relation to the employment of staff on the South Grafton Abattoir site.

Schedule 1

Ramsey Food Processing Pty Ltd (ACN 082 062 468)

Schedule 2

Tempus Holdings Pty Ltd (ACN 121 335 395)

25        The matters which are set out in cl 4 of the recitals and in cl 2 of the operative provisions bear some further comment. It was the evidence in the present proceedings of both Mr Considine and Mr Ramsey that no payment was made to Tempus for the services supposedly provided to Ramsey Food Processing other than such payments as were necessary to put Tempus in funds to discharge obligations which nominally had been assumed by it. The practice was that invoices would be raised by Ms Park in the name of Tempus, to reflect obligations assumed by Tempus. Payments would then be made into the Tempus bank account by Ramsey Food Processing to permit Tempus, in turn, to meet the obligation when it was due. Those obligations included net wages to employees, PAYG payments to the Australian Taxation Office, GST payments to the Australian Taxation Office, superannuation contributions required to be made on behalf of employees and some other expenses. Only so much money as was required to meet an immediate liability was transferred from the bank account of Ramsey Food Processing (administered by Ms Park) to the bank account of Tempus (also administered by Ms Park). For example, an amount equivalent to net wages only for employees was electronically transferred in time (but no earlier than necessary) for that money to be transferred by Ms Park from the Tempus bank account to the employees in question, again electronically. Where relevant invoices raised in the name of Tempus identified PAYG payments, payment by Ramsey Food Processing was deferred until payment by Tempus was due to the Australian Taxation Office. Similarly, any GST liability on services supposedly provided by Tempus was not reflected in money transferred to Tempus until such money was required to be transferred by Tempus to the Australian Taxation Office. The same thing happened with superannuation contributions. Correspondingly, any money which might find its way into the Tempus bank account from some other source was recovered promptly or reflected as a credit due to Ramsey Food Processing against which any transfer from Ramsey Food Processing was offset. That included wage subsidies, workers compensation reimbursements and even small amounts of bank interest credited to the Tempus account. It is worth noting now that, apparently pursuant to this operating principle and arrangement, at a later time (after Tempus was supposedly placed into voluntary administration) an $80,000 refund of workers compensation premiums was recovered from the Tempus bank account and transferred to the account of Ramsey Food Processing at Mr Ramsey’s direction. That amount would have been more than sufficient to meet the monetary claims in the present proceedings. Upon what legal foundation (if any) that step was taken remained unexplained. The practical effect was to strip the funds from Tempus to reflect an obvious belief that none of the money passing through its bank account, in one direction or another, was ever its property, but was the property of Ramsey Food Processing.

26        The result of the practices followed at the direction of Mr Ramsey was that money passed through the Tempus account only so often and to such an extent as was necessary to shortly thereafter discharge the obligations assumed by Tempus. Those were in truth nothing more than clerical arrangements. For all practical purposes the Tempus bank account was treated as an account within the Ramsey Group. I am satisfied, on the whole of the evidence, that those arrangements were adopted so as to give colour to the proposition that it was Tempus, rather than Ramsey Food Processing, which was legally liable for those payments. The effect of Mr Ramsey’s evidence was that similar practices had earlier been followed with respect to the four companies within the Ramsey Group used to employ labour at the abattoir before late 2006.

27        At about the time, or shortly after, that Mr Marshall’s letter of 16 October 2006 was given to employees at the abattoir, Mr Considine conducted meetings with employees prior to their shift start time. His evidence was that he did so at Mr Ramsey’s request. He said Mr Ramsey had a list of employees who would transfer to Tempus and those whose employment would be terminated. Mr Ramsey denied responsibility for the list. Although Mr Ramsey said that it was up to Mr Considine as to which employees Tempus would engage, I am satisfied that Mr Ramsey intended and knew that most employees would be offered employment by Tempus but some would not. Whether the specific decisions as to who would not be offered employment were made by Mr Marshall, Mr Considine or Mr Ramsey they were, in my view, made on behalf of Ramsey Food Processing and Mr Ramsey either directed or acquiesced in them. Nine of the 11 employees whose circumstances are the subject of complaint in the present proceedings were transferred to the books of Tempus at about this time. Two were employed at the abattoir subsequently, also as the apparent employees of Tempus.

28        On the evidence, apart from this nominal change in employer, which gave effect to the method chosen by Mr Ramsey to deal with the obligations arising from the orders made by this Court on 4 October 2006, nothing changed for employees who were allowed to remain in employment. Mr Considine did not acquire any responsibility or authority which he did not already possess as Plant Manager. He did not take on, nor was it contemplated that he would do so, any role concerning the recruitment or (in general) dismissal of employees. He did not become concerned in any new aspect of personnel management, notwithstanding the supposed employment of virtually the entire workforce by Tempus, notionally a company under his control and direction. Personnel functions continued to be performed by Mr Marshall subject only to direction by Mr Ramsey. Nor did Mr Considine become involved in any other aspect of the administration of the affairs notionally being conducted in the name of Tempus. Administrative matters were within the exclusive province of Ms Park, subject only to Mr Ramsey’s overall authority.

29        If the true position arising from Mr Marshall’s letter of 16 October 2006 had been that one employment relationship ceased and a new one commenced, payment of accrued entitlements would have been necessary and could not legally be avoided. At the time of notional transfer from one of the employing companies to Tempus many (probably virtually all) employees undoubtedly had accrued entitlements standing to their credit. Annual leave is the most obvious one. None of those entitlements were paid. Instead, book entries were made showing the credits as thereafter owed by Tempus.

30        Despite the transfer in October 2006 of all ongoing employees to the books of Tempus it is clear from the evidence that this was not seen as something which would inhibit further changes to employment arrangements at the abattoir if Mr Ramsey felt them to be necessary or desirable. In early 2008, Mr Ramsey judged that it had become inconvenient to retain certain of the abattoir employees on the books of Tempus. The reason assigned by Mr Ramsey in his evidence was that he thought that workers compensation premiums were being incurred at an unnecessarily high level. The first change occurred to employees in the offal and tripe room. On 22 January 2008, Mr Considine signed letters on Tempus letterhead addressed to those employees. Mr Considine’s evidence was that the letters were given to him by Mr Marshall for signature and were given back to Mr Marshall after they were signed for distribution to the employees concerned. The letters were in the following terms:

Please be advised that Tempus Holdings Pty Ltd will cease supplying labour for offal and tripe room employees at the South Grafton Abattoir on Monday 4th February 2008.

Paul Allen Contracting Services Pty Ltd will supply the labour, for this part of the operation from the above-mentioned date. Paul Allen Contracting Services Pty Ltd has indicated that they are willing to employ yourself under the same terms and conditions as you have previously been employed.

If you wish to accept their offer of employment, please sign the attached letter authorizing the company to transfer your employment and entitlements to Paul Allen Contracting Services Pty Ltd.

31        Similar steps were taken in late April 2008 with respect to employees in the boning room except that they were to be transferred to Mortimer Administration. Again letters on Tempus letterhead were signed by Mr Considine who said he did so having been handed the letters for signature. Those letters were in the following terms:

Please be advised that Tempus Holdings Pty Ltd will cease supplying Boning Room personnel at the South Grafton Abattoir on Monday 5th May 2008.

Mortimer Administration Services Pty Ltd will supply labour, for this part of the operation from the above-mentioned date. Mortimer Administration Services has indicated that they are willing to employ yourself under the same terms and conditions as you have previously been employed.

If you wish to accept their offer of employment, please sign the attached letter authorising the company to transfer your employment and entitlements to Mortimer Administration Services Pty Ltd.

32        It also appears that some employees engaged directly at Mr Ramsey’s “Turangga Farm” appeared on the books of Tempus. Mr Considine denied any involvement in those arrangements. Mr Ramsey subsequently directed that the employees in question should be transferred off the Tempus books. Mr Considine’s evidence was that Mr Marshall also handed him those letters, on Tempus letterhead, to sign. The letters were undated but were in the following terms:

Please be advised that Tempus Holdings Pty Ltd will cease supplying labour for Turangga Farm.

Ramsey Pastoral Company Pty Ltd will now supply the labour, itself for this enterprise. Ramsey Pastoral Company Pty Ltd has indicated that they are willing to employ yourself under the same terms and conditions as you have previously been employed.

If you wish to accept their offer of employment, please sign the attached letter authorizing the company to transfer your employment and entitlements to Ramsey Pastoral Company Pty Ltd.

33        On 7 November 2008, Mr Considine and Mr Ramsey had a disagreement. In his oral evidence Mr Ramsey disclaimed any recollection of the nature of the disagreement although he did appear to recall something of the events which followed. Mr Considine said in his evidence that Mr Ramsey had, for the first time, directly challenged Mr Considine’s competence. I infer that this was not an infrequent occurrence in Mr Ramsey’s relations with other people. Mr Considine said he left the abattoir on that day (Friday), leaving the keys with Mr Ramsey but, having spoken with Mr Ramsey over the weekend, came to work as usual the following Monday morning. Mr Ramsey rang the abattoir at 6:00 am and Mr Considine answered. Mr Ramsey expressed surprise that Mr Considine was at the abattoir and suggested he leave. Mr Considine did so. Mr Ramsey and Mr Considine did not agree about whether Mr Considine spoke with Mr Ramsey face to face later in the day or, as Mr Ramsey suggested in his evidence, by telephone a few days later. However, they did agree that there was some discussion which involved the premise that Mr Considine would need to be replaced as director of Tempus. Mr Considine denied any further involvement in the affairs of the abattoir or Tempus (apart from later resigning as director) from 7 November 2008. I am satisfied that he did not have any further involvement. In due course Mr Hannigan provided Mr Considine with such documentation as was necessary to transfer all Mr Considine’s (and Drama’s) interests in Tempus to Mr Warren Park who also lived at “Turangga Farm”. Mr Considine and Mr Ramsey agreed that they did not speak again for at least the following 12 months. However, administration of the affairs of Tempus continued uninterrupted for the time being. Vouchers were still raised, bank transfers occurred and wages were paid.

34        On 24 November 2008, Mr Marshall sent a letter to Tempus employees on the letterhead of Ramsey Food Processing. Mr Marshall signed the letter as “Personnel Officer”. The letter was in the following terms:

Tempus Holdings Pty Ltd will on 28 November 2008 cease to be a labour hire company, supplying labour to our company.

If you are interested in further employment, please obtain an employment application form from the front office for employment with Paul Allen Contracting Services Pty Ltd, and return it as soon as possible.

35        The following day Mr Marshall sent a letter dated 25 November 2008 on Tempus letterhead to Tempus employees, including the complainant employees in the present proceedings. Again the letter was signed by Mr Marshall as “Personnel Officer”. It was in the following terms:

Tempus Holdings Pty Ltd will this week cease to be a labour hire company providing labour for Ramsey Food Processing Pty Ltd. Accordingly, we are unable to offer you any ongoing employment.

36        At least a number of the complainant employees applied to Paul Allen Contracting for further employment. All of those employees who applied were unsuccessful, although many employees at the abattoir were taken onto the books of Paul Allen Contracting. In the case of unsuccessful applications a letter was sent on the letterhead of Paul Allen Contracting signed by Mr Marshall and dated 30 November 2008. Mr Marshall signed again as “Personnel Officer”. The letters said:

We refer to your recent application for employment with Paul Allen Contracting Services Pty Ltd.

Please be advised that unfortunately your application for employment has been unsuccessful.

37        However, the bulk of the workforce at the abattoir became “employed” by Paul Allen Contracting in this way. As in 2006, accrued entitlements were not paid, as would have been necessary in a real change of employment. In the leave management records which were maintained for various companies (Paul Allen Contracting, Mortimer Administration, Tempus and Ramsey Pastoral) the following amounts are shown as being transferred from Tempus as a liability and transferred to Paul Allen Contracting as a liability between 30 November 2008 and 31 December 2008: annual leave – $122,781.86; sick leave – $47,436.99; long service leave – $105,051.67; and accountable long service leave – $64,964.96. Those book entries are consistent with the earlier pattern when employees were notionally transferred to the employment of Tempus. The same record shows as remaining liabilities in the name of Tempus as at 31 December 2008: annual leave – $29,989.82; sick leave – $11,777.66; long service leave – $24,647.80; and accountable long service leave – $16,112.53.

38        Despite the fact that Tempus had the benefit of an unqualified indemnity from Ramsey Food Processing with respect to all its obligations arising out of the “supply of labour” to Ramsey Food Processing, Mr Ramsey directed, on his evidence in the present proceedings, that no such obligations were to be satisfied or payments made. There appear to have been one or two exceptions made in February 2009, but they were exceptions to this general rule. Mr Ramsey’s explanation for the fact that no payments were made to the complainant employees of amounts clearly outstanding was that no request had been made to Mr Marshall for such a payment and/or that no invoice had been raised referring to such a payment. I did not believe him and I reject this explanation. In my view, any outstanding and unsatisfied entitlements, including those sought in the present proceedings, were not honoured because Mr Ramsey decided they would not be.

39        None of the complainant employees whose position requires examination in the present proceedings obtained ongoing employment at the abattoir. Each was a permanent employee. Each lost his or her job. I am satisfied that the letters from Mr Marshall dated 25 November 2008 on Tempus letterhead to which I have referred were effective to bring the employment of the complainant employees to an end effective on 28 November 2008. Those letters were effective to bring their employment to an end regardless of which company was their employer.

40        According to evidence in the present proceedings given by Mr Ramsey, Ramsey Food Processing ceased to trade at the end of February 2009. Ramsey Meats then became the operating company for the abattoir in place of Ramsey Food Processing. That change occurred shortly after complaints began to be made by the employees whose entitlements arise for consideration in the present proceedings and the applicant began the enquiries which have led to the present proceedings. As I mentioned earlier, Mr Ramsey ceased to be a director of Ramsey Food Processing shortly after the respondents’ defences were filed in the present proceedings and other changes were also made to the nominal management of Mortimer Administration at around the same time.

41        It seems possible that the change to the operational control of the abattoir was made to minimise the potential exposure of Ramsey Food Processing to the possible outcome of the present proceedings. An inference to that effect would be available having regard to the pattern of conduct employed by Mr Ramsey to deal with the exposure of companies in the Ramsey Group to legal liability following the proceedings before Greenwood J. Whether that inference should be drawn does not require attention at the moment. If steps are, or have been, taken with respect to the conduct of the affairs of Ramsey Food Processing, and with respect to its assets, which are intended to have the effect of defeating legitimate claims made against it, that would require attention outside the present scope of the proceedings. Any such issues would have to be determined on all the evidence then available.

42        Tempus remained in the nominal ownership of Drama, with Mr Considine as its director and secretary, until 9 January 2009 when Mr Warren Park (who was employed by Ramsey Pastoral) became formally the sole shareholder, director and secretary. The change of ownership and directors was accomplished with the legal assistance of Hannigans. Tempus went into voluntary administration a short time thereafter, apparently towards the end of March 2009. This, like the apparent cessation of trading of Ramsey Food Processing, occurred in the early stages of the investigation by the applicant which led to the present proceedings. Mr Hannigan completed a questionnaire for Tempus, administered by the voluntary administrator which he despatched with a letter dated 1 April 2009. Mr Hannigan identified himself as a director of Tempus from 13 February 2009. He represented that the business of Tempus ceased on 30 November 2008 at a time when monies were owing to employees in the sum of $41,784.94. Mr Hannigan, however, also referred to the expected receipt of a workers compensation refund, which would be available to meet claims of creditors. I referred to this earlier. When received, that money ($80,000) was removed from the Tempus bank account and transferred to Ramsey Food Processing.

43        A liquidator was later appointed to Tempus on 10 March 2010. A return provided by Mr Park on 24 March 2010 identified a sole asset of a bank deposit with the National Australia Bank of $63.62. In a report dated 11 May 2010 the liquidator estimated assets at zero and total liabilities of $107,601.81.

Legal principles

44        For the purpose of identifying the legal principles which require attention in the present case it is useful to distinguish amongst three different circumstances in which a business might obtain labour for its own purposes, without direct employment. I shall refer to those three possibilities as: independent contracting; labour hire; and intra-group arrangements.

Independent contracting

45        The difference between a contract of employment (a contract of service) and an independent contract (a contract for services) is well established in the law of this country – (see Humberstone v Northern Timber Mills (1949) 79 CLR 389; Australian Mutual Provident Society v Allan (“Chaplin’s Case”) (1978) 52 ALJR 407; Stevens & Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16; Hollis v Vabu Pty Ltd (2001) 207 CLR 21) although the tests developed to resolve which of the two relationships has been established in any particular case may be less easy to apply than to state. In either case, however, the relationship is a direct contractual one between the business entity and the person who supplies their labour. No occasion arises in the present case to attempt to apply the legal tests in this area directly to the question of whether the complainant employees worked under contracts of service (as employees) rather than contracts for service (independent contractor). They clearly worked as employees. However, the tests developed in this area have at least the following relevance: when applied they indicate clearly that Tempus did not stand in a traditional relationship of employer with any of the complainant employees. Mr Considine (as director and “controlling mind” of Tempus) had no role (except as a bare formality) in engaging or dismissing employees. Neither he, nor Tempus, had any actual control over the work they performed. If Tempus was not the employer, the true employer requires identification. There is only one candidate after 16 October 2006 – Ramsey Food Processing.

Labour hire

46        A contract of employment cannot be unilaterally assigned (see Nokes v Doncaster Amalgamated Collieries Ltd [1940] AC 1014 at 1018; Finance Sector Union of Australia v Commonwealth Bank of Australia [2001] FCA 1613; 111 IR 241 at [64]).

47        Subject to that principle, the common law has long recognised the possibility that an employee of one business entity might be hired, loaned or seconded to another person or business, without any change in employment relationship occurring. That is so even if a good measure of practical control is exercised over the work of the employee by the person to whom the employee’s services are supplied. Amongst the earlier English cases where such arrangements were discussed are Quarman v Burnett (1840) 6 M&W 499 (“Quarman”); Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Ld [1947] AC 1 (“Mersey Docks”); and Denham v Midland Employers Mutual Assurance Ld [1955] 2 QB 437 (“Denham”). However, discussion of arrangements for the hire of labour in those early cases must be approached with some caution because in some the issue at hand concerned a question of which entity bore liability to a third party for the negligence or other conduct of the hired (or loaned or seconded) employee: Quarman and Mersey Docks were such cases.

48        In Quarman a “job-mistress” hired horses and a driver to pull and drive the defendants’ own carriage. The driver wore the defendants’ livery. Although the defendants had no control over the way the horses were handled, they could direct the driver where and when to drive. The driver was found to have remained the employee of the job-mistress, and was not the employee of the defendants.

49        Baron Parke, giving the judgment of the Court, said (at 513):

The immediate cause of the injury is the personal neglect of the coachman, in leaving the horses, which were at the time in his immediate care. The question of law is, whether any one but the coachman is liable to the party injured; for the coachman certainly is.

Upon the principle that qui facit per alium facit per se, the master is responsible for the acts of his servant; and that person is undoubtedly liable, who stood in the relation of master to the wrong-doer – he who had selected him as his servant, from the knowledge of or belief in his skill and care, and who could remove him for misconduct, and whose orders he was bound to receive and obey; and whether such servant has been appointed by the master directly, or intermediately through the intervention of any agent authorized by him to appoint servants for him, can make no difference.

50        The principle stated in the second paragraph was applied in Mersey Docks, over 100 years later. It remains applicable to this day.

51        Mersey Docks was a case concerning liability to a third party for the negligence of a crane driver. The crane driver was found to be the employee of the crane supplier, even though the hire agreement stipulated that he would be regarded as the employee of the stevedores to whom the crane was hired, who had immediate control over what work the crane driver did, although no power to direct how the crane should be operated.

52        The principle of non-assignment was recognised. Lord Macmillan said (at 14):

Servants cannot be transferred from one service to another without their consent and even where consent may be implied there will always remain a question as to the extent and effect of the transfer. Here the driver became the servant of the stevedores only to the extent and effect of his taking directions from them as to the utilization of the crane in assisting their work, not as to how he should drive it.

53        Lord Porter said (at 15):

A contract of service is made between master and man and an arrangement for the transfer of his services from one master to another can only be effected with the employee’s consent, express or implied. His position is determined by his contract. No doubt by finding out what his work is and how he does it and how he fulfils the task when put to carry out the requirements of an employer other than his own, one may go some way towards determining the capacity in which he acts, but a change of employer must always be proved in some way, not presumed.

54        His Lordship also said (at 17):

Many factors have a bearing on the result. Who is paymaster, who can dismiss, how long the alternative service lasts, what machinery is employed, have all to be kept in mind. The expressions used in any individual case must always be considered in regard to the subject matter under discussion but amongst the many tests suggested I think that the most satisfactory, by which to ascertain who is the employer at any particular time, is to ask who is entitled to tell the employee the way in which he is to do the work upon which he is engaged.

55        Lord Simonds observed (at 20):

… the terms of the bargain that the driver shall be the servant of one party or the other cannot be used by either of them to contradict the fact, if it is the fact, that the complete dominion and control over the servant has not passed from one to the other.

56        Lord Uthwatt said (at 22):

The realities of the matter have to be determined. The terms of the bargain may colour the transaction; they do not necessarily determine its real character.

57        All these observations must be considered bearing in mind the directions and observations of the High Court in the leading authorities in this country, but they serve to illustrate that, from the point of view of the common law, the search is for substance and reality, and the courts are slow to embrace artifice and pretence. The modern cases in Australia about labour hire arrangements, to which I will turn shortly, take no different position.

58        Quarman and Mersey Docks were each cases concerning liability to third parties in which it was held that liability had not passed from the employer. The distinction between a case where liability might be owed to a third party and one where the claim was made by an employee was discussed by Lord Denning in Denham.

59        Lord Denning pointed out (at 443):

Much of the difficulty which surrounds this subject arises out of the nineteenth century conception that a servant of a general employer may be transferred to a temporary employer so as to become for the time being the servant of the temporary employer. That conception is a very useful device to put liability on the shoulders of the one who should properly bear it, but it does not affect the contract of service itself. No contract of service can be transferred from one employer to another without the servant’s consent: and this consent is not to be raised by operation of law but only by the real consent in fact of the man, express or implied: see Nokes v Doncaster Amalgamated Collieries Ld. In none of the transfer cases which have been cited to us had the consent of the man been sought or obtained. The general employer has simply told him to go and do some particular work for the temporary employer and he has gone. The supposed transfer, when it takes place, is nothing more than a device – a very convenient and just device, mark you – to put liability on to the temporary employer; and even this device has in recent years been very much restricted in its operation. It only applies when the servant is transferred so completely that the temporary employer has the right to dictate, not only what the servant is to do, but also how he is to do it: see Mersey Docks and Harbour Board v Coggins & Griffith (Liverpool) Ld. Such a transfer rarely takes place, if ever, when a man is lent with a machine, such as a crane or a lorry: nor when a skilled man is lent so as to exercise his skill for the temporary employer. In such case the parties do not contemplate that the temporary employer shall tell the man how to manipulate his machine or to exercise his skill. But a transfer does sometimes take place in the case when an unskilled man is lent to help with labouring work: see Garrard v A. E. Southey & Co. The temporary employer can then no doubt tell the labourer how he is to do the job. The labourer becomes so much part of the organization to which he is seconded that the temporary employer is responsible for him and to him.

60        I accept, therefore, that arrangements whereby labour is provided by one company to another, without the recipient becoming thereby an employer, are longstanding and unremarkable. There appears no place for an assumption of illegality or illegitimate purpose from the mere fact that a “labour hire” arrangement has been put in place. The Australian cases recognise that, provided the arrangement meets certain objective criteria.

61        Utilisation in Australia of labour hire arrangements has increased significantly in past decades. There is no doubt that sometimes such arrangements reflect a desire by the proprietors of a business to avoid liability for employment related obligations. That is not illegal as an objective. It has been traditionally reflected in the ability of a business to let a contract “for services” (independent contracting) rather than making a contract “of service” (employment). At one level of analysis, a labour-hire contract is just an example of a business obtaining necessary labour on contract from another business, like the cases already discussed.

62        I shall discuss “labour hire” arrangements between associated or related companies separately. First, it is necessary to give more specific attention to such arrangements between unrelated companies. That is, nominally, the position which the respondents say has arisen in the present case, where Tempus supplied labour to Ramsey Food Processing and where Tempus and Ramsey Food Processing were under supposedly independent control and were not related.

63        Modern labour hire cases, where the arrangement itself has come under attack or suspicion, and has been required to be justified, must be understood in light of two matters additional to the features to which I have already referred. First, the labour hire company, which provides labour to another unrelated company, may have a relationship with those whose labour it provides which is either a contract of service (employment) or a contract for services (independent contract). Accordingly, there may be a legitimate labour hire arrangement in place both where the labour hire company employs persons directly, and also where the labour hire company engages them as independent contractors and provides their services to another company on that footing. In either case, a labour hire company may, in the right circumstances, act as a provider of labour to another business. The second factor is that, in a scenario of this kind (i.e. where the enterprises are unrelated) it is assumed that the labour hire company is conducting a business of its own. Accordingly, it is usual to search for indications of commercial practicality in the arrangement from the point of view of the labour hire company, as well as for indications that the true primary relationship (whether employment or independent contract – i.e. contract of service or contract for services) is between the labour hire company and the person providing his or her labour and not truly between that person and the business in which the labour is ultimately utilised.

64        The Troubleshooters cases from 1989 to 1991, which received attention in both this Court and the High Court, were examples of a business arrangement which was found to be a genuine one for the supply of labour from one business to other businesses. In those cases, the relationship which Troubleshooters Available had with the persons whose labour it provided to others was not one of direct employment; it engaged them as contractors. However, the High Court judgment (Accident Compensation Commission v Odco Pty Ltd (1990) 64 ALJR 606) dealt with the question whether Troubleshooters Available was the “employer” of persons whose labour it supplied to builders, for the purpose of a levy for accident compensation arrangements. In that statutory scheme certain independent contractors were deemed also to be “employees”. The primary question was whether Troubleshooters Available was the “employer” and therefore liable, or whether liability fell on the builders to whom labour was supplied. In the High Court, Troubleshooters Available was found to be liable under the statutory scheme. By contrast, in the cases in this Court (see at first instance Odco Pty Ltd v Building Workers’ Industrial Union of Australia [1989] FCA 483 and on appeal Building Workers’ Industrial Union of Australia v Odco Pty Ltd (1991) 29 FCR 104), the question was whether, assessed by conventional tests, the relationship between Troubleshooters Available and those it engaged and supplied to builders was that of employment or independent contracting. The Court found it was a contracting relationship. Provided those matters are borne in mind, the judgment in the High Court provides a useful example, for present purposes, of the characteristics of a “labour hire” arrangement where liability was found to remain with the labour hire company.

65        The factual position was described by the High Court as follows (at 607–608):

When a builder needs a tradesman he contacts TSA and places an order. An employee of TSA then completes an order sheet recording the builder’s name, the person to whom the tradesman should report at the building site, the type of tradesman required and the duration of the work. The employee of TSA then contacts an appropriate tradesman and advises the tradesman of the builder’s requirements. If the proposal is acceptable to the tradesman, he attends at the building site and performs the necessary work at the direction of the builder. Subsequently, the tradesman telephones TSA to advise details of hours worked during the previous seven days. TSA raises an invoice to the builder charging the hours worked by the tradesman at a previously agreed hourly rate (which includes remuneration to TSA for its services to the builder). The tradesman is paid by TSA at the hourly rate or set price agreed between TSA and the tradesman. The tradesman makes no payments to TSA for having placed him. TSA’s reward comes from the difference between the amount it charges the builder and the amount it pays the tradesman.

66        Towards the end of its analysis the High Court said (612–613):

Once it is accepted that there was (1) an agreement between TSA and the builder for the supply of a tradesman to the builder to do certain work on terms that the builder was to remunerate TSA for supplying the tradesman and for the work which he did, and (2) an agreement between TSA and the tradesman whereby the tradesman agreed to perform work at the site at the builder’s direction for remuneration to be paid by TSA, it follows as a matter of plain language that the tradesman supplies services to TSA by attending at the site and doing work there. By attending there and doing work, he supplies services to TSA for the purposes of its business, notwithstanding he also at the same time supplies the same services to the builder for the purposes of its business.

67        It will be noted that the important ingredients in the High Court’s analysis were the separation of business interests and the identification of reward in the pursuit by Troubleshooters Available of its own business. As I noted earlier, a labour hire arrangement of this kind must be distinguished from the circumstance to be discussed a little later – the intra-group arrangement.

68        In Damevski v Giudice (2003) 133 FCR 438 (“Damevski”) in this Court Merkel J made, with respect, some pertinent observations about the general characteristics of cases where a successful argument has been mounted that a labour hire company has been inter-positioned between a client and workers hired for the purpose of the client’s business. Merkel J said (at [174]):

174    … 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, 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.

69        None of those tests were satisfied in the present case by the arrangements concerning Tempus.

70        Damevski is the authority in this Court which is closest in terms of legal principle (although less clear in its factual context) to the present matter. The essential facts will appear sufficiently from the extracts which follow. There was some division on the Full Court whether the “labour providing” company (identified as MLC) should be regarded as the agent of the hiring company (identified as Endoxos) for the purpose of the employment of the employee (Damevski). That was the view formed by Merkel J who said (at [172]):

172    … the “real substance” of the Endoxos and Damevski agreements was that AICA/MLC’s role in the relationship between Endoxos and its former employees was that it acted as agent for both parties in creating privity of contract between them. …

71        That was not the majority view. The majority view (Wilcox and Marshall JJ) was that the employment relationship between Endoxos and Damevski was a direct one, notwithstanding the inter-positioning of MLC. Wilcox J, who resolved that point of difference between Marshall J and Merkel J doubted “that the difference matters very much”. Wilcox J said at [3], [4] and [6]:

3    It is clear that nobody connected with MLC ever had a subjective intention of effecting a contract between Mr Damevski and Endoxos. The whole point of MLC’s intervention was to replace the existing employment contract between Mr Damevski and Endoxos with an arrangement that would enable Endoxos to avoid some of the obligations that attached to the employment contract. However, the question is whether this intention was achieved. …

4    I need not repeat all the points made by my colleagues about the conduct of the parties. Their finding that there was a contract of employment between Endoxos and Mr Damevski is compelling, whether one focuses on the evidence relevant to the existence of any relationship between Mr Damevski and MLC or that relevant to any relationship he had with Endoxos.

…

6    In relation to Endoxos, it is clear from the conduct of Endoxos’ managing director, Lindsay Burke, that, whatever may have been his belief about the contractual position, Mr Burke intended there would be no change in the nature of the relationship between his company and Mr Damevski. He said “nothing will change”; and nothing did change. Mr Damevski continued to do the same work, after 19 August 2001, as he had done before that date; under the same direction and control; using the same Endoxos vehicle, uniform and equipment; and, importantly, having his remuneration fixed and paid by Endoxos. Endoxos clearly intended that the relationship between Mr Damevski and itself would function in the same way as it did before 19 August 2001.

72        Marshall J said (at [58]):

58    … the relationship between Endoxos and Mr Damevski was one of mutual dependence and involved no one else, other than MLC in a confined capacity which related entirely to the manner of effecting Mr Damevski’s remuneration. Mr Damevski had no right to delegate his shifts to other persons. He worked solely for Endoxos. He was provided with equipment by Endoxos to perform work.

73        Merkel J said (at [143]–[144] and [153]–[154]):

143    It is also clear that, although Damevski continued to carry out his cleaning services for Endoxos as from 19 August 2001 in precisely the same manner as he had done previously, Damevski, Endoxos and AICA/MLC intended that Damevski was doing so as a consequence of the Endoxos agreement and the Damevski agreement. Viewed objectively all three parties intended that those agreements would enable Damevski to continue working for Endoxos as he had done previously, save that he was now doing so through the agency of AICA/MLC, as provided by those agreements. In that regard Damevski gave evidence before the Commission that, although he wanted to remain a direct employee of Endoxos, he reluctantly agreed to sign a letter accepting AICA/MLC’s offer “as detailed in the information pack” delivered to him.

144    However, it does not follow that, because Damevski terminated his employment as a cleaner with Endoxos as from 19 August 2001 and entered into contractual arrangements with AICA/MLC in relation to his employment as from 19 August 2001, he had no contractual relationship with Endoxos in respect of that employment. Whether such a contractual relationship existed depends on the proper characterisation of the contractual arrangements made between the various parties.

…

153    It is clear … that the proposal involved all of Endoxos’ staff agreeing to accept AICA/MLC’s offer to enable Endoxos to continue with, rather than relinquish, the cleaning contracts it had with its clients so that the relationship Endoxos had developed with its employees in the past “can continue long into the future”. Damevski was informed of the proposal by Mr Lindsay Burke (“Lindsay Burke”), the managing director of Endoxos, who informed Damevski and other Endoxos staff that, although they would need to go onto subcontracts, “nothing would change”.

154    Indeed, nothing did change in relation to the manner in which Damevski provided his services to Endoxos after 19 August 2001. Damevski worked for the same clients, was supplied by Endoxos with the same clothing, vehicle and equipment (with the Endoxos logo) with which he had previously been supplied as an employee. He continued to be provided with the same shifts and to be supervised in respect of his work by the same Endoxos managers and supervisors, albeit that they were now also “independent contractors”. Mr Kelvin Burke, the resources manager of Endoxos, who also became an “independent contractor”, stated that to Endoxos’ clients “there would appear to be no difference” because they would see the same people, equipment and vehicles.

74        The difference of view in Damevski made no difference to the outcome of the proceedings and in the present case, as in that case, it makes little difference whether the matter is approached by reference to the concept of agency or by giving attention to whether there was a direct employment relationship as a matter of substance between the complainant employees and Ramsey Food Processing. I shall return to that question after discussing the third circumstance, earlier identified.

Intra-group arrangements

75        Arrangements within a group of companies, or between or amongst associated companies present different issues. The matters I am about to discuss have no real significance for the arrangements with Tempus. It would not matter if they did. The Tempus arrangements did not pass the tests I will identify and discuss. Those tests may have been relevant to a consideration of the arrangements with the earlier Ramsey “employing” companies but that is not the issue for present attention.

76        There may be many reasons why companies, businesses or enterprises associated with each other might wish to organise their affairs in a way where one legal personality employs labour for the ultimate use and benefit of other legal personalities. Such arrangements will often not be characterised or accompanied by the apparent profitability or identified reward which might be necessary in order to regard an arms-length arrangement as a genuine one.

77        In such intra-group arrangements there may be overlapping, or even common, directorships, interlocking shareholdings (either cross-ownership or through ultimate ownership) and there is frequently a system of cross-guarantees in place. Little of this may be apparent to outsiders. The details may not be discoverable through the public records system. Arrangements between or amongst companies related in this way where one company (or more) operates to engage labour while others are concerned with management, operations, marketing or sales are by no means unusual. They are certainly not illegal. Arrangements along these lines may even be indispensible for some forms of business activity e.g. joint ventures. Although more than mere lip service must be paid to the separation of legal personality provided by individual incorporation, the tests applied to other labour hire arrangements, of independence and separate business, are either not relevant or are much less readily applied in such a circumstance.

78        Nevertheless, it must be possible to identify a rational explanation for the arrangement and the explanation must be satisfactorily related to an intelligible business objective. That is so because otherwise, doctrines of agency, at least, may operate to defeat a bare claim of independence and isolated liability, supported only by a bare reference to separate incorporation. That is particularly likely to be the case when: the separate employing company is completely reliant upon a company to which it purportedly supplies labour; it has no assets and no management structure of its own; and it exists only as a corporate shell to protect another company, which does have assets, from liability to employees. In such a case a court might not hesitate long before pronouncing the arrangement ineffective or, in a more serious case, a sham.

79        In Textile Footwear & Clothing Union of Australia v Bellechic Pty Ltd [1998] FCA 1465 (“Bellechic”) Ryan J said, of restructured arrangements in a group of companies:

In … circumstances, in which the employees were engaged to work in a business in which a number of separate corporate entities participated otherwise than as partners, it was open to those controlling the business to select which company should be the employer provided that the selection was consistent with the financial and administrative organisation of the business and was not otherwise a sham.

80        On the facts of that case his Honour found that the attempted re-arrangement of employment obligations was ineffective and that changes to the appearance of employment relationships were done for the “administrative convenience” of the real employer.

81        Similarly, in Romero v Auty (2001) 19 ACLC 206; [2000] VSC 462, Warren J found that an attempt to change employment obligations from one company to another was ineffective to do so. Her Honour recorded matters similar to some of the arrangements in the present case, saying (at [25]):

It appeared to be agreed between the parties that Westbury Joinery Services [the new “employer”] was the corporate vehicle whereby the company paid moneys to it for the payment of payroll and related matters. Funds to meet the weekly payroll were credited on a weekly basis to the Westbury Joinery Services account from the company [the “previous” employer Westbury Joinery Company Pty Ltd] accounts. The company provided only sufficient funds to cover the payroll and to maintain a modest account balance. Other payments made from the Westbury Joinery Services account, for example, bonus payments, superannuation payments and employee entitlements were covered by the transfer of funds from the company. Westbury Joinery Services paid the labour and associated costs of the company. It did not have significant assets and made no provision in its accounts for accrued employee entitlements. Such entitlements were uniformly met by the transfer of funds from the company for that purpose.

82        There was evidence that group certificates were issued by the new “employer” which dealt, in its own name, with the Australian Taxation Office, and that the new “employer” was the insured party for workers compensation purposes, rather than the “previous” employer. Notwithstanding those matters, her Honour found that the altered arrangements were ineffective to alter the true position about employment.

83        Conversely, in the case upon which the respondents placed most weight in the present proceedings, Golden Plains Fodder Australia Pty Ltd v Millard [2007] SASC 391 (“Golden Plains”), a Full Court of the Supreme Court of South Australia upheld a finding of a trial judge that a change of employer from one company in a group to another was not a sham, but legally effective.

84        The facts and circumstances of Golden Plains must be borne in mind when evaluating its significance for the respondents’ argument in the present proceedings. It must also be remembered that the Tempus arrangements do not fall into the category of an intra-group arrangement although, as I said earlier, it would not matter in this case if those tests were applied. The Golden Plains proceedings began as a common law action against the operating company of a business. In that suit, the plaintiff did not argue that the operating company, Golden Plains Fodder Australia Pty Ltd, was his employer. The plaintiff argued that another company in the group, Macpri Pty Ltd, was his employer. Golden Plains argued that it, and not Macpri, was the “real” employer and that the common law suit was therefore barred by reason of the provisions of the workers compensation legislation. It is not necessary to explore the details of the statutory provisions. The attempt to assert that Golden Plains, and not Macpri, was the employer would, if successful, have defeated the suit altogether. The onus therefore lay on Golden Plains to show it was an incompetent defendant. That onus was not discharged. The trial judge determined, as a preliminary point, that the suit was not statute barred because the defendant, Golden Plains, was not the employer; Macpri was.

85        The employing company (Macpri) was established some time after the incorporation of the original company (Golden Plains). When incorporated Macpri had the same directors as Golden Plains. It replaced Golden Plains as the employer registered with WorkCover, South Australia and the registration of Golden Plains was cancelled. The trial judge found that the directors of Macpri and Golden Plains had intended that, from the time of its formation, Macpri would be the employing company for the operations of Golden Plains. The trial judge referred to the remarks of Ryan J in Bellechic, which I set out earlier, and applied them. He found that the establishment of Macpri and its use as an employing company was not a sham.

86        The conclusion reached by the trial judge was critically affected, it would seem, by his evaluation of the evidence of key witnesses. Before the trial judge (in proceedings some ten years after the establishment of the Macpri employment arrangements) three members of the family which established both Golden Plains and Macpri gave evidence to the effect that the establishment of Macpri was just an accounting exercise and the true employer in the Golden Plains business had always been Golden Plains itself. That evidence directly contradicted evidence they had each given to the Industrial Commission of South Australia a few years earlier when they had each said that Macpri was the employer of workers in the Golden Plains business. The trial judge did not accept their change of position and did not accept any of them as honest witnesses.

87        The ruling of the trial judge was appealed. The legal principles applied on the appeal (and at first instance) are uncontroversial. Gray J (with whom David J agreed) said (at [32]–[33]):

32    Where there is an issue of identifying the employer of an employee when there might be two (or more) possible employers, courts have adopted the approach of resolving the issue by the application of the principles developed for determining whether a person was an employer at all.

33    The touchstone is the practical reality of the relationship. Courts have consistently emphasised that in determining whether a relationship between parties is one of employment or independent contract, the court should focus on the practical reality of the relationship.

88        On appeal, Gray J recorded the nature of the appellants’ argument (which impeached their own conduct) in the following way (at [25]):

25    It was further contended in the present case that the arrangements entered into between Golden Plains and Macpri, as well as the arrangements between those companies and Mr Millard, were a “sham”. It was contended that the business records that suggested and evidenced that Macpri was the employer of Mr Millard disguised or masked the true position. Counsel for Golden Plains submitted that, notwithstanding the extensive representation by business records and conduct evidencing that Macpri was Mr Millard’s employer, this was false. It was contended that this evidence could be swept aside and the conclusion reached that the truth was that Golden Plains was his employer. To understand the breadth of the submission, it should be pointed out that it was said that representations as to Macpri being the employer made in certified company accounts, to the Tax Commissioner, to WorkCover, and to others were false. Counsel for Golden Plains appeared at times reluctant to use the word “sham”, but that was the substance of the submission.

89        On the facts of the case, Gray J said (at [46]–[48]):

46    It is apparent that a decision was made in 1996 to have the operation run through the two companies, with Macpri undertaking the role of employer of the labour force as indicated above and Golden Plains being the trading arm of the operation.

47    … The arrangement appears to have been that Macpri would be responsible for labour requirements and would provide that labour to Golden Plains. In return it received a consulting fee that was sufficient to meet the outgoing expenses including wages, superannuation, payroll tax and WorkCover levy.

48    There are understandable commercial reasons why the whole operation should have been structured in this way, with the responsibility for labour being with Macpri. There is no suggestion that to do so was in breach of any law or regulation or would cut across any statutory obligations in respect to workers’ compensation, payroll tax or income tax. This was the way those involved in the overall operation structured the business. It was not a sham. It was a legitimate way of doing business.

90        White J was also prepared to accept the legitimacy of the arrangements, saying (at [91]):

91    … It is not uncommon within a corporate group for the employees to be engaged by an entity which is not involved in the ownership of assets or in the group’s trading operations. This may be done for perceived taxation advantages or to distance the group’s assets from claims by workers in respect of unpaid entitlements. When properly implemented, it cannot be said that such an arrangement is a sham in the sense described above. On the contrary, such arrangements are often quite transparent, and the apparent effect is precisely the actual legal effect sought to be achieved by those arrangements.

91        Reliance by the respondents on Golden Plains was misplaced for two reasons. First, the result on the facts of that case does not affect the legal principles at work, which are against the respondents’ arguments. Secondly, Tempus was not in the position of an intra-group company. There was no common directorship and no shared ownership. Tempus was purportedly independent from Ramsey Food Processing. However, even if the Tempus arrangements are to be evaluated as an intra-group arrangement they were ineffective to isolate employment, and employment obligations, from Ramsey Food Processing.

92        Golden Plains is an example of a factual scenario where employment arrangements were separated from an operating or trading company in a way which was legally effective. However, that is not the present case. Just as there is no support in the authorities for the proposition that employment arrangements can never be so separated, there is also no support in the authorities to suggest that all that is required is the formal establishment (or purchase) of a separate legal entity, establishment of a separate bank account and the use in various quarters of a new or different name.

Application of the legal principles to the facts

93        I shall deal, in due course, with specific claims for relief arising from the termination of employment of the complainant employees, but as I said at the outset of this judgment, the principal question for decision is whether Ramsey Food Processing, and not Tempus, was the true employer of the employees in question.

94        The respondents’ position appeared to be that Ramsey Food Processing would not be the employer of employees at the abattoir if a shelf company, Tempus, was interposed between it and the employees, if money passed through a separate bank account and if matters such as workers compensation insurance, superannuation contributions and taxation obligations were handled in the name of the interposed company and paid for through its bank account. No authority goes so far. Indeed, the authorities uniformly proceed on the footing, whatever the factual findings in a particular cases, that bare formalities would never be enough to obscure the real substance of an arrangement.

95        When I look to the substance of the arrangements, and their actual components and effect, I have no hesitation in concluding that they neither constitute or evidence employment by Tempus of any person. I am quite satisfied that, whatever was the position before 16 October 2006 (about which it is not necessary to make a definite finding), after that date the employer (at least of all the complainant employees) was Ramsey Food Processing. When regard is paid to the purpose for which Tempus was acquired that conclusion is strengthened.

96        One substantial flaw in the respondents’ position was that they did not themselves give effect, as a matter of fact, to the legal separation which they asserted. Nor was it evident in the earlier arrangements, so far as the evidence in the present case disclosed. When Tempus became involved, there was no evidence that anything changed or that at the abattoir any new employment actually commenced for the employees concerned. A similar thing may be said about the treatment of employees who, in January 2008, were transferred to Paul Allen Contracting (offal and tripe room employees) or, in April 2008 to Mortimer Administration (boning room employees), or to Ramsey Pastoral (employees at “Turangga Farm”) or, finally, in November 2008 to Paul Allen Contracting (Tempus “employees”). These arrangements were treated as a form of book entry. That circumstance reveals their true character.

97        Tested against the principles for determining whether a person or entity is, or is not, the employer of an individual, Tempus fails every test and Ramsey Food Processing, through its human agents, satisfies every legal test. It makes no difference to this analysis that Mr Marshall was nominally employed by Mortimer Administration or that Mr Considine’s services were nominally provided through Drama or that Mr Allen may have been nominally employed by Paul Allen Contracting or that Ms Park may have appeared on the books of Mortimer Administration as its employee also. Corporations act through human agents, whether other corporations are inter-positioned between the first corporation and those human agents or not. Ultimately each of the persons I have mentioned performed their services and carried out their duties in the business of Ramsey Food Processing and for the purposes of that business. When they dealt with the general workforce, and the complainant employees in particular, they did not do so on the evidence before me for the purpose of the business of any of the labour hire or service companies. Certainly that is unmistakably the case so far as Tempus is concerned.

98        Tempus bore none of the characteristics of an employer. It had no business of its own. It earned no money. It had no interest in the engagement of any employee except as a favour to the respondents. Ramsey Food Processing, on the other hand, had every right and privilege normally associated with an employer in its dealings with the workforce at the abattoir. It had the right to recruit employees and to dismiss them. It had the right to decide what work was to be performed and by whom. With those rights came corresponding obligations. Those obligations were not displaced by the inter-positioning of Tempus, the Tempus bank account or the Tempus letterhead.

99        The attempted inter-positioning of Tempus between Ramsey Food Processing and the employees who performed their work in Ramsey Food Processing’s business was ineffective to produce the factual and legal consequence that Tempus was their employer. Whether the matter is approached by asking whether Tempus was the actual employer (or whether Ramsey Food Processing was the direct employer notwithstanding the attempted inter-positioning of Tempus from mid-October 2006), or by asking whether Tempus acted as the agent for Ramsey Food Processing (rather than in its own right), the answers are the same. On either of those approaches, the respondents’ defence to the present proceedings must be rejected. Tempus was not an employer in its own right. Ramsey Food Processing was, at all relevant times between 17 October 2006 and 28 November 2008 the employer of each of the 11 complainant employees.

100        A less charitable view, but one which is available on the material before me, is that Tempus was inter-positioned between Ramsey Food Processing and Ramsey Food Processing’s employees at the abattoir in a way which was designed to hide the true position and to avoid Ramsey Food Processing’s liabilities to those employees should that ever become necessary. On that view the arrangement was a sham.

101        My conclusions to this point do not depend on any prior conclusion that the arrangements were a sham. That is a separate matter about which I will say something now. It is enough to find that the arrangements put in place were ineffective to achieve their intended purpose.

Sham

102        There was some debate about whether the applicant was entitled to contend, and it was open to me to conclude, that the arrangements made to inter-position Tempus between Ramsey Food Processing and employees at the abattoir were a “sham”. Counsel for the respondents contended that he was not required, on the pleadings, to meet any allegation of “sham”. Counsel for the applicant responded that it was not necessary for the applicant to establish that the arrangements were a sham, but nevertheless that conclusion was available as an accurate description of the arrangements.

103        Whether or not the arrangements were a sham will not bear upon the terms of any declarations to be made at the moment or affect the question of what entitlements are due to any of the complainant employees. However, it may be a relevant consideration in relation to whether penalties should be imposed and, if so, in what amount(s). I have decided that it is open to the Court to deal with this question and that I should do so.

104        Although the applicant must succeed on the basis of the findings I have so far made, I have no doubt that the arrangements involving the use of Tempus were not only legally ineffective for the reasons I have already given, but that they were also a sham. Before I deal in a little more detail with that question I should explain why, in my view, this is a legitimate question for examination, in addition to the matters which have been so far discussed.

105        The statement of claim filed in support of the application does not use the word “sham”. That is not surprising. The contraventions alleged do not depend on the proof of fraud or deceit, but upon non-satisfaction of statutory (or statute based) entitlements. There was no need to allege or prove “sham”, fraud or deceit to establish matters of that kind. A description of the arrangements which led to the contraventions as a “sham” is more in the nature of an argument, or suggested conclusion, than a statement of any element of the contraventions which were alleged.

106        Before the trial commenced, the parties filed and exchanged opening written submissions. In the submissions filed for the applicant the word “sham” was not used. However, in the discussion of what conclusion should be drawn from the facts to be established the applicant’s submissions contended that a number of aspects of the Tempus arrangements were “purportedly” put in place. The submission also said:

69.    The evidence referred to above demonstrates that, to the extent that Tempus was utilised as part of the employment arrangements at the Abattoir, the nature and extent of its involvement was entirely controlled by the first and/or the second respondent. It had no independent existence whatsoever.

…

72.    When the circumstances in which the Tempus arrangements came into effect, were managed, and terminated, are considered, this conclusion [that Ramsey Food Processing was the employer of the complainant employees] is reinforced. These arrangements were entirely orchestrated and controlled by the first respondent at the direction of the second respondent.

73.    In light of the analysis in Damevski and the other authorities, it could not be suggested that the Tempus arrangements resembled a genuine labour hire arrangement. The present is not a case in which the matter is finely balanced. It is one in which the facts overwhelmingly support the conclusion that the first respondent was the employer of the employees.

107        The written submissions for the respondents contended:

23.    There can be no doubt that Tempus as a company or corporation had the capacity to enter into contracts with both the Claim Employees, in terms of their employment by it and with RFP, in terms of the supply of contract labour at the Abattoir and that it did so.

24.    Tempus had the contractual capacity to enter into employment contracts and did so with each of the Claim Employees during the identified period of their employment.

25.    Tempus had the contractual capacity to supply labour to RFP under contract and did so in the identified period of that supply.

26.    … addressing only the structural elements of the supply of contract labour to a company by another there was nothing exceptional or untoward concerning the institution of this kind of arrangement.

108        I am satisfied that it was sufficiently disclosed to the respondents before the trial began that the genuineness of the arrangements made would be a central issue in the proceedings, as it was. Counsel for the respondents suggested in final submissions that if a “sham” had been alleged he might have wished to call further evidence, but he was not able to indicate from whom, or of what character. There was no limit imposed on the explanation or justification which Mr Ramsey might have advanced for the arrangements, in light of the obvious attack being made upon them.

109        The notion of “sham” was referred to by Ryan J in Bellechic, to which both parties referred in their arguments. The discussion in Golden Plains, upon which the respondents relied heavily, also involved consideration of the notion of “sham” and of legitimacy.

110        I am satisfied, therefore, that in the circumstances of the present case it is open to go further than the findings I have already made and examine whether the arrangements were not only legally ineffective, but were also a sham.

111        In a passage which has often been quoted, Lockhart J after reference to a number of authorities, said in Sharrment Pty Ltd v Official Trustee in Bankruptcy (1988) 18 FCR 449 (at 454):

A “sham” is therefore, for the purposes of Australian law, something that is intended to be mistaken for something else or that is not really what it purports to be. It is a spurious imitation, a counterfeit, a disguise or a false front. It is not genuine or true, but something made in imitation of something else or made to appear to be something which it is not. It is something which is false or deceptive.

112        However, it is important to note two things. First, his Honour placed the word “sham” in quotation marks (in this passage and elsewhere) to emphasise the special care to be taken when using it as a description of conduct. Secondly (and this point is related to the first), his Honour commenced this section of his judgment with the following caution (at 453):

“Sham” is a word which, although not infrequently having attracted the attention of the courts usually hovers on the periphery of cases. Here it is at the heart of the case. It is a word which first appeared as slang in the seventeenth century and the dictionaries described it as being of obscure origin. It is indeed a pity that it cannot be relegated to its earlier obscurity because of the ambiguity and uncertainty that surrounds its meaning and application.

113        Diplock LJ in Snook v London & West Riding Investments Ltd [1967] 2 QB 786 also used the word “sham” in quotation marks and referred to it as a “popular and pejorative word”. To describe something as a “sham” may, as Gleeson CJ said in ACCC v C G Berbatis Holdings Pty Ltd (2003) 214 CLR 51 (at [7]) about the word “unconscionable” when used in everyday speech: “be merely an emphatic method of expressing disapproval of someone’s behaviour”.

114        I bear all those limitations in mind. Nevertheless, in my view, the descriptive content of the notion of a “sham” distilled by Lockhart J from the authorities applies in every relevant respect to the arrangements put in place for the employment of workers at the abattoir in mid-October 2006. So to conclude does not identify any additional ground for relief at the present stage of the proceedings. Indeed it does not add any present legal consequence to the factual conclusions earlier stated, which do not depend on any use (whether in everyday speech or legal parlance) of the notion of “sham”. Nevertheless, having regard to the evidence in the present case, and to the factual picture which is revealed by that evidence, I do not believe it to be inappropriate to express additional conclusions about the character and purpose of the arrangements which have been considered in the present proceedings.

115        I have no doubt that the arrangements concerning Tempus had their genesis in two objectives on the part of Mr Ramsey. The first was to create an occasion for the apparent “termination” of employment of all the “employees” of the Ramsey “employing” companies, thereby permitting the liquidation of the companies and the extinguishment (so it has been thought) of any liability owed by them, whether to employees or under the orders made by Greenwood J. The second objective was to ensure that Ramsey Food Processing would not become directly liable to employees for their entitlements, whether already accrued or to be accrued. The arrangements to achieve these objectives were devoid of any legal content. They represent an attempt to prevail by form, over any substance. They were a sham.

116        I also have no doubt that Mr Ramsey, and Ramsey Food Processing under his control, have endeavoured to shelter behind the arrangements to dishonour and deny the commitment, voluntarily made, that Tempus would be fully indemnified in its apparent obligations towards employees. It was Mr Ramsey who decided that the indemnity would not be honoured. When the applicant sought to invoke it as a source of obligation to pay outstanding employee entitlements the response of Ramsey Food Processing, through its solicitors, on 7 September 2009, was:

We act for Ramsey Food Processing Pty Ltd.

We are instructed there is no relationship between Tempus Holdings Pty Ltd and Ramsey Food Processing Pty Ltd and the Deed of Agreement you refer to in your correspondence does not give you any privity of contract.

Our client shall defend any actions commenced.

117        The respondents thereby rejected the indemnity freely given to Tempus as an integral part of the arrangement and dishonoured the promise that Ramsey Food Processing would stand behind Tempus and make good obligations to employees at the abattoir incurred in its name. The ready rejection of these obligations also supports the conclusion that the arrangements were, from first to last, a sham.

Summary of conclusions of fact and law

118        When the legal principles are applied to the facts of the present case, three possible conclusions (to which I earlier referred) are open. Each leads to the same result.

119        First, despite the agreement between Mr Ramsey and Mr Considine in October 2006, the deeds dated 16 October 2006 and 19 May 2007, the steps taken in the name of Tempus and the use of a separate bank account, Tempus never became, nor acted as, the employer of the complainant employees. Tempus did not exercise any form of control over the engagement, performance of work, payment or ultimate termination of employment of any of the complainant employees. All such responsibilities were borne by some different legal entity. On that conclusion, the only possible alternative for consideration is Ramsey Food Processing, in whose business the complainant employees worked and on whose behalf all the functions referred to above were carried out. Those findings are sufficient to sustain the present application and warrant the orders sought against Ramsey Food Processing, and against Mr Ramsey for short additional reasons soon to be given.

120        Secondly, if any steps taken to inter-position Tempus between the complainant employees and Ramsey Food Processing are to be regarded as having any effect at all it is abundantly clear that everything which was done in the name of Tempus was done by Tempus (or others) acting on behalf of Ramsey Food Processing. All the things done in the name of Tempus were done by persons who were themselves acting in the course of the business, and on behalf, of Ramsey Food Processing. Those persons were Mr Ramsey, Mr Marshall and Ms Park. Mr Considine’s own contribution was minor, co-operative and purely formal. On this approach, recognising the separate legal existence of Tempus and giving some weight to the things done in its name, the conclusion which must be reached is that anything done by Tempus was done as the agent for Ramsey Food Processing and not by Tempus independently. Apart from its bare legal existence, Tempus did not function independently. It had no business of any sort. It earned no income. There was no rational explanation for conduct in its name except to serve the interests of Ramsey Food Processing. It was therefore, at best, an agent for Ramsey Food Processing which, for that reason also, cannot effectively resist the present application or the orders sought. Nor can Mr Ramsey.

121        Thirdly, although this further conclusion is not a necessary finding for either of the earlier two conclusions, everything done in the name of Tempus was, in my view, a sham. The establishment of Tempus had its origins in deceit. Later, despite the assurances given to Mr Considine, the written indemnity, the fact that accrued entitlements were shown in the books kept for Tempus and that money was received into the Tempus bank account sufficient to cover all the obligations identified in the present proceedings, persons acting on behalf of Ramsey Food Processing acted to frustrate, deny or defeat the entitlements of employees identified in the present proceedings. The matters relied on to justify this conduct were based, from beginning to end, on deceit and on a “sham” arrangement. That conclusion supports and reinforces the earlier two, although not necessary for either.

122        Whatever view is taken, the applicant has made out a clear case for relief.

Accessorial liability

123        The application seeks that Mr Ramsey pay penalties as a person involved in each of the contraventions by Ramsey Food Processing.

124        I have no doubt that Mr Ramsey was involved in and complicit in the steps which were taken, first to terminate the employment of the complainant employees and then to deny them their legal entitlements from the time of that termination. In Construction, Forestry, Mining and Energy Union v Clarke [2007] FCAFC 87, 164 IR 299 a Full Court said (omitting references) (at [26]):

26    … Regardless of the precise words of the accessorial provision, such liability depends upon the accessory associating himself or herself with the contravening conduct – the accessory should be linked in purpose with the perpetrators … The words “party to, or concerned in” reflect that concept. The accessory must be implicated or involved in the contravention … or, … must participate in, or assent to, the contravention.

125        See also Temple v Powell (2008) 169 FCR 169; Australian Building and Construction Commissioner v Construction, Forestry, Mining and Energy Union (2010) 187 FCR 293; and York v Lucas (1985) 158 CLR 661.

126        Not only was Mr Ramsey involved in any contravention committed by Ramsey Food Processing, he was its guiding mind. He is wholly concerned in and responsible for the contraventions by Ramsey Food Processing. He is liable in his own right as an accessory.

Relief

127        At the present stage of the proceedings it is necessary to deal with the question of what declarations are appropriate to reflect the findings I have made, and what further orders by way of payment to employees are necessary to vindicate their rights to payment in lieu of notice, severance payment (if applicable) and payment for accrued annual leave.

128        I propose to make orders by way of declarations and orders specifying the monetary entitlement of each employee. The applicant is to make the necessary calculations to give effect to the conclusions expressed hereunder.

129        Later, it will be necessary to deal with the question of whether pecuniary penalties should be imposed on the first and/or second respondent and what (if any) such penalties should be ordered.

130        Having regard to the terms of the letter dated 16 October 2006, signed by Mr Marshall, advising employees that their employment (with the three companies which went into insolvency) was “at an end”, and to the fact that, nevertheless, work continued to be performed without interruption or apparent change, I propose to proceed on the basis that the period to which the application in the present proceedings relates commenced on 17 October 2006 and that most of the complainant employees are entitled to a calculation of their entitlements since that date. Two of the complainant employees (Messrs Felsch and Windler) were engaged with effect from 5 October 2007 and 27 November 2007 respectively. For reasons I will explain in a little more detail, I am satisfied that the employment of each of the complainant employees came to an end with effect on 28 November 2008.

131        Most (10) of the complainant employees were covered by the Federal Meat Industry (Processing) Award 2000 and entitled, under the Award, to notice of termination of employment, or payment in lieu. They are entitled to consideration of whether severance pay was due to them when their employment was terminated. One of the complainant employees (Mr Ryder) was not covered by the Award, but he was entitled to accrued annual leave under s 235 of the Workplace Relations Act.

Payment in lieu of notice

132        During final submissions agreement was reached on the period of notice to which the complainant employees were, under the Award, entitled but were denied (on any view of who was their employer). I agree with the common position then reached, which was that all of the complainant employees received 3 days notice, instead of the period required in each case under the award, where it applied.

133        Employees were notified by Mr Marshall by letter dated 24 November 2008 on the letterhead of Ramsey Food Processing that Tempus would, on 28 November 2008, “cease to be a labour hire company, supplying labour to our company”. By letter dated 25 November 2008 Mr Marshall advised employees that they would, as a result not be offered “any ongoing employment”. This letter was on Tempus letterhead. If Tempus had been the employer, this would constitute notice of termination of employment with Tempus. On the view of the facts which I take, this letter from Mr Marshall was effective to constitute notice of termination of employment by Ramsey Food Processing.

134        All but three of the complainant employees were entitled to 10 days notice under the Award and two (Messrs Baker and Cassidy) were entitled to 15 days notice having regard to their age (over 45 years). Eight of the complainant employees are therefore entitled to be paid for a further seven days in lieu of notice; Messrs Baker and Cassidy are entitled to be paid for a further 12 days. Mr Ryder was not covered by the Award.

Severance pay

135        Most (nine) of the complainant employees were in employment with Ramsey Food Processing, after 17 October 2006, for more than two but less than three years. Under cl 10.3.1 of the Award, those employees were, if entitled to severance pay, entitled to be paid a further six weeks pay on termination. Two employees (Messrs Felsch and Windler) were each employed for more than one but less than two years. They were, if entitled to severance pay, entitled to be paid a further four weeks pay.

136        Entitlement to severance pay depends on whether employment was terminated “by reason of redundancy”. Clause 10.1.2 of the Award provided as follows:

10.1.2     Redundancy occurs where an employer has made a definite decision that the employer no longer wishes the job the employee has been doing done by anyone and that decision leads to the termination of employment of the employee, except where this is due to the ordinary and customary turnover of labour.

137        On the findings I have made the employer was Ramsey Food Processing. Whether the complainant employees were redundant within the meaning of cl 10.1.2 must be assessed, therefore, from the position of Ramsey Food Processing. The complainant employees are a group consisting of people who, unlike other employees, did not after 28 November 2008 secure ongoing employment at the abattoir. Employees who were retained at the abattoir were nominally employed (in their ongoing roles) by Paul Allen Contracting. In the light of my earlier findings, I very much doubt that those supposed arrangements had any effect upon the existing employment of those persons. The better view is that they simply remained employees of Ramsey Food Processing. For the purpose of the present discussion, and consideration of the operation of cl 10.1.2, approaching the matter that way involves no prejudice to Ramsey Food Processing and could, in some circumstances operate to its benefit. That is because if, in truth, all employees were terminated on 28 November 2008 it would be clear beyond argument that the conditions for the application of cl 10.1.2 were satisfied in the case of the complainant employees.

138        On the evidence, the workforce at the abattoir consisted of permanent employees (including each of the complainant employees) and a “daily” workforce. Numbers in the latter group fluctuated to meet changing operational demands. There is no evidence that the termination of any complainant employee was a response to occasional fluctuations in the need for labour of this kind, or that the termination of any of them was due to the ordinary and customary turnover of labour. On the other hand, there was evidence from Mr Ramsey that, at the time of termination of their employment: “there wasn’t any work for them”; there were no “positions for them at that time”; “we went out of our way to employ as many as we could and keep them in employment”; and “our objective was to employ everyone”.

139        In my view, it follows naturally from this evidence that Ramsey Food Processing (and Mr Ramsey) decided that the jobs of the complainant employees (as members of the permanent workforce) were not to be done by them or by anyone, and the termination of their employment was not due to the ordinary and customary turnover of labour.

140        Had the position seemed equivocal it would, in my view, have been necessary for the respondents to show that termination of the employment of each of the complainant employees was due to “the ordinary and customary turnover of labour”. That circumstance was expressed to operate as an exception to a general rule (see Vines v Djordjevitch (1955) 91 CLR 512, 519–520; Director of Public Prosecutions v United Telecasters Sydney Limited (1990) 168 CLR 594 at 611; and Chugg v Pacific Dunlop Ltd (1990) 170 CLR 249 at 257–258) and the benefit of it, if the general rule was otherwise applicable, would need to be established by the party seeking its benefit. I do not accept the submission of the respondents that an onus of excluding the operation of the exception would lie on the applicant. However, as I have said, the matter is more clear-cut than that and it is not necessary to resolve the matter by reference to notions of onus.

141        Consequently, I am satisfied that orders should be made that most (eight) of the complainant employees (excluding Mr Ryder, who was not covered by the Award) be paid a further six weeks pay and Messrs Felsch and Windler be paid a further four weeks pay.

Annual leave

142        No claim is pressed in the present proceedings in relation to any period prior to 17 October 2006. That appears to be because the proceedings before Greenwood J in 2006 proceeded upon the premise that the relevant employing companies did not include Ramsey Food Processing. Having regard to the evidence of Mr Ramsey to the effect that the arrangements with Tempus merely repeated the earlier arrangements, I think there must now be very serious doubt about whether Ramsey Food Processing was not the employer of many of the complainant employees before 17 October 2006. However, I have not been asked to decide that question, or grant any relief referable to the earlier period, and I need say no more about it.

143        Having regard to those matters, the calculation of annual leave was not in issue. There is no doubt that most of the complainant employees (including Mr Ryder) have a claim to accrued annual leave dating from 17 October 2006, at the latest. Two (Messrs Felsch and Windler) have shorter periods of service. No claim at all is made for three complainant employees (Messrs Tomlinson, Korn and Slack). The agreed calculations took those various matters into account and should be given effect to.

Interest

144        Interest on the unpaid amounts for payment in lieu of notice, severance pay and accrued annual leave was claimed under s 722 of the Workplace Relations Act, not disputed and should be allowed. Interest should be calculated in accordance with Practice Note CM 16 from 28 November 2008 to the date on which orders are to be made.

145        Interest on judgment will apply, without the necessity for a separate order, from the date orders are made to the date of payment – see s 723 of the Workplace Relations Act, s 52 of the Federal Court of Australia Act 1976 (Cth) and Rule 39.06 of the Federal Court Rules 2011.

Workers compensation

146        Counsel for the respondents referred frequently to the fact that a small number of the complainant employees were receiving some form of workers compensation payment, or the benefit of some altered working arrangement, at the time of the termination of their employment. He also referred to Mr Ramsey’s declared view (which he asserted in his oral evidence) that persons on workers compensation could not be dismissed. I did not understand what the significance of these references was intended to be. Each of the complainant employees lost their job. Their employment was in no sense preserved. It was not disputed by Mr Ramsey that each of the complainant employees had outstanding, unsatisfied entitlements. Each of them was, at the direction of Mr Ramsey (on his own admission) denied payment of their outstanding entitlements: first, by the refusal of Ramsey Food Processing to observe the pre-existing arrangements for payment, through the Tempus account, of employee entitlements; secondly, by the refusal of Ramsey Food Processing to observe or honour the indemnity given by it to Tempus; thirdly, by the steadfast refusal of Ramsey Food Processing, under the control of Mr Ramsey, to respond to the claims made on behalf of the complainant employees by the applicant; and last of course by the approach taken to the present proceedings.

147        In those circumstances, I see no real room for any reference to the workers compensation status of any of the complainant employees. Although I did not understand how it was said to be relevant I can only surmise that it was intended to suggest, in those cases, that there was a diminished entitlement to some of the relief claimed. I can see no basis for such a suggestion.

Declaratory Relief

148        I propose to make declarations to the following effect:

1.    Each of Paul Lumley, Robert Baker, John Woods, Britt Cassidy and Toni Lynch was employed by the first respondent at the South Grafton Abattoir from at least 17 October 2006.

2.    Each of Grant Tomlinson, Nathan Korn and Brent Slack was employed by the first respondent at the South Grafton Abattoir from at least 17 October 2006.

3.    John Ryder was employed by the first respondent at the South Grafton Abattoir from at least 17 October 2006.

4.    Peter Felsch was employed by the first respondent at the South Grafton Abattoir from 5 October 2007.

5.    Paul Windler was employed by the first respondent at the South Grafton Abattoir from 27 November 2007.

6.    Each of Paul Marshall, Renee Park, Tempus Holdings Pty Ltd and Mortimer Administration Service Pty Ltd was, at all times material to the grant of relief in the present proceedings, under the direction and control of the first and second respondents.

7.    Each of Paul Marshall, Renee Park, Tempus Holdings Pty Ltd and Mortimer Administration Service Pty Ltd was, at all times material to the grant of relief in the present proceedings, the agent of the first respondent.

8.    The employment of each of the employees referred to in 1, 2, 3, 4 and 5 above was terminated by the first respondent, effective on and from 28 November 2008, by notice given on behalf of the first respondent on 25 November 2008.

9.    The first respondent, in breach of clause 9 of the Federal Meat Industry (Processing) Award 2000, failed to afford notice of termination of their employment to each of the employees referred to in 1, 2, 4 and 5 above.

10.    The first respondent, in breach of clause 10 of the said Award, failed to pay severance pay to each of the employees referred to in 1, 2, 4 and 5 above as a result of the termination of their employment.

11.    The first respondent, in breach of s 235 of the Workplace Relations Act 1996 (Cth), failed to pay to each of the employees referred to in 1, 3, 4 and 5 above the value of annual leave accrued by them in the service of the first respondent since the relevant date referred to in 1, 3, 4 or 5 above.

12.    The second respondent was involved in the contraventions of the first respondent referred to in 9, 10 and 11 above within the meaning of s 728 of the Workplace Relations Act 1996 (Cth).

Publication of orders

149        The applicant is to provide short minutes of order containing the declarations set out above, orders specifying the total amount due to each of the complainant employees, and the date upon which such orders will take effect. The day appointed to make formal orders may be arranged with my Associate when the necessary drafting has been done.

150        The draft orders should be supported by a sufficient statement of calculations to show each of the elements of the payment to be made to each complainant employee (including interest) and a sufficient indication of how the calculations were made.

Further proceedings

151        Following publication of orders the parties will be allowed a sufficient time to consider their position and then attempt to reach agreement on the most efficient way to conduct the remainder of the proceedings dealing with the question of penalties. The matter will be listed for directions at an appropriate time.

Associate:

Dated:    19 October 2011