FEDERAL COURT OF AUSTRALIA

Kerrisk v DC Holdings WA Pty Limited [2013] FCA 1217

THE COURT ORDERS THAT:

1.    The interlocutory application of the respondent filed 27 September 2013 for summary judgment be dismissed.

2.    The respondent pay the costs of the applicants to be taxed if not agreed.

3.    The respondent file and serve its defence within 28 days and the applicants file and serve any reply within 14 days after being served with the defence.

4.    The matter be listed for further directions on 31 January 2014 at 11:15am (WST).

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

REASONS FOR JUDGMENT

overview

1    By interlocutory application filed 27 September 2013, the respondent seeks an order that the applicants’ proceeding against it be dismissed pursuant to s 31A(2) of the Federal Court of Australia Act 1976 (Cth) and that the applicants pay the respondent’s costs of the proceeding.

2    Section 31A(2) provides that the Court may give judgment for one party against another in relation to the whole or any part of a judgment if:

(a)    the first party is defending the proceeding or that part of the proceeding; and

(b)    the Court is satisfied that the other party has no reasonable prospect of successfully prosecuting the proceeding or that part of the proceeding.

3    In this case, the respondent is defending the proceeding and brings the interlocutory application for summary judgment.

4    The question is whether the Court is satisfied that the applicants have “no reasonable prospect of successfully prosecuting the proceeding”.

5    The circumstances in which a court may be satisfied that a party has no reasonable prospect of successfully prosecuting a proceeding have been considered in Spencer v Commonwealth [2010] HCA 28; (2010) 241 CLR 118 (Spencer).

6    In Spencer, at [25], French CJ and Gummow J in a joint judgment emphasised that s 31A(2) requires a “practical judgment” by the Federal Court as to whether the applicant has more than a “fanciful” prospect of success. Their Honours noted that may be a judgment of law or of fact, or of mixed law and fact. They further observed that where there are factual issues capable of being disputed and in dispute, summary dismissal should not be awarded to the respondent simply because the Court has formed the view that the applicant is unlikely to succeed on the factual issue.

7    In this proceeding, the applicants say there are mixed questions of fact and law in issue, whereas the respondent essentially submits that there are only questions of law relevantly in issue and the Court is in a position at this point of the proceeding to determine them without the need for the matter to proceed to a trial.

8    The respondent in pressing the view that the Court has the ability at this point to finally determine the question of law in a summary way, relies on observations in Jefferson Ford Pty Ltd v Ford Motor Company of Australia Ltd [2008] FCAFC 60; (2008) 167 FCR 372 where, at [131], Gordon J emphasised that a “real issue of law” does not necessarily preclude summary judgment. I accept that proposition.

9    In the result, however, I am not satisfied that summary judgment should be ordered so the respondent’s application should be dismissed with costs.

Pleading and evidence

10    The application for summary judgment was supported by the affidavit of Mr Scott Chesterman, solicitor on behalf of the respondent, which put into evidence a Facilities and Service Agreement (FSA) relating to a dental practice at 38 Outram Street, West Perth, Western Australia, and 551 Marmion Street, Booragoon, Western Australia, together with an Associateship Deed (Deed) between the respondent, the applicants, and Dr NR Radny (Dr Radny) and a company associated with him, PUG Nominees Pty Ltd (PUG). The affidavit of Ms Fiona McLay, solicitor, filed on behalf of the applicants, also put into evidence an Asset Sale Agreement (ASA) made between the parties to this proceeding. It appeared in the course of consideration of the evidence received on the interlocutory application that the parties generally accept that these undated agreements and the deed were each made on or about 28 March 2011.

11    I also received into evidence, on the tender of the applicants at the hearing, a copy of a concurrent writ of summons with accompanying statement of claim in action CIV 1595 of 2013 in the Supreme Court of Western Australia, wherein the respondent, as plaintiff, has sued the applicants, as first defendant and second defendant, claiming damages for breaches of the FSA and ASA, as well as an injunction restraining the defendants in that proceeding from soliciting a customer of the “Dental Practice” referred to in the statement of claim. I later also received into evidence, at the hearing, on the respondent’s tender, the defence and counter-claim in CIV 1595 of 2013 and then the reply and defence to counter-claim. The action CIV 1595 of 2013 was commenced 15 April 2013 and so precedes the proceeding in this Court. In the event, the writ and pleadings in CIV 1595 of 2013 are of limited relevance to the interlocutory application before me, other than to provide some context to the current proceeding in this Court.

12    By the statement of claim in this proceeding, the first applicant (Dr Kerrisk), who is a periodontist, and the second applicant (Mindil), which is a company associated with him and the trustee of the PK Dental Trust, seek relief under s 16(1) of the Independent Contractors Act 2006 (Cth) (IC Act) varying the FSA in accordance with the relief sought in the originating application, on the basis that the FSA was unfair and harsh.

13    In the statement of claim (put generally) the applicants plead:

    That the applicants would perform dentistry and related services at the subject premises.

    Dr Kerrisk would perform the “Dental Services” personally during the “Term”, these expressions being terms defined by reference to the FSA.

    Dr Kerrisk would perform the Dental Services with due care and skill and to the standard expected of a dentist experienced in the performance of obligations and services required under the FSA.

    The applicants were licensed by the respondent to use and occupy the premises and perform the Dental Services.

    The FSA was a “services contract” within the meaning of that term and s 5 of the IC Act.

    Dr Radny was a periodontist who conducted a dental practice at the same premises.

    Dr Radny conducted the dental practice pursuant to the licence granted by the respondent.

    PUG was a company associated with Dr Radny and trustee of the N R Radny Family Trust.

    The parties and Dr Radny and PUG made the Deed.

    It was a term of the Deed that Dr Kerrisk and Dr Radny would conduct licensed dental practices at the premises in association.

    The Deed was a “services contract” or alternatively a condition or collateral arrangement that related to the FSA and is taken to be part of that services contract by reason of s 5(4) of the IC Act.

    It was a term of the Deed that Dr Radny would not interfere with, or seek to influence improperly, Dr Kerrisk’s professional judgment in relation to the conduct of his dental practice and that any new patient, unless specifically referred to, or requesting to be dealt with by a particular specialist, would be allocated between Dr Radny and Dr Kerrisk by Dr Radny acting reasonably provided that Dr Kerrisk may decline to take any patient allocated.

    In late October and during November 2012 Dr Radny engaged in a course of conduct, particulars of which are provided, that was in breach of Dr Radny’s obligations under the Deed, was unconscionable and carried out in bad faith, evinced an intention to no longer be bound by the Deed and prevented Dr Kerrisk from performing the Dental Services in accordance with the FSA and the Deed.

    The respondent failed to ensure that: Dr Kerrisk had unrestricted access and use of the premises to perform his practice; the use and occupation of the premises was free from substantial interference by Dr Radny and/or PUG in relation to the performance of his dental practice; and that the use and occupation of the premises was free from threatening, intimidatory and/or bullying conduct by Dr Radny and/or PUG.

14    The applicants also plead that the FSA failed to provide a number of terms, which may generally be described as being to the following effect:

    authorising the applicants to terminate the FSA in circumstances where Dr Radny repudiated the Deed;

    authorising the applicants to terminate the FSA upon the termination of the Deed;

    providing for compensation to be payable to the applicants by the respondent upon the termination by either of the applicants or both of them of the FSA in any of the pleaded circumstances;

    providing that cl 2.3 would have no effect upon the termination of the FSA by the applicants in any of the circumstances;

    providing that upon termination by the applicants of the FSA in the pleaded circumstances the respondent would treat the obligations of the applicants as having been fully discharged on and from the time of termination and thereafter indemnifying them from loss.

15    It may be observed that the proceeding in this Court has a certain defensive quality to it in light of the earlier proceeding commenced by the respondent in this proceeding against the applicants in this proceeding in CIV 1595 of 2013.

issue

16    What is at issue in this proceeding is the availability of relief to the applicants under the IC Act. Part 3 of that IC Act enables this Court (or the Federal Circuit Court) to review a “services contract” on either or both of the grounds that the contract is unfair or harsh. The Court’s powers where the grounds of an application is made out are enumerated in ss 15 and 16 of the IC Act.

17    Section 11(1) of the IC Act makes it clear that Pt 3 applies to a “services contract” other than:

(a)    a services contract to the extent that the contract relates to the performance of work by the independent contractor for the private and domestic purposes of another party to the contract; or

(b)    without limiting paragraph (a), a services contract to which an independent contractor that is a body corporate is a party, unless the work to which the contract relates is wholly or mainly performed by:

(i)    a director of the body corporate; or

(ii)    a member of the family of a director of the body corporate.

18    In relation to the proper construction of terms in issue in this proceeding, the parties seek to draw something from the terms of para (a).

19    The primary question, however, in this proceeding is whether the FSA is a “services contract”. It is pleaded in [8] of the statement of claim that the FSA is a “services contract”.

20    Section 5(1) of the IC Act provides the general meaning of such a contract in the following terms:

(1)     A services contract is a contract for services:

(a) to which an independent contractor is a party; and

(b) that relates to the performance of work by the independent contractor; and

(c) that has the requisite constitutional connection specified in subsection (2).

Note:    Conditions or collateral arrangements relating to a services contract may be taken to be part of the services contract: see subsection (4).

21    It may be seen immediately that key terms in this definition are “a contract for services”, “an independent contractor”, and “relates to the performance of work by the independent contractor”.

Respondent’s submissions

22    It is at this point that the respondent says that a real question of law arises that may be dealt with summarily, not involving questions of fact or mixed questions of law and fact. In this regard, the respondent submits that:

    it is plain from the terms of the FSA that the applicants do not perform dentistry and related services in relation to the dental practice owned by the respondent, as alleged in [7(a)] of the statement of claim;

    the FSA is not a “services contract” for the purposes of s 5;

    therefore, Pt 3 of the IC Act has no application.

23    The respondent provides the following analysis of the relevant contractual documents.

24    It notes that the expression “Dental Practice” is defined in cl 1.1 FSA to mean the dental practice conducted by Dr Kerrisk.

25    It further notes that the “Dental Practice Obligations” are defined in cl 1.1 FSA to be those set out in Sch 2 FSA, which obligations are to be observed and performed by Dr Kerrisk in conducting the Dental Practice: cl 4.2 FSA.

26    Further, that Dr Kerrisk must conduct the Dental Practice personally during the term of the FSA: cl 4.1(1) FSA.

27    And that the respondent cannot interfere with the way Dr Kerrisk conducts the Dental Practice: cl 10.2 FSA.

28    Thus, the respondent says it has no interest in Dr Kerrisk’s Dental Practice and refers to cl 4.1(b) FSA. It says that it merely provides facilities and services to Dr Kerrisk pursuant to cl 3 FSA in return for a fee (calculated in accordance with cl 6 FSA).

29    The respondent says Dr Kerrisk does not provide any services to the respondent. Rather, he provides dental services to patients of his Dental Practice. The only obligation imposed on him by the FSA in relation to those services, the respondent contends, is that they be conducted at the relevant premises: cl 1.1 of Sch 2 FSA.

30    In relation to the Deed and the ASA, the respondent says it is acknowledged in recital A FSA that at the time of entering the FSA Dr Kerrisk sold his previous practice to the respondent under the terms of the ASA. It says from that date, Dr Kerrisk conducted his own practice at premises which are shared with Dr Radny in accordance with arrangements under the FSA and the Deed.

31    The respondent says that by the ASA:

    The respondent purchased the assets of the dental practice previously conducted by Dr Kerrisk: cl 3.1 ASA.

    The assets acquired by the respondent consisted of the goodwill and all other property, rights and assets of the applicants, used in the practice previously conducted by Dr Kerrisk, which included the exclusive right to carry on that practice in succession to the applicants: cl 1 ASA (definitions of “Assets” and “Goodwill”).

    Certain assets are excluded from the purchase, including records which the applicants are required by law to keep: cl 1 ASA (definitions of “Excluded Assets” and “Excluded Records”).

    Entry into the FSA was a condition precedent to entry into the ASA: cl 2.1 ASA.

32    By the Deed, the respondent says:

    The respondent and the applicants, and Dr Radny and PUG, set down the arrangements by which the respective practices of Dr Kerrisk and Dr Radny are to be conducted in association: recital F Deed.

    The FSA is identified as the “second facilities and services agreement” in order to distinguish it from a similar agreement between the respondent and Dr Radny and PUG: cl 1.1(e) and (k) Deed.

    The Dental Practice of Dr Kerrisk is identified as the “Associate Licensed Practice” to distinguish it from the “Primary Licensed Practice” of Dr Radny: cl 1.1(b) and (i) Deed.

    The scheme is that:

(a)    Dr Kerrisk and Dr Radny each conduct their own respective practices: cl 1.1(b) and (i), 3.1, 3.2, 3.6, 3.7, 5.3 and 5.4 Deed; and

(b)    new patients are apportioned between the two practices: cl 3.5 Deed.

33    Thus, the respondent says that it is apparent that contrary to the allegation in [7(a)] of the statement of claim:

    Dr Kerrisk has not performed Dental Services under the FSA in relation to a dental practice owned by the respondent;

    Dr Kerrisk performs Dental Services for the patients of the dental practice owned by him (presumably under a contract between the dentist and the patient).

34    The respondent says that, subject to one matter, the respondent accepts that, if the applicants satisfy the Court that the FSA is a “services contract” under s 5 of the IC Act, the exclusions in s 11 do not stand in the way. However, as adverted to above, the respondent draws upon the exclusion in s 11(1)(a) in support of its submission concerning the correct construction of the meaning of “services contract”.

35    The one matter to which that submission is subject is this. The respondent says that to the extent that the applicants rely upon the services which Dr Kerrisk provides to patients of the Dental Practice to establish the “performance of work” for the purposes of s 5(1)(b), that work is performed for the private and domestic purposes of the patients, bringing it within the exclusion in s 11(1)(a). However, the primary submission is that the provision of services to patients does not satisfy that part of the definition of “services contract” in s 5(1)(b).

36    Concerning the s 5 definition of “services contract” the respondent says there is a question of statutory construction as to whether, in order for a contract to be a “services contract”, the independent contractor party to the contract must perform services for the principal party to the contract. If this is required, the FSA is not a “contract for services”.

37    This is the construction the respondent submits should be adopted by the Court because it:

    gives effect to the purpose of the IC Act;

    is consistent with the true meaning of “independent contractor” for the purposes of s 5; and

    sits neatly with and is not antagonistic to the excluded category of services contracts in s 11(1)(a).

38    In pressing this preferred construction the respondent draws attention to s 4 of the IC Act which provides that an independent contractor is “not limited to a natural person”. It also refers to the explanatory memorandum to the Independent Contractors Bill 2006 (Cth) (Bill) which states, at [13], that:

The proposed definition of independent contractor would define the expression to mean that it is not limited to a natural person. The question of whether a worker is an employee or an independent contractor would continue to be determined by the common law.

39    The second reading speech for the Bill is also relied on where it records the Minister as stating, at p 7, that:

The federal unfair contracts jurisdiction will be extended to include incorporated independent contractors, meeting another of the recommendations made by the House of Representatives committee. We are concerned that this not become a remedy for the ‘big end of town’.

To this end, it will only be available to corporations where a director of the corporation or members of the director’s family personally performs the work under the contract. This kind of arrangement would be in keeping with family business operations.

40    The respondent also points to the meaning of the term “independent contractor” as explained in the Regulation Impact Statement in the explanatory memorandum to the Bill, as follows:

Who is an independent contractor?

An ‘independent contractor’ is a person who contracts to perform services for others without having the legal status of an employee. The term is generally used to refer to a person who is engaged by a principal, rather than an employer, on a labour only contract. Under such a contract, the principal pays the independent contractor a one-off flat rate. There are generally no legislatively prescribed minimum entitlements or other employee-style benefits and the independent contractor is responsible for a number of aspects of the relationship that would usually be the responsibility of an employer (for instance, remitting income tax to the Australian Tax Office and contributing to a superannuation fund). Independent contractors’ work arrangements take a variety of forms, for example, they may have a direct relationship with another enterprise or work through an intermediary (such as a labour hire firm), and they may or may not employ staff.

The common law has traditionally maintained a distinction between ‘employees’ and ‘independent contractors’. Employees are engaged under a contract of service (an employment contract), whereas independent contractors are engaged under a contract for services. Historically, independent contractors have been perceived as running their own business and working under commercial, not employment, contracts. In contrast, employees have been seen as subject to control and direction. The courts have adopted a multi-factor test to determine whether a person is an employee or independent contractor. No single issue concerning control, economic independence or the description of the relationship in a contract will be determinative, however, courts will place greater weight on some matters, in particular, on the right to control the manner in which the work is performed.

41    The respondent additionally points to what was said in the Regulation Impact Statement under the heading of “Benefits of independent contractors”, as follows:

The flexibility that independent contractors provide is essential to Australian business. Businesses can use specialist contractors for a range of non-core activities, as needed, allowing them to focus on their core business more effectively. This can enable business to compete more effectively in Australian and international markets and to adapt to changing economic conditions. It also facilitates businesses engaging workers on a short-term basis to address fluctuating work levels.

For the independent contractor, it can provide more freedom to choose working hours, to decide when to take holidays, who to work for and what type of work to undertake. High demand for specialist contractors in particular industries contributes to higher wages and ease of worker mobility. These factors can make independent contracting attractive to many workers. For professionals and tradespeople, this may equate to gaining higher pay without the managerial responsibility that tends to accompany higher paying jobs in large organisations.

42    The respondent further notes that in ATS (Asia Pacific) Pty Ltd v Dun Oir Investments Pty Ltd [2012] FCA 1004; (2012) 212 FCR 566, having had regard to these passages from the explanatory memorandum, Cowdroy J observed, at [34], that each demonstrated that, in enacting the IC Act, Parliament intended that it apply in circumstances “in which a party chooses to contract for another party’s services, rather than engage them on the basis of a contract of employment. Further, the work comprised work in the industry or enterprise in which the ‘employer’ is directly engaged”.

43    Attention is also drawn to what his Honour said, at [42]-[43]:

42 The intention of the Act is, inter alia, to provide protection to persons who enter into independent contracting as a form of work arrangement. This intention does not apply to the agreement the subject of this dispute.

43 Insofar as ATS submits that ‘independent contractor’ extends to any person providing any form of services to an employer, such submission is rejected. In a sense all contracting parties are ‘independent’ of the other. The term ‘independent contractor’ has uniquely been confined to the workplace environment where such contractor is undertaking work which would otherwise be required to be performed by an employee. To extend the concept of ‘independent contractor’ in the manner suggested by ATS would have the consequence that, for example, contracts for the provision of legal services, accounting services or logistical or transport services would be subject to scrutiny under the Act. This would result in an unwarranted extension of the Act’s purview.

44    The respondent notes that an application for leave to appeal from his Honour’s decision was successful (see ATS (Asia Pacific) Pty Ltd v Dun Oir Investments Pty Ltd [2012] FCA 1460), but the appeal was later discontinued. The respondent notes that in granting leave to appeal Rares J said, at [7], that something can “relate to the performance of work” without the contract requiring any work to be performed. The respondent submits, however, that this was in the situation where the “independent contractor” party was being paid whether it was required to provide services to the principal party or not – that is, it was being paid for being on standby.

45    The respondent also seeks to draw support for its construction of the meaning of “independent contractor” and “services contract” by reference to what Bromberg J said in Construction, Forestry, Mining and Energy Union v Victoria [2013] FCA 445; (2013) 302 ALR 1 (CFMEU v Victoria) at [128]-[133] about the nature of the expression “independent contractor”.

46    As to the meaning of “contract for services”, the respondent submits the Parliamentary intent in using it is apparent from the explanatory memorandum to the Bill, in the following paragraphs:

19. Subsection 5(1) would provide that services contract is defined to mean a contract for services:

•     to which an independent contractor is a party;

•     that relates to the performance of work by the independent contractor; and

•     that has the requisite constitutional connection, which is specified in subsection 5(2).

20. It is intended that the term ‘contract for services’ is to take its common law meaning. The common law relies on the multi-factor (indicia) test to make the distinction between a contract of employment (contract of service) and a contract for services. The leading Australian High Court authorities outlining this test and the indicia are the cases of Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 and Hollis v Vabu Pty Ltd (Crisis Couriers No. 2) (2001) 207 CLR 21.

47    Thus, the respondent again seeks to emphasise that the notion of “contract for services” and an “independent contractor” when one takes into account the legislative background is such that a services contract must be one in which a person who might otherwise be categorised as an employee, provides services to the other party to the contract.

48    The respondent says the objects of the IC Act include protecting the freedom of independent contractors to enter into services contracts and to recognise independent contracting as a legitimate form of work arrangement that is primarily commercial (s 3(1)). It contends that the IC Act achieves those objects principally by providing for the rights, entitlements, obligations and liabilities of parties to services contracts to be governed by the terms of those contracts, subject to, amongst other things, the laws of the Commonwealth as applying to those contracts (see s 3(2)).

49    The respondent contends that consistent with this protective purpose, it is apparent from the language of s 5(1) that the protections afforded by Pt 3 are intended to be made available to those who, as independent contractors, provide services to others. As independent contractors, they are not afforded the protection of minimum standards afforded to employees.

50    The respondents also highlight the predecessor provisions to those found in the IC Act are to be found in ss 127A to 127C of the former Workplace Relations Act 1996 (Cth) (Workplace Relations Act) . They say upon the enactment of the “Work Choices” legislation in 2006, the former unfair contracts provisions were repealed and were in effect re-enacted in the IC Act. Broadly speaking, I accept this is so.

51    The respondent notes that authorities point both ways on the statutory construction issue, but contend that the construction urged upon the Court by the respondent is more persuasive.

52    In Lee v Aerial Taxi Cabs Co-Operative Society Ltd [1999] FCA 1727; (1999) 97 IR 407 (Lee) where the applicant taxi driver sought a determination that a booking services agreement he had with the company was unfair or harsh, the issue arose whether the agreement was a contract for services for the purposes of s 127A(1) of the Workplace Relations Act. Gyles J accepted an argument that the taxi driver had not established that there was any contract within the meaning of s 127A(1). He considered that the agreement in question was not itself a contract for services. He said the parties were the driver and the company and on no view of the facts did the driver provide services to the respondent (see [16]).

53    The contrary view, however, was provided by Madgwick J in Jordan v Aerial Taxi Cabs Co-operative Society Ltd [2001] FCA 972; (2001) 108 IR 263 (Jordan), another case that arose under s 127A of the former Workplace Relations Act. His Honour, at [38], considered that the company provided the taxi driver with services pursuant to the agreement, namely its radio network services. His Honour said that, but for the terms of s 127A(3)(b) and (c) this would be enough to enable s 127A to catch the agreement: “it is a contract for services; it is binding on an independent contractor and … it” relates to “the performance of work by him or her”. His Honour did not consider there was any justification for reading down the language of s 127A(1). He added:

However subs (3) indicates that the contracts touched by the section are to be those as to which the interested parties are, on the one hand, the ‘independent contractor’ and, on the other, ‘the person contracting for the services’. This is a clear indication that the section was indeed intended to be limited to cases where one party, the ‘independent contractor’, performs work and thereby provides services to the other, the ‘person contracting for the services’. It would not be enough that the applicant had provided services, for example, to the taxi-owner, for s 127A(1)(a) to catch his contract with the respondent.

54    The respondent says that, absent the references to ss 127A(3)(b) and (c), his Honour considered the provision broad enough to encapsulate contracts under which the independent contractor provides services to others.

55    The respondent also notes that in JY Smile Centre Pty Ltd v Idameneo (No 123) Pty Ltd [2013] FCCA 336 (JY Smile Centre), Judge Jarrett in the Federal Circuit Court preferred the view of Madgwick J in Jordan and found that given there were no counterparts to s 127A(3)(b) and (c) in the IC Act, he refused to enter summary judgment under s 17A of the Federal Circuit Court of Australia Act 1999 (Cth).

56    The respondent seeks to distinguish the outcome in JY Smile Centre on the basis that a number of considerations now put to this Court were not taken into account. First, that in JY Smile Centre it was taken for the purposes of the application that the applicants were independent contractors, something not conceded here. Secondly, no reference was made in JY Smile Centre to the explanatory memorandum. Nor to what Bromberg J said in CFMEU v Victoria concerning the concept of an independent contractor. Thirdly, no reference was made to s 11(1)(a). In relation to the last point, the respondent draws attention to [51]-[53] of the explanatory memorandum to the Bill, where it is ultimately stated that under proposed s 11(1)(a), “Part 3 would not apply to a services contract which relates to work performed by an independent contractor for the private and domestic purposes of another party. The term ‘another party’ would cover situations where there may be two or more parties to the services contract”. The respondent submits the last two words of s 11(1)(a), “the contract”, must be read as referring to the services contract referred to at the commencement of s 11(1)(a) and not in any other way. The respondent finally submits that in JY Smile Centre, the Court did not pay regard to the different statutory schemes which underlie the current Act and the former ss 127A to 127C of the Workplace Relations Act considered by Madgwick J.

Applicants’ submissions

57    The applicants contend that it is immediately apparent that the contentions relied upon by the respondent involve questions of fact or mixed questions of law and fact. They say this is so because the question of whether the FSA is to be properly characterised as a “services contract” hinges upon whether it is a contract for services, whether Dr Kerrisk was an independent contractor and whether the FSA relates to the performance of work by Dr Kerrisk, as well as whether the FSA, if it is a contract for services, has the requisite constitutional connection specified in s 5(2) of the IC Act, although there is no issue between the parties in the latter regard.

58    The applicants say a fundamental legal and factual premise of their case is that Dr Kerrisk should be classified as an “independent contractor” for the purposes of s 5 of the IC Act.

59    The applicants submit the definition of independent contractor provided by s 4, by saying that it is not limited to a natural person, provides no assistance in resolving the question of whether a person or entity is an independent contractor or not. This question has been left by reference to principles of the common law, and thus cases such as Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 (Hollis) and Stevens v Brodibb Sawmilling Co Pty Ltd (1986) 160 CLR 16 are relevant. See also Bank of Queensland Ltd v Industrial Court of New South Wales (No 2) [2008] FCA 1435 (Bank of Queensland) at [7]. The explanatory memorandum is also here relevant.

60    The applicants says it is well settled that the Court will look to what is the real substance of the relationship in determining whether somebody is an employee, on the one hand, or an independent contractor on the other. The applicants draw attention to what was said in Hollis at [24] in the judgment of the plurality to the effect that it is the “totality of the relationship” which must be considered.

61    In this regard, the applicants say the totality of the relationship in the present case necessarily includes reference to the ASA and the Deed, as well as the FSA itself.

62    They say that whether or not Dr Kerrisk is to be characterised as “an independent contractor” for the purposes of the IC Act is a mixed question of fact and law in respect of which, to the extent that it is factual, a controversy exists which can only be resolved after trial; and they here refer to what was said by Logan J at [17] and [58] in Bank of Queensland.

63    The applicants contend the substance or reality of the relationship cannot be identified simply by reference to the terms of the FSA, or the related agreements, but may include reference to the way the parties carried out or gave effect to their obligations under the FSA, the ASA and the Deed.

64    The applicants submit the respondent approaches the application for summary judgment on the fundamentally misconceived basis that it need only assert that Dr Kerrisk and Mindil do not perform dentistry and related services in relation to the dental practice owned by the respondent.

65    They say it is clear the respondent seeks to advance its case for dismissal on the basis of what it contends to be the proper characterisation of the terms of the FSA, without regard to evidence going to the substance of the relationship. The conclusion it contends for in truth involves assertions of fact which the respondents have made no attempt to prove.

66    The applicants say that by way of illustration that the respondent submits that it is apparent that Dr Kerrisk does not perform dental services under the FSA in relation to a dental practice owned by the respondent. The applicants say this contention is manifestly a construct derived only from the interpretation of the FSA and the Deed, not supported by the evidence. Rather the evidence reveals that at material times from about 28 March 2011, the respondent was the owner of the dental practise conducted at the premises in question. It is not in dispute or does not appear to be that the work that Dr Kerrisk was performing after 28 March 2011 was performed at the premises. He was required by the FSA to perform work at the premises and prevented by covenant from performing dental work elsewhere within a specified radius of the premises: cl 10 ASA.

67    The applicants contend by way of further illustration that the respondent submits that Dr Kerrisk performs dental services for patients at the dental practice owned by him (presumably under a contract between the dentist and the patient).

68    They say, however, there is no evidence of ownership by Dr Kerrisk of the dental practice after 28 March 2011. Nor is there any evidence about contracts with patients, or the identity of the patients. The respondent has chosen not to lead evidence identifying whether any of the patients treated by Dr Kerrisk after 28 March 2011 at the premises (in respect of whom the respondent has responsibility for invoicing under the FSA) are in fact the patients of the dental practice that the respondent acquired the exclusive right to carry on in succession to the applicants (as vendors) under the ASA. The applicants say the respondent’s submission in this regard is mere conjecture.

69    As to the question of statutory construction which the respondent identifies as arising, the applicants take issue with the contention that, because the work performed by Dr Kerrisk involves the provision of services to patients, the FSA cannot be characterised as involving the performance of services to the respondent. They say the submission is flawed for the following reasons. Firstly, there is no evidence Dr Kerrisk owned a practice conducted at the premises after 28 March 2011, as submitted above. Moreover, the terms of the FSA point to the dental practice being owned by the respondent. Further, and in any event, it cannot sensibly be suggested there is no reasonable prospect of the applicants successfully arguing that the performance of work by Dr Kerrisk in accordance with the FSA involved performing work for the benefit of the respondent, namely the provision of professional dentistry and related services to, and for the benefit of, its dental practice, notwithstanding that the dental work was performed on patients (third parties). The applicants refer to Informax International Pty Ltd v Clarius Group Ltd [2012] FCAFC 165; (20120 207 FCR 298 in which the impugned “services contract” involved the provision of services to a third party. The applicants say it is notable that Dr Kerrisk’s work obligations under the FSA were not limited to performing dental work on patients but extended to providing assistance to and consulting with Dr Radny, ensuring patient invoices were paid promptly, maintaining patient records and forwarding payments to the respondent: cl 2.3 of Sch 1 and Sch 2 FSA. Moreover, cl 3.4 FSA makes it clear that any goodwill developed by Dr Kerrisk in performing his work was for the benefit of the respondent. The applicants say it is reasonably arguable that by providing, under licence, diagnostic, remedial, specialist and preventative dentistry services as appropriate to patients of the dental practice, as to which see cl 1.1 of Sch 2 FSA, Dr Kerrisk was performing work or services for the respondent who owned the practice. The fact that the work performed by Dr Kerrisk might be characterised as being for the benefit of the dental practice and the patients of the practice is of no consequence in resolving the question as to whether the FSA was a “services contract”.

70    In relation to the proper construction of the FSA, the applicants also take issue with the respondents submission that Dr Kerrisk does not provide any services to the respondent and that he provides services to patients of his dental practice.

71    First, the applicants say the definition of “Dental Practice” in cl 1.1 FSA sheds no light on whose practice is being “conducted”, pursuant to the FSA.

72    They also say the evidence before the Court reveals the following:

    On or about 28 March 2011, the applicants entered into the ASA with the respondent.

    At the time of the entry into the ASA, Dr Kerrisk conducted a dental practice (defined in the ASA as “the Practice”) at premises (see definitions of “Practice” and “Premises” in cl. 1.1 ASA).

    The dental practice operated alongside and at the same premises as a dental practice operated by Dr Radny.

    Pursuant to the ASA, the applicants as vendors sold the “Assets” to the respondent free from any encumbrance: cl 3.1 ASA.

    The sale of the “Assets” was conditional upon the parties entering into the FSA: cl 2.1 ASA.

    The Assets included the “Goodwill” and all other property, rights and assets of the applicants used in the “Practice”, but excluding “Excluded Assets”. The Goodwill of the Practice included the exclusive rights to carry on the Practice in succession to the applicants: cl 1.1 ASA.

    On completion, pursuant to the ASA, title in the Goodwill of the Practice passed to the respondent: cl 7.1 ASA.

    Under the ASA, the applicants covenanted to the respondent that, amongst other things, they would not engage in any business, activity or services which are in competition with the “Practice” (that is to say, the Practice acquired by the respondent), or interfere with the relationship between the Practice and its customers, employees and suppliers. The covenant was acknowledged as “necessary to protect the Goodwill”: cl. 10.7 ASA.

    The restrictive covenant contains an exception in relation to conducting the Practice in accordance with the “Dental Practice Obligations” under the FSA: cl 10.6 ASA.

    The Dental Practice Obligations are capable of being performed by reason of the licence granted by the respondent under cl 3.3 FSA.

    Under the FSA, Dr Kerrisk acknowledged that any goodwill of the Dental Practice derived or developed by him during the term was held on behalf of the respondent: cl 3.4 FSA.

73    Thus, the applicants contend the suggestion by the respondent that the terms of the FSA make it apparent that upon commencement of the FSA Dr Kerrisk was conducting his own dental practice, that is as a proprietor, is contradicted by the provisions of the FSA dealing with:

    Goodwill, namely cl 3.3 pursuant to which a licence to the “Goodwill” was granted to Dr Kerrisk for the “Term”, and cl 3.4 pursuant to which Dr Kerrisk acknowledges that ownership of the goodwill created during the Term is held on behalf of and enures for the respondent’s benefit.

    Ownership of patient records and intellectual property, namely cl 7.2(a) pursuant to which any intellectual property rights in “Patient Records” and other material produced by or on behalf of Dr Kerrisk in the course of or in connection with conducting the Dental Practice immediately vests in the respondent, and cl 7.2(c) pursuant to which the respondent grants Dr Kerrisk a licence to use the “Dental Corporation IP” during the Term and cl 2.1(a) of Sch 1, which refers to the Licence in the context of it being reasonably required to enable Dr Kerrisk to conduct the Dental Practice.

    Confidential information, namely cl 12, which imposes upon Dr Kerrisk obligations of confidence in relation to information, including business information, patient and supplier lists, patient records, operating procedures, price lists and data bases of which he becomes aware in the course of or in connection with conducting the Dental Practice. Clause 12.3, it is submitted, strongly suggests that the respondent holds a proprietary interest in the confidential information.

    The “Associate Dentist’s” independence, namely cl 10.2, which would be redundant if Dr Kerrisk owned the dental practice, as contended for by the respondent.

74    Additionally, the applicants say cl 10 ASA, which contains the non-compete and non-solicitation covenants, is manifestly intended for the benefit of the respondent as purchaser of the Practice and for the protection of the Goodwill that it acquired under the ASA. In particular it is submitted that the obligation in cl 10.2(c), which prohibits the applicants from interfering “with the relationship between the Practice and its customers…” is specifically referable to “the Practice” (as defined) and its customers. That means the practice acquired by the respondent, which had been conducted by Dr Kerrisk at the premises, and the customers of that practice. Had it not been the intention of the parties that Dr Kerrisk would be performing his obligations under the FSA in respect of the Practice acquired by the respondent (and the customers of that practice) it is difficult to comprehend why the “Exceptions” provision in cl 10.6 ASA was drafted in the following terms:

Clause 10 does not restrict a Prohibited Person from:

(a)    conducting the Practice in accordance with the Dental Practice Obligation under the [FSA]; or

…

75    The applicants note the respondent relies upon cl 4.1(b) FSA, which states that “[The respondent] acknowledges that during the Term, as set out in this agreement, it has no interest in the Dental Practice”. The applicants say it is implicit in this submission that the Court is invited to construe the reference to “interest” as a reference to proprietary interest. They say this submission is unsustainable in the context of the FSA overall and in particular the provisions they have relied upon above. It is submitted it is inconsistent with the recitals in the Deed that record that Dr Kerrisk was granted a licence to conduct the “Associate Licenced Practice”. They say the fact alone that Dr Kerrisk needed a licence from the respondent to carry on the dental practice undermines the respondent’s contention.

76    So far as the statutory construction point is concerned, the applicants say that even if the respondent’s contentions are correct, the fact that dental services are provided by Dr Kerrisk in accordance with the FSA to patients is not mutually inconsistent with the characterisation of the FSA as involving the performance of services for the respondent.

77    For completeness, however, the applicants submit the decision of Gyles J in Lee highlights the need for the Court to consider evidence of the totality of the relationship before resolving the issue of whether a contract is a “services contract” and also that it is clear from the terms of the impugned agreement in that case that it did not require the performance by the applicant of services for anyone. It was in substance an agreement to abide by the respondent’s by-laws, in consideration for access to the radio network.

78    As to Jordan, the applicants say this does not assist the respondent as, had it not been for the existence of s 127A(3)(b) and (c) of the Workplace Relations Act, the reasoning of Madgwick J would lead to the conclusion that the FSA could be a services contract either because pursuant to its terms the respondent provided services to the applicant, or the applicant provided services to third parties.

79    Further, the applicants note the decision in JY Smile Centre does not assist the respondent and supports the contention that it is arguable that a contract does not have to require the “independent contractor” to provide services to the other party to the contract before it can be said to be a services contract under the IC Act. There, his Honour held that the provision of services by one party to the contract is, arguably, enough to engage the definition. Moreover, that the contract does not have to involve the performance of work by the independent contractor for the other party, it need only “relate to” the performance of work by the independent contractor.

80    The applicants say there is no clear and binding authority in relation to the construction point that the respondent contends requires resolution. All this fortifies the submission that the Court should decline to determine this proceeding summarily.

consideration

81    In the result, I largely accept the submissions made on behalf of the applicants.

82    While, as I noted above, there is no doubt that in an appropriate circumstance the Court may dismiss a case summarily by determination of a real legal issue, in this case I am not satisfied that the factual issues raised by the applicants as to the true relationship both under the FSA, ASA and Deed, or otherwise, between the parties, and thus, whether it can truly be said that the applicants did not relevantly provide services to the respondent, are unarguable.

83    The construction points as to the FSA made by the applicants and set out above raise real questions as to what the substance of that relationship is.

84    The pleadings in this case are at a point where only the statement of claim has been filed. Bare allegations have been made concerning the ownership of a dental practice by the respondent. I am not prepared at this point in the proceeding to make legal findings on an assumed factual basis to the contrary. No defence has yet been filed, thus there has been no reply and it may be that as the proceeding develops quite distinct factual issues will be raised.

85    It is not beyond argument, and certainly not a fanciful proposition, that the totality of the circumstances may ultimately and upon closer consideration suggest that the applicants are independent contractors for the purpose of the IC Act and that they provided services to the respondent under the FSA, thus satisfying the definition of a services contract under s 5 of the IC Act.

86    It is also unclear and not beyond argument that on the proper construction of the IC Act the points made in JY Smile Centre by his Honour are well made. The observations of Madgwick J in Jordan lend support to the construction there taken.

87    In that regard, while the background to the IC Act, particularly the explanatory memorandum, may suggest that a more restrictive and less literal meaning should be given to the relevant terms and construction of the s 5 definition of a services contract than that contended for on behalf of the applicants, that construction is far from inevitable. The explanatory memorandum and other relevant documents suggest a particular policy motivation for the IC Act and the concept of services contract inserted in it, but that does not necessarily mean that the plain words and expressions used in ascribing a meaning to “services contract” should not be given effect to.

88    In the result, I am not satisfied that there is a single clear real legal issue that falls for determination which enables the summary dismissal of the proceeding of the applicants against the respondent. I accept the submission made on behalf of the applicants that questions of fact and law may arise. In my judgment it is not appropriate in all of the circumstances of this case to conclude, as s 31A(2)(b) of the Federal Court of Australia Act 1976 (Cth) requires, that the applicants have no reasonable prospect of successfully prosecuting the proceeding.

conclusion and orders

89    For these reasons, the interlocutory application for summary judgment is dismissed.

90    The appropriate orders, therefore, are that:

1.    The interlocutory application of the respondent filed 27 September 2013 for summary judgment be dismissed.

2.    The respondent pay the costs of the applicants to be taxed if not agreed.

3.    The respondent file and serve its defence within 28 days and the applicants file and serve any reply within 14 days after being served with the defence.

4.    The matter be listed for further directions on 31 January 2014 at 11:15am (WST).

Associate:

Dated:    18 November 2013