FEDERAL COURT OF AUSTRALIA

Director, Fair Work Building Industry Inspectorate v ADCO Constructions Pty Ltd (No 2) [2016] FCA 1463

ORDERS

THE COURT ORDERS THAT:

The originating application filed 1 July 2015 be dismissed.

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

REASONS FOR JUDGMENT

COLLIER J:

1    The Director, Fair Work Building Industry Inspectorate (the Director) seeks orders under the Fair Work Act 2009 (Cth) (the FW Act) against a principal contractor, ADCO Constructions Pty Ltd (ADCO) in respect of ADCO’s conduct on two building sites in south-east Queensland. In essence, the Director claims that ADCO discriminated against a particular subcontractor whose workers were not party to an enterprise agreement which also covered the Construction, Forestry, Mining and Energy Union (CFMEU), in contravention of s 354(1) of the FW Act. Specific orders sought by the Director are:

1.    Declarations pursuant to section 21 of the Federal Court of Australia Act 1976 (Cth) that the Respondent is taken to have contravened section 354 of the Fair Work Act 2009 (Cth) (FW Act) as alleged in the statement of claim;

2.    An order pursuant to section 546 of the FW Act that the Respondent pay penalties pursuant to part 3-1 item 11 of the table in section 539(2) of the FW Act for breaches of section 354(1) of the FW Act;

3.    An order pursuant to section 546(3) of the FW Act that each of the penalties imposed on the Respondent are to be paid within 28 days to the Consolidated Revenue Fund of the Commonwealth;

4.    An order pursuant to section 545(2)(b) of the FW Act awarding compensation for the loss suffered by Surf City Cranes Pty Ltd;

5.    An order pursuant to section 547 of the FW Act that the Respondent pay interest;

6.    Such further order as the Court sees fit.

2    Before turning in more detail to the claims of the Director it is useful to outline the background facts, many of which have been agreed by the parties in a Statement of Agreed Facts filed on 1 September 2016.

BACKGROUND FACTS

3    ADCO is a national construction company which was involved in the delivery of projects across Australia in 2012 and 2013. Three such projects were at Bond University (the Bond University project), Robina Town Central (the Robina project) and Pindara Hospital on the Gold Coast. Although events at Pindara Hospital were initially the subject of the Director’s claims against the respondent, that aspect of the claim is no longer pressed.

4    The Bond University project related to the $18 million construction of the Abedian School of Architecture at Bond University’s Gold Coast campus. This project commenced around September 2011 and was completed around October 2013.

5    The Robina project related to the $14 million construction of a single storey car park at the Robina Shopping Centre for Queensland Investment Corporation. This project commenced around July 2013 and was completed around March 2014.

6    In both of these projects ADCO required crane hire services. Surf City Cranes Pty Ltd (SCC) is a crane hire company. SCC is the subcontractor to which I referred earlier in this judgment.

Entities controlled by Mr and Mrs Morrish

7    It is convenient at this stage to examine the features of business entities controlled by Mr Jonathan Morrish and Mrs Sharon Morrish.

8    Mr and Mrs Morrish had the control and beneficial ownership of a number of entities, namely SCC, Crane Hire Pty Ltd (Crane Hire) and Morrish Investments Pty Ltd (Morrish Investments). At material times Mr Morrish was the sole director of both SCC and Crane Hire.

9    Crane Hire was registered in 2011. Mr Morrish and the operations manager of SCC, Mr James Dawson, focussed on winning crane hire work, whereas Mrs Morrish and a book-keeper, Ms Mel Chittick (with the assistance of external accountants) focussed on the administrative side of the business.

10    At all material times Morrish Investments was the trustee for the Morrish Family Trust. Morrish Investments owned all assets, including the cranes and the crane yard, and the trading name “Surf City Cranes”. Mrs Morrish was the director and sole shareholder of Morrish Investments. Mr and Mrs Morrish and SCC     were beneficiaries of the trust.

11    In the first half of 2012 Mr and Mrs Morrish decided to restructure their business such that SCC was the provider of crane hire services to the industry, and Crane Hire was the employer of crane operators, riggers and doggers and the supplier of labour to SCC. It is common ground that this structure was adopted for two reasons:

1.    Mr and Mrs Morrish accepted their accountant’s advice that it was in their financial interests, from a financial risk perspective, to separate the employer from the companies that held the assets in their business structure; and

2.    The intention of Mr and Mrs Morrish at the time was to position Crane Hire as a labour hire operation, not only for the SCC business, but potentially in future for others in the industry.

Employment arrangements

12    Also in the first half of 2012 Mr and Mrs Morrish engaged an industrial relations consulting firm, Drayton’s Workplace Consulting Pty Ltd (Draytons) to assist them in the negotiation of an enterprise agreement with workers who were crane operators, riggers and doggers. In May 2012 Mr and Mrs Morrish instructed Draytons to change the name of the employer in a proposed draft enterprise agreement from SCC to Crane Hire. Mr and Mrs Morrish also instructed Draytons to undertake an analysis of industry wage rates, because they wanted to offer competitive rates of pay to employees in the enterprise agreement.

13    On 22 June 2012 a meeting of employees of the Morrish business took place at which a copy of the proposed enterprise agreement was provided, and terms thereof explained, including that Crane Hire would be the employer of workers in the business thenceforth. Employees voted on the agreement on 2 July 2012 and it was approved by a valid majority of employees.

14    Following the lodgement of the enterprise agreement for approval, there was at least one meeting with employees at which the agreement and its terms and conditions were discussed with employees. With the assistance of Draytons, Mrs Morrish prepared a one-page summary document setting out the applicable “Crane Hire” pay rates in the enterprise agreement. This document was made available to existing employees and used in the recruitment of new employees.

15    At all material times SCC had a bank account at the ANZ Bank. A bank account with the ANZ Bank in the name of Crane Hire was opened on 23 June 2014.

16    Throughout the relevant period, Crane Hire did not provide labour to any entity apart from SCC.

Enterprise agreement between ADCO and the CFMEU

17    On 18 October 2012 an enterprise agreement between ADCO and the CFMEU was approved by the Fair Work Commission. Clause 35.2 of that enterprise agreement provided:

Use of Contractors

If the company wishes to engage contractors and their employees to perform work in the classifications covered by this agreement, the company must first consult in good faith with potentially affected employees and their union. Consultation will occur prior to the engagement of subcontractors for the construction works.

If, after consultation, the company decides to engage bona fide contractors, these contractors and their employees will receive terms and conditions of engagement (on terms no less favourable) as they would receive if they were engaged as employees under this agreement performing the same work. The use of sham subcontracting arrangements is a breach of this agreement.

Events at Bond University

18    ADCO engaged SCC to provide crane services at the Bond University project from around April 2012 until mid-October 2012. It is common ground that ADCO also required further crane services at the site after October 2012.

19    Evidence of delays at the Bond University project was given by Mr Michael Duckett who, at all material times, was ADCO’s Project Construction Manager of the Bond University Project and Project Manager of the Robina Project. Mr Duckett was responsible for managing the delivery of both projects. In his affidavit sworn 29 March 2016 Mr Duckett deposed that:

    The design of the building being constructed as part of the Bond University Project was extremely complex and challenging. This design complexity contributed to delays in the construction of the building.

    The project also experienced substantial rain delays and inclement weather. Even when the rain had stopped, there was time required to dry the site out before construction activities could recommence.

    Up to and including 12 October 2012 ADCO experienced 60 days of delays as a result of inclement weather.

    In total, the Bond University Project experienced delays of approximately 114.5 days due to inclement weather.

20    In October 2012 CFMEU officials Mr Tim Jarvis and/or Mr Scott Vink telephoned Mr Duckett at ADCO. During that conversation Mr Jarvis and/or Mr Vink said words to the effect that they were not happy about SCC being used by ADCO because SCC did not have a “union EBA”, and “they wanted [ADCO] to get rid of SCC” and instead use another crane hire company, Gold Coast Cranes Pty Ltd (GCC). It is common ground that, at all material times, workers employed by GCC were not covered by an enterprise agreement which also covered the CFMEU.

21    On 11 and 12 October 2012 CFMEU officials attended the Bond University project site.

22    Mr Duckett deposed:

30.    On 11 October 2012, I received a telephone call from Mr Tanner who informed me that the CFMEU had been to the Bond University Project site and stopped the whole job. He told me that Scott Vink had abused him in front of the workers, had been calling ADCO “grubs’ and telling workers that “Mr ADCO didn’t give a shit about you’. I believe Mr Tanner may have also mentioned during this phone call that the CFMEU did not like SCC being on site.

31.    Mr Tanner did not often contact me specifically regarding a union visit. He did keep me up to date generally in relation to whether there were or were not any union issues. I believe he called me specifically on this occasion because it was a particularly bad incident and it had caused delay to the Bond University Project.

32.    I also recall that I was told by Mr Tanner at some stage prior to 12 October 2012 that Jonathan Morrish, who is the Director of SCC, had had confrontations with union officials in the past, that they were “out to get him”, and that he had not “made friends” with the unions on previous projects. I knew who Mr Tanner was talking about as I had met Mr Morrish briefly in person, just in passing on a project site.

23    In October 2012 Mr Richard Tanner was the site manager of the Bond University project and an employee of ADCO. He deposed that on 11 October 2012 he saw Mr Vink or Mr Jarvis at the Bond University project site, and that one of the union officials said to him, with reference to SCC:

What are these guys doing here?

24    On or around 12 October 2012 Mr Andrew Sutherland from the CFMEU rang Mr Hawkins, the Queensland Manager of ADCO. In his affidavit sworn 1 April 2016 Mr Hawkins deposed that during the course of their conversation Mr Sutherland said words to the following effect:

I’m the CFMEU organiser for your Green Square Project. I’m watching that job very closely. Scott Vink is the organiser at Bond Uni, and he’s not happy about you using Surf City Cranes. You need to do something about them.

25    On or around that day Mr Hawkins and Mr Duckett decided to remove SCC from the Bond University project. It is common ground that Mr Duckett instructed Mr Tanner to the effect:

We have to finish up SCC, we can’t have them on site any more, the heat from the union is too high, we need to move them on.

26    GCC was subsequently engaged to replace SCC on the Bond University project.

27    On 12 October 2012 Mr Duckett had a telephone conversation with Mr Morrish in which Mr Duckett said words to the effect:

We can’t tell you to get an EBA, but we have been strongly urged to use nominated contractors or some one with a ‘bona fide EBA’; and

We are encouraged to use recognised EBAs.

28    Mr Morrish learned that SCC had been removed from the Bond University project at around the same time as learning that SCC had been removed from another site nearby. He travelled to Brisbane to speak with CFMEU officials, and met with Mr Travis O’Brien, an industrial legal officer of the union. Mr Morrish’s evidence was that Mr O’Brien agreed that CFMEU organisers would come out and speak with him (transcript 16 August 2016 p 82 ll 11-22).

29    Subsequently on or about 17 October 2012 Mr Jarvis and Mr Sutherland of the CFMEU visited SCC’s crane yard where they met with Mr Morrish, Mrs Morrish and Mr Dawson. In his affidavit sworn 8 December 2015 Mr Morrish gave evidence of the following events and conversation at that meeting:

84.    Tim arrived with Andrew Sutherland. Tim introduced me to Andrew. Sharon arrived shortly after Tim Jarvis and Andrew Sutherland arrived. James Dawson, Surf City’s Operations Manager was also present for the conversation. Carolyn Mansfield, a secretary for Surf City also joined the conversation part way through.

85.    On arriving at the Surf City yard, Tim Jarvis and Andrew Sutherland walked into the middle of the yard and Tim Jarvis said words to the following effect:

(a)    ‘You have enough cranes in here to have an EBA, a union EBA’.

(b)    ‘You have more cranes than Chris Lindores’. I understood that Tim was referring to a company run by Chris Lindores called Lindores Construction Logistics.

(c)    ‘You guys have gone and got an EBA and it’s not a union EBA’.

(d)    ‘It’s one world and it’s our world so we don’t give a hoot what’s outside, so it’s just our union world.

(e)    ‘You’ve been contacting Fair Work and the Ombudsman’.

(f)    ‘We’re going to watch you burn’.

(g)    ‘At no point have we said that you can’t’ work on union sites but you must have a bona fide agreement’.

86.    I asked words to the effect of, ‘What does bona fide mean?’

87.    Tim responded with words to the effect ‘It means that someone else has a union agreement, that’s who you can work with’.

88.    I said words to the effect of:

(a)    ‘We don’t need a union EBA because we have a Fair Work one.’

(b)    ‘This Fair Work is under your government.’

By this I meant that Fair Work was implemented by the Labor government.

89.    Tim repeated words to the effect of ‘That’s the one world, we don’t care about anyone else’s agreement.’ Tim further said words to the effect of ‘You guys are running around with the front page and showing customers and saying you have an agreement.’

90.    I responded with words to the effect of ‘Well obviously our front page is identical to the union one, it’s got the Fair Work stamp on it.’

91.    Tim responded with words to the effect of ‘That’s not the case’.

92.    Sharon and I said words to the effect that we had looked at the enterprise agreement which they had emailed to us. Someone from the union, I believe either Tim or Andrew, had previously emailed this to us. Sharon and I suggested to the effect that we could review it and eliminate the clauses that did not apply to us.

93.    Tim responded to the effect of ‘Well you can make a submission. You have to pay $1200-$1500 for an application for an EBA. We might, we’re busy so we might get to it in six months, might get to it in twelve months, you know, we’re very busy’.

94.    I understood by Tim’s response that the CFMEU was not interested in negotiating an enterprise agreement with Surf City.

95.    Sharon and I then spoke about the fact that we wanted to work on ADCO sites again. Tim responded to the effect that ‘we haven’t removed you from site’. I asked to the effect how we could work on the ADCO sites again. Tim responded to the effect ‘you can pay an application fee, if we get time to look at it, we’ll consider and process it’.

96.    Tim stated to the effect that he had spoken to Richard Tanner and said that if Surf City Cranes want to work with ADCO you know what has to happen in the future and Richard had responded to the effect ‘Yeh we know that.’

30    On or about 20 October 2012 Mr and Mrs Morrish met Mr Tanner at the Bond University project site. It is common ground that during that meeting:

    Mr Tanner stated words to the effect that “we [the site] have been instructed by [the office] to use another company” and it was “out of his hands”;

    Mr Tanner confirmed to the effect that there had been no safety breach by SCC on the Bond University Project;

    Mr Tanner indicated that he was unhappy that SCC had been removed from the site.

31    In or about late October 2012 Mrs Morrish had a telephone conversation with Mr Hawkins. During that conversation Mr Hawkins said words to the effect that “ADCO had no choice”.

32    The Director also alleges that on or about 13 October 2012 Mr Dawson spoke with Mr Greg Radburn or Mr Tanner of ADCO to the following effect:

1.    Mr Radburn or Mr Tanner asked Mr Dawson to remove the Surf City crane from the Bond University Project;

2.    Mr Dawson asked why Surf City had been asked to cease work on the Bond University Project;

3.    Mr Radburn or Mr Tanner replied “Well you know what’s been happening. We can’t have you guys here anymore for that reason”.

Events at the Robina Project

33    On 5 July 2013 Mr Tanner, in his capacity as ADCO’s site manager at the Robina project, booked SCC to carry out crane services work, installing site sheds into position for the commencement of project works which were due to commence on 8 July 2013.

34    On or around 6 July 2013 ADCO, through Mr Duckett, decided to cancel the booking of the SCC cranes. Mr Tanner contacted Mr Morrish to inform him of that decision.

35    On or around 11 July 2013 Mr Duckett received a copy of an email from Mr Jarvis of the CFMEU with the subject “EBA contractors” and the message “Please call before engaging any one” and attached list of contractors. Mr Duckett subsequently emailed Mr Jarvis’ list of contractors to Mr Tanner and Mr Chris Zidar (ADCO’s Contracts Administrator in respect of the Robina project).

Meeting with Mr Colin Kitto

36    On or about 23 July 2013 Mr and Mrs Morrish met with Mr Colin Kitto, ADCO’s Gold Coast Manager responsible for oversight of the Bond University, Pindara Hospital and Robina projects. The purpose of the meeting was to discuss issues raised in an email dated 22 May 2013 sent by Mrs Morrish to Mr Bob Hill, the Chairman of ADCO. The discussion at this meeting is in dispute – indeed paragraphs 56A, 56B and 56C of the further amended statement of claim set out the Director’s allegations of further contraventions of the FW Act by ADCO referable to that discussion.

GCC and the CFMEU

37    As I noted earlier in this judgment, at material times GCC was not party to an enterprise agreement with the CFMEU during 2012 or most of 2013. On 10 September 2013 the GCC Enterprise Agreement covering its operators, riggers and dogmen was approved by the Fair Work Commission. The CFMEU was covered by that agreement.

FURTHER AMENDED STATEMENT OF CLAIM

38    The Director relies in this proceeding on his further amended statement of claim filed on 26 May 2016. In summary, the Director alleges:

    In respect of the Bond University project:

○    it can be inferred that SCC was removed from the Bond University project because SCC employees were not covered by an enterprise agreement which covered the CFMEU;

○    in removing SCC from the Bond University project, Messrs Hawkins, Tanner, Duckett and/or Radburn discriminated against SCC in breach of s 354(1) of the FW Act because they removed SCC on the basis that employees were not covered by an enterprise agreement which covered the CFMEU;

○    Mr Duckett, Mr Hawkins and Mr Kitto refused to further engage SCC on the Bond University project because employees were not covered by an enterprise agreement which covered the CFMEU, and this conduct breached s 354(1) of the FW Act;

○    Mr Kitto refused to further engage SCC unless it signed a union EBA. In so doing Mr Kitto discriminated against SCC because he refused to further engage SCC because its employees were not covered by an enterprise agreement which covered the CFMEU;

○    ADCO is liable for those contraventions of the FW Act pursuant to s 793 of the FW Act.

    In respect of the Robina project:

○    it can be inferred that the engagement of SCC on the Robina project was cancelled by ADCO because SCC employees were not covered by an enterprise agreement which covered the CFMEU;

○    it can be inferred that the engagement of SCC on the Robina project was cancelled by Mr Tanner because SCC employees were not covered by an enterprise agreement which covered the CFMEU;

○    cancellation of the engagement of SCC on the Robina project by Mr Tanner and ADCO was discrimination against SCC in breach of s 354(1) of the FW Act;

○    it can be inferred that Mr Duckett refused to engage SCC on the Robina project because SCC employees were not covered by an enterprise agreement which covered the CFMEU;

○    in refusing to further engage SCC on the Robina project Mr Duckett discriminated against SCC in breach of s 354(1) of the FW Act because SCC employees were not covered by an enterprise agreement which covered the CFMEU;

○    pursuant to s 793 of the FW Act ADCO is liable for the contraventions of the FW Act by Mr Tanner and Mr Duckett.

(In light of the fact that, so far as I can ascertain, Mr Radburn was involved in the Pindara Hospital project, I understand that the Director no longer presses any claim concerning Mr Radburn. Certainly no evidence of Mr Radburn was tendered, Mr Radburn was not called as a witness, and no issue in respect of this was made by the Director.)

39    Further, in respect of a meeting between Mr Kitto of ADCO and Mr and Mrs Morrish on or about 23 July 2013 at ADCO’s office in Bay Street, Southport, the Director alleges in summary that:

    Mr Kitto refused to further engage SCC unless SCC signed a union EBA; and

    accordingly – Mr Kitto discriminated against SCC in breach of s 354(1) of the FW Act because he refused to further engage SCC because employees of SCC were not covered by an enterprise agreement which covered the CFMEU.

40    Finally, the Director in the further amended statement of claim pleaded losses to SCC as a result of the allegedly contravening conduct:

    in respect of the Bond University project – net loss of income of approximately $45,812.98;

    in respect of the Robina project – net loss of income of approximately $103,206.38.

RELEVANT LEGISLATION

41    The Director claimed breach by ADCO and its senior staff of s 354(1) of the FW Act. This section provides:

Coverage by particular instruments

(1)    A person must not discriminate against an employer because:

(a)    employees of the employer are covered, or not covered, by:

(i)    provisions of the National Employment Standards; or

(ii     a particular type of workplace instrument (including a particular kind of workplace instrument within a type of workplace instrument); or

(iii)    an enterprise agreement that does, or does not, cover an employee organisation, or a particular employee organisation; or

(b)    it is proposed that employees of the employer be covered, or not be covered, by:

(i)    a particular type of workplace instrument (including a particular kind of workplace instrument within a type of workplace instrument); or

(ii)    an enterprise agreement that does, or does not, cover an employee organisation, or a particular employee organisation.

Note:    This subsection is a civil remedy provision (see Part 4 1).

(2)    Subsection (1) does not apply to protected industrial action.

42    It is clearly s 354(1)(a) of the FW Act which is the subject of alleged contraventions by ADCO and its employees. The Director’s fundamental claim is that ADCO discriminated against SCC because SCC’s employees were not covered by an enterprise agreement which also covered the CFMEU. The claim is not referable to any proposal of an enterprise agreement involving SCC’s employees, the CFMEU or otherwise.

43    Insofar as the claims of the Director are referable to conduct of ADCO staff, the Director relies on s 793(1) of the FW Act which states that any conduct engaged in on behalf of a body corporate by, inter alia, an officer, employee or agent of the body within the scope of his or her actual authority is taken, for the purposes of the FW Act, to have been engaged in also by the body corporate. I understand there is no suggestion by ADCO that the ADCO employees the subject of the Director’s claim were acting otherwise than in the scope of their authority.

RELEVANT ISSUES

44    This proceeding involved a trial over several days. Oral and affidavit evidence on behalf of the Director was received from Mr Morrish, Mrs Morrish, Mr Dawson, and Mr Ian Aldridge (a crane operator who had performed work for the SCC business over a period of approximately seven and a half years). On behalf of ADCO, oral and affidavit evidence was received from Mr Tanner, Mr Hawkins, Mr Duckett, Mr Kitto and Mr Zidar. ADCO also relied on an affidavit of Mr Jarvis Robertson, a project manager for ADCO, affirmed 24 March 2016. The Director did not seek to cross-examine Mr Robertson.

45    The picture painted by the evidence given on behalf of both the Director and ADCO is damning of those CFMEU officials identified in that evidence. It suggests a chilling, contemptuous and indeed gloating disdain on the part of those CFMEU officials for the prospect of harm – brought about by the exercise of CFMEU power – to the livelihoods of Mr and Mrs Morrish, their employees and the Morrish business entities. It also indicates capricious misuse and exploitation of union power to coerce ADCO to defer to whatever agenda the CFMEU was pressing at the time.

46    However.

47    No evidence in this proceeding was given by any member of the CFMEU to either support or contradict the claims of the Director or evidence of the witnesses of the Director and ADCO, in relation to alleged statements of CFMEU officials. Were proceedings commenced by the Director against the CFMEU the Court would almost certainly have the benefit of evidence given on behalf of the union, and be in a position to reach a more informed view of the evidence given on behalf of the Director and ADCO of the conduct of CFMEU officials.

48    This is not such a case. It is not the conduct of the CFMEU or its officials which is on trial – it is the conduct of ADCO. It follows that, for the purposes of the claims brought by the Director against ADCO, the Court can only proceed on the basis of the evidence before it in assessing whether the FW Act has been contravened by ADCO as the Director has claimed.

49    By reference to the further amended statement of claim I have already summarised the substance of the Director’s allegations against ADCO. In response, ADCO’s defence to those claims of the Director can be summarised as follows.

50    First, ADCO claims that the allegations of the Director cannot be substantiated in respect of ADCO’s interaction with SCC, because SCC employed no workers who could be covered by an enterprise agreement that also covered an employee organisation within the meaning of s 354(1) of the FW Act. Rather, all workers the Director claimed were employees of SCC were actually employed by Crane Hire, a separate company (albeit a related company also controlled by the Morrish family). Accordingly, ADCO claims that the Director’s case fails at this initial hurdle.

51    Second, even if there were discrimination by ADCO against SCC by ADCO removing SCC from the Bond University project, refusing to engage SCC both further in respect of the Bond University project, and refusing to engage SCC in respect of the Robina project, ADCO denies that its reasons for doing so contravened s 354(1) of the FW Act.

52    Third, ADCO denies that Mr Kitto “refused to engage” SCC as the Director alleges.

53    It is appropriate for me to examine these issues in turn.

1.    FIRST ISSUE: WAS SCC “AN EMPLOYER” FOR THE PURPOSES OF S 354(1) OF THE FW ACT?

Submissions of the parties

54    In summary the Director submitted as follows:

    Each case must be considered on its own facts. There are, however, established principles relevant to determining the question whether an employment relationship exists, as identified in such cases as Damevski v Giudice (2003) 133 FCR 438; Gothard, in the matter of AFG (Receivers and Managers Appointed) (in Liq) v Davey [2010] FCA 1163, and Jacinta Arcadia v Accenture Australia (2008) 170 IR 288. The Director also relied heavily on my decision in Fair Work Ombudsman v Eastern Colour Pty Ltd (No 2) [2014] FCA 55.

    Crane Hire, SCC and Morrish Investments have the same registered address, principal place of business address and contact address.

    Although Crane Hire was established as a company which could in future provide labour to entities other than SCC, it never had.

    It is clear that, practically speaking, Mr and Mrs Morrish regarded Crane Hire and SCC as one entity.

    Operationally there was no distinction between Crane Hire and SCC during the relevant period.

    It is only after 8 July 2014 (when a written agreement was entered between Crane Hire and SCC) that Crane Hire invoiced SCC for the costs of labour supplied by Crane Hire to SCC. Notwithstanding this, no money changed hands, because Crane Hire had no bank account and all Crane Hire expenses were paid by SCC.

    In reality, the reference to “profit” in the books of account of Crane Hire referred to an amount yet to be paid by Crane Hire to workers.

    Crane Hire was dependent on SCC for all aspects of Crane Hire’s operations.

    Most workers were based at SCC’s crane yard at Burleigh Heads.

    Crane Hire had never had a telephone number or a website separate from that of SCC.

    Crane Hire and SCC had always used the same business equipment including printers, computers and stationery.

    All documents referable to SCC and Crane Hire were held and maintained at either the Morrish family home or the SCC crane yard.

    Although formal ownership of plant used in Morrish businesses was vested in Crane Hire, cranes operated by Crane Hire bore the SCC logo and telephone number.

    SCC paid maintenance and other costs in respect of cranes and trucks.

    Crane services were booked by contacting SCC or Mr Morrish. Crane Hire had no staff to take bookings.

    Advertisements for employment positions bore the SCC logo.

    Workers such as Mr Ian Aldridge saw no distinction between SCC and Crane Hire.

    Employee induction material referred to both SCC and Crane Hire.

    Customer dockets bore the SCC letterhead.

    While employees more recently had received pay slips from Crane Hire, they previously received pay slips from SCC.

    Crane Hire only paid for wages, superannuation, payroll tax and WorkCover payments for workers from 9 July 2014.

    Workers wore uniforms with the SCC logo.

    At material times SCC paid for uniforms and personal protective equipment of workers. Uniform shirts were provided to employees by Mr Morrish.

    This case is distinguishable from cases such as Golden Plains Fodder Australia Pty Ltd v Millard (2007) 99 SASR 461. The practical reality was that Crane Hire had no separate existence or operation to Surf City.

55    In response, ADCO’s submissions were, in summary:

    The financial statements and tax returns of SCC and Crane Hire for the 2013 and 2014 financial years reflected the structure whereby Crane Hire was the employer of employees in the Morrish businesses. Mrs Morrish checked these documents for accuracy and Mr Morrish accepted that he signed off on them as being true and correct.

    SCC’s Trading Account for the year ending 30 June 2014 clearly showed that SCC did not employ anyone in that financial year, but rather procured labour from Crane Hire.

    The figures for the year ending 30 June 2013 were consistent with other evidence showing that SCC stopped employing anyone by September 2012, and from at least that point in time procured the relevant labour.

    Crane Hire’s financial statements record it as incurring all relevant employment related expenses in the form of wages, superannuation and payroll tax (where applicable).

    Mr Dawson was employed by Crane Hire, and all cranage employees reported to him.

    Mr and Mrs Morrish instructed Draytons to assist in the making of the enterprise agreement, changing the employer in the draft agreement from SCC to Crane Hire.

    There was no evidence that Mr and Mrs Morrish sought to subvert minimum award rates.

    During the period prior to the approval of the enterprise agreement the employees of the Morrish business were informed at a meeting of employees that their employer was Crane Hire.

    Documentation produced internally and externally by SCC and Crane Hire during the relevant period recorded the employment transactions in respect of payroll, taxation and superannuation as being paid by Crane Hire as the employer.

    All of the Director’s witnesses confirmed their understanding that at all relevant times Crane Hire was the employer of the relevant labour. Attempts by Mr and Mrs Morrish to retreat from this position should be treated with scepticism.

    The use of the same yard, office facilities and IT system is a logical consequence of running a substantial family business. None of these things tells against Crane Hire being the legal employer.

    Although until mid-2014 there was no bank account in the name of Crane Hire, and only one bank account for SCC, this did not deprive the Morrish entities of their separate legal personality.

    These facts are not similar to those in such cases as Damevski 133 FCR 438; Eastern Colour (No 2) [2014] FCA 55 and Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174 – rather they are more akin to “internal organisation” cases identified in Ramsey 198 FCR 174 at [79]-[92].

Relevant authorities

56    Both parties directed the Court’s attention to leading cases considering the identity of employers, in particular Damevski 133 FCR 438; Eastern Colour (No 2) [2014] FCA 55; Ramsey 198 FCR 174; Golden Plains Fodder 99 SASR 461, and Gothard [2010] FCA 1163. It is useful to commence consideration of this issue by examination of principles emerging from those cases.

Damevski

57    In Damevski 133 FCR 438 the applicant was a cleaner who had previously been employed by the second respondent, Endoxos. As Marshall J explained, Mr Damevski resigned when given the choice between resigning and “contracting” his services to a company called MLC Workplace Solutions (MLC), or not being provided with any work in the future by Endoxos. It appears that at a meeting of Endoxos employees held to discuss the impending “transition to MLC”, Mr Lindsay Burke, an Endoxos manager, told the employees “nothing would change”, but at a subsequent meeting they were told that if they did not “sign with MLC they would not have any work”. Mr Damevski signed the “resignation” document, and continued working on the understanding that he was doing so as a subcontractor. From that time onwards:

    Endoxos was required to pay MLC for Mr Damevski’s services within 24 hours of the weekly invoice sent by MLC;

    Mr Damevski was paid by MLC fortnightly;

    MLC deducted amounts from Mr Damevski’s pay with respect to accident and public liability insurances, long service leave and superannuation;

    Mr Damevski continued to work at the direction of Endoxos;

    the only work Mr Damevski performed was work for Endoxos;

    when Mr Damevski was sick he notified Endoxos, not MLC;

    Endoxos relocated him in his work areas, without any consultation with MLC either by Endoxos or Mr Damevski.

58    Endoxos asserted that there was no evidence of a direct contractual relationship between Mr Damevski and Endoxos; Mr Damevski had resigned from Endoxos; and Mr Damevski had entered into a separate agreement to perform work for MLC.

59    Marshall J found that:

    Mr Damevski had had a previous relationship with Endoxos;

    there was no evidence of a signed contract employment between Mr Damevski and Endoxos;

    the evidence was that Mr Damevski worked solely for Endoxos pursuant to an arrangement where he would be paid by MLC, who would in turn look to Endoxos for reimbursement of such payments plus an administration fee;

    Endoxos retained the right to direct and control the performance of Mr Damevski’s work and terminate his services on its own behalf and not as agent of MLC;

    MLC acted as an agent for Endoxos in paying Mr Damevski, on Endoxos’ behalf. This was the only role it performed;

    there was no evidence of Mr Damevski providing his services as an independent contractor.

60    Endoxos sought to rely on the decision in Building Workers’ Industrial Union of Australia v Odco Pty Ltd (1991) 29 FCR 104. In relation to this however Marshall J observed at 450:

60.    It is apparent from the information pack that MLC was attempting to replicate the arrangement discussed in Odco. Labour hire agencies that rely on Odco to legitimise particular activities should bear in mind that the existence of a contractual relationship and employment relationship, in any given set of circumstances, is ultimately a question of law. When attempting to replicate the arrangement discussed in Odco, it is not sufficient to give lip service to it. There is no legitimacy in arrangements which merely attempt to exploit difficult areas of law and create vehicles designed, inter alia, to enable employers to avoid their award and statutory obligations.

61    At 450-451 his Honour distinguished the facts before him from those in Odco 29 FCR 104 on the following basis:

61.    … Contrary to the current case, the workers discussed in Odco were first “screened” at interviews conducted by the labour hire company, Troubleshooters Available (Troubleshooters). Inquiry was made of the worker’s reasons for wanting to be self-employed, whether they had been self-employed before, whether they were members of a relevant union and superannuation scheme, and whether they had construction industry long service leave registration.

62.    A worker was invited to sign an “Agreement to Contract”, in much the same form as the AICA Agreement to Contract, provided satisfactory answers were given at the interview. The result of this was to make the worker eligible to be offered work from time to time on some particular site for some particular builder client of Troubleshooters.

63.    In Odco, the Court dismissed many of the arguments advanced by the relevant union to show that Troubleshooters had no real control over the workers and that Troubleshooters’ role was in reality one of agent. The Court however, accepted that the maintenance of communication between a worker and Troubleshooters does not negate the existence of a contractual relationship between the worker and the builder. The Court also made it clear that payment of wages by a third party is not fatal to the existence of a contract of employment between a worker and a putative employer.

64.    The Court found, ultimately, that the evidence indicated that it was always intended that Troubleshooters would be liable to pay the worker for all work, at the rate which it had agreed with the worker, whether or not it received payment from the builder. Relevant to this was the fact that Troubleshooters was the entity that fixed and adjusted the remuneration to which the worker was entitled and the builder was not always aware of the rate paid to the worker by Troubleshooters. In the instant case, Endoxos, not MLC, determined Mr Damevski’s rate of pay.

65.    Endoxos did not establish an arrangement in the form recognised in Odco or any like arrangement.

62    On the facts of the case Marshall J was also satisfied that when Mr Damevski returned to work after his “resignation” he began working with Endoxos again, without any relevant role having been played by MLC, and it could be implied that Endoxos and Mr Damevski informally re-entered an arrangement in the nature of a contract of service on the same terms and conditions under which Mr Damevski had previously worked for Endoxos the preceding day. His Honour found that consideration was provided by Mr Damevski by performing cleaning services for Endoxos, with MLC merely performed an administrative function by providing Mr Damevski’s pay, on behalf of Endoxos (at 455-456).

63    While Endoxos relied on the requirement for an intention to create legal relations to assert that there was no evidence of a legally enforceable contract, his Honour observed at 456 that:

95.    It is an accepted principle of contract law that although a person’s apparent intention will generally represent their real intention, an objective approach should be taken in establishing intention.

…

96.    Endoxos may have set about making arrangements for the provision of labour through a third party, but ultimately it acted in a way that showed that it in fact intended to create legal relations. The evidence indicates that Endoxos wanted to maintain control of Mr Damevski, expected him to use their equipment and clothing emblazoned with Endoxos livery and, ultimately, wanted to be able to dismiss Mr Damevski.

64    Merkel J in Damevski 133 FCR 438 similarly found the “real substance” of the Endoxos and Damevski agreements was that 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, because, in summary:

    the employees were to be employed precisely as they had been previously by Endoxos, subject to the interpolation of MLC as a conduit for payment of the new rates of pay payable to the employees;

    Endoxos, rather than AICA/MLC, made all of the specific arrangements relating to Damevski’s re-engagement to work as a cleaner for it as from 19 August 2001; and

    all of the relevant features of Damevski’s employment, save for the manner and quantum of payment, remained unchanged.

Eastern Colour (No 2)

65    In Eastern Colour (No 2) [2014] FCA 55 Mr and Mrs Baronio were the directors of Eastern Colour Pty Ltd (Eastern Colour), a company which was the trustee of the Eastern Colour Family Trust established for the benefit of the Baronio family. Eastern Colour operated the family farm. Two sons of Mr and Mrs Baronio were the sole directors and shareholders of two companies established as labour hire companies for the supply of labour hire to the farm. An arrangement with farm employees was reached whereby they worked for the first labour hire company up to a maximum of 40 hours per week. If they wished to work more than 40 hours they would then work for the other labour hire company.

66    As trial judge I found that despite the formal labour hire arrangements, the true employer of the workers was Eastern Colour in circumstances where:

    all relevant employees believed that Mr and Mrs Baronio were “the bosses” who could hire and fire employees, and that this appeared to be a correct perception;

    the evidence of each of the relevant employees was that they believed that they were working for Eastern Colour;

    relevant employees had limited knowledge of the two labour hire companies, other than as entities whose names appeared on pay slips;

    employees on the farm wore shirts bearing the name “Eastern Colour”, on the basis that this was their employer. Similarly, the only Workplace, Health and Safety Guidelines applicable at the farm were in the name of Eastern Colour;

    employees performed the work in the same location (namely on the farm owned by Eastern Colour) and by packing fruit in boxes labelled as produced by Eastern Colour;

    there was no practical difference in the work environment or practice of an employee after an employee had worked 40 hours;

    employees were not aware of arrangements whereby they worked up to 40 hours for one of the labour hire companies and any hours in excess of those original 40 hours for the other labour hire companies;

    the directors of the labour hire companies were not involved in employing staff;

    the labour hire companies existed only to provide services to Eastern Colour;

    despite the time sheets and pay slips – there was no contract of employment between either labour hire company and relevant employees.

67    Further, as I observed at [130], the arrangements put in place in that case constituted an attempt to exploit difficult areas of law, and create vehicles designed, inter alia, to enable employers to avoid their award and statutory obligations.

Ramsey

68    In Ramsey 198 FCR 174, Mr Ramsey had been the person in effective control of the management and operation of an abattoir through various companies, since 1998. 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. Buchanan J noted that in 2001 and 2002 there was some reorganisation of corporations within the Ramsey group insofar as was concerned employment of workers. In August 2002, Mr Ramsey decided to close the abattoir for a short time and all employees were terminated. When the abattoir reopened shortly thereafter, some employees were not employed. Following orders of the Federal Court adverse to the Ramsey companies and directing payment of compensation to affected employees, those Ramsey companies went into liquidation. Buchanan J found that:

14.    … 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.

69    Mr Ramsey caused a letter to be sent to all employees, suggesting that they approach Tempus Holdings Pty Ltd (Tempus) for employment.

70    Ramsey Food Processing Pty Ltd (Ramsey Food Processing) put Tempus in funds to meet its liabilities associated with the supply of the labour including wages, workers compensation insurance, superannuation contributions and tax obligations. Those liabilities were handled in Tempus’s name, and through its bank account. Ramsey Food Processing agreed to provide an indemnity to Tempus in respect of any liability arising from the employment of the employees. Ramsey Food Processing, rather than Tempus, had the right to recruit and dismiss employees, and to decide what work was to be performed and by whom. As his Honour observed at 183:

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.

71    His Honour also observed (at 184 [28]) that 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 the Federal Court on 4 October 2006, nothing changed for employees who were allowed to remain in employment.

72    In considering whether Tempus, or Ramsey Food Processing, was the employer of the relevant workers Buchanan J examined the historical development of labour hire companies and continued at 191:

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.

73    His Honour noted that different issues arose where labour hire services were provided by a company to a related entity, compared with the provision of such services by unrelated corporations. In relation to intra-group provision of services, Buchanan J observed at 195-196:

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 arm’s-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, eg 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.

74    His Honour observed that principles relevant to intra-group arrangements did not apply in the case before him.

75    Further, his Honour noted that the respondent relied on Golden Plains Fodder 99 SASR 461 as authority for the proposition that a change of employer from one company in a group to another may be legally effective. His Honour concluded however that Golden Plains Fodder 99 SASR 461 was distinguishable because that case involved an intra-group company (unlike the circumstances in Ramsey 198 FCR 174), but more particularly because even if the Tempus arrangements were to be evaluated as an intra-group arrangement they were ineffective to isolate employment, and employment obligations, from Ramsey Food Processing (at 199 [91]).

Golden Plains Fodder

76    In Golden Plains Fodder 99 SASR 461 the plaintiff, Mr Millard, injured his hand while working at a plant operated by Golden Plains Fodder Australia Pty Ltd (Golden Plains). A preliminary question was whether Golden Plains was Mr Millard’s employer. Mr Millard contended that it was not – rather, a related company (Macpri Pty Ltd) was his employer. This question required decision because of the operation of s 54 of the WorkCover Corporation Act 1984 (SA) – if Golden Plains was Mr Millard’s employer his action for compensation was statute-barred. The facts indicated that from incorporation until June 1996 Golden Plains performed all of the functions of an employer, including paying workers’ wages, deducting income tax and issuing group certificates. In June 1996 the directors of Golden Plains instructed their accountant to arrange for the incorporation of Macpri, with themselves as the directors of Macpri. Golden Plains’ registration as the employer was cancelled, and Macpri became the registered employer, was assigned a registration number and began paying the workers, deducting income tax from their wages and issuing group certificates. Macpri was the registered employer when Mr Millard injured his hand.

77    At first instance the trial Judge found that only Golden Plains carried on a business, that the workers generated income for Golden Plains and, out of that income, Macpri paid the workers after Golden Plains had transferred the necessary funds from its bank account to that of Macpri. His Honour found that there was little evidence of Mr Millard’s intentions concerning the identity of his employer, however the directors of Golden Plains and Macpri intended that Macpri be the employer of Mr Millard, and the intentions of the parties were the decisive factor in identifying Macpri as the employer.

78    On appeal to the Full Court of the Supreme Court of South Australia, Golden Plains argued that the primary Judge was in error in having regard to evidence of the subjective intention of the parties in identifying the employer, on the basis that when construing a contract a court should determine what would objectively be conveyed by what was said or done, having regard to the circumstances in which those statements and actions happened (at [23]-[24]). Golden Plains also contended that the arrangements entered into between Golden Plains and Macpri, as well as those companies and Mr Millard, were a “sham”. Gray J (David J agreeing) considered whether the arrangements were a sham, and after examining a number of authorities including Snook v London & West Riding Investments Ltd [1967] 2 QB 786; Scott v Commissioner of Taxation (Cth) (No 2) (1966) 40 ALJR 265 and Sharrment Pty Ltd v Official Trustee (1988) 18 FCR 449 observed (at [29]) that it was appropriate to receive evidence directly from the parties about their intentions when directed to the topic of sham. However Gray J continued:

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.

34.    The totality of the circumstances surrounding the relationship of the various parties, including conduct subsequent to the creation of the alleged employment relationship, is relevant.

35.    Documentation created by one or more of the parties describing or evidencing an apparent employment relationship will be relevant to, but not necessarily determinative of, the true character of the relationship. The documentation may have been brought into existence for other purposes, for example, for tax minimisation or the reduction of insurance premiums, without reflecting the reality of the parties’ relationship. The payment of wages by a particular entity is not conclusive of the existence of an employment relationship. The beliefs of the employees as to the identity of the employer is admissible and is entitled to be given weight.

(Footnotes omitted.)

79    After considering the facts Gray J said:

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.    A number of documents tendered emanating from the defendant contained the description of Golden Plains trading as Macpri. Counsel for Golden Plains disavowed any suggestion that this was correct. The business records do not support the suggestion that Golden Plains traded as Macpri. 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.

49.    Counsel for Golden Plains at times referred to the reality of the arrangement and at other times to the process as a sham or as simply the paper side of the arrangement. However advanced, this submission should be rejected.

80    Accordingly his Honour found that Macpri was Mr Millard’s employer.

81    At [69] White J set out a number of principles he considered applicable in such cases, namely:

1.    Regard is to be had to the totality of the circumstances surrounding the relationship of the parties.

2.    The circumstances may include the factors considered in determining whether a given relationship is an employment relationship at all.

3.    Events which occurred after the relevant contract was formed may also be considered.

4.    It is the reality of the contractual arrangements which is to be considered. Effect may be given to that underlying reality despite the absence of any submission that certain arrangements are a sham.

5.    Payment of wages and issuing a taxation group certificate by one entity is important but not conclusive as to the identity of the employer. It may reflect no more than financial convenience between entities within one corporate group. Nevertheless, such factors will in most cases require active consideration.

6.    Documents created by one or more of the entities describing or evidencing their relationship will be relevant, but not necessarily conclusive as to the true character of the relationship. The Court should consider the purpose for the creation of the documents. For example, certain documents may have been prepared for a purpose other than describing the contractual relationship, such as taxation minimisation or reduction of insurance premiums.

7.    Conversations and conduct at the time of the engagement of the worker are of considerable significance. The belief of the worker as to the identity of the employer is admissible and should be given due weight.

8.    When new employees are engaged to work in a business in which a number of separate corporate entities participate other than as partners, it is open to those controlling the business to select the company which is to be the employer. However, that selection must be consistent with the financial and administrative organisation of the business and not otherwise be a sham.

(footnotes omitted.)

82    His Honour considered that in the Golden Plains case particular regard should be had to the circumstances surrounding the commencement of Mr Millard’s employment, and that events after the employment could also be considered.

83    After examining the documentary evidence before the Court, his Honour concluded that it could not reasonably be found that the various documents did not reflect the reality of the arrangements between the parties (at [103]).

Gothard

84    In Gothard [2010] FCA 1163, the Court was required to identify which of a group of related companies in liquidation was or were the employer of the respondents in order to determine whether they represented priority creditors of any of those companies pursuant to s 433(3)(c) of the Corporations Act 2001 (Cth). The facts were complicated by multiple respondents who were potentially employees of different companies within the group, notwithstanding that only one of the companies appeared to have a contractual liability to pay them. Edmonds J considered numerous authorities and at [60] observed:

Aspects of the practical realities of the relationship which have been considered relevant in the cases referred to above, include a consideration of the entity which:

(a)    had practical and legal control and direction of the employees;

(b)    made decisions about hiring;

(c)    made decisions about disciplinary issues;

(d)    made decisions about the level of remuneration;

(e)    actually paid remuneration;

(f)    communicated with employees about leave;

(g)    made decisions about termination of employment.

85    After a very detailed and lengthy judgment his Honour made factual findings relevant to the documentary evidence; the question whether there was a contract of employment between the companies and the workers; and whether the workers could, in the course of their employment, provide services to their employer by performing work which benefited third parties and vice versa.

Application of relevant principles to this case

86    Examining the facts of this case in light of relevant principles it is clear that, at material times, SCC was not the employer of the workers of the Morrish businesses. Crane Hire was their employer. I have formed this view for the following reasons.

87    It is clear that SCC and Crane Hire are companies in the same corporate group. Both Mr Morrish and Mrs Morrish give evidence to that effect. In any event this conclusion must inevitably be drawn from the facts before the Court, including that at material times Crane Hire, SCC and Morrish Investments had the same sole director (Mr Morrish), as well as the same registered address, principal place of business address and contact address listed with ASIC (affidavit of Sharon Morrish sworn 8 June 2016 para 14); prior to October 2014 Mrs Morrish managed the administration and finances for both SCC and Crane Hire with the assistance of a bookkeeper, Ms Mel Chittick (affidavit of Sharon Morrish sworn 8 June 2016 para 15); and at material times SCC and Crane Hire used the same accountants (affidavit of Sharon Morrish sworn 8 June 2016 para 16).

88    As was recognised in, for example, Golden Plains Fodder 99 SASR 461 and by Buchanan J in Ramsey 198 FCR 174 at [76], in circumstances where there are a number of companies in the same group it is unremarkable for the group to be structured such that one of the companies supplies services to third parties, and another of the companies provides labour in support of group activities, either to other members of the group or to third parties. Indeed in this case it is common ground that:

    Mr and Mrs Morrish intended Crane Hire to be the employer of workers from the second half of 2012 following advice from their accountants to separate the employer entity in the business structure from the companies holding the assets;

    this was done with a view to positioning Crane Hire as a labour hire operation in the industry; and

    formal arrangements were put in place to give effect to this intention.

89    It is also clear that the employees knew of the arrangements which had been put in place and that they knew that Crane Hire was their employer. This can be seen from the evidence before the Court as to meetings between the Morrishs and employees of the business where employees were informed of the new role of Crane Hire as their employer under the enterprise agreement to which the employees and Crane Hire were parties. It can also be seen, for example, from the following evidence of employee Mr Aldridge during cross-examination at the hearing:

Yes. And you all knew by that, of course, that Crane Hire Proprietary Limited was your employer?---Yes.

And that it was the company that was making the Enterprise Agreement with you?---Yes.

And committing to the terms and conditions that it would pay you as employees?---Yes.

Yes. Now, when you worked for Crane Hire Proprietary Limited within the Surf City business, you filled out timesheets?---That’s correct, yes.

And in those days, you had a timesheet that had Crane Hire Proprietary Limited on it. Do you remember that?---Yes. Well, the wife did all that, but, yes. Yes, it did have, yes.

(transcript 17 August 2016 p 175.)

90    Similarly, during cross-examination Mr Dawson gave the following evidence:

Now, from September 2012, as operations manager for the Surf City Cranes business, you were employed by the company controlled by the Morrishes called Crane Hire Pty Ltd?---Yes.

Yes. And you had some full-time employees and casual employees, who you say reported to you in the various roles of operator, riggers and dogmen?---Yes.

And again, from around – from at least around September 2012 those employees who reported to you were also employed by that company called Crane Hire Pty Ltd?---Yes.

(transcript 16 August 2016 pp 56-57.)

91    In claiming that as a practical reality SCC was the employer of workers in the Morrish business, the Director relies in particular on my decision in Eastern Colour (No 2) [2014] FCA 55. There are similarities between the facts of this case and those in Eastern Colour (No 2) [2014] FCA 55 to the extent that both involved business structures where much of the corporate group activity took place through one company and labour hire was sourced from another company in that group. The facts of the case currently before me are, however, very different to those in Eastern Colour (No 2) [2014] FCA 55. In Eastern Colour (No 2) [2014] FCA 55 I found that the workers believed they were working for the operating company Eastern Colour Pty Ltd; the directors of the labour hire companies in the corporate group (who were the sons of the directors of Eastern Colour Pty Ltd) had no involvement in employing staff; the authority to hire and fire employees was in the directors of Eastern Colour Pty Ltd, and there was no contract of employment between either labour hire company and workers. I also found that the employment arrangements in Eastern Colour (No 2) [2014] FCA 55 were a sham, being a construct under which workers would be employed successively by the two labour hire companies to avoid overtime rates being payable by Eastern Colour Pty Ltd for work in excess of 40 hours in a week, and that this construct was deliberately created for that purpose in contravention of relevant provisions of the Workplace Relations Act 1996 (Cth) and certain clauses of the applicable Notional Agreement Preserving State Awards.

92    On the facts before me there was no sham in the arrangements whereby Crane Hire was the employer of workers in the Morrish business. Mr and Mrs Morrish, as the persons in control of the group, and for apparently legitimate business reasons to minimise possible future risk, put it to employees that Crane Hire would be their new employer. The employees agreed to the enterprise agreement in which Crane Hire had that role. There was, as Buchanan J identified in Ramsey 198 FCR 174 at [78], a “rational explanation for the arrangement”, and the explanation was “satisfactorily related to an intelligible business objective”.

93    The Director pointed to the manner in which Mr and Mrs Morrish regarded Crane Hire and SCC as one entity, what could be described as the “invisibility” of Crane Hire as an entity compared with SCC (whose logo for example promoted the business) and such financial circumstances as the direct payment by SCC of wages, superannuation, payroll tax and WorkCover payments until 9 July 2014.

94    ADCO submitted that the evidence of Mr and Mrs Morrish in this respect should be accorded caution because of their investment in this litigation. I accept this submission. But in any event, in circumstances where both SCC and Crane Hire appeared to be corporate alter egos of at least Mr Morrish, it is not surprising that both he and Mrs Morrish not only regarded, but treated both companies as functioning within the corporate group. I also consider it unsurprising in the circumstances that the financial and business resources of SCC, being the primary operating entity in the business, would be utilised to support the operation of Crane Hire. This does not mean, however, that Crane Hire was not the true employer of the workers in the Morrish business.

95    Further, the fact that SCC was both the public face of the Morrish business for dealing with customers, and given a prominent role in the Morrish business structure as the entity with which employees may have identified (for example, through uniforms with the SCC logo), does not mean that the practical realities of the situation pointed to SCC as the employer of the workers. The documentary evidence before the Court in form of financial accounts of SCC and Crane Hire for the financial years ending 30 June 2013 and 30 June 2014 recording Crane Hire as the employer of workers and SCC as employing no workers; employment transactions in respect of payroll, taxation and superannuation being paid by Crane Hire as the employer; and receipt by workers of pay slips recording Crane Hire as their employer, in my view represent the truth of the position so far as concerns employment of workers in the Morrish business.

96    My finding that SCC was not the employer of the workers in terms alleged in the Director’s amended statement of claim means that the application before me should be dismissed, because it is not possible that ADCO or Mr Kitto could have discriminated against SCC in contravention of s 354(1) of the FW Act.

97    In the interests of completeness however, and also in the event that I am wrong in respect of my finding that SCC was not the employer of the workers in the Morrish business, I will consider the other issues before the Court. As I explained earlier, these issues are:

    whether the reasons of ADCO in removing SCC from the Bond University project, and refusing to engage SCC both further in respect of the Bond University project and in respect of the Robina project, contravened s 354(1) of the FW Act; and

    whether Mr Kitto refused to engage SCC for reasons which contravened s 354(1) of the FW Act.

2.    SECOND ISSUE: DID ADCO REMOVE SCC FROM THE BOND UNIVERSITY PROJECT, REFUSE TO ENGAGE SCC FURTHER IN RESPECT OF THE BOND UNIVERSITY PROJECT, AND REFUSE TO ENGAGE SCC IN RESPECT OF THE ROBINA PROJECT, FOR REASONS WHICH CONTRAVENED S 354 OF THE FW ACT?

98    A threshold question in respect of this issue is whether, in taking the actions it did, ADCO discriminated against SCC.

99    The Macquarie Dictionary defines “discriminate” as, inter alia:

to make a distinction, as in favour of or against a person or thing: to discriminate against a minority.

100    “Discrimination against” in the industrial relations context was discussed in Australian Building and Construction Commissioner v McConnell Dowell Constructors (Aust) Pty Ltd (2012) 203 FCR 345 in relation to s 45(1)(a)(i) of the Building and Construction Industry Improvement Act 2005 (Cth). The Full Court observed:

69.    First, it is considered that the natural and ordinary meaning of the phrase “discriminate against” is that an “adverse distinction” is made between persons. Such was the conclusion of Ryan J in Helal No 1 and the conclusion of Tracey J in National Retail Association. It is also a conclusion consistent with the decision of Gray J in Cozadinos where his Honour referred to a person “suffering harm by way of discrimination”. It is a conclusion which is supported by both the terms of s 45 and the heading to that section which reinforces the constraint that the section is confined to “discrimination against [an] employer”. It is said to be “an elementary and fundamental principle that the object of the court, in interpreting a statute, ‘is to see what is the intention expressed by the words used’ … It is only by considering the meaning of the words used by the legislature that the court can ascertain its intention”: Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 304 per Gibbs CJ. The Chief Justice there went on to observe that “it is not unduly pedantic to begin with the assumption that the words mean what they say”.

101    ADCO submitted that the Director was required to prove that ADCO had treated SCC differently or distinctly from other subcontractors, and that this differentiation or distinction was established by reference to those in comparable circumstances save for the alleged protected attribute. The difficulty, in ADCO’s submission, was that GCC, the cranage contractor to which ADCO directed the work, had the same protected attribute as SCC – namely its employees were not covered by an enterprise agreement which also covered the CFMEU.

102    It is clear that ADCO treated SCC differently from GCC, which ADCO engaged to undertake the cranage work in respect of the Bond University and Robina projects after terminating and cancelling SCC. That there was active discrimination against SCC is evident from the undisputed evidence before the Court that in circumstances where ADCO had engaged SCC to work on at least the Bond University project, subsequently ADCO made a deliberate and conscious decision to reject SCC as a cranage operator in favour of another subcontractor.

103    I do not accept that ADCO’s conduct cannot be said to be “discrimination against” SCC within the meaning of s 354(1) of the FW Act unless the reason for the discrimination was proscribed by the FW Act.

104    I accept that, in the ordinary meaning of the word, ADCO “discriminated against” SCC by making an “adverse distinction” between it and GCC. It follows that the key issue is whether ADCO’s discrimination against SCC was for the reason set out in s 354(1) of the FW Act.

105    In this respect the reverse onus rests on ADCO pursuant to s 361 of the FW Act, such that ADCO must prove, on the balance of probabilities, that the alleged prohibited reason (namely, that SCC was an employer of employees who were not covered by an enterprise agreement which also covered the CFMEU) was not a substantive and operative reason for ADCO removing and/or refusing to engage SCC in each case: Board of Bendigo Technical and Further Education v Barclay (2012) 248 CLR 500 at 516-517, 530-531, 540-542, 545-546; Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (2014) 253 CLR 243 at 249, 257, 260, 267. Identification of the reason or reasons involves a question of fact which must be answered in the light of all the facts established in the proceeding: French CJ and Crennan J in Barclay 248 CLR 500 at 517.

106    In this case I am satisfied that ADCO has discharged this onus of proof. The reason for ADCO’s discriminatory actions against SCC in relation to the Bond University and Robina projects was because ADCO knew that the CFMEU objected to SCC’s presence on the Bond University and Robina project sites, and that SCC’s continued presence would cause the CFMEU to take action causing delays and disruption to those projects. ADCO was not motivated, as a substantive and operative reason, by the fact that employees of the Morrish business were not covered by an enterprise agreement which also covered the CFMEU.

107    I have formed this view for the reasons which relate to:

(a)    direct evidence of their motivations for action by ADCO witnesses.

(b)    evidence of ADCO witnesses in relation to SCC’s industrial arrangements.

(c)    evidence of Mr Morrish, Mrs Morrish and Mr Dawson.

(d)    issues relevant to GCC.

(e)    continued use of SCC by ADCO.

108    I will turn to each of these matters in more detail.

(a)    Direct evidence of ADCO witnesses as to their motivations in relation to Bond University and Robina projects

109    Direct extensive evidence on behalf of ADCO was given by the following witnesses, who were senior staff at ADCO involved with the Bond University and/or Robina projects at material times:

    Mr Richard Tanner

    Mr Simon Hawkins

    Mr Michael Duckett

    Mr Colin Kitto

    Mr Jarvis Robertson

    Mr Chris Zidar.

110    Each of these witnesses except Mr Robertson gave oral evidence at the hearing. Mr Robertson gave evidence that in August 2011 he was appointed the Contracts Administrator for the Bond University Project. From Mr Robertson’s affidavit evidence it appears he had no role in the decision to terminate SCC on this project.

111    The evidence of the ADCO witnesses was credible, candid and responsive. Certainly a number of the ADCO witnesses admitted to an inability to recall particular details, however that is not surprising in light of the four years which have passed since material events and the fact that the Bond University and Robina projects were but two projects among many with which ADCO has been involved on the evidence before the Court.

112    Examining the evidence of those witnesses however, a number of themes consistently emerged. These were as follows:

    a key focus for ADCO during the life of the Bond University and Robina projects was that they be completed as much as possible within time and budget;

    the witnesses were afraid of union disruption and delay to the projects;

    CFMEU officials had made statements to witnesses which intimated that the CFMEU did not want SCC on the project sites and there would be trouble if SCC was there; and

    while SCC was a good and reliable contractor, from ADCO’s perspective it was only one crane hire company among others available for engagement on the Gold Coast. In short: SCC was dispensable. ADCO was prepared to disengage from any relationship with SCC and replace SCC with any other good and reliable subcontractor, without hesitation, if for any reason SCC’s presence caused problems to ADCO on the Bond University or Robina projects. SCC’s presence did cause ADCO problems, and SCC was jettisoned.

113    Earlier in this judgment I set out agreed facts, reflecting some of the evidence of these witnesses. It is convenient at this point to both revisit and examine evidence of witnesses in further detail, through the prism of identifying the reasons for ADCO’s actions concerning SCC. I will examine the evidence of Mr Kitto separately, in light of the separate alleged contraventions of the FW Act pleaded in paragraphs 45 and 46 of the further amended statement of claim.

Bond University project

114    It appears to be common ground that the decision to dispense with the services of SCC on the Bond University project was made by Mr Hawkins (ADCO’s Queensland manager) and Mr Duckett (ADCO’s project manager on the Bond University project).

Mr Hawkins

115    Mr Hawkins deposed in his affidavit sworn 1 April 2016 that as Queensland manager he had strategic oversight of risk management for ADCO projects in Queensland, including overseeing the management of operational risks (including the completion of projects on time) and industrial risks or delays and disruptions to the delivery of projects caused by industrial relations issues. His uncontested evidence was that, at material times, the building and construction industry in Queensland was very competitive, profit margins set by ADCO were very tight, and accordingly the projects needed to be extremely well managed to ensure they were delivered on time and on budget for clients and also at a profit for ADCO. He deposed that the industrial relations landscape in Brisbane and the Gold Coast was very unstable in the period 2011-2013, and that ADCO received significant attention from the CFMEU and the Builders Labourers Federation (BLF) during this period. He gave evidence that there had been loss of time due to industrial activity on ADCO projects, in particular at the Green Square Project constructed by ADCO in Fortitude Valley, Brisbane. Mr Hawkins deposed that the Bond University project also experienced industrial issues due to the insolvency of the formworker QConcrete, and delays because of bad weather and complex design issues. Mr Hawkins said:

42.    I was concerned about the delays and was conscious of maintaining our relationship with the client. In relation to the issues with QConcrete, a decision was made that ADCO would pay the cost of labour and materials for QConcrete, to ensure the project could progress. I was concerned about the implications of this decision, which meant significant additional costs for ADCO and the likelihood that ADCO would make a significant loss on the Bond University Project.

116    Mr Hawkins gave evidence that he had regular discussions with either Mr Kitto or Mr Duckett in relation to union visits to the Bond University site. He continued:

44.    By October 2012, given the matters of which I was aware as described above, I was sensitive to any risk of delay to our projects. I was especially sensitive to any risk of further delays to the Bond University Project, which was running significantly behind and which I knew from forecasting was going to result in a significant loss to ADCO. As far as I was concerned at that point in time it was imperative that I keep all of our projects moving and not expose ADCO to the risk of any further delay or disruption.

117    Mr Hawkins said that on or around 12 October 2012 he received a telephone call from Mr Andrew Sutherland of the CFMEU, who said words to the following effect:

I’m the CFMEU organiser for your Green Square Project. I’m watching that job very closely. Scott Vink is the organiser at Bond Uni, and he’s not happy about you using Surf City Cranes. You need to do something about them.

118    In his affidavit evidence Mr Hawkins gave evidence that he believed he consulted Mr Duckett by telephone almost immediately after the telephone conversation with Mr Sutherland. Importantly, Mr Hawkins also gave evidence as follows:

49.    Mr Sutherland’s phone call to me had left me with the clear impression that ADCO needed to move SCC on, or else the CFMEU and BLF would cause disruption to the Bond University Project and the other key ADCO projects in Queensland. I regarded Mr Sutherland as having effectively given me an ultimatum: get rid of SCC at the Bond University Project or risk further serious disruption to Bond and other key projects such as Green Square.

119    During the hearing I asked Mr Hawkins a question about this alleged statement of Andrew Sutherland, as follows:

HER HONOUR: So, Mr Hawkins, Scott Fink: “And he’s not happy about you using Surf City Cranes” is code? It means, “Get rid of Surf City Cranes”?---Yes.Yes.

They wouldn’t say, “Get rid of them”; they would say, “We’re not happy about them”, and you need to get rid of them. That’s what that means?---Yes.

Is that what you’re saying?---Yes.

(transcript 19 August 2016 p 328 ll 40-47.)

120    Counsel for the Director asked questions of Mr Hawkins following my question, in the following terms:

MR MURDOCH: Now, following up on her Honour’s question to you, you say that that’s the code. You’ve said, in paragraph 49, that you were effectively given an ultimatum:

Get rid of SCC at the Bond University project or risk further serious disruption to Bond and other key projects, such as Green Square.

You agree with me that it wasn’t the case, was it, that Mr Sutherland made any mention to you, in that conversation, of any disruption to Bond or any other key projects?---In all conversations with the union, they – there is always an existence of some form of threat, and - - -

Well – sorry. You finish.

HER HONOUR: Sorry. Finish?---And that’s where that conversation was going.

MR MURDOCH: That’s your assumption, isn’t it?---That’s my experience.

Well, it’s your experience, but it’s your assumption based on your experience?---Yes, it is my assumption based on my experience, yes.

(transcript 19 August 2016 p 329 ll 1-20.)

121    In re-examination, the exchange between Counsel for ADCO and Mr Hawkins was relevantly as follows:

All right. Now, you will recall her Honour asked you a question, following on from questions that Mr Murdoch had asked you, in relation to your best recollection of what Mr Sutherland told you in the immediate lead up to your decision to remove SCC from Bond University; do you remember her Honour asking you question a question about?---Yes.

And do you remember there was a – her Honour asked whether you took the words of Mr Sutherland, as best you recall as set out in paragraph 45 of your affidavit, to be effectively code; do you remember her Honour using that word?---Yes.

I just want to ask you some further questions in relation to that just to explain why you had a view that it was code for “you’ve got to get these – that you’ve got to get Surf City off that job”. If you go to paragraph 45. Now, Mr Sutherland identifies himself to you as the CFMEU organiser for your Green Square project, and then he says:

I’m watching that job very closely.

Did you see any code in those words?---Most definitely. Yes.

Could you tell her Honour what you took from those words that Andrew Sutherland told you at that time?---That was Andrew’s way of – of making a threat that he would stop that project should we not comply with their other requirements.

All right. And then he makes a reference to Scott Vink being the organiser at Bond University, and then he says:

And he’s not happy about you using Surf City Cranes.

Did you see any code in that?---Yes. Most definitely.

Could you explain to her Honour what you took that to mean?---The – not happy with them being used is a pure reference to we want them removed. And that is the code. That was the code that they were using.

And then he used the words, as best you recall:

You need to do something about them.

What did you take that to mean?---That we need to remove them from the site. And when he’s using the word “need”, what did you take that to mean?---We had no choice.

(transcript 19 August 2016 p 338 ll 1-43.)

Finding

122    The fact, and terms, of the conversation between Mr Hawkins and Mr Sutherland are not challenged. It is perfectly credible that Mr Hawkins would have assumed that the telephone call from Mr Sutherland of the CFMEU was in the nature of a threat by the CFMEU to ADCO, to disrupt ADCO construction activities, if ADCO retained SCC as a subcontractor. It is equally credible that Mr Hawkins would have taken that threat seriously, and contacted Mr Duckett to discuss the immediate removal of SCC from the Bond University Project.

123    This is particularly so in light of oral evidence by Mr Hawkins that he believed the CFMEU would use any tactics it considered effective to bring about the outcome it desired on building sites. In particular, I note Mr Hawkins’ evidence that, in relation to the Green Square Project, the CFMEU had instigated work stoppages for alleged safety reasons in circumstances where Mr Hawkins was confident that alleged safety issues raised by the union did not justify those work stoppages, and where areas of imminent risk could have easily been barricaded of or separated from the workface. I also note the following evidence of Mr Hawkins:

All right. Did ADCO, at that time, to your knowledge, at the Green Square project have a safety resolution procedure in place?---Yes.

And, again, based on the information that came to you from site management – so, again, focusing on your knowledge of these events as at October 2012 – did it appear to you that the union had followed those procedures in relation to any of those work stoppages?---No. They had not.

(transcript 19 August 2016 p 337 ll 41-47.)

124    During cross-examination by Counsel for the Director, Counsel raised the question why ADCO had not sought to engage with the CFMEU in relation to SCC:

Now, why was it that, without trying to engage with the union to ascertain what the root of the problem was, that you’ve decided to remove Surf City?---Because, from our experience, we knew what the next step for the union was going to be, and that was to stop the works on the site.

But why was it different from an issue raised by Vink, for example, in respect of the pay for Qconcrete or an issue raised in respect of safety? Why was there no engagement with them to try and resolve the issue?---Because the message was very clear.

HER HONOUR: So can I ask you this. So there’s no room for negotiation as far as you can see?---That’s correct, yes.

You’ve been told: “The union doesn’t want them. End of story. Don’t bother talking any more.” Is that the message you’re getting?---That’s the message, yes.

All right. Thank you.

MR MURDOCH: Following up on her Honour’s question, your best recall of the discussion with Sutherland, which you’ve set out in paragraph 45, was that Mr Vink wasn’t happen about you using Surf City Cranes and you had to do something about them. Now, you didn’t know why Vink wasn’t happen, did you?---Because it was only that he wanted them removed.

Well, you see, you keep saying that, but your best recall is that you were told that Vink wasn’t happy about them being used and you had to do something about them. Now, for all you knew, it could have been a lack of happiness as a result of a pay issue or a safety issue, couldn’t it?---No, it was – it was made very clear what the union wanted done at the time.

You’re recreating the conversation, aren’t you?---No.

(transcript 19 August 2016 pp 330-331.)

125    It is clear from Mr Hawkins’ evidence that he considered it would be a waste of time to seek to engage with the CFMEU and try to persuade the union to alter its stance in relation to SCC. In my view Mr Hawkins’ evidence in this respect is credible based on his experience in dealing with the union.

Mr Duckett

126    At material times Mr Duckett was the project construction manager for ADCO. He was normally based at the company’s Southport office and reported to Mr Kitto, who was the Gold Coast manager and in turn reported to Mr Hawkins. Mr Duckett swore an affidavit on 29 March 2016 in these proceedings.

127    I have already noted Mr Duckett’s evidence concerning the substantial delays experienced by ADCO on the Bond University Project. Mr Duckett gave detailed evidence about his concern about the impact of the insolvency of the subcontractor engaged to carry out the formwork, QConcrete, on the Bond University Project, and that it was an issue discussed at weekly Queensland management meetings. Mr Duckett deposed:

24.    Due to the issues outlined above, it was apparent to me as at October 2012 that we were going to incur a significant financial loss on the Bond University Project.

128    Mr Duckett gave further detailed evidence about his belief that CFMEU officials objected to SCC’s presence on ADCO sites. In particular he said:

28.    I was aware in around October 2012 that the CFMEU did not want SCC on site and wanted ADCO to replace them with another crane contractor, Gold Coast Cranes (GCC).

29.    I was aware of this from two sources of information. I was contacted directly by either Tim Jarvis from the BLF or Scott Vink from the CFMEU about this issue. I recall that in very direct and fairly colourful terms they indicated that they were not happy about SCC being used because they didn’t have a union EBA and they wanted ADCO to get rid of them and use GCC. I was also informed about this issue by Mr Tanner during a discussion we had about a union visit to site (which is discussed below).

129    Mr Duckett gave evidence about his understanding of poor relations between the CFMEU and Mr Morrish. In this respect he said:

32.    I also recall that I was told by Mr Tanner at some stage prior to 12 October 2012 that Jonathan Morrish, who is the Director of SCC, had had confrontations with union officials in the past, that they were “out to get him”, and that he had not “made friends” with the unions on previous projects. I knew who Mr Tanner was talking about as I had met Mr Morrish briefly in person, just in passing on a project site.

130    In cross-examination Mr Duckett gave further oral evidence about his understanding, namely information he had received that, on another project, there had been “heated discussions”, or conflict between the union and SCC (transcript 19 August 2016 p 355 ll 8-20).

131    Mr Duckett then gave evidence about his approach to SCC remaining engaged by ADCO in light of CFMEU hostility:

33.    I have been in the construction industry a long time and you hear about what happens to other commercial building contractors in terms of the industrial action that the CFMEU and BLF have taken on their sites. I had heard about the unions putting pressure on other building contractors and causing whatever disruptions they could. Based on my experience and what I had heard of on other people’s projects, it was my view that if the CFMEU or BLF had an issue with a particular subcontractor or wanted something done, they would create whatever issues were necessary to put pressure on the building company to achieve what the union wanted.

34.    It was also at the forefront of my mind that we had been experiencing a lot of problems with the unions at the Green Square Project site.

35.    On around 12 October 2012, I spoke to Mr Hawkins on the phone. During this call, I indicated that the union was very unhappy with SCC being on site and they wanted ADCO to remove SCC from the site.

36.    I was very concerned during the conversation with Mr Hawkins. We discussed that it was highly likely that if we did not remove SCC from site, the CFMEU and BLF would cause further disruption and delays to the Bond University Project.

37.    During this discussion, we considered the Bond University Project as a whole and what was best for the project commercially and also ADCO. We felt that we could not bear the risk of further disruptions and delays to a project that had already experienced so many problems. We knew we had to mitigate the losses we were already going to incur, deliver the project and maintain ADCO’s reputation in the eyes of the client.

38.    We decided that the best commercial decision was to give the CFMEU and BLF a “win” of sorts and do what they wanted in this particular case. We discussed that the only realistic way to do this was to remove SCC from the Bond University Project. We did not think there was any other option as we were stuck with the issues with QConcrete and we needed to keep the project moving without further delays. It was clear to me that Mr Hawkins was of the same view as I was.

39.    Mr Hawkins and I made a decision in this phone call that the only solution was to remove SCC from the Bond University Project.

132    Mr Duckett continued later in his affidavit:

41.    Shortly after this telephone call, I called Mr Tanner and said to him words to the effect of “We have to finish up Surf City Cranes, we can’t have them on site any more, the heat from the union is too high, we need to move them off.”

Finding

133    As I have already noted, I found Mr Duckett a credible witness. Certainly his evidence is completely plausible, and I accept his version of why he considered it necessary for ADCO to terminate the engagement of SCC as a subcontractor.

134    The Director submits that it is not credible in light of the paucity of information that Mr Duckett and Mr Hawkins should have decided to remove SCC without understanding why the CFMEU wanted them removed. On the contrary – in the light of the material before the Court I consider it totally credible that Mr Hawkins and Mr Duckett should have simply decided, without further discussion with the CFMEU, to remove SCC. Mr Hawkins and Mr Duckett were clearly interested in one thing – the need to complete the Bond University Project without attracting any more delays of any kind. Unfortunately from the perspective of SCC, it appears from the evidence of Mr Hawkins and Mr Duckett that they considered SCC to be, ultimately, dispensable. Both Mr Hawkins and Mr Duckett knew that the CFMEU objected to SCC. Mr Duckett knew that there was a history of heated discussions between the CFMEU and SCC. It is also clear that in the interests of avoiding disruption to the project Mr Hawkins and Mr Duckett were prepared to do whatever was necessary within reason to placate the CFMEU, and that included terminating SCC without hesitation.

Mr Tanner

135    At material times Mr Tanner was the Site Manager for the Bond University project. Mr Tanner gave detailed evidence about delays to the project – in particular the fact that ADCO lost approximately six months to bad weather. He also gave evidence about industrial issues which arose when QConcrete became insolvent.

136    In his affidavit sworn 1 June 2016 Mr Tanner described events leading to the termination of the engagement of SCC in the following terms:

10.    On 11 October 2012, about 4 union officials came to the Bond University Project site. Two of the union officials were Scott Vink from the CFMEU and Tim Jarvis from the BLF. My understanding was that the BLF represented labourers and form-workers on building sites and the CFMEU represented other work classifications, including crane operators. I recognised Mr Jarvis because he had visited a site at Robina that I had worked on previously. I had not met Scott Vink before but I was introduced to him on this day. Although I was not introduced to the other officials, I believe they were union officials as they were wearing union uniforms. Upon arrival at the site, the officials directed all workers on site to stop work and called them together for a meeting. It was not a designated break time and the workers were engaged in work activities. During the meeting, the officials said to the employees, words to the effect of “ADCO are a bunch of grubs, they don’t give a shit about you and your wages”. They also said words of abuse to me in front of the workers and were calling me “Mr ADCO”. They said a whole range of things about ADCO in an aggressive manner, and were ranting and yelling. Mr Vink and Mr Jarvis were doing the talking to the workers during the meeting, and in particular Mr Jarvis was doing most of the talking.

11.    At one point, either Mr Vink or Mr Jarvis, looked to the crane marked “Surf City Cranes” and asked “what are they doing here?”. I did not know why they said this at the time, but I spoke to Jon Morrish of SCC shortly after this and he said that the union had issues with SCC.

137    Mr Tanner deposed that he contacted Mr Duckett on both 11 and 12 October 2012 and told him about the union visits. He said that within a day or two Mr Duckett telephoned him back and said words to the effect of “We can’t have Surf City Cranes on site anymore” and “We have got to get these guys off site”. Mr Tanner said that he contacted SCC and told Mr Morrish that because of issues with the CFMEU, ADCO could no longer have SCC on site.

138    Mr Tanner also gave evidence of the otherwise good relationship between ADCO and SCC. He deposed:

24.    On or around 20 October 2012, Jon Morrish and his wife, Sharon Morrish arrived at the Bond University Project site and asked to meet with me. I took them into my office on the site.

25.    I believe Mrs Morrish said to the effect that SCC had a good working relationship with ADCO, and they didn’t understand why they were being penalised and had not received notification of a safety breach. I told the Morrish’s to the effect that I had been instructed that ADCO could no longer use SCC on the Bond University Project site because of issues with the CFMEU, and that it was out of my hands. I also told them to the effect that I was disappointed about this because I had always found them to be reliable and efficient, and there had been no safety breach. I believe I told them to the effect that they couldn’t work here because the unions didn’t want them here on site.

139    During cross-examination Mr Tanner stated that he was not happy about SCC being removed from the Bond University project. He also said however that if Mr Duckett had intimated that he did not wish to discuss why SCC was to be removed, Mr Tanner would not have pressed the issue (transcript 18 August 2016 p 298 ll 16-17).

Finding

140    The evidence of Mr Tanner in respect of events at the Bond University Site is credible. It is consistent with my conclusion that ADCO managers had a good relationship with SCC, and no problem with them, other than the apparent fact that the CFMEU had a problem with them. It is also clear that the CFMEU officials intimated to Mr Tanner that they did not want SCC on site.

Robina project

Mr Hawkins

141    Mr Hawkins gave evidence that he did not know anything about whether SCC was engaged on this project.

Mr Duckett

142    Mr Duckett was assigned to be the Project Manager of the Robina Project in around June 2013, working with Mr Tanner as Site Manager and Mr Zidar as Contracts Administrator. Mr Duckett’s evidence was that he did not specifically recall a conversation with Mr Tanner about booking SCC to undertake a particular site shed drop, however he conceded as follows:

51.    I do not specifically recall telling Mr Tanner to cancel the booking. However, if Mr Tanner told me that he had booked SCC, I would be concerned by this because the Robina Project was a large project that was going to be watched closely by the CFMEU and BLF. My understanding at the time was that the CFMEU and BLF still had issues with SCC. A decision to engage SCC was going to infuriate the unions before the project had even properly commenced.

52.    I believe that I would most likely have told Mr Tanner that it was a bad idea to book SCC and that he should cancel the booking, because we did not want any heat from the unions, especially not before the project was up and running.

Finding

143    The evidence of Mr Duckett in respect of the Robina Project is consistent with his evidence in relation to the Bond University Project. I find it credible that, in circumstances where Mr Duckett considered the presence of SCC on the Bond University project created “too much heat” with the CFMEU, he would have considered SCC an unacceptable risk to ADCO to engage as a subcontractor on the Robina project.

Mr Tanner

144    Mr Tanner gave evidence that he was assigned to be the Site Manager for the Robina Project. Early in his tenure in that role he assisted Mr Zidar (the contracts administrator for the Robina Project) by obtaining quotes for a number of trades and the installation of site sheds. Mr Tanner made an informal phone call to SCC on or about 5 July 2013 to book SCC for the installation of the site sheds. He deposed that he did not believe there would be issues with SCC performing this work, because it was merely the unloading of site sheds. Mr Tanner continued in his evidence:

33.    On or around 6 July 2013, I phoned Jon Morrish to cancel the job. I did so because I had a discussion with Michael Duckett on or about 5 July 2013, during which I mentioned that I had booked SCC to do the site shed drop. Mr Duckett said words to the effect that we should not use SCC because they have issues with the union or that the union have issues with them. I cancelled the booking. I took this action because I understood that was what my manager (Mr Duckett) required of me.

34    The only reason why I cancelled and did not reschedule the booking of SCC to do the site sheds was as I have stated above. I had no regard to whether or not sec had employees who were not covered by an EBA with the CFMEU.

145    Mr Tanner gave further evidence that he regarded SCC as having competitive rates and being a reliable subcontractor, and that he was happy to use them.

146    Mr Tanner gave evidence denying Mr Morrish’s evidence that Mr Tanner had said to the effect that he was cancelling the engagement of SCC due to a meeting that he had had with a union delegate the day before. Mr Tanner’s evidence continued:

35.    … I did not meet with a union delegate. My recollection is that I told Mr Morrish that I was cancelling the job because of issues we were having with the union or they were having with the union. I may have said something to the effect that we, meaning ADCO, had been approached by the union and could not use SCC.

Finding

147    Mr Tanner was a credible witness whose evidence in the witness box was candid and plausible. I accept his evidence. In particular, I accept his evidence in paragraph 35 of his affidavit in relation to his conversation with Mr Morrish – if Mr Tanner had not had a meeting the previous day with the union it is unlikely he would have told Mr Morrish that he had met with the union delegate the day before their conversation.

Mr Zidar

148    In his affidavit affirmed 29 March 2016 Mr Zidar said he was appointed as contracts administrator of the Robina project in or around early July 2013. He reported to Mr Duckett.

149    Mr Zidar said that of the Gold Coast projects with which he had been involved, ADCO had engaged SCC, GCC or a third crane company Mulherrin Cranes & Rigging.

150    Relevantly, Mr Zidar gave evidence as follows:

19.    I recall that, at some time prior to these purchase orders being issued, I had been instructed by Mr Duckett that we could not use sec on the Robina Project.

20.    I was aware that there had been issues the previous year at ADCO’s Bond University Project in relation to SCC and the CFMEU, although I wasn’t aware at the time of the details of what had occurred. I didn’t give the reasons much thought at the time, but I took note of Mr Duckett’s instruction as I wanted to comply with the directions of my supervisor.

21.    I also recall that, around this time, I was aware that the CFMEU had particular contractors that they regarded as acceptable for use by builders in the Gold Coast area. For example, in the course of preparing this affidavit, I have been shown an email that I received from Mr Duckett on 11 July 2013 which attached a document that Mr Duckett said had been issued by the union. Although I do not recall receiving this email at the time or reading the attachment, I understand the document attached to this email to be a list of union-endorsed contractors for different trades at that particular time.

151    Mr Zidar deposed that he was aware GCC was a supplier that was “endorsed” by the CFMEU. In engaging GCC instead of SCC, relevantly Mr Zidar gave the following evidence:

31.    To the extent that I was involved in the process of deciding which crane subcontractor to use on the Robina Project on an ongoing basis, the only factors that I had regard to were the following:

(a)    Mr Duckett told me that I was not able to use sec. I took that to be an instruction or request from my manager not to use SCC on the Robina Project and I complied with that instruction;

(b)    GCC’s rates were very competitive and they improved their rates for particular equipment when I asked them to;

(c)    I understood at that time that GCC was a supplier that the union regarded as acceptable, so there were not likely to be industrial problems at the Robina Project if they were engaged; and

(d)    My knowledge of Mr Duckett’s approval of that course of action.

32.    At no stage was I aware of or did I have regard to SCC’s industrial arrangements.

Finding

152    Mr Zidar’s evidence is consistent with that of Mr Duckett in respect of the refusal of ADCO to engage SCC. I accept Mr Zidar’s evidence that he engaged GCC on the Robina project because he was instructed to do so by Mr Duckett.

(b)    Evidence of ADCO staff in respect of SCC’s enterprise agreement

153    Evidence was given by numerous ADCO site staff, in particular Mr Hawkins and Mr Duckett, rejecting the proposition that the SCC’s industrial arrangements were a factor in their decision making. Mr Hawkins deposed at paragraph 53 of his affidavit that he was not aware of SCC’s industrial arrangements at the time, not familiar with them as a contractor, and the sole consideration for him was to protect ADCO and its clients from a serious risk to its projects. In his affidavit at paragraphs 40 and 53 Mr Duckett gave similar evidence.

154    As I observed earlier in this judgment, I found Mr Hawkins and Mr Duckett to be impressive and credible witnesses. I accept their evidence as to the absence of any role in their decision making of the industrial arrangements to which SCC was a party.

(c)    Evidence of Mr Morrish, Mrs Morrish and Mr Dawson

155    Mr and Mrs Morrish and Mr Dawson gave extensive evidence concerning their interactions with CFMEU officials, and with the ADCO staff working on the Bond University and Robina projects. In my view none of their evidence leads me to the conclusion that the reasons of ADCO for its actions in relation to SCC were in contravention of s 354(1) of the FW Act. Indeed, in significant ways their evidence is consistent with the reasons given by ADCO for its actions concerning SCC.

156    Overall I found Mr and Mrs Morrish and Mr Dawson credible witnesses in respect of their interactions with ADCO staff and with CFMEU officials. On numerous occasions however I found Mr Morrish unresponsive and obfuscating in respect of questions put to him under cross-examination. Examples of this are at transcript 16 August 2016 p 46 l 41-p 47 l 7, 16 August 2016 p 70 l 38-p 71 l 22, 17 August 2016 p 109 l 37-p 111 l 43, 17 August 2016 p 134 l 10-p 134 l 45, and 17 August 2016 p 162 l 19-p 163 l 25.

Working relationship with ADCO

157    In his evidence Mr Morrish pointed to the good working relationship which had existed between ADCO and SCC, such that work completed for ADCO constituted approximately one third of SCC’s income from 2006 until mid-October 2012. In his affidavit sworn 8 December 2015 Mr Morrish referred to a conversation between himself, Mrs Morrish and Mr Tanner on or about 20 October 2012, in the following terms:

(a)    Mr Tanner stated to the effect that I should take my crane home because ‘we [the site] have been instructed by [the office] to use another company’ and it was ‘out of his hands’.

(b)    Mr Tanner confirmed to the effect that there had been no safety breach by Surf City on the Bond University Project.

(c)    Mr Tanner stated to the effect the reason you can’t work here is because the unions don’t want you here on site.

(d)    Mr Tanner indicated to the effect that he was unhappy that Surf City had been removed from the site.

158    This evidence is consistent with that of Mr Tanner, and indeed other ADCO witnesses, in that ADCO consistently maintained its position that its actions concerning SCC on the Bond University and Robina sites were not related to SCC’s performance, but were because the CFMEU simply did not want SCC on the sites. Mrs Morrish and Mr Dawson give similar evidence. In my view it is clear that ADCO had a good working relationship with SCC at material times leading to the events the subject of this claim.

Confrontation with CFMEU officials

159    Mr Morrish gave evidence in his affidavit sworn 8 December 2015 that he was upset about the removal of SCC from ADCO worksites. He said:

80.    … We had a number of discussions with representatives of the union around this time, including around obtaining an enterprise agreement that was acceptable to the CFMEU. Further details are set out below.

81.    On or around 17 October 2012, I received a phone call from Tim Jarvis. I knew that Tim Jarvis was a CFMEU official because I had previously had discussions with Tim about other matters.

82.    Tim said words to the effect of could he meet with me in the Surf City yard at 21 Hutchinson Street in Burleigh later that day. I agreed to meet with Tim.

83.    I then called Sharon and informed her of the meeting and requested that she join me.

84.    Tim arrived with Andrew Sutherland. Tim introduced me to Andrew. Sharon arrived shortly after Tim Jarvis and Andrew Sutherland arrived. James Dawson, Surf City’s Operations Manager was also present for the conversation. Carolyn Mansfield, a secretary for Surf City also joined the conversation part way through.

85.    On arriving at the Surf City yard, Tim Jarvis and Andrew Sutherland walked into the middle of the yard and Tim Jarvis said words to the following effect:

(a)    ‘You have enough cranes in here to have an EBA, a union EBA’.

(b)    ‘You have more cranes than Chris Lindores’. I understood that Tim was referring to a company run by Chris Lindores called Lindores Construction Logistics.

(c)    ‘You guys have gone and got an EBA and it’s not a union EBA’.

(d)    ‘It’s one world and it’s our world so we don’t give a hoot what’s outside, so it’s just our union world.

(e)    ‘You’ve been contacting Fair Work and the Ombudsman’.

(f)    ‘We’re going to watch you burn’.

(g)    ‘At no point have we said that you can’t work on union sites but you must have a bona fide agreement’.

86.    I asked words to the effect of, ‘What does bona fide mean?’

87.    Tim responded with words to the effect ‘It means that someone else has a union agreement, that’s who you can work with’.

88.    I said words to the effect of:

(a)    ‘We don’t need a union EBA because we have a Fair Work one.’

(b)    ‘This Fair Work is under your government.’ By this I meant that Fair Work was implemented by the Labor government.

89.    Tim repeated words to the effect of ‘That’s the one world, we don’t care about anyone else’s agreement.’ Tim further said words to the effect of ‘You guys are running around with the front page and showing customers and saying you have an agreement.’

90.    I responded with words to the effect of ‘Well obviously our front page is identical to the union one, it’s got the Fair Work stamp on it.’

91.    Tim responded with words to the effect of ‘That’s not the case’.

92.    Sharon and I said words to the effect that we had looked at the enterprise agreement which they had emailed to us. Someone from the union, I believe either Tim or Andrew, had previously emailed this to us. Sharon and I suggested to the effect that we could review it and eliminate the clauses that did not apply to us.

93.    Tim responded to the effect of ‘Well you can make a submission. You have to pay $1200-$1500 for an application for an EBA. We might, we’re busy so we might get to it in six months, might get to it in twelve months, you know, we’re very busy’.

94.    I understood by Tim’s response that the CFMEU was not interested in negotiating an enterprise agreement with Surf City.

95.    Sharon and I then spoke about the fact that we wanted to work on ADCO sites again. Tim responded to the effect that ‘we haven’t removed you from site’. I asked to the effect how we could work on the ADCO sites again. Tim responded to the effect ‘you can pay an application fee, if we get time to look at it, we’ll consider and process it’.

96.    Tim stated to the effect that he had spoken to Richard Tanner and said that if Surf City Cranes want to work with ADCO you know what has to happen in the future and Richard had responded to the effect ‘Yeh we know that.’

Subsequent conversation with Andrew Sutherland

97.    Within a week or two of the meeting with Tim Jarvis and Andrew Sutherland referred to above, I called Andrew Sutherland.

98.    I said to Andrew words to the effect of, ‘Can we sign two EBAs, one for union sites and another for non-union sites?’

99.    Andrew responded with words to the effect of ‘By the sounds of it you can’t afford to have a union EBA so don’t worry about it. Forget about it’.

160    Mr Morrish in his evidence also referred to an earlier conversation he had had with Mr Duckett, in the following terms:

34.    At some stage on around 12 October 2012 Michael Duckett called me in response to the message I had left him. During that conversation:

(a)    Michael stated to the effect ‘We can’t tell you to get an EBA, but we have been strongly urged to use nominated contractors or some one with a ‘bona fide EBA” and ‘we are encouraged to use recognised EBAs’.

(b)    I responded to the effect that Surf City has an approved EBA from Fair Work, but the union was refusing to recognise any EBA which has not been done in conjunction with the unions.

161    Similar evidence was given by Mrs Morrish in her affidavit affirmed 8 December 2015. In particular Mrs Morrish said:

14.    In October 2012, I telephoned Simon Hawkins, ADCO’s Queensland Manager, about the fact that Surf City had been removed from the Bond University Project. I called Mr Hawkins because I saw on the ADCO website that he was responsible for ADCO’s operations in Queensland and I believed that he would be able to address my concerns.

15.    During this conversation:

(a)    I stated to the effect that Surf City had a good working relationship with ADCO since 2006 and we didn’t understand why we were being penalised;

(b)    Mr Hawkins stated to the effect that:

(i)    ADCO ‘had no choice’ but to remove Surf City from the project.

(ii)    Surf City should get an agreement with the union and return to ADCO.

(iii)    ‘it would be advisable for [Surf City] to get a Union EBA and [we] can reengage [Surf City].’

(c)    I stated to the effect that Surf City Cranes has an EBA which was approved by Fair Work Australia.

(d)    Mr Hawkins responded to the effect that Surf City’s agreement was not a union EBA and not a bona fide agreement.

162    Mrs Morrish also gave similar evidence to that of Mr Morrish in relation to the meeting with the CFMEU officials on 17 October 2012:

24.    I received a phone call from Jon on 17 October 2012. Jon said words to the effect that CFMEU officials were coming to the Surf City yard site to meet with us and that I should come to the yard as quickly as possible.

25.    When I arrived at the Surf City yard, Tim Jarvis, Andrew Sutherland, Jon Morrish and James Dawson were in the yard.

26.    Jon introduced me to Tim and Andrew. Tim said to me words to the effect of, ‘Oh you’re the crazy wife’.

27.    I understood that this was a reference to a telephone conversation that I had had with Joe Myles from the CFMEU some time prior to the meeting.

28.    Tim said words to the effect of ‘I never said you couldn’t work on sites because you have a non-union EBA, I would never say that because it’s illegal.’

29.    Either Jon or I responded with words to the effect of ‘Well, what’s the problem?’

30.    Tim said words to the effect of ‘You don’t have a bona fide EBA’.

31.    I said words to the effect of ‘What is the difference between a bona fide EBA and a non-union EBA. Our EBA has been recognised by Fair Work Australia, isn’t Fair Work Australia the top body?’

32.    Tim then said words to the effect of ‘We don’t recognise Fair Work Australia, there is only one world, union world’. He opened his arms wide and turned in a circle.

33.    I responded with, ‘Well what hope do we have if you don’t recognise the head body in Australia?’

34.    Jon and I said we’d been removed from ADCO sites and wanted to be able to continue to work with them.

35.    Tim responded to the effect that:

(a)    if ADCO kicked you off then you should take it up with them as it is their call.

(b)    Surf City could get a bona fide EBA and take it back to ADCO and you would probably be allowed back on site.

(c)    he had spoken to Richard Tanner and said that if Surf City Cranes want to work with ADCO you know what has to happen in the future and Richard had responded to the effect ‘Yeh we know that’.

36.    I stated to the effect that I understood Gold Coast Cranes was currently on the site and they did not have a union EBA. Andrew stated to the effect that [Gold Coast Cranes] were getting an agreement drawn up at the moment and from a safety point of view that was good.

37.    Tim also stated to the effect that we could pay the union’s fee and lodge an EBA with them for consideration but that they were very busy and any consideration of the EBA could take up to 12 months and ultimately may not be approved.

163    Mr James Dawson’s evidence in relation to the meeting with the CFMEU officials is consistent with that of Mr and Mrs Morrish. In addition however I also particularly note the following evidence of Mr Dawson in his affidavit affirmed 8 December 2015:

44.    While I do not remember the specific statements made by Jon, Sharon, Tim and Andrew, I remember that:

(a)    I was present when the CFMEU representatives came to the crane yard.

(b)    Jon and/or Sharon:

(i)    stated to the effect that Surf City was seeking to be able to work on all of the building sites and did not think that Surf City should be excluded from any sites.

(ii)    asked the CFMEU representatives to the effect of what would Surf City have to do for the union to provide Surf City with access to this work.

(c)    Tim and/or Andrew stated to the effect that Surf City would have to have a ‘union EBA’.

(d)    Jon and/or Sharon then stated to the effect of whether Surf City could have two EBAs - a non-union EBA to cover smaller jobs and a union EBA to cover larger sites like ADCO.

(e)    Tim and/or Andrew stated to the effect that:

(i)    the CFMEU would not allow that to happen.

(ii)    the CFMEU would make it difficult, an extremely slow process, for Surf City to obtain a union EBA.

Findings

164    In many ways the evidence of Mr Morrish, Mrs Morrish and Mr Dawson represented the high point of this aspect of the Director’s case against ADCO. The Director relied primarily on this evidence to support his claim that the reason for ADCO’s decision to terminate any engagement with SCC on the Bond University and Robina projects was because SCC employees were not covered by an enterprise agreement which also covered the CFMEU. Indeed, the evidence of Mr Morrish, Mrs Morrish and Mr Dawson indicates that the lack of an enterprise agreement covering their workers and the CFMEU was an issue for the CFMEU. However even if I were to substantially accept the evidence of Mr Morrish, Mrs Morrish and Mr Dawson, this evidence does not affect my finding that ADCO’s reasons for its actions were not as alleged by the Director. I take this view because:

1.    It appears from the evidence before the Court that the objections of the CFMEU officials to SCC were based on a broad antipathy to SCC and the Morrishs. That SCC had not negotiated an enterprise agreement with the CFMEU was no doubt part of the equation. Indeed on the basis of the evidence before me, it appears that the CFMEU deeply resented the fact that the Morrishs had negotiated a non-union enterprise agreement with employees of the business. It was certainly enough of an issue for the CFMEU to raise it in the discussion with Mr and Mrs Morrish on 17 October 2012. However the apparent reference to Mrs Morrish as “the crazy wife” by CFMEU officials and to SCC’s alleged contact of the Fair Work Commission and the Fair Work Ombudsman (presumably allegedly in relation to the CFMEU) suggests a wider antagonism between the Morrishs and the CFMEU. As I have already observed, this history of bad feeling between the Morrishs and the CFMEU was known to ADCO project staff.

2.    Even assuming that that the issue of the absence of an enterprise agreement covering the CFMEU and Morrish staff was part of the reason for the CFMEU’s objection to SCC, this does not equate to a finding that the state of industrial arrangements between SCC and the CFMEU was a substantial or operative factor influencing ADCO in its decisions concerning SCC. I take a similar view to the evidence that the Morrishs and the CFMEU officials discussed whether the enterprise agreement was “bona fide” or “non bona fide”.

3.    As the evidence clearly demonstrates, at material times CFMEU was not interested in negotiating an enterprise agreement with SCC. The chilling comment “We’re going to watch you burn” and the suggestion that the CFMEU might – without certainty of approval – over a period of 12 months “consider an application” by SCC to negotiate such an agreement illustrated the union’s deep hostility towards SCC.

4.    Critically, to the extent that the Morrishs claim comments were made by ADCO staff (including Mr Duckett) suggesting that SCC endeavoured to negotiate an enterprise agreement with the CFMEU, I consider the more likely interpretation is that such comments were meant to be advice to Mr Morrish to resolve his obviously poor relationship with the CFMEU, and that reaching such an agreement was an obvious way to do it. Indeed, the predominance of evidence before the Court suggests that that absence of an enterprise agreement between the Morrish entities and the CFMEU was an aspect of the real problem, namely the poor relationship between the Morrishs and the CFMEU which caused the CFMEU to object to SCC being on the ADCO sites.

(d)    Issues relevant to GCC

165    It is common ground that ADCO replaced SCC on the Bond University project and the Robina project with GCC. It is also common ground that, at material times, like SCC, employees of GCC were not covered by an enterprise agreement with the CFMEU.

166    That ADCO replaced SCC with a cranage operator which also did not have an enterprise agreement with the CFMEU is strongly suggestive of the fact that ADCO’s termination of SCC on both project sites was not because SCC did not have an enterprise agreement with the CFMEU. The additional apparent fact that the CFMEU had no difficulty with GCC notwithstanding that its workers were not covered by an enterprise agreement which also covered the CFMEU indicates that the relationship between SCC and the CFMEU was more complicated than industrial arrangements between them (or more precisely, the lack thereof). Ultimately, however, this circumstance supports ADCO’s explanation for its termination and cancellation of arrangements with SCC – namely because the CFMEU wanted SCC off site.

(e)    Continued use of SCC by ADCO

167    In his affidavit Mr Hawkins deposed as follows:

68.    Since the events referred to in this affidavit, SCC has continued to be engaged by ADCO on the following projects:

(a)    Greenslopes Private Hospital project, which was the $35.9 million expansion to the existing hospital including a critical care unit, labour delivery suites, neonatal critical care unit, oncology unit, consulting suites, kitchen refurbishment and medical records facility refurbishment;

(b)    the Gold Coast Airport LAGS Upgrade project, which was the $1.9 million construction of an additional exit from the Gold Coast International airport;

(c)    the Q SuperCentre project, which was the $2.1 million extension to the Woolworths shopping centre at Broadbeach;

(d)    the Southport Court House project, which was the $1.6 million refurbishment of the existing court house building;

(e)    the Merrimac State School project, which was the $3.9 million construction of a new three storey school building;

(f)    the Beach House Bar and Grill restaurant project at Browns Plains, which was the $1.9 million construction of a new restaurant;

(g)    the Banora Point Shopping Centre project, which was a $1.6 million shopping centre refurbishment;

(h)    the IGA Project at Murwillumbah, which was the $3.4 million construction of an IGA supermarket;

(i)    the Australia Fair Metro West project, which was a $7 million shopping centre refurbishment; and

(j)    the Gold Coast Cultural Precinct project, which is ongoing and is currently in the design phase and site establishment phase. This is currently estimated as a $2 million project and involves the construction of a new amphitheatre for the Gold Coast Cultural Precinct.

69.    Save for the Greenslopes Private Hospital project and the Gold Coast Cultural Precinct project, these were all small projects and it is unlikely the CFMEU would have been interested in them. The Gold Coast Cultural Precinct project is a new project which has not yet progressed to the construction phase, and my understanding is that the CFMEU has not yet shown any interest in that project.

168    This evidence demonstrates that:

    Mr Hawkins – and ADCO – has not objected to continued engagement of SCC, despite the ongoing absence of an enterprise agreement between SCC (or any relevant Morrish entity) and the CFMEU. Indeed, the fact that ADCO engaged SCC on these projects supports the evidence before the Court that ADCO and SCC have a good working relationship and ADCO is prepared to engage SCC where it can; and

    a key concern of Mr Hawkins is to avoid engaging SCC in circumstances which might attract disruption from the CFMEU.

169    Both conclusions are consistent with my earlier findings in this judgment.

3.    THIRD ISSUE: CONTRAVENTIONS ALLEGED BY PARAGRAPHS 45 AND 46 OF THE FURTHER AMENDED STATEMENT OF CLAIM – “THE KITTO AMENDMENTS”

170    In paragraphs 45 and 46 of the further amended statement of claim the Director pleads as follows:

45.    On or about 23 July 2013, Mr Morrish and Mrs Morrish met with Colin Kitto at ADCO’s office in Bay Street, Southport.

46.    During the meeting Mr Kitto stated to the effect:

(a)    ADCO had signed a ‘union EBA’ to assist ADCO in moving from the ‘Tier 2’ type work they were performing to ‘Tier 1’ type work.

(b)    under the ‘union EBA’ ADCO could only utilise companies with union or ‘bona fide’ EBAs.

(c)    Surf City would need to sign a union EBA to continue working for ADCO.

(tracked deletions omitted.)

171    Subsequently the Director claimed:

56A.    On the basis of the matters pleaded in paragraphs 45 to 46 Mr Kitto refused to further engage Surf City unless Surf City signed a union EBA.

56B.    On the basis of the matters pleaded in paragraphs 45 to 46 it can be inferred that Mr Kitto refused to further engage Surf City because employees of Surf City were not covered by an Enterprise Agreement which covered the CFMEU.

56C.    In advising Mr and Mrs Morrish that Surf City would need to sign a union EBA to continue working for ADCO. Mr Kitto discriminated against Surf City in breach of section 354(1) of the FW Act because he refused to further engage Surf City because employees of Surf City were not covered by an Enterprise Agreement which covered the CFMEU.

Relevant evidence

172    The amendments to the further amended statement of claim in respect of Mr Kitto plead that Mr Kitto refused to further engage SCC for reasons in contravention of s 354(1) of the FW Act.

173    Mr Kitto gave evidence in an affidavit sworn 24 March 2016 and orally under cross-examination. He was the Gold Coast Manager during the period in which ADCO performed services as lead contractor at the Bond University project. Mr Kitto gave evidence of delays to the project, Mr Duckett informing him that the CFMEU did not want SCC on the site, and his regular discussions with Mr Duckett and Mr Hawkins. In particular, Mr Kitto deposed as to his belief that Mr Duckett was capable of dealing with any concerns raised by the unions.

174    Mr Kitto’s recollection of events around his meeting with Mr and Mrs Morrish was slightly vague, and he made reference to contemporaneous documents. Those documents indicated that Mrs Morrish had sought a meeting with Mr Bob Hill, the owner of ADCO, and that Mr Kitto had communicated with Mr Morrish to the effect that Mr and Mrs Morrish could come and speak with him about the issues concerning them. The meeting took place on 23 July 2013 at Mr Kitto’s office. His evidence continues:

31.    I took them into the office board room where I met with them. During the meeting:

(a)    I explained to them that it was not going to be possible for them to meet with Bob Hill. Being the owner of ADCO, Mr Hill does not get involved in the day to day running of the business and does not work in the office.

(b)    Either Mr or Mrs Morrish said to the effect “We don’t have an EBA with the CFMEU. We’ve asked them for a union agreement, but they won’t make one with us.”

(c)    I asked Mr and Mrs Morrish to the effect of why that was.

(d)    Either Mr or Mrs Morrish responded to the effect “We’ve been having a lot of trouble with the union. They call us ‘grubs’. We went to their office one day and sat there all day and non-one would see us.”

(e)    I said something to the effect of “Well, maybe you need to keep trying.”

32.    At that point, the predicament that the Morrish’s were in was clear to me. I understood from the discussion that the union were not letting them on building sites because they didn’t have an EBA with the CFMEU and that even though they were keen to negotiate one, the CFMEU appeared not to be interested in doing that.

33.    The Morrishes were open and frank about their predicament and expressed their frustration, and I was open and frank about the predicament that ADCO was in.

34.    I believe I could have said something to the effect that ADCO could not afford to fight the CFMEU because if ADCO utilised a company that the union did not approve of, then the unions would find a way to shut the sites down.

35.    It got to the point where I said something to the effect that I understood their frustration, but in the circumstances, there was nothing that ADCO could do.

36.    I did not say anything to the effect that ADCO would not use SCC and in fact, I said there would be other opportunities for SCC on other jobs.

37.    In the course of preparing this affidavit, I have read paragraphs 39 to 40 of Mr Morrish’s affidavit dated 8 December 2015. I have also read paragraphs 19 to 22 of Mrs Morrish’s affidavit dated 8 December 2015. In response to the allegations in those paragraphs:

(a)    I deny that the meeting took place on or about 27 October 2012, for the reasons set out above;

(b)    I deny that I said to the effect that ADCO had signed a “union EBA” to assist ADC in moving from the “Tier 2” type work they were performing to “Tier 1” type work. My view at the time was that ADCO was a Tier 2 building contractor and we were not looking to move to Tier 1, so I never would have said this;

(c)    I deny that I said to the effect that under the “union EBA” ADCO could only utilise companies with union EBAs. At no stage did I say anything about our EBA requiring that, as it does not say that and I would not have said this;

(d)    I deny that I said to the effect that Surf City would need to sign a union EBA to continue working for ADCO. At no stage did I tell them that they had to get a union EBA. It was clear to me from our discussion that this was something they thought they needed to do but they could not get the union on board;

(e)    I deny that I said to the effect that I had been given or seen a list of companies issued by the CFMEU that ADCO could utilise the services of.

38.    The meeting did not last very long and although I felt sympathetic to the position that the Morrish’s were in with the CFMEU, I did not indicate that ADCO was in any position to change anything.

39.    After approximately 20 minutes, Mr and Mrs Morrish left the office. I did not have any further discussions with sec after this meeting.

175    Mr and Mrs Morrish both gave further evidence in response to Mr Kitto’s affidavit.

176    Mr Morrish swore a relevant affidavit on 15 April 2016. Examining this affidavit there appears to be substantial agreement by Mr Morrish with Mr Kitto’s evidence, subject to a number of key differences, namely:

    Mr Morrish did not recall Mr Kitto making a statement referred to by Mr Kitto in paragraph 31(e) of his affidavit, namely that the Morrishs would need to “keep trying”.

    Mr Kitto stated to the effect that ADCO had experienced “heat from the union” on sites.

    Mr Morrish disagreed that Mr Kitto made the statement referred to in paragraph 36 of his affidavit, namely that there would be other opportunities for SCC on other jobs. Rather, Mr Morrish recollected Mr Kitto indicated “there may be opportunities on other jobs that were not monitored by the unions”.

    Mr Morrish claimed Mr Kitto said words to the effect that SCC would need to sign a “union EBA” to continue working for ADCO.

177    Mrs Morrish affirmed an affidavit in this matter on 15 April 2016. Again, there was substantial agreement between the evidence of Mrs Morrish and Mr Kitto, key differences being:

    Mrs Morrish disagreed that Mr Kitto made the statement referred to in paragraph 36 of his affidavit, namely that there would be other opportunities for SCC on other jobs. Rather, Mrs Morrish recalled Mr Kitto saying words to the effect that when SCC had a “union EBA” then ADCO would use SCC on the ADCO union sites, and further that if ADCO was working on a non-union site they could use SCC.

    Mrs Morrish said that she and Mr Morrish had said words to the effect “We want you guys to stand up” and “We have been loyal”.

178    Mrs Morrish also deposed that when Mr Kitto referred to “the predicament that ADCO was in”, he meant that if ADCO did not engage subcontractors the CFMEU approved of, being subcontractors with enterprise agreements with the CFMEU, the CFMEU would shut down the relevant ADCO project.

179    Further I note that Mr Morrish deposed that Mr Kitto was careful and appeared to be considering his choice of words during their conversation. Mrs Morrish similarly thought that Mr Kitto was very careful with his wording, and that while he understood their frustrations Mr Kitto had to put ADCO first.

Did Mr Kitto refuse to further engage SCC for the reasons alleged by the Director?

180    In my view it cannot be said that Mr Kitto refused to “further engage” SCC in respect of ADCO work.

181    First, it is not clear to me that, as at 23 July 2013, Mr Kitto had power to engage – or refuse to engage – SCC or any other cranage operator in respect of ADCO work. Certainly Mr Kitto gave evidence that he was “responsible for any projects undertaken by ADCO within the Gold Coast region”, that Mr Tanner reported to a project manager who in turn reported to Mr Kitto, that Michael Duckett reported to Mr Kitto in respect of the Bond University and Robina projects, and that Mr Kitto reported in turn to Mr Hawkins (transcript 19 August 2016 pp 375-376). On the evidence however Mr Kitto did not appear to make decisions affecting SCC on either the Bond University or Robina projects – those decisions were made by Mr Hawkins and Mr Duckett. While on the evidence Mr Kitto had “oversight” of Gold Coast projects it is unclear what this precisely means.

182    Second, I do not accept that anything said by Mr Kitto at the meeting of 23 July 2013 constituted a “refusal to engage” SCC. It is clear that Mr Kitto’s purpose in meeting Mr and Mrs Morrish was because Mrs Morrish had sought to meet with ADCO’s owner, Mr Bob Hill, and Mr Kitto sought to explain to Mr and Mrs Morrish why ADCO had terminated SCC at the Bond University site and cancelled SCC at the Robina site. There is no evidence that Mr Kitto or the Morrishs discussed any ADCO project on which SCC could have a role, or that Mr or Mrs Morrish requested work on any particular project which was refused by Mr Kitto. I consider the meeting could be properly characterised as a discussion, and an explanation by Mr Kitto that, from ADCO’s perspective, SCC was a high risk engagement because of CFMEU disapproval of SCC.

183    Third, I do not accept that Mr Kitto made the statements alleged by the Director at paragraph 46 of the further amended statement of claim. I take this view because:

    As both Mr and Mrs Morrish said in their evidence, Mr Kitto was clearly careful in the words he used in his discussion with them. I consider it unlikely that Mr Kitto would have said ADCO had signed a “union EBA” to assist ADCO in moving from “Tier 2” type work to “Tier 1” type work, when his evidence was that his view at the time was that ADCO was a Tier 2 building contractor and they were not looking to move to Tier 1. He was firm in respect of this evidence under cross-examination. In these circumstances I also consider it unlikely that Mr Kitto would have freely claimed that ADCO could only use companies with “bona fide EBAs” or that SCC would need to sign a “union EBA” to continue working with ADCO.

    My impression of Mr Kitto as a witness was that he was credible, but also somewhat indifferent to the circumstances of Mr and Mrs Morrish and SCC compared with his concern for the interests of ADCO. I consider it likely that he would, for example, have made the comment he claimed in paragraph 35 of his affidavit, namely that he understood their frustration, but in the circumstances, there was nothing that ADCO could do. I consider it likely that if he said anything at all about SCC negotiating an enterprise agreement with the CFMEU, that it would have been in the context of SCC improving its relationship with the CFMEU and becoming acceptable to the CFMEU on ADCO sites in which the CFMEU was interested.

    I consider it unlikely that Mr Kitto said that SCC would need to sign a “union EBA” to continue working for ADCO. This allegation is not plausible in light of subsequent engagement by ADCO of SCC on other projects. While I note Mr Morrish’s evidence in his affidavit of 15 April 2016 that these other projects were “ad hoc and minor in nature and were often performed because Surf City was already at or near the site working for another company”, it cannot be said that ADCO has “refused to engage” SCC further. I also note that, Mr Kitto in cross-examination said that 90% of the work ADCO had given SCC since the events involving the Bond University and Robina projects had been on the Gold Coast, and that he did not have any issues with SCC (transcript 19 August 2016 p 387 ll 10-14).

184    In my view the claims of the Director concerning Mr Kitto are not substantiated.

CONCLUSION

185    The material before the Court clearly indicates that SCC was not the employer of workers in the Morrish cranage operations business. The employer was Crane Hire. This arrangement was put in place by Mr and Mrs Morrish for legitimate business reasons. The workers were aware of the identity of their employer. I do not accept that the “real” employer was SCC simply because the primary entity and public face of the Morrish business enterprise was SCC. To accept that proposition would not only require a rejection of the separate corporate identity of Crane Hire, but a rejection of the practical reality of the employment arrangements in the Morrish business as well as the corporate structure of the group.

186    Further I am satisfied that, even if SCC was the employer of the relevant workers, ADCO’s decisions to terminate SCC on the Bond University project and cancel its engagement of SCC on the Robina project were not for reasons contravening s 354(1) of the FW Act. I am also satisfied that Mr Kitto’s conversation with Mr and Mrs Morrish on 23 July 2013 did not involve a “refusal to engage” SCC for ADCO work for reasons alleged by the Director.

187    In its decision-making, ADCO and its staff were not interested in any industrial arrangements SCC had with the CFMEU or otherwise. ADCO staff were interested only in ensuring that ADCO projects remained on time and within budget. If SCC was for any reason whatsoever to jeopardise ADCO’s position in respect of its projects ADCO was prepared to end its engagement of SCC (and it did so). In this case it was the avoidance of industrial disruption and consequent delay which would have arisen because the CFMEU objected to SCC being on the sites which motivated ADCO in its decision to terminate and refuse to engage SCC, not whether SCC (or, in this case, Crane Hire) employees were covered by an enterprise agreement to which the CFMEU was also a party. This was also made clear by Mr Kitto in his meeting with Mr and Mrs Morrish, which meeting was a courtesy to Mr and Mrs Morrish rather than any exercise in decision-making by Mr Kitto.

188    Finally I note that, in Director, Fair Work Building Inspectorate v ADCO Constructions Pty Ltd [2016] FCA 602 Logan J reserved costs of the Director’s application to further amend the amended statement of claim. I will hear submissions as to whether costs should be ordered in respect of that interlocutory application.

Associate:

Dated:    5 December 2016