This extract from a Fair Work Commission unfair dismissal case contains an examination of arrangements between a company and a person in the context of resolving whether the person was an employee capable of pursuing an unfair dismissal claim by contending that there was a dinmissal.
“Consideration
[16] In order for Mr Coulthard to have had standing to make an application under s 365, he needed to be a person who had been “dismissed”. Section 386 defines this concept, and although it is found in Part 3-2 of the Act, it is well-settled that it applies also to s 365, which sits in Part
3-1. It is clear from s 386 that only an employee can be ‘dismissed’. In Khayam v Navitas English Pty Ltd [2017] FWCFB 5162, the Full Bench confirmed that s 386 is concerned with the termination of the employment relationship, not just the termination of the contract of employment. However, it is axiomatic that there can be no employment relationship without a contract of employment.
[17] From [106], the Commissioner set about determining whether Mr Coulthard was an employee by reference to what he referred to as “the contract entered between the parties”, but without identifying the relevant parties. We infer that the “parties” that the Commissioner had in mind were Mr Coulthard and RE, as the Commissioner ultimately concluded at [138] that there was a relationship of employment between them. However, the question of who were the relevant parties to any contract was foundational to the analysis that the Commissioner was required to conduct in order to determine the jurisdictional objection. The appellants denied that Mr Coulthard had personally contracted with either company. They maintained that it was Mr Coulthard’s company, VJC, that had contracted with RS. In the absence of any written contract which could speak for itself, the Commissioner needed to ascertain whether there was a contract of any kind between Mr Coulthard and either of the appellants. Only then could he proceed to determine whether, based on such a contract, the legal character of the relationship it established was one of employment.
[18] To the extent that the Commissioner concluded that there was a contract of employment between Mr Coulthard and RE, he was in error. The evidence before the Commission did not permit such a conclusion. There was no evidence about the formation of any contract between Mr Coulthard and RE or RS. There was nothing in the evidence to indicate as between these parties an offer and acceptance, an exchange of consideration, or an intention of these persons to create legal relations. Nor did Mr Coulthard make any effort to identify the particular substantive terms of the contract that were said to exist between him and RE or RS. When asked at the appeal hearing what evidence Mr Coulthard relied on to show the existence of a contract between him and RE or RS, his representative pointed to various elements of post-contractual conduct: a warning letter issued by RE to Mr Coulthard, the letter terminating his services, and certain email correspondence between the parties. But this evidence is consistent with there being a contract between VJC and RS pursuant to which Mr Coulthard would provide services on behalf of his company to RS and RE and be paid for these services on production of invoices sent by JVC to RS.
[19] The existence of a contract between VJC and RS is not in dispute. The Commissioner concluded that such a contract existed (see [23] and [24]). This conclusion was correct. It is consistent with the evidence before the Commissioner. This is what the three founders had intended. They had sought and accepted professional advice on how to structure their enterprise. They had set up RS as a service company. They had agreed to use their “trustees” to provide services to the group as independent consultants. For Mr Coulthard, this trustee was a corporate entity, VJC. The Commissioner said at [139] that he accepted Mr Coulthard’s evidence that the advice received by the founders in 2019 was “limited to corporate structures, company registrations and accounting matters”, and that it did not relate to the terms of engagement. But this is not consistent with the Commissioner’s earlier recitation of the unchallenged facts. It is also not credible for Mr Coulthard to suggest that the corporate structures he put in place were real and genuine for some legal purposes, such as tax and risk management, but not others. Week in and week out Mr Coulthard submitted invoices to RS in the name of his company in respect of consulting fees. The evidence clearly showed that the work performed by Mr Coulthard for the benefit of RS, RE and other entities was undertaken pursuant to a contract between VJC and RS. He submitted invoices to RS in the name of his company. He charged GST, which was presumably remitted to the ATO. The fees that were the subject of the invoices were paid into the company’s bank account. Presumably, Mr Coulthard’s personal taxation affairs proceeded on the basis that the services agreement between VJC and RS was genuine. All of the evidence indicates that it was. There was no suggestion by Mr Coulthard that his dealings with the various group entities were a sham, nor do we consider this to have been the case.
[20] Mr Coulthard also pointed to the evidence of the work that he performed exclusively for RS or RE for several years and said that this was a clear indication that he had been an employee. This is a common misconception. Individuals work in this way all the time. It is an everyday occurrence for a person to provide services to clients through their own company, and it is not uncommon that this company may perform work extensively or even exclusively for a particular client. That is what happened here. That is what the three founders had decided to do, and that is what they did. The evidence of Mr Coulthard’s work is entirely compatible with the conclusion that there was a contract between VJC and RS, and that through this company he provided services for the benefit of RS and RE.
[21] The Commissioner considered that the invoicing arrangements were not a “core condition of the contract between the parties”, and that he did not consider that this factor outweighed other indicators that an employment relationship existed, such as control (at [135]). But before any weighing of indicia can be engaged in, the parties to the relevant contract had to be identified. The invoicing arrangement was not just a factor to be considered when deciding whether the relevant contract bore the character of employment or independent contracting: in this case it was clear evidence of who the parties to the relevant contract really were. Those parties were VJC and RS. VJC provided consulting services to RS in the human form of Mr Coulthard. It issued invoices to RS, and its fees were paid into VJC’s bank account. At the hearing, Mr Coulthard stated that some of these invoices remained unpaid. He will have no standing to sue in his own name to recover those amounts. The plaintiff in any action for breach of contract will be VJC.
[22] The Commissioner was in error to accept the “evidence of Mr Coulthard that he was VJC” (at [126]). This was not evidence of fact that was capable of being accepted by the Commissioner. It was a conclusory statement that reflected the opinion of a lay witness. Further, it was an erroneous opinion. It invited the Commission to disregard the corporate veil by ignoring the existence of VJC and the contractual arrangement that it had entered into with RS. Of course, the human hand of Mr Coulthard was behind the activities of VJC. But there is a human hand behind every company. A corporation is an abstraction, but its legal existence is very real and cannot be disregarded simply because work is being done by an individual. In the present case, the real-life distinction between VJC and Mr Coulthard is a particularly stark one because, as the Commissioner noted, VJC was formed by both Mr Coulthard and his wife, who are its co-directors, both of whom have an interest in the work of their company, and the income that it earns. In this respect the facts are reminiscent of those before the High Court in ZG Operations Australia Pty Ltd and another v Jamsek and another [2022] HCA 2, where the partnerships that had contracted with the principal had been formed by the owner-drivers and their wives.
[23] We reject Mr Coulthard’s contentions that the passages in which the Commissioner refers to his work being conducted through VJC have been taken out of context or involve some infelicity of expression. It was perfectly natural for the Commissioner to have spoken in these terms because they reflected the intention of the relevant persons and the reality of the arrangements that they put in place.
[24] It is in the public interest to grant permission to appeal because the decision manifests an injustice and raises a question of general importance concerning the integrity of contracts to provide personal services through corporate entities. The appropriate course is to exercise our powers under s 607(3) of the Act to uphold the appeal, quash the decision, and to redetermine the appellants’ jurisdictional objection ourselves.
[25] On rehearing, we find that the evidence establishes the existence of a contract between VJC and RS pursuant to which Mr Coulthard provided consulting services on behalf of his company to the Redei group, and in exchange for which VJC received payment on production of invoices. The evidence does not support a conclusion that there was a contract of any kind between Mr Coulthard and RE or RS. He was therefore not an employee of either company. He was not dismissed within the meaning of s 386, and therefore had no standing to make an application under s 365. The jurisdictional objection is upheld. Mr Coulthard’s application is dismissed. “
Appeal by Redei Services Pty Ltd and another v Coulthard – Re – [2024] FWCFB 349 delivered 20 August 2024 per Clancy DP, Colman DP and Hampton DP