Attorney General v George [2004] CKHC 5; OA 11.2003 (15 January 2004)

IN THE HIGH COURT OF THE COOK ISLANDS
HELD AT RAROTONGA
(CIVIL DIVISION)

NO: OA 11/2003

IN THE MATTER OF
the Declaratory Judgments Act 1994

AND

IN THE MATTER OF
the Electoral Act 1998

BETWEEN

ATTORNEY- GENERAL
Applicant

AND

HON. NORMAN GEORGE
Member of Parliament for the
constituency of Tengatangi-Areora-
Ngatiarua
Respondent

Miss J Maki Solicitor General and Mr. J. McFadzien for the Applicant.
Hon. N George in person.

Judgment of the Chief Justice

Dated the 15^th day of January 2004

1. This is an application brought in the name of Hon. Dr. Terepai Maoate as Attorney General. It seeks two declaratory orders:

That the Member of Parliament for the constituency of Tengatangi-Areora-Ngatiarua (the constituency), Hon Norman George, became a Crown servant (as that term is defined in section 2 of the Electoral Act 1998) on or after 2 December 2002;

The Parliamentary seat of the said Hon. Norman George became vacant on or about 2 December 2002 by operation of section 8(1)(l) of the Electoral Act 1998.

2. The definition of Crown servant set out in section 2 of the Act is as follows:

"Crown Servant" means any person who is employed in the service of the Crown and remunerated by way of salary or wages, but does not include any person whose salary is paid pursuant to the Civil List Act 1984 or any person remunerated only by way of allowances, commissions or fees.

Section 8(1)(l) of the Act provides that the seat of a Member of Parliament shall become vacant if he or she becomes a Crown Servant. It is accepted that the Respondent was not remunerated pursuant to the Civil List Act or by way of allowances or commissions.

3. On 28 June 1999 the Respondent was declared elected as the Member of Parliament for the constituency. By letter dated 2 December 2002 and signed by the Respondent on 10 December 2002 the Respondent trading under the name "Focus Consultancies" entered into a contract with the Environment Service for a term of a maximum of twelve months. The remuneration as recorded was "Total consultancy fee $40000.00 plus V A T $5000.00". The Environment Service is a statutory corporation established by the Rarotonga Environment Act 1994-95 for which a Minister of the Crown is responsible, the governing council of which is appointed by the Minister and the funding of which is predominantly by appropriation from the Cook Islands Government Account. No issue is taken with the assumption made between the parties that the Environment Service falls within the ambit of the Crown as that term is applied under the definition of Crown Servant.

4. The Applicant limited his presentation of the case to written submissions to which were attached and accepted as evidence -

(a) Letter dated 2 December from The Prime Minister to the Director of the Environment Service;

(b) Letter dated 2 December 2002 from the Director to the Respondent and signed by the latter on date 10 December 2002;

(c) Invoices from Focus Consultancies to the Director dated 13 December 2002, 17 January 2003, 14 February 2003, and 18 March 2002.

5. The Respondent as well as providing written submissions filed affidavits by Robert Woonton, Prime Minister, and Vaitoti Tupa, the Director, sworn on 20 October 2003. They purport to be sworn before the Respondent himself but I have read them. In addition The Respondent attached to his submissions what he described as "work samplings of the type of duties performed" These are dated 14 May 2003, 26 March 2003,19 February 2003, 6-12 March 2003, 27 May to 3 June 2003, 24 July (sic) to 1 July 2003. I observe that after the invoice dated 18 March 2003 all payments were suspended so what purports to be work done after that date can have little if any relevance to the issue in this case.

6. Reference was made in the submissions to, among other authorities, GLC v Minister of Social Security [1972] All ER 285, Attorney-General v Tapaitau (3 April 2003 Greig CJ HC OA6/2002), Re Shine Ex Parte Shine [1891-94] All ER Rep. 789, Ready Mix Concrete v Minister of Pensions [1968] 1 All ER 433, and Cunningham v TNT Express Worldwide (NZ) Ltd [1993] 1ERNZ 595.

7. In Tapaitau I said this at paras 20 and following:

20 The issue at the relevant time or times is whether the Respondent falls within the definition of Crown Servant. That means was he in the service of the Crown and remunerated by salary or wage and not by fees only. That is in two parts. The first is the true relation between the parties. Did it amount to being in the service of the Crown? The second is the actual payment for the service. Was it by salary or wages or by fees only? The first part has been conceded against the Respondent but because the fundamental issue is one though in two parts it seems appropriate that I should consider independently of the concession the question of the relations between the parties. I think that on the second part there is no suggestion that the Respondent was paid wages. The whole of the argument has been on the assumption that the payment or remuneration was salary.

21 The phrase "employed in the service of the Crown" is not defined. Counsel did not cite any authority as to its meaning. I have been unable to find any assistance on the whole phrase in any of the texts which are useful in citing the meaning of words and phrases. However Black's Law Dictionary (6th edition 1990) defines "employed" as performing work under an employer and employee relation. The Oxford English Dictionary (2nd Edition 1989) [the OED] defines "employed" as "that is in one's employ" and "employ" as "the state or fact of being employed; esp. that of serving an employer for wages."

22 The distinction between a contract of service and one for services has been a longstanding basis for distinguishing between the servant or employee and the independent contractor. There is no need here to discuss or choose between the various tests which may apply to define the distinction and in any event, as I have said the whole contract and, where appropriate, its matrix must be considered. What I think follows from what I have said and quoted is that the phrase in the definition requires a master and servant relation, a contract of service and not a contract for services.

23 The other words in issue in this case in the definition of Crown Servant are not separately defined either and in the end one must rely on the ordinary meaning of them. Again I refer to the OED. Salary is a "fixed payment made periodically to a person as compensation for regular work: now usually restricted to payments made for non-manual or non-mechanical work (as opposed to wages)." Fee has a number of definitions following its derivation from the estate in land and the tribute paid therefore. The relevant one is stated to be, "Extended to denote the remuneration paid or due to a lawyer, physician or (in recent use) any professional man, a director of a public company etc. for an occasional service." Counsel for the Applicant referred to a 19^th Century case Re Shine Ex parte Shine [1891-94] All E R Rep 789. Which was quoted with approval in a 1972 case at first instance in England GLC v Minister of Social Security [1971] 2 All E R 285 where the occasional nature of the payment was of importance to qualify it as a fee. I doubt if the views of even a very learned Lord Justice in-the 19^th Century are of much assistance today especially when the Judge was careful not to intend any exclusivity in his definition.

8. It needs to be noted that in that case the Respondent admitted that he was employed as a Crown Servant and so the sole question was the status of the payments to him. In this case both parts of the definition are in issue. I observe that the definition is in two parts connected by "and". There needs to be an answer to both parties; that is whether the Respondent is employed in the service of the Crown and second is also remunerated by way of salary or wages. Both these have to be answered in the affirmative to qualify the person as Crown Servant. Then the question arises whether the remuneration is by way of fees only. Each case must be decided on its own facts and circumstances. It is appropriate to repeat that the test is objective. The intentions and interpretations of the parties are irrelevant.

The Respondent is a Barrister practicing in the Cook Islands. He has held Ministerial office and was Attorney-General in the Course of the Tapaitau case. Focus Consultancies is an unincorporated body. The contract with that body is made with the Respondent himself.

9. The letter from the Prime Minister to the Director dated 2 December 2002 noted that the Environment Service had been without the services of a lawyer for some time to advise on environmental laws and other legal and international treaty issues. The Prime Minister sought a service that would be available to him at all times to cover all aspects of his duties and responsibilities as Prime Minister. He directed that the appointment of the Respondent be made immediately.

10. The contract form which is on the letter head of the Environment Service is dated 2 December 2002 and addressed to "Mr. Norman George Focus Consultancies". It refers to a meeting on 1 December 2002 and makes an offer of the "following tasks to be undertaken and be completed by the Focus Consultancies within the given time frame below". The time frame was "a maximum period of twelve (12) months". The tasks were set out in 8 paragraphs as follows:

1. Advisor to the Minister for the Environment on all environmental laws, issues and subjects;

2. To advise the Minister and the Director on all environmental legal issues, international treaties and Memorandums of Understandings as well as protocols relevant to these.

3. To assist with the completions of the new Environment Bill;

4. To prepare speeches, documents, and briefing notes for the Minister;

5. To carry out any other lawful functions that the Minister or the Director may require from time to time;

6. To assist the Minister for the Environment confront or handle environmental issues that may be publicly debated;

7. To consult with and give advice to the Director of the Environmental Service whenever required;

8. To be available to travel for environmental conferences, workshops on consultations whenever necessary.

12 The remuneration was recorded as Total Consultancy Fee; $40,000.00 and Plus Vat $5,000.00. Payment was to be made on receiving an invoice from the Respondent on the 20^th of each month. A brief report detailing work done was to be attached to the invoice. The Director was to provide all necessary information and there was to be an "ongoing dialogue between the Director and the Consultant. The contract was to commence on 2 December 2002 subject to termination by either party in three months notice. It was recorded in this paragraph about early termination that; "Compensation for actual work done will be payable provided the work performed up to the termination of this offer is satisfactory to the Director of the Environment service. Payment for work shall not be unreasonably withheld". That document was signed by the Respondent on 10 December.

11. The first invoice is dated 13 December 2002. It is for an amount of "Fees 3,333.33 and VAT 416.67. These amounts are one twelfth of the total remuneration mentioned in the contract. The invoice is for the period to 20 December 2002. 18 days from the date of commencement and 10 days from the date the Respondent signed. The text of the invoice states: Fees for professional on call all hours availability services international & domestic env. Issues, Ministerial advisory services - for period 20 December 2002" The second invoice is dated 17 January 2003. It is for the period to 20 January is for the same amount as the first and has similar but not identical wording. The third invoice is dated 14 February 2003 for the period to 20 February. It is for the identical amount and is in the identical wording of the second invoice. The fourth invoice is dated 18 March 2003 for period to 20 March and for the identical amounts and with the identical wording. There is no evidence to show what if any other brief details of work done were provided with the invoices. There is no evidence to show what precisely was done by the Respondent in carrying out the contract.

12. The Applicant's case puts its principal focus on the remuneration aspect of the contract and its execution; the conduct of the parties in the course of the contract. Particular reference is made to Shine and the four characteristics there referred to. It is said that the important features of this case are the sum of money to be paid, pursuant to a contract, computed on an annual basis and paid monthly on invoices. It is pointed out that the invoices appear to be calculated not on services actually rendered but on a fraction of the annual amount. The invoices have the appearance of being pro forma and show that the Respondent was on call; available at "all hours" which is inconsistent with the idea of professional services.

13. The Respondent points to the wording of the contract itself the absence of PAYE provisions and any other usual provision expected in a contract of service. The contract itself does not refer to any on call obligation that is mentioned in the preliminary letter of the Prime Minister and the invoices. It is submitted that there is no level of control on the Respondent but he is to carry out his professional business. The inclusion of VAT indicates other than employment. It is suggested that there was a retainer element in the contract thus justifying the regular invoice amount.

14. I should say at once that this was not in my judgment a retainer contract. Invoices were to be rendered for work done on a monthly basis with the maximum amount for the whole twelve months. That is not to say that the invoices rendered did not cover work done at a proper rate. I note that there is no specification of the fee rate which might be chargeable by the Respondent. Urgent work over several days might well justify a fee of $3333.00. As I have said there is no evidence before me of what work was actually done by the Respondent.

15. The first and most important step is to examine the contract document. It is in respect of an advisory role. The Respondent is to undertake certain tasks over a fixed period. The tasks include matters within the general practice of the Respondent and he is free to carry these out as he thinks best. Although there is an understanding that he is to be available when required that is not on the basis of an employee owing sole loyalty to the employer. The remuneration is expressed as a one sum consultancy fee plus VAT. It is payable monthly on invoices rendered for the work done not as a monthly or other fractional payment of the whole sum. The Respondent is very much his own master subject to consultation with the Director who is to provide all information required. The absence of PAYE provisions in the contract and its execution is an important indication against service.

16. Cooke P, as he then was, in Cunningham at p.699 adopted the test approved in Lee Ting Sang v Chung Chi-Keung [1990] 2 AC 374 at 382, whether a person has engaged himself to perform services and to do so on business on his own account. Having regard to that test and to the other principles to be drawn from the other authorities mentioned I conclude that in this case the Respondent was not employed in the service of the Crown and was not paid or remunerated by way of wages or salary. The application must fail and is formally dismissed. I reserve the question of costs. Counsel may make submissions on these if required.

Laurie Greig CJ