ZG Operations Australia Pty Ltd v Jamsek
[2022] HCA 2(2022) 96 ALJR 144
(2022) 312 IR 74
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The impact of this case on ATO policy is discussed in Decision Impact Statement: Jamsek v ZG Operations Australia Pty Ltd (No 3) (Published 15 May 2024).
(Judgment by: Gageler J, Gleeson J)
ZG Operations Australia Pty Ltd & Anor
v Martin Jamsek & Ors
Judges:
Kiefel CJ
Gageler JKeane J
Gordon J
Edelman J
Steward J
Gleeson J
Legislative References:
Fair Work Act 2009 - 13; 14
Judgment date: 9 February 2022
Canberra
Judgment by:
Gageler J
Gleeson J
78 In contrast to the companion appeal in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd ("CFMMEU") [100] , which concerns a labour hire arrangement of a kind that has come to prominence with the disaggregation of business structures in the late 20th and early 21st centuries, the controversy underlying this appeal arises out of a scenario well known in an earlier industrial age.
79 A company with an established workforce of employees wants to change the structure of its business to turn them into independent contractors. To achieve that change, the company proffers written contracts which its workers sign. The conduct of the business of the company goes on with little change in practice. Later, an issue arises in a taxation or superannuation or workplace compensation or workplace entitlement context about whether the company achieved its aim. A worker claims that the written contract cannot obscure the reality that the true nature of his or her relationship with the company did not change at all.
80 Faced with claims of that type, to the extent necessary to adjudicate the issues in dispute, courts and tribunals applying common law principles have been astute to ascertain what the real relationship between the company and the worker was following the signing of the contract and to characterise that relationship in its totality. They have not always been astute to distinguish contractual variation from contractual performance. That has been unsurprising given that contractual performance and any contractual variation will have occurred within the same matrix of fact. The distinction, moreover, has not always been seen to have mattered, since the terms of the contract as varied and the manner of its performance have both been understood to have borne on the ultimate question of characterisation. That has been so whether the ultimate question of characterisation has been framed more in terms of whether the worker was supplying subordinated labour under the control of the company or more in terms of whether the worker was carrying on his or her own business.
81 Yellow Cabs of Australia Ltd v Colgan [101] provides an early instructive example. There a taxi company was found by a majority of the New South Wales Industrial Commission (Street and Cantor JJ, Piddington J dissenting) to have been successful in turning its previously employed workforce of taxi drivers into independent contractors by getting them to enter into "leases" in relation to its taxis, which they then drove according to the company's rules. Street and Cantor JJ said [102] :
"[I]n all arrangements where the parties occupy a relationship in the nature of that of joint adventurers, there is necessarily involved a certain degree of direction and control arising out of the nature of the relationship created by the agreement itself. But this does not necessarily create the relationship of employer and employee, that question, all the surrounding circumstances having been taken into consideration, being mainly determined by the degree and extent of the detailed control vested in one party over the acts of the other party in the actual execution of the work contemplated in the joint venture."
After referring to the terms of the "leases" and associated contractual documents, and to the work practices in place prior to the "lease" arrangements, their Honours continued [103] :
"Under the new system the drivers kept the cab at the company's garage or not, according to their own convenience, and they worked whatever days or hours they liked without control by the company. They were not bound to start from or finish at the company's garage, nor were they required to record their time on the bundy clock. They were not compelled to furnish any record of their hours, nor to work from any specified rank or under any orders as to the place or direction in which they should cruise for work. They paid for their own petrol and they were liable to repay to the company the cost of repairing any damage to the cab or its equipment."
In concluding that the previous relationship of employment had not been maintained under the new system, their Honours said [104] :
"Such a system does not appear to establish that the drivers were subject to the commands of the company as to the manner in which they shall do their work, but were independent in that, though they embarked upon the carrying out of a joint enterprise, each driver was substantially in the position of an independent contractor 'who undertakes to produce a given result, but so that in the actual execution of the work he is not under the order or control of the person for whom he does it, and may use his own discretion in things not specified beforehand.'"
82 In Cam and Sons Pty Ltd v Sargent [105] , Evatt J referred to Yellow Cabs as containing a discussion of the principles applicable to determining the issue in that case, which was whether a shipping company had succeeded by entering into a written agreement in turning the master and crew of one of its ships into a partnership chartering the ship. Proceeding on the understanding that "the relationship between the parties [was] to be determined by a careful consideration of the terms of the agreement made between them and their conduct whilst it was in force" [106] , Judge Markell had determined at first instance that the relationship between the shipping company and the master and crew during the period in which the written agreement was in force was "in fact" that of employer and employee. The Full Court of this Court (Rich, Dixon, Evatt and McTiernan JJ) unanimously upheld that result in ex tempore reasons for judgment delivered seriatim. In the language of Dixon J, "the learned judge was perfectly right in treating the substance of the relation of master and servant as subsisting between the parties". His Honour explained [107] :
"In a matter of this sort we are to look at the substance of the transaction and not to treat a written agreement, which is designed to disguise its real nature, as succeeding in doing so if it amounts merely to a cloud of words and, without really altering the substantial relations between the parties, describes them by elaborate provisions expressed in terms appropriate to some other relation."
83 The approach in Yellow Cabs was later reflected, and Yellow Cabs was cited, in the reasoning in R v Foster; Ex parte The Commonwealth Life (Amalgamated) Assurances Ltd [108] sufficiently set out in CFMMEU [109] . There, as noted in CFMMEU, application of that reasoning led to the result that an insurance company was not shown on the evidence to have been successful in making its insurance salesmen independent contractors.
84 Here, the primary judge (Thawley J) and the Full Court of the Federal Court (Perram, Wigney and Anderson JJ) took essentially the same approach to the resolution of the ultimate question of whether Mr Jamsek and Mr Whitby remained employees of the company after each signed the 1986 contract. They were correct to do so.
85 Subject to one qualification, we see nothing wrong with the Full Court's identification of the applicable common law principles. The one qualification concerns the Full Court's apparent preparedness to contemplate that two persons who have contracted with each other might simultaneously be an employer and an employee and a hirer and an independent contractor [110] . If the contemplation was no more than that a contract under which a relationship of employment is established and maintained need not be a contract that deals solely with the subject-matter of employment or that admits of performance solely through the establishment and maintenance of a relationship of employment, the contemplation would have been wholly orthodox. If the contemplation was that a single relationship established and maintained under a contract could be simultaneously a relationship of employer and employee and of hirer and independent contractor, the contemplation would have been heterodox. For the purposes of determining who is an "employee" at common law, the distinction between an employee and an independent contractor is and has always been a true dichotomy.
86 Our disagreement is with the evaluative conclusion reached by the Full Court. Against the background of the facts set out by Kiefel CJ, Keane and Edelman JJ, and without repetition of the principles we have referred to in CFMMEU, our reasons for disagreement can be expressed briefly and sufficiently with reference to the relationship between Mr Jamsek and the company during the period of the 1993 contract. Implicit in our earlier identification of the ultimate question is that we adopt the abbreviations of Kiefel CJ, Keane and Edelman JJ.
87 Leaving more equivocal indications to one side, two features of the relationship that existed in fact between Mr Jamsek and the company point inexorably to it having been a relationship within which Mr and Mrs Jamsek in partnership provided carriage services to the company using their own truck as distinct from a relationship within which Mr Jamsek provided personal service to the company as a truck driver.
88 The first is that Mr and Mrs Jamsek were obliged to, and did, maintain the truck which was used to perform the 1993 contract. A relationship of employment is a relationship of personal service. Personal service is not inherently inconsistent with the individual who provides service being responsible for the physical means by which his or her service is provided [111] . Bicycle couriers were found to be employees in Hollis v Vabu Pty Ltd [112] despite having used their own bicycles, just as Mr McCourt has been found to be an employee in CFMMEU despite having purchased and presumably used his own hard hat. But acceptance by the plurality in Hollis [113] that motor vehicle couriers and motorbike couriers in contractual arrangements similar to the bicycle couriers might not have been employees shows that questions of scale can be important and even decisive [114] . Where work contracted for, actually performed by an individual, and paid for, involves use of a substantial item of mechanical equipment for which the provider of the work is wholly responsible, the personal is overshadowed by the mechanical. That was recognised by this Court in Humberstone v Northern Timber Mills [115] and again in Wright v Attorney-General for the State of Tasmania [116] . Those cases were cited as authorities for that proposition in Neale v Atlas Products (Vic) Pty Ltd [117] ; they support what has become the "conventional view" that "owners of expensive equipment, such as [a truck], are independent contractors" [118] .
89 The second important feature of the relationship is that it was Mr and Mrs Jamsek in partnership who contracted for the doing of the work involving the use of the truck, and who were therefore jointly and severally liable to the company for the performance of the 1993 contract and jointly and severally entitled to be paid by the company when performance in fact occurred. They together invoiced the company as partners and were together paid by the company as partners.
90 No doubt in recognition of those difficulties, the argument for Mr Jamsek on the appeal involved an attempt to deconstruct and reconstruct the relationship under the 1993 contract, portraying it both as one within which Mr and Mrs Jamsek in partnership were obliged to and did provide the truck and were responsible for invoicing and receiving payment and as one within which Mr Jamsek alone was obliged to and did do the driving. Whilst there is no reason in principle why their relationships could not have been structured and performed that way, that is not what was contracted for and that is not what happened in practice. Mr Jamsek usually drove the truck, but he was not contractually obliged to do so, and on occasions he did not. Mr Jamsek did no substantial work in the performance of the contract other than to load, unload and drive the truck for the purpose of carrying the company's goods. When he did that work in the performance of the contract, the partnership invoiced and was paid for the carriage of goods he provided using the truck. What was contracted for, provided, and paid for, under the contract was the carriage of goods by means of a truck, not the truck and separately Mr Jamsek as an individual to drive it.
91 We agree with the orders proposed by Kiefel CJ, Keane and Edelman JJ, including the order remitting the issues raised by the notice of cross-appeal to the Full Court for determination.