VABU PTY LIMITED v FC of T

Judges: Meagher JA

Sheller JA
Beazley JA

Court:
Supreme Court of New South Wales - Court of Appeal

Judgment date: Decision delivered 6 September 1996

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Sheller JA

During the financial year ended 30 June 1993 the appellant, Vabu Pty Limited, paid about $2 million to about eighty couriers it engaged in the courier business it conducted under the name ``Crisis Couriers'' in the central business district of Sydney, North Sydney and Sydney suburbs. Twenty-four of the couriers used pedal bicycles, thirteen used motor cycles and the rest a variety of motorised vehicles. The appellant paid to the couriers who used pedal bicycles a flag fall payment for each contract of carriage undertaken and to the other couriers amounts based on a flag fall payment for each contract of carriage undertaken together with a running rate per kilometre.

The question for decision in this appeal is whether the persons the appellant engaged as couriers to deliver parcels and items on behalf of its clients were employees for the purposes of the Commonwealth Acts and Regulations which provide for the imposition and administration of the Superannuation Guarantee Levy. The Acts are the Superannuation Guarantee Charge Act 1992 (the Charge Act) and the Superannuation Guarantee (Administration) Act 1992 (the Administration Act). Regulations have been made under both these Acts but these are not material to the present question.

The Administration Act requires an ``employer'' who has what is described as a ``superannuation guarantee shortfall'' in a year, to lodge with the respondent a ``superannuation guarantee statement'': s 33 of the Administration Act. That ``statement'' in effect acts as a self assessment of the liability of the ``employer'' to pay a charge to the respondent for the year concerned. The charge is equal to the shortfall and is levied under ss 5 and 6 of the Charge Act. The moneys so extracted from the ``employer'' via this charge are deposited with Consolidated Revenue.

The appellant sought, by an application for declaratory relief in the Administrative Law Division of the Court, a declaration that it was not an employer within the meaning of the scheme and an order declaring that it was not obliged to lodge a Superannuation Guarantee Statement for the year ended 30 June 1993. Ireland J heard the application. His Honour found a relationship of employer and employee at common law between the appellant and its couriers and dismissed the summons with costs. From that decision the appellant appeals to this Court.

Two questions need to be considered; whether there was a common law relationship of employer and employee and, if there was not, whether the definition in s 12(3) of the Administration Act applied. Section 12(1) provides that, subject to the section, in the Act ``employee'' and ``employer'' have their ordinary meaning. However, for the purposes of the Act, inter alia, subs (3) expands the meaning of those terms and makes particular provision to avoid doubt as to the status of certain persons. The subsection provides:

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ATC 4902

``If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.''

The expression ``a contract that is wholly or principally for the labour of the person'' was considered by this Court in World Book (Australia) Pty Ltd v FC of T 92 ATC 4327; (1992) 27 NSWLR 377.

Consideration, in any particular case, of whether a relationship of employer and employee exists, starts with the High Court's decision in Stevens v Brodribb Sawmilling Company Pty Ltd (1986) Aust Torts Reports ¶ 80-000; (1986) 160 CLR 16. At Aust Torts Reports 67,446; CLR 24 Mason J, with whose judgment Brennan J was in general agreement, said that a prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. The importance of control lies not so much in its actual exercise, though that is relevant, as in the right of the employer to exercise it. But his Honour said:

``... the existence of control, while significant, is not the sole criterion by which to engage whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question:... other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.''

The significant factors in that case were that the persons engaged provided and maintained their own equipment, set their own hours of work and received payments, not in the form of fixed salary or wages, but in amounts determined by reference to the volume of timber which they had been involved in delivering, through the use of their equipment, to the sawmill. The authority of Brodribb's bush boss seems to have been confined to the organisation of activities determining the location of roads and ramps, selecting the logs to be snigged, monitoring the volume and quality of production and deciding whether work should take place in bad weather. There was no basis for inferring an intention that the bush boss should have authority to direct the appellants, Stevens and Gray, in the management and control of their equipment which they were using for the purpose of delivering timber to the mill. At Aust Torts Reports 67,447; CLR 26 Mason J said that the power to delegate is an important factor in deciding whether a worker is a servant or an independent contractor and referred to
Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 391 . At Aust Torts Reports 67,448; CLR 27 his Honour referred to what has been called the ``organisation'' test, that is to say, that the person engaged was part and parcel of the other's organisation and said he was unable to accept that the organisation test could result in an affirmative finding that the contract was one of service when the control test either on its own or with other indicia yielded the conclusion that it was a contract for services. ``... Of the two concepts, legal authority to control is the more relevant and the more cogent in determining the nature of the relationship''. However at Aust Torts Reports 67,448; CLR 29 his Honour reiterated that control is not now regarded as the only relevant factor. ``Rather it is the totality of the relationship between the parties which must be considered''.

At Aust Torts Reports 67,453; CLR 36-37 Wilson and Dawson JJ said that in most cases it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. Other indicia suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or distinct calling on the part of the person engaged, the provision by him of his own place of work or of his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of remuneration without deduction for income tax.

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ATC 4903

``None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance. However an attempt to list relevant matters may mislead because they are no more than guides. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance.''

Deane J agreed with the reasons set out in the judgment of Mason J for the conclusion that the persons engaged were independent contractors and not employees.

Counsel for the respondent emphasised the terms of engagement and the degree of control of hours worked, behaviour and work done. Counsel for the appellant emphasised the method of payment and the fact that the taxation returns of three of the couriers which were produced claimed by way of deduction very substantial expenses against the income earned for providing the courier service. As in so many of these cases the answer to the ultimate question is finely balanced. The appellant treated the couriers as contractors. They were left to provide for themselves in matters which if a relation of employer and employee existed would normally be provided for by the employer. This was the reality of the relationship and fitted easily with the kind of work that the couriers were performing. Such a circumstance diminishes the significance of the various matters which are pointed to and suggest some control.

I have had the benefit of reading the judgment prepared by Meagher JA. I agree that the matters to which his Honour has referred tend to the conclusion which, in my opinion, is the correct one, that there was not between the appellant and the couriers it engaged a common law relationship of employer and employee.

For reasons that I gave in World Book (Australia) Pty Ltd v FC of T at ATC 4334; NSWLR 385-6 I do not regard a person who enters into a contract to produce a given result and who is paid for that result, as working under a contract wholly or principally for the labour of that person. On the one hand the person employs himself or herself to produce the result, on the other the person is working in the service of the other contracting party. In the present case, as Meagher JA has said, the couriers supplied their own vehicles and bore the expense of maintaining and running them. In short they provided the resource and bore the cost, in large measure if not entirely, of delivering parcels and other items which the appellant had contracted with its clients to deliver. The couriers were paid a flag fall payment and, where they used vehicles, a running rate per kilometre for each contract of carriage undertaken. The contracts between the appellant and the couriers were neither wholly nor principally for the labour of the couriers. Each courier agreed to deliver the parcels and items that the appellant had contracted to deliver for the particular client, that is to say, to produce the result the appellant had contracted with that client to produce. Accordingly the courier was not an employee within the extended meaning of that term under s 12(3) of the Administration Act.

I agree with the orders proposed by Meagher JA.