CFMMEU v Personnel Contracting

[2022] HCA 1

---

• The impact of this case on ATO policy is discussed in Decision Impact Statement: Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd (Published 31 March 2022).

(Judgment by: Gageler J, Gleeson J)

Construction, Forestry, Maritime, Mining and Energy Union
v Personnel Contracting Pty Ltd

Court:

Judges: Kiefel CJ

Gageler JKeane J
Gordon J
Edelman J
Steward J

Gleeson J

Legislative References:
Fair Work Act 2009 - 13; 14

Hearing date: 31 August 2021
Judgment date: 9 February 2022

Canberra

---

Judgment by:
Gageler J
Gleeson J

93 The Fair Work Act 2009 (Cth) for the most part confers rights and imposes obligations on, and in respect of the relationship between, an employer and an employee ^[147] The terms "employer" and "employee" are defined to "have their ordinary meanings" ^[148] The "ordinary meanings" to which that foundational definition refers are not the grammatical meanings of the legislatively chosen words purposively construed in their statutory context ^[149] The reference in the definition is instead to the meanings ascribed to "employer" and "employee" at common law ^[150]

94 The meanings ascribed to "employer" and "employee" at common law have been formulated over the past two centuries principally in the context of drawing, for the purpose of tortious liability, "the distinction between employees (for whose conduct the employer will generally be vicariously liable) and independent contractors (for whose conduct the person engaging the contractor will generally not be vicariously liable)" ^[151] The common law distinction which has been drawn for that purpose has been said in this century in this country to be "too deeply rooted to be pulled out" ^[152]

95 Around the beginning of the twentieth century, the common law distinction "came somewhat deviously and indirectly into the early law of workmen's compensation" ^[153] The common law distinction came in the course of the twentieth century to be imported more directly into a range of other areas of statute law, including industrial relations, taxation and superannuation. The Fair Work Act continued that trend when, early in this century, its elaborate statutory edifice was erected on the foundation of precisely the same common law distinction.

96 Professor Patrick Atiyah once noted that ^[154] :

"In attempting an answer to the question, 'Who is a servant?' two approaches are possible. The first is based on the assumption that a contract of service is a legal concept known to the law in a variety of contexts, and that the first enquiry in any case involving vicarious liability should be directed to the question whether a contract of service exists. ...

The alternative approach emphasises that the classification of a particular factual situation must always be considered in the light of the purpose for which the classification is being made."

97 The common law in and of Australia has steadfastly adhered to the first of those two approaches, and the Australian legislative references to employment or service have generally adopted the common law. Curial adherence to, and legislative adoption of, the same approach has not been quite so consistent in some other common law jurisdictions. In the United Kingdom, the common law distinction seems of late largely to have been abandoned ^[155] In the United States, the common law distinction has been maintained, but different approaches have been taken in different statutes at different times ^[156]

98 So we have it that, like the National Labor Relations Act 1935 (US) as amended from 1947 ^[157] and like the Commonwealth Conciliation and Arbitration Act 1904 (Cth) as also amended from 1947 ^[158] , but unlike the Fair Labor Standards Act 1938 (US) ^[159] and the National Minimum Wage Act 1998 (UK) ^[160] , the Fair Work Act postulates the existence of employment at common law as a precondition to its operation. Subject to presently immaterial exceptions, unless two persons are or have been in a relationship of employment at common law independently of the operation of the Fair Work Act, one of those persons cannot be an "employer" and the other cannot be an "employee" within the meaning of the Fair Work Act.

99 Although the context is statutory, the outcome of this appeal therefore turns on a question which arises at common law. The question is as to how the existence of a relationship of employment is to be determined. The question has not squarely arisen in this Court for 20 years. The answer is of far-reaching importance.

100 The question now arises for the consideration of this Court in a procedural context fully described by Kiefel CJ, Keane and Edelman JJ. Their Honours' explanation of the facts and abbreviations can conveniently be adopted. Some additional facts will be mentioned in due course.

101 The ultimate issue in the appeal is whether Mr McCourt was employed by Construct under the ASA during the two discrete periods during which Construct made the labour of Mr McCourt available to Hanssen under the LHA. The first period was from 27 July 2016 to 6 November 2016. The second period was from 14 March 2017 to 30 June 2017.

102 Our conclusion on the ultimate issue is that, whilst Mr McCourt was not employed by Construct merely by reason of having entered into the ASA, Mr McCourt was employed by Construct during each of those periods by reason of what then occurred in the performance of the ASA.

103 The pathway of analysis leading to that conclusion proceeds in three stages. The first stage involves examining the nature of a relationship of employment at common law - the critical point being that it is a relationship which exists in fact. The second stage involves identifying the scope of the inquiry to be undertaken to determine whether a relationship that exists in fact is a relationship of that nature - the critical point being that it involves looking beyond contractual terms to contractual performance. The final stage involves examining the relationship that existed in fact between Mr McCourt and Construct during the periods during which Construct made the labour of Mr McCourt available to Hanssen. That examination illuminates points of distinction between their relationship and some other "triangular" labour hire relationships which have been found in the past not to be relationships of employment.

The nature of a relationship of employment at common law

104 Employment at common law has its roots in the relationship of service which the common law recognised between master and servant. Employment is a voluntary relationship between an individual, the employee, and another person, the employer, within which the employee performs a genus of work for the employer - what was traditionally called "service" - in exchange for some form of remuneration.

105 Typically, although not universally ^[161] , the relationship of employment is established and maintained under a contract between the employer and the employee. Throughout the nineteenth century, a contract under which a relationship of master and servant was established was routinely referred to as a contract of service. Moving into the twentieth century, a contract under which a relationship of employer and employee was established and maintained came more commonly to be referred to as a contract of employment ^[162]

106 The terminology remains apt so long as two things are recognised. One is 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: a relationship of employment can be established and maintained under a contract that has contractual purposes broader than, and contractual consequences additional to, simply establishing a relationship within which an individual performs work of the requisite genus for another person. The other is that it is the character of the relationship that is established and maintained under a contract that gives character to the contract. Expressed using other prepositional terms, a contract "of" employment is a contract "for" a relationship of employment ^[163] The employment relationship is established and maintained "within" the contractual relationship, the employment relationship does not subsist simply "in" the contractual relationship.

107 In Dare v Dietrich ^[164] , Lockhart J, in addressing the question of whether a contract under which one person does work for another is a contract of service, pointed out that "[t]he question is answered by examining all the various elements which constitute the relationship between the parties" ^[165] In the same case Deane J said ^[166] :

"A contract of service is that form of contract which embodies the social relationship of employer and employee. It cannot be identified by reference to the presence of any one or more static characteristics. The relationship is a dynamic one which needs to be accommodated to a variety of different and changing social and economic circumstances. It is, however, of the essence of a contract of service that it is a bilateral contract involving executory obligations on behalf of both employer and employee".

On the appeal to this Court, the substance of the reasoning of both Lockhart J and Deane J was endorsed by Gibbs, Mason and Wilson JJ, with whom Aickin J agreed ^[167] In finding that the arrangement between the parties in that case did not give rise to a contract of service, the plurality observed that the arrangement "lacked the element of mutuality of obligation that is essential to the formation of such a contract" ^[168]

108 The centrality of the concern of the common law with the identification and characterisation of the relationship established and maintained between employer and employee under a contract has been emphasised in the description of a contract of employment as having "a two-tiered structure" ^[169] :

"At the first level there is an exchange of work and remuneration. At the second level there is an exchange of mutual obligations for future performance. The second level - the promises to employ and be employed - provides the arrangement with its stability and with its continuity as a contract. The promises to employ and to be employed may be of short duration, or may be terminable at short notice; but they still form an integral and most important part of the structure of the contract. They are the mutual undertakings to maintain the employment relationship in being which are inherent in any contract of employment properly so called."

109 That description is consistent with the recent holding in WorkPac Pty Ltd v Rossato ^[170] that the distinction between a casual employee and another employee, according to the ordinary meaning of "casual employee", lay in the absence of a "firm advance commitment" as to the duration of the employee's employment to be found, if at all, in the terms of the contract of employment. There, six consecutive relationships of casual employment were found to have been created pursuant to six consecutive contracts of employment, each incorporating standard terms and conditions ^[171] Here, for reasons that will eventually be explained, Mr McCourt entered into two consecutive relationships of casual employment with Construct in the performance by him and Construct of a single overarching contract: the ASA.

110 The relationship of employment is, however, not to be conflated with the contract under which the relationship is established and maintained. The two are "distinct" ^[172] "The employment is the continual relationship, not the engagement or contracting to employ and to serve." ^[173] "It is the service ... carried on." ^[174]

111 Whether a continual relationship for which a contract might make provision actually exists at any given time is a question of fact ^[175] Whatever the contract might say about the obligations of the parties, a relationship of employment does not exist until the relationship is in fact formed, and the relationship of employment ceases to exist when the relationship is in fact broken. Thus, "[i]t does not appear to have been doubted in this country that a wrongful dismissal terminates the employment relationship notwithstanding that the contract of employment may continue until the employee accepts the repudiation constituted by the wrongful dismissal and puts an end to the contract" ^[176] One consequence is that a wrongfully dismissed employee can refuse to accept the dismissal and can "[keep] the contract open" by remaining ready and willing to work ^[177] If the employer can then be induced to retract the dismissal, the employment relationship can be re-established without need for a new contract ^[178]

112 Here, again for reasons that will eventually be explained, Mr McCourt and Construct in fact established and maintained continual relationships for the doing of work by Mr McCourt throughout each of the two periods during which Construct made his labour available to Hanssen under the LHA. They did not establish a relationship of the requisite kind merely by entering into the ASA and they did not maintain a relationship of the requisite kind throughout the entirety of the term of the ASA.

113 Where a continual relationship under which work is done by an individual in exchange for remuneration in fact exists, the characterisation of that relationship as one of employment or service, on the one hand, or as one of hirer and independent contractor, on the other hand, has long been understood to turn on one or other or both of two main overlapping considerations. The first is the extent of the control that the putative employer can be seen to have over how, where and when the putative employee does the work ^[179] The second is the extent to which the putative employee can be seen to work in his or her own business as distinct from the business of the putative employer ^[180] Factors relevant to that second consideration have been said to include, but not to be 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" ^[181] A third consideration sometimes identified is perhaps little more than a variation of the second consideration: it is the extent to which the work done by the putative employee can be seen to be integrated into the business of the putative employer ^[182]

114 Each consideration is a matter of degree. None is complete in itself. Each can fairly be said to be "really posing the ultimate question in a different way rather than offering a definition which could be applied for the purpose of providing an answer" ^[183]

115 These considerations are compositely reflected in most standard descriptions of a relationship of employment, or of a contract of employment, at common law. In its first restatement of the law of agency, published in 1933, for example, the American Law Institute ("ALI") defined a "servant" as "a person employed to perform service for another in his affairs and who, with respect to his physical conduct in the performance of the service, is subject to the other's control or right to control" ^[184] The ALI then went on to enumerate "matters of fact", to be considered, "among others", "[i]n determining whether one acting for another is a servant or an independent contractor". The ALI definition was restated in almost identical terms in 1958 and in substantially similar terms in 2006 ^[185]

116 The ALI definition was adopted and applied by Latham CJ in Federal Commissioner of Taxation v J Walter Thompson (Aust) Pty Ltd ^[186] His Honour there said that the definition, including its enumeration of "matters of fact which are considered in determining whether one acting for another is a servant or an independent contractor", was "in accordance with our law" ^[187] The definition remains in accordance with our law, notwithstanding the taxonomical shift that has since occurred through which, as a result of our preference to confine the term "agency" to its narrower sense of connoting "an authority or capacity in one person to create legal relations between a person occupying the position of principal and third parties" ^[188] , the vicarious liability of an employer for wrongs of an employee committed in the course of employment is here no longer "commonly regarded as part of the law of agency" ^[189]

117 Consistently with the definition it first formulated in 1933, in its more recent restatement of the law of employment, published in 2015, the ALI has sought to distil from the case law three conditions for the existence of a relationship of employment. They are that: "(1) the individual acts, at least in part, to serve the interests of the employer; (2) the employer consents to receive the individual's services; and (3) the employer controls the manner and means by which the individual renders services, or the employer otherwise effectively prevents the individual from rendering those services as an independent businessperson" ^[190] In respect of the third of those identified conditions, the ALI has elaborated ^[191] :

"An individual renders services as an independent businessperson and not as an employee when the individual in his or her own interest exercises entrepreneurial control over important business decisions, including whether to hire and where to assign assistants, whether to purchase and where to deploy equipment, and whether and when to provide service to other customers."

118 To similar effect, Professor Joellen Riley has proffered the following definition of a contract of employment or of service ^[192] :

"The concept of a contract 'of service' captures the notion that the employed worker is subservient to the employer - as a servant to a master in past times - and works under their control and direction, and within an organizational structure determined by the demands of the business interests of the employer. This notion 'of service' is intended to distinguish the employee who is an integral part of the employer's enterprise from entrepreneurial workers who provide their labour as a consequence of some other commercial arrangement. The independent contractor provides labour to others while in pursuit of gains for his or her own discrete enterprise."

119 Those definitions are useful. But an important lesson of the experience of the common law would be lost if any of them were elevated to be any more than a description of the frequently identified features of a contract of employment or a relationship of employment. The overall experience of the common law has taught "respect for the humble particular against the pretentious rational formula" ^[193] The peculiar experience of the common law in drawing the distinction between employees and independent contractors has taught more specifically that "there is no shorthand formula or magic phrase that can be applied to find the answer, but all of the incidents of the relationship must be assessed and weighed with no one factor being decisive" ^[194]

120 Through that case-by-case - "multi-factor" ^[195] , "multi-factorial" ^[196] or multiple "indicia" ^[197] - approach, the common law has shown itself to be "sufficiently flexible to adapt to changing social conditions" ^[198] To adapt a remark of an English commentator, it may not be entirely unfair to observe that "[t]he accumulation of case law has added weight rather than wisdom" ^[199] , but it is fairer to observe that "the emphasis on various matters has shifted in response to the changing way work, and society in general, is organised" and that the "fundamental tests" have remained "more or less constant" ^[200] Undoubtedly, the approach the common law has up till now developed will admit of results that are contestable in a marginal case. That is in the nature of any legal criterion application of which turns on evaluative judgment. Here, it is a tolerable incident of the common law's sensitivity to the diversity and vagaries of lived experience.

121 The reality is that, for so long as employment at common law is to be understood as a category of relationship that exists in fact, "it is the totality of the relationship between the parties which must be considered" ^[201] "The ultimate question will always be whether a person is acting as the [employee] of another or on [his or her] 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." ^[202]

122 Here, and again for reasons that will eventually be explained, the most significant indication that the relationships between Mr McCourt and Construct during the two relevant periods were relationships of employment was the degree of control that Construct ultimately had over how Mr McCourt physically performed his labour. Construct had that control through the combined operation of Mr McCourt's contractual obligations to it under the ASA and its relationship with Hanssen under the LHA.

Determining the existence of a relationship of employment at common law

123 Turning from the nature of a relationship of employment at common law to the inquiry that must be undertaken to determine whether a relationship of that nature exists, it must be frankly acknowledged that uncertainty has arisen as to the scope of the inquiry that is permissible where the contract of employment is wholly in writing.

124 The proposition that a written contract of employment must be interpreted according to ordinary contractual principles is not in doubt. Gleeson CJ referred to the application of those ordinary principles of interpretation to a written contract of employment, and no more, when he succinctly stated in Connelly v Wells ^[203] :

"Where the relationship between two persons is founded in contract, the character of the relationship depends upon the meaning and effect of the contract. In the absence of a suggestion that a contract was varied after it was originally made, its meaning and effect must be determined as at the time it was entered into. If the contract is in writing, then the court which is considering the nature of the relationship between the parties is directed to an examination of the terms of the written agreement in the light of the circumstances surrounding its making."

125 The uncertainty that has arisen is rather as to whether the inquiry into the nature of a relationship that has been established and maintained under a written contract is limited to consideration of the terms of the contract to the exclusion of consideration of the manner of performance of the contract.

126 The source of the uncertainty can be traced to the decision of the Privy Council in Narich Pty Ltd v Commissioner of Pay-roll Tax ^[204] There, just three years before the ultimate abolition of appeals to it ^[205] and without reference to any authority other than its own decision five years earlier in Australian Mutual Provident Society v Chaplin ^[206] , the Privy Council stated three "governing principles" ^[207] :

"The first principle is that, subject to one exception, where there is a written contract between the parties whose relationship is in issue, a court is confined, in determining the nature of that relationship, to a consideration of the terms, express or implied, of that contract in the light of the circumstances surrounding the making of it; and it is not entitled to consider also the manner in which the parties subsequently acted in pursuance of such contract. The one exception to that rule is that, where the subsequent conduct of the parties can be shown to have amounted to an agreed addition to, or modification of, the original written contract, such conduct may be considered and taken into account by the court.

The second principle is that, while all relevant terms of the contract must be regarded, the most important, and in most cases the decisive, criterion for determining the relationship between the parties is the extent to which the person, whose status as employee or independent contractor is in issue, is under the direction and control of the other party to the contract with regard to the manner in which he does his work under it.

The third principle relates to cases where the parties have ... included in their written contract an express provision purporting to define the status of the party engaged under it, either as that of employee on the one hand, or as that of independent contractor on the other. ... 'The law ... is this: if the true relationship of the parties is that of master and servant under a contract of service, the parties cannot alter the truth of that relationship by putting a different label upon it ... On the other hand, if their relationship is ambiguous ..., then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them.'"

127 The third of those principles, although stated by means of a quotation from an earlier English decision, was entirely in accordance with the common law as then understood in Australia. Legal characterisation of a relationship into which parties have entered under a written contract has never been thought to be controlled by the contractual language chosen to describe the relationship. The characterisation must turn on the substantial relations between the parties, which might be informed but cannot be altered by the presence in the contract of "elaborate provisions expressed in terms appropriate to some other relation" ^[208] Michael Black QC pithily encapsulated that understanding in an employment context in the submission that "the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck" ^[209]

128 The second principle stated by the Privy Council amounted to an adequate, albeit incomplete, exposition of the nature of a relationship of employment at common law. That topic need not be further addressed.

129 The first principle stated by the Privy Council, in so far as it contained the italicised words, in our opinion, was wrong as a matter of common law principle and was contrary to the authority of this Court in two earlier decisions. The first was Cam & Sons Pty Ltd v Sargent ^[210] , where the primary judge was said to have been "perfectly right" in finding the relationship subsisting between parties to a written contract to have been in fact that of employer and employees in circumstances we explain in ZG Operations Australia Pty Ltd v Jamsek ^[211] The second was R v Foster; Ex parte The Commonwealth Life (Amalgamated) Assurances Ltd ^[212] , to which we will momentarily turn.

130 The error of common law principle in Narich lay in conflation of the distinction between the relationship of employment and the contract under which the relationship is established and maintained. Focusing exclusively on the terms of the contract loses sight of the purpose for which the characterisation is undertaken. That purpose is to characterise the relationship.

131 The importance of keeping, and the danger of losing, sight of the purpose for which the characterisation is undertaken being the characterisation of the relationship were highlighted by Allsop CJ in the decision under appeal. His Honour said (the emphasis being his) ^[213] :

"The relationship is founded on, but not defined by, the contract's terms. Hence the importance of standing back and examining the detail as a whole ... This perspective is essential to view the circumstances as a practical matter ... This perspective and proper approach to the characterisation of the whole is likely to be distorted, not advanced, by an overly weighted importance being given to emphatic language crafted by lawyers in the interests of the dominant contracting party. The distortion will likely see formal legalism of the chosen language of such party supplant a practical and intuitively sound assessment of the whole of a relationship by reference to the elements of the informing conceptions."

132 There will be cases, of which Narich and Chaplin may well have been examples, in which an examination of the manner of performance of a written contract will reveal nothing of significance about a relationship in fact established and maintained by the parties under the contract that cannot be gleaned from an examination of the contractual terms. But there will be cases where, without any variation to the terms of a written contract, the true character of a relationship in fact established and maintained under the contract will be revealed through the manner of the performance of the contract. That will be so where the terms of the written contract are sufficiently opaque or obscure to admit of different manners of performance. And it will be especially so where such a contract is a standard form written contract couched in language that might arguably have been chosen by the putative employer to dress up the relationship to be established and maintained as something somewhat different from what it might turn out to be.

133 That was precisely the scenario considered in Foster. There an insurance company applied in the original jurisdiction of this Court under s 75(v) of the Constitution for a writ of prohibition directed to the Commonwealth Court of Conciliation and Arbitration to restrain further proceedings in relation to an industrial award. The award had been made in respect of insurance salesmen engaged by the company under standard form written contracts which described them as agents and not employees and which stipulated that they were not subject to the will of the company as to the manner in which they performed the duties specified in the agreement. The ground on which the company sought the writ was that the award had not arisen from an "industrial dispute" within the meaning of the Conciliation and Arbitration Act because the company and its agents did not stand in the relationship of employer and employees. The writ of prohibition was refused for the reason that, notwithstanding the terms of the written contracts, the absence of the relationship of employer and employees was not established on the evidence before the Court.

134 Having summarised a number of the terms of the standard form written contracts, Dixon, Fullagar and Kitto JJ said ^[214] :

"Provisions of this character are perhaps more likely to arouse misgivings as to what the practical situation of the agent may be in fact than to prevent a relation of master and servant being formed.

For, if in practice the company assumes the detailed direction and control of the agents in the daily performance of their work and the agents tacitly accept a position of subordination to authority and to orders and instructions as to the manner in which they carry out their duties, a clause designed to prevent the relation receiving the legal complexion which it truly wears would be ineffectual."

Their Honours concluded ^[215] :

"The materials ... before [the] Court ... fail to exclude ... the possibility that the real relation between some or all of the agents and the ... company in their actual work, week in week out, is in fact that of employer and employee, whatever the agreement may say."

135 Foster was applied by the Full Court of the Supreme Court of New South Wales in Ex parte Robert John Pty Ltd; Re Fostars Shoes Pty Ltd ^[216] to hold that a "deed of licence", in the performance of which a shopkeeper was in fact given exclusive possession of shop premises, gave rise to a relationship of landlord and tenant within the jurisdiction of the fair rents board under the Landlord and Tenant (Amendment) Act 1948 (NSW), as amended. The reasoning of Sugerman J, with whom the other members of the Full Court agreed, is instructive ^[217] His Honour said ^[218] :

"It is not necessary to go so far as to find the document a sham. It is simply a matter of finding the true relationship of the parties."

His Honour went on ^[219] :

"In determining whether the fair rents board had jurisdiction to determine the fair rent of the subject premises it is necessary to have regard to the real character of the relationship of the parties if this be found, as their relations worked out in fact, to have differed from the relationship which might be taken as intended to be constituted by the deed of licence if considered alone."

136 Since Narich, the existence of a relationship of employment at common law has been squarely considered by this Court only in Stevens v Brodribb Sawmilling Co Pty Ltd ^[220] and Hollis v Vabu Pty Ltd ^[221] It may be conceded that neither of those cases concerned a relationship formed under a contract wholly in writing. But it is impossible to understand the detailed factual reasoning actually engaged in by this Court in either Stevens or Hollis as confined to the identification and interpretation of contractual terms. With the possible exception of one Justice responding to the argument put in one case ^[222] , the same may be said of the reasoning in every case before Stevens and Hollis in which the existence of a relationship of employment had been in issue in this Court: contractual terms had always been examined, but never to the exclusion of contractual performance ^[223]

137 The explanation given by Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ of the overarching purpose of the factual inquiry in which they engaged in Hollis also contradicts any notion that the factual inquiry in which their Honours were engaged in that case was confined to the identification and interpretation of contractual terms. Having noted a number of oral and written contractual terms, their Honours said ^[224] :

"It should be added that the relationship between the parties, for the purposes of this litigation, is to be found not merely from these contractual terms. The system which was operated thereunder and the work practices imposed by Vabu go to establishing 'the totality of the relationship' between the parties; it is this which is to be considered."

Later, their Honours said ^[225] :

"The concern here is with the bicycle couriers engaged on Vabu's business. A consideration of the nature of their engagement, as evidenced by the documents to which reference has been made and by the work practices imposed by Vabu, indicates that they were employees."

The work practices identified as bearing on that characterisation included that the couriers "were not providing skilled labour or labour which required special qualifications" ^[226] , that they "had little control over the manner of performing their work" ^[227] , that they "were presented to the public and to those using the courier service as emanations of Vabu" ^[228] , that "Vabu superintended the couriers' finances" ^[229] and that "there was considerable scope for the actual exercise of control" over the couriers in the running of Vabu's business ^[230]

138 Faced with contracts wholly in writing, some trial and intermediate appellate courts in Australia have done their best to limit their analysis to the identification and interpretation of contractual terms in conformity with the approach indicated in Narich. In so doing, they have sometimes been driven to engage in the rather artificial exercise of treating conduct engaged in by the parties in the performance of the contract as a "course of dealing" from which then to infer a mutual intention to supplement the written contract with further contractual terms making more specific provision for the conduct found in fact to have occurred ^[231]

139 Mostly, however, trial and intermediate appellate courts have taken their cue from Stevens and Hollis in assuming that, despite what was said in Narich, "the nature of the relationship may be legitimately examined by reference to the actual way in which work was carried out" ^[232] The assumption was explicit in the reasoning of the Full Court of the Federal Court in the decision here under appeal ^[233] It was also explicit in the reasoning of the Full Court of that Court in the decision under appeal in ZG Operations Australia Pty Ltd v Jamsek ^[234]

140 No doubt inspired by aspects of the reasoning in WorkPac, the focus of the arguments on the hearing of the appeal in this Court was on a close examination of the terms of the ASA. That said, it is not insignificant that no party was able to avoid making reference to the manner of performance of the ASA and to its interaction with the manner of performance of the LHA.

141 The reticence of the parties to engage with the manner of the performance of the ASA and its interaction with the manner of the performance of the LHA was, in our opinion, unwarranted. As has already been noted, WorkPac held only that the distinction between a casual employee and another employee was to be found in the terms of the contract of employment. The plurality was not laying down any principle directed to the distinction between an employee and an independent contractor ^[235]

142 The assumption on which lower courts have mostly proceeded is, in our opinion, correct. The italicised words in the first of the three principles stated by the Privy Council in Narich did not accord with the prevailing understanding of the common law in Australia when Narich was decided. To the extent of the inclusion of those words, that first principle was wrong when Narich was decided. That principle has not grown to be either correct or workable with age: it should not be accepted to be part of the common law of Australia.

143 The true principle, in accordance with what we understand to have been the consistent doctrine of this Court until now, is that a court is not limited to considering the terms of a contract and any subsequent variation in determining whether a relationship established and maintained under that contract is a relationship of employment. The court can also consider the manner of performance of the contract. That has been and should remain true for a relationship established and maintained under a contract that is wholly in writing, just as it has been and should remain true for a relationship established and maintained under a contract expressed or implied in some other form or in multiple forms.

The relationships of employment at common law in this case

144 Having to this stage established that the inquiry at common law is into the legal character of the relationship that existed in fact between Mr McCourt and Construct during the two relevant periods and that the scope of the inquiry informing the legal characterisation of the relationship legitimately extends to the manner of the performance of the ASA, including its interaction with the manner of the performance of the LHA, it is now necessary to undertake that characterisation.

145 The first point to be made is that Mr McCourt and Construct did not establish a continual relationship under which Mr McCourt was to perform work merely by entering into the ASA. The ASA obliged Construct to use reasonable endeavours to keep itself informed of opportunities in the building industry for Mr McCourt to supply labour to builders identified by Construct ^[236] , obliged Construct to inform Mr McCourt of opportunities to supply his labour to builders ^[237] , and entitled Construct to negotiate a payment rate for the supply of Mr McCourt's labour to a builder ^[238] The ASA equally entitled Mr McCourt to refuse to take up an opportunity to supply his labour to any builder ^[239]

146 No continual relationship under which Mr McCourt was to perform work was established under the terms of the ASA until Construct informed Mr McCourt of an opportunity to supply his labour to a builder and Mr McCourt chose to take up that opportunity. The continual relationship under which Mr McCourt was to perform work was then one which the ASA contemplated would be maintained for so long as Mr McCourt's labour was required by the builder ^[240] subject to an ability of Mr McCourt to terminate the relationship at any time on four hours' notice to Construct ^[241]

147 Only on the two occasions when Mr McCourt in fact took up an opportunity to supply his labour to Hanssen was a continual relationship of that nature in fact established. Following the exchange that occurred between Mr McCourt and Construct on 26 July 2016, the first relationship of that nature was established and maintained during the period from 27 July 2016 to 6 November 2016. Mr McCourt then went travelling around Australia. Following his return to Perth, the second relationship of that nature was established and maintained during the period from 14 March 2017 to 30 June 2017, after which Hanssen appears no longer to have required Mr McCourt's labour.

148 During each of those two periods in which a continual relationship under which Mr McCourt was to perform work existed, Mr McCourt was obliged under the ASA to attend Hanssen's building site and there to supply his labour to Hanssen in a "safe, competent and diligent manner" ^[242] He was obliged to ensure that accurate records were maintained of his hours of labour ^[243] Construct was in turn obliged, on presentation of an invoice by Mr McCourt, to "underwrite" payment to Mr McCourt of the rate Construct had negotiated with Hanssen ^[244]

149 Of course, Mr McCourt never in fact kept any record and Construct never in fact insisted on him presenting any invoice before paying him. Whether acquiescence of the parties in that practice might be analysed in terms of contractual variation or waiver or estoppel by convention is of no present significance.

150 What is of significance is that, in the performance of each relationship between Mr McCourt and Construct that was in fact established and maintained under the ASA, Mr McCourt turned up at Hanssen's building site each morning, where he clocked on. During the day, he did whatever he was told to do in the way he was told to do it by Hanssen's site managers and leading hands. He then clocked off at the end of the day. Each week, he received from Construct, by direct debit into his bank account, an amount which represented the hourly rate of pay Construct had negotiated for his labour with Hanssen. The hours he had worked and the amount he was paid were recorded on a "payment advice" which Construct then gave to him.

151 That pattern of work and that method of payment were explained by the terms and manner of the performance of the LHA. Under the terms of the LHA, Hanssen was able to place an order with Construct for labour. Construct was then to arrange for workers to present themselves at Hanssen's building site. The workers were there to be "under [Hanssen's] direction and supervision from the time they report[ed] to [Hanssen] and for the duration of each day on the assignment" ^[245] Hanssen was to pay Construct, and Construct was to pay the workers, for their hours worked ^[246] That was essentially what occurred in practice in respect of the provision by Construct to Hanssen of the labour of Mr McCourt.

152 Although there are salient distinctions which will be noted in due course, the back-to-back operation of the contract between Mr McCourt and Construct (the ASA) and the contract between Construct and Hanssen (the LHA) was in important respects not dissimilar to the triangular labour hire arrangement considered by this Court in Accident Compensation Commission v Odco Pty Ltd ("Odco [No 1]") ^[247] Adapting language used by this Court to describe the arrangement in that case to the circumstances of this case, it can be seen that Mr McCourt worked under the ASA for the benefit of Construct, in the sense that his work was done for the purposes of Construct's business and enabled Construct to obtain payment from Hanssen under the LHA, which in turn enabled Construct to pay Mr McCourt under the ASa ^[248] By supplying his labour to Hanssen for the purposes of Hanssen's business, Mr McCourt was at the same time supplying his labour to Construct for the purposes of Construct's business ^[249]

153 The issue in Odco [No 1] was whether a labour hire company was liable to pay a levy under an extended statutory definition of "employer" in the Accident Compensation Act 1985 (Vic). No issue was raised in the appeal to this Court in Odco [No 1] about whether the labour hire arrangement considered in that case gave rise to any relationship of employment at common law. The assumption on which the appeal was conducted was that it did not ^[250] Issues about whether the labour hire arrangement considered in Odco [No 1] gave rise to a relationship of employment at common law were addressed in separate proceedings before the Federal Court, both at first instance ^[251] and on appeal in Building Workers' Industrial Union of Australia v Odco Pty Ltd ("Odco [No 2]") ^[252] The resolution of those issues was that the arrangement did not give rise to a relationship of employment at all ^[253]

154 Not very long afterwards, Odco [No 2] was distinguished by the Victorian Court of Appeal in Drake Personnel Ltd v Commissioner of State Revenue ^[254] There the putative employer was an employment agency described as being in the business of supplying "temporary workers" to its clients, who were entitled to and did exercise day-to-day control over the work of those temporary workers. The submission accepted by the Victorian Court of Appeal was to the effect that the exercise by the client of day-to-day control over the work of a temporary worker was properly "referred back" to the contract between the agency and the temporary worker for the purpose of characterising the relationship between them at common law. Working for the purposes of the agency's business, being paid by the agency, and being subject to day-to-day control by reference to the contractual arrangement between the agency and the client, a temporary worker was an employee of the agency ^[255]

155 The approach taken by the Victorian Court of Appeal in Drake Personnel - attributing significance to the back-to-back contracts, between the temporary workers and the employment agency and between the agency and its client, in assessing the control that the agency had over the manner in which the temporary workers performed their work - was sound in principle. The approach is preferable to the rival approach taken five years later by the English Court of Appeal in Bunce v Postworth Ltd ^[256] , on which Construct sought to rely in argument for its persuasive value. The reasoning in Bunce is conspicuously unpersuasive. Out of a professed and entirely proper concern to establish "who in reality [had] the power to control what the worker [did] and how he [did] it" ^[257] , Bunce actually produced the result that a worker over whose day-to-day work a power of control was in reality exercised through the operation of back-to-back contracts between him and an employment agency and between the agency and its client was treated as the employee of neither the agency nor its client. Of the rival approaches, Drake Personnel produces a result that accords with reality; Bunce does not.

156 The Drake Personnel approach was correctly applied by E M Heenan J in dissent in Personnel Contracting Pty Ltd v Construction, Forestry, Mining and Energy Union of Workers ^[258] to find that labour hire arrangements into which Construct had entered of a kind similar to the arrangement in the present case gave rise to relationships of employment between Construct and workers. The dissent is to be preferred to the decision of the majority in that case.

157 That is not to cast doubt on the correctness of Odco [No 2]. There are three important distinctions between the triangular labour hire arrangements considered in Odco [No 1] and Odco [No 2] and the arrangements in Drake Personnel, Personnel Contracting and the present case. First, the subject-matter of the back-to-back standard form contracts in Odco [No 1] and Odco [No 2] was not unambiguously hourly labour. The subject-matter was described contractually not just as "hourly" labour but also in terms of a "job" or "work done" ^[259] The way in which the issue about employment at common law was joined between the parties in Odco [No 2] did not engage the Full Court of the Federal Court in any examination of potential differences in the performance of the contracts. Second, the contracts between the putative employees and the labour hire company in those cases did not oblige, as here, the putative employees to supply labour in a "safe, competent and diligent manner" but rather to "carry out all work" which the putative employees agreed with the clients of the labour hire company to do and which the putative employees "guaranteed against faulty workmanship" ^[260] Third, and most importantly, nothing in the contracts between the labour hire company and its clients purported to place the putative employees under the direction and control of the clients ^[261]

158 The aspects of the relationship that existed in fact between Mr McCourt and Construct during each of the two relevant periods most pertinent to the legal characterisation of the relationship can be summarised as follows. First, Mr McCourt was engaged by Construct under the ASA to supply nothing but his labour to Hanssen, which he in fact did and for which he was paid an agreed hourly rate by Construct. Second, by supplying his labour to Hanssen, Mr McCourt was at the same time supplying his labour to Construct for the purposes of Construct's business. He was not in any meaningful sense in business for himself. Third, and most importantly, when supplying his labour to Hanssen, Mr McCourt was subject to the direction and control of Hanssen through the back-to-back operation of his obligation to Construct under the ASA and Construct's obligation to Hanssen under the LHA. Those aspects of the relationship made it a relationship of employment.

Conclusion

159 The conclusion that Mr McCourt was an employee of Construct during the two relevant periods is the conclusion to which the Full Court would have come in the decision under appeal were it not for the Full Court's inability to assess Personnel Contracting to have been "plainly wrong". That is clear from its reasoning ^[262] In adopting the approach that it did, the Full Court conducted itself in a manner befitting its position as an intermediate appellate court within an integrated national legal system. The error in its conclusion is entirely without fault on its part.

160 The appeal must be allowed. The orders proposed by Kiefel CJ, Keane and Edelman JJ must be made.