D & D TOLHURST PTY LTD v COMMR OF STATE REVENUE (VIC)

Members:
GAA Nettle

Tribunal:
Administrative Appeals Tribunal

Decision date: 10 October 1997

GAA Nettle

I have before me an appeal from the Commissioner's disallowance of objection to an assessment issued pursuant to sub-sections 18(1) and 18(5A) of the Pay-roll Tax Act 1971. By that assessment the Commissioner assessed to payroll tax, as ``wages'', commissions which had been earned by some 13 investment advisers associated with the stockbroking operations of D & D Tolhurst Pty Ltd. ``Wages'' are defined in s. 3 of the Act as meaning ``any wages, remuneration, salary, commission, bonuses or allowances... to or in relation to an employee as such or to or in relation to any person deemed by section 3C to be an employee.'' The Commissioner has assessed Tolhurst on the basis that commissions and other emoluments paid by Tolhurst to the advisers are paid to the advisers in the capacity of employees as such and on the further or alternative basis that, whether or not the advisers are employees as such, they are deemed to be employees by s. 3C.

The objection

2. The basis of objection is summarised in a letter from Ernst & Young to the Commissioner, dated 16 December 1993. In the letter it is contended that the advisers are neither common law employees nor deemed

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employees within the meaning of s. 3C because, it is said:

``• advisers are free to conduct their businesses as they see fit. They work the hours and days they choose. They take their holidays as and when they choose. They do not need approval from Tolhurst. They determine the level of brokerage they will charge their clients;

• Tolhurst does not introduce any new clients or business to the advisers even in an overflow situation. When such a situation does arise, Tolhurst employs additional salaried staff to cope with the overflow;

• conversely, the advisers do not introduce any new clients or business to Tolhurst. Nor do they permit Tolhurst to have any dealings with their existing clientele. When advisers are absent on holidays etc. they entrust their clientele to another adviser for that period. They do not entrust their clientele to Tolhurst directors or employees;

• each adviser is totally responsible for the bad debts of his/her clientele;

• each adviser is totally responsible for the cost of any errors he/she has caused;

• each adviser is totally responsible for any interest or costs incurred when any of his/ her clients fail to settle with the regime known as T+5;

• Tolhurst provides each adviser with office space and furniture, maintains their client ledgers, gives them access to research material, provides the necessary accounting and administrative support for the conduct of their businesses and issues them with a `proper authority'. The advisers do not receive any `fringe benefits' such as telephone allowances, car allowances, car parking etc. Advisers are required to meet their own expenses;

• each adviser is free to sever his/her arrangements and commence a similar arrangement with another stockbroking firm which has a dealer's licence and which is prepared to provide the same services as Tolhurst. In this event the adviser's clients would follow the adviser. They would not remain with Tolhurst.''

3. As the taxpayer's arguments came later to be formulated they were that:

(a) the advisers are not common law employees of Tolhurst because:
- (i) the advisers are not required to work regular defined hours;
- (ii) the advisers earn their remuneration per job - if they do not provide investment consulting services and do not transact business on behalf of their clientele they do not receive any income - and further it is the adviser and not Tolhurst who bears the burden of any bad debts of the clientele of the adviser;
- (iii) the advisers are not required to perform the work themselves - they may and do engage others to do so;
- (iv) the advisers work under totally different conditions to those of Tolhurst common law employees;
- (v) the advisers are not obliged to obey instructions other than to ensure compliance with the Corporations Law and ASX rules and regulations and thereby to protect Tolhurst's dealers' licence and ASX membership; and
- (vi) Tolhurst does not have the right to control the manner in which the advisers conduct their respective businesses,
(b) s. 3C(1)(a) of the Act does not apply because, it is said, although Tolhurst supplies services to the advisers the services are not all or in relation to the performance of work. It is also contended that s. 3C(1)(b) of the Act does not apply because, although the advisers have services supplied to them by Tolhurst, those services are not the services of person [sic] for or in relation to the performance of work.

Facts agreed upon

4. The facts agreed upon for the purposes of the reference were as follows:

(1) Tolhurst is a stockbroker and a licensed dealer who holds licence no. 12551.
(2) The Commissioner issued assessments of Pay-roll Tax for the months of November and December 1993 (``the relevant period'') each of which assessments were dated 20 January 1994.
(3) By a letter dated 15 March 1994, two objections to the assessments issued to Tolhurst were lodged.

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(4) By a letter dated 14 March 1995, the Commissioner issued Notices of decisions to Tolhurst disallowing the objections to the assessments. By a second letter dated 14 March 1995, the Commissioner informed Ernst & Young of the making of the decisions and the serving of the Notices on Tolhurst.
(5) By a letter dated 11 May 1995 Ernst & Young requested the decisions be referred to the Tribunal.
(6) By a letter dated 8 June 1995, Ernst & Young were served with a Request for Further and Better Particulars of their three objections pursuant to s. 33(3) of the Pay- roll Tax Act 1971. Under cover of a letter dated 7 July 1995 Ernst & Young furnished the Further and Better Particulars sought by the Commissioner. Ernst & Young subsequently provided additional material such as the Compliance and Procedure Manual (to which I will later refer), which was drawn by Blake Dawson Waldron, solicitors, for Tolhurst and a group of other brokers, and other relevant material.

The evidence

5. The hearing before me was confined to one day's extended sitting on 27 September 1997. Mr De Wijn appeared for Tolhurst. Mr Berglund appeared for the Commissioner. Three witnesses gave evidence on behalf of Tolhurst and two further witnesses gave evidence on behalf of the Commissioner. The witnesses called for Tolhurst had all sworn affidavits. The Commissioner's witnesses had prepared witness statements. Al1 witnesses were cross examined.

6. The first of Tolhurst's witnesses was David Shea, an accountant employed by Tolhurst, who had commenced his employment with Tolhurst in 1992 and who in the initial stages of his employment had been engaged upon what he described as compliance issues and systems development. Mr Shea said that the ASX rules and the Corporations Law^[1] See Division 3 of Pt 7.3 of Chapter 7 of the Corporations Law . allow a person to conduct his or her own business as an investment adviser only if he or she affiliates himself or herself with an entity such as Tolhurst which holds an authorised dealer's licence. According to Mr Shea, Tolhurst began to enter into contractor arrangements with investment advisers in the early 1990s as part of a plan to attract to Tolhurst investment advisers with an established clientele of their own. Mr Shea said that Tolhurst also perceived there to be benefits for investment advisers in the adoption of the contract arrangements, including that:

• the advisers could operate freely, independently and autonomously as independent advisers;
• by associating with Tolhurst, they would not be required to apply for separate Dealers' Licences or to maintain compliance with all the ASX and Australian Securities Commission (``ASC'') requirements;
• they would not be required to obtain corporate membership of the ASX, thereby avoiding the $250,000 joining fee, nor would they be required to comply with the Membership Liquid Capital Maintenance (MLCM) requirement, thereby avoiding the need to introduce further cash resources of at least $250,000 into the business;
• they would save working capital costs otherwise required to obtain and maintain office accommodation, staff, electronic equipment, furniture and fittings, stationery and other overheads;
• they would retain the exclusive rights to transact business for their existing clientele, and any new clients that they obtained, and throughout and after the conclusion of the engagement period that they would be free to pursue personal investment activities or other business interests;
• their profits would be entirely related to the extent of their efforts and success in servicing their own clientele.

7. Mr Shea said the terms of agreement between Tolhurst and each of its investment advisers were usually set out in a letter, and he referred to two forms of letter, to which all others were said to be similar. The first form of letter was as follows:

``Following discussions we have held over the last couple of weeks, D & D-Tolhurst Ltd would like to offer you a consultancy arrangement commencing on 25 October 1993.

If you were to join us, we would be entitled to 60% of the brokerage written by you on equity and equity related transactions. The same arrangement would also extend to commission earned by you on the lodgment of any other financial instruments.

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The brokerage rate on all business written by you on behalf of your, your family or family company would be 1%.

The brokerage earned by you, after deducting the above administration charges, would be payable to you monthly in arrears, subject that in addition to this charge, you would be responsible for 100% of:

(i) any bad debts on business written by you,

(ii) the cost of any errors caused by you, and

(iii) any interest (charged at ANZ Reference Rate plus 1%) or other costs incurred by the firm where any of your clients fails to settle on a T+5 basis.

We would also broadly be entitled to 60% of any fee or advisory income earned by you. However, we think that these deals are probably best negotiated on a case by case basis, before the deal takes place. The same would apply to any underwriting proposition introduced by you.

It is essential in the prevailing climate that every individual connected with the firm does all he or she can to ensure that the firm maintains a good relationship with the ASX and the regulatory authorities. There has been a prolification of legislative changes, and additions and amendments to ASX rules in the recent past - we for our part will do all we can to keep advisers up to date with these changes. On joining the firm you will be given a copy of its Compliance and Procedures Manual. You are expected to study this Manual thoroughly and to have a good working knowledge of ASX Rules and relevant legislation.

Should you leave us for any reason, you are prevented from dealing with clients of the fin and all documents and information which come to your notice during your employment are and remain the confidential information of D & D-Tolhurst Ltd. All employees are also requested to acknowledge D & D-Tolhurst Ltd summary rights in the event that company policy or directions are not followed.

Naturally, we require you to warrant that you have full capacity to enter into this Agreement and by doing so, D & D-Tolhurst Ltd will not incur any liability other than its obligations to you as set out in this letter.

Hours of work are flexible in order to meet the demands of the day and will vary from time to time. Each day commences with a morning meeting at 8.45am for equity dealers and it would be appreciated if you were to attend this meeting. As discussed, you will commence with us on Monday 25 October 1993 and on your first day it would be appropriate for you to meet with me at around 8.30am.

Noel, I am very pleased to welcome you aboard and I hope you enjoy your time with us all at D & D-Tolhurst. Should you find arrangements set out herein to be acceptable, I would appreciate the return of a signed copy of this letter to confirm your acceptance of our arrangements.''

The alternative form of letter read:

``Following discussions we have held over recent weeks, D & D-Tolhurst Ltd would like to offer you a consultancy arrangement.

If you were to join us, you would be entitled to 40% of the brokerage written by you on equity and equity related transactions. The same arrangement would also extend to commissions earned by the firm on the lodgment of any other financial instruments, including money market deals, which have been originated by you.

Your share of the above commission would be payable to you monthly in arrears, subject to the proviso that you would be responsible for 100% of:

(i) any bad debts on business written by you,

(ii) the cost of any errors caused by you, and

(iii) any interest or other costs incurred where any of your clients fails to settle on a T+5 basis.

Any of the above costs would be deducted from your commission share.

You would also broadly be entitled to 40% of any fee or advisory income generated by you. However, we think that these deals are probably best negotiated on a case by case basis.

Consultants are expected to look after their own expenses, but in your case, D & D-

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Tolhurst would carry the expense of circulating your client base to inform them of your move. Requests for the funding of interstate travel are initially dealt with on a case by case basis, but a regular allowance would be provided once it was established that such expenditure was in the firm's best interest. A very small amount is also allocated to each consultant for public relations expenditure and the allowance for any quarter is based on income generated by the individual in the preceding quarter. I understand from Alan Urban that you have a number of earnings models for mining companies stored in a PC which you own. We would like the opportunity to study some of this material to see if it suits your requirements. In the event that it did, we would be prepared to pay for individual studies on some mutually agreed basis.

It is essential in the prevailing climate that every individual connected with the firm does all he or she can to ensure that the firm maintains a good relationship with the ASX and the regulatory authorities. There has been a proliferation of legislative changes, and additions and amendments to ASX rules in the recent past - we for our part will do all we can to keep advisers up to date with these changes, and to this end, have joined with a group of other brokers to compile a Compliance and Procedures Manual.

This manual will be the first target of ASC and ASX inspection teams on their future inspection visits. We have requested that the manual be couched in simple but clear terms, and that it includes numerous examples setting out the way to go in a particular set of circumstances, so that it can be regarded as a help, rather than a hindrance, to all staff members and consultants.

We hope that the terms of this offer are attractive to you. If you agree with them would you please sign the duplicate copy of this letter, and return it to us.''

8. Mr Shea said that once the terms of engagement of an adviser had been agreed upon Tolhurst applied to the Australian Securities Commission for a ``Proper Authority'' to be issued to the adviser and once that had been obtained, the adviser was provided with access to a desk, telephone, computer screen and the Tolhurst administrative facilities necessary to service and advise the adviser's clients. Mr Shea said that although all of the investment advisers' transactions were required by ASX regulations and the Corporations Law to be concluded in the name of Tolhurst,^[2] Because it was the licensed dealer. and they were, the calculation of the brokerage entitlement of each adviser was worked out on a monthly basis and paid monthly after deduction of any expenses or losses for which the adviser was personally responsible. Advisers were also said to be invited to participate in underwriting share issues and placements. Mr Shea said that Tolhurst would normally allocate placements to advisers in direct relation to the amount of business that the advisers transacted with their clients. Mr Shea said that it was a matter for the advisers to determine who should conduct their work while they were absent on leave. In effect what happens is for each to make arrangements with another to cover. Tolhurst did not pay advisers sick leave, holiday leave, long service leave or compassionate leave payments and the company never provided advisers with any form of superannuation support (although it was bound to and did pay the superannuation guarantee levy).

9. The picture which emerged from cross examination was little different, except perhaps in the degree to which it showed that Tolhurst exercises control over its investment advisers. Mr Shea said that he had acted as the Tolhurst compliance officer for some 18 months after joining Tolhurst and that as a compliance officer his duties were to ensure that each of the investment advisers was fully aware of Stock Exchange regulations and Corporations Law requirements. He had discharged that duty, he said, by delivering a lecture to each new investment adviser at the time at which the investment adviser joined the firm and providing each new investment adviser with a copy of the Tolhurst compliance manual. He said he thereafter ensured that each investment adviser kept his or her manual up to date, by filing supplements as they were prepared from time to time by Tolhurst's solicitors, and that as new compliance issues arose Mr Shea attended the morning investment meetings of investment advisers to explain the importance of the matter. Mr Shea said that on occasion he ran spot checks on investment advisers, by taking a sample of the paperwork prepared by different investment advisers and examining it to ensure

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compliance with requirements, and where he found faults he pointed out the errors to the relevant advisers and if they thereafter failed to heed his advice he reported the matter to the directors of Tolhurst. He said he did so because, under regulations, Tolhurst must ensure that each adviser is adequately supervised in the performance of his or her duties.^[3] See Corporations Regulations , Reg. 7.3.02. Mr Shea was also taken through some of the provisions of the Tolhurst compliance manual, and in particular a direction printed on the inside of the cover of the manual that each investment adviser was required to comply with the requirements set out in the manual; the definition of ``staff'' which appears on page 2 of the manual, which includes investment advisers; the requirement on page 8 of the manual that investment advisers not act as an investment adviser for any dealer other than Tolhurst; the requirement on page 23 of the manual as to how to deal with unusual transactions; the order, set out on page 28, in which the order in which business is to be transacted; and the confidentiality undertaking on the back cover of the manual. Mr Shea said that many of the requirements were industry practice and he added that, as far as he was concerned, it was up to him, as compliance officer, to ensure that the investment advisers complied with the law and that he told them how to comply. Thus, whilst he spent only 10% of his time on compliance issues and 90% on other matters, he ranked the importance of the work on compliance issues and other matters in the proportions of 50/50.

10. The second of the taxpayer's witnesses was Eric William Head who deposed in an affidavit sworn on 29 August 1997 to having had a long career in stock brocking and that he had joined the firm of Tolhurst in 1990 after leaving the service of Credit Lyonnaise May and Mellor. Whilst at Credit Lyonnaise May and Mellor he had had approximately 100 clients whom he had advised regularly, and for whom he purchased and sold securities, and he said that he regarded those clients as his clients. He said that he kept a list of these clients and that when he left Credit Lyonnaise May and Mellor to become an investment adviser with Tolhurst he contacted the clients by telephone and told them of his move to Tolhurst. The evidence set out in his affidavit about the way in which he conducted business at Tolhurst was otherwise not dissimilar to that given by Mr Shea about Tolhurst investment advisers generally, although it did emerge from Mr Head's evidence that Tolhurst deducted PAYE tax from Mr Head's commissions, by arrangement with Mr Head. As with the cross examination of Mr Shea, a large part of the cross examination of Mr Head was directed to the Tolhurst compliance program. Mr Head agreed that the Tolhurst compliance officer could tell him, Mr Head, to follow firm policy and that he, Mr Head, would obey any such direction. Mr Head was also asked questions about the research which was undertaken by Tolhurst and the use which Mr Head made of that research, and Mr Head agreed that Tolhurst undertook extensive research and that the results of the research were made available to him and through him to his clients in the form of Tolhurst research reports and firm newsletters together with a list of recommended ``buys'' and ``sells''.

11. The last of the taxpayer's witnesses was Russell Thomas Howard, who gave evidence which was largely directed to the manner in which he operated as an investment adviser at Tolhurst. He said that clients telephone him asking for his advice on investment strategies and as to which securities to purchase or sell. He said that in providing advice he was entirely independent of anyone else at Tolhurst and did not have to have his advice perused or approved by anyone at Tolhurst. He said he usually gave advice over the telephone but from time to time he also provided written advice (although none of it was produced). He deposed that from time to time one of the analysts employed by Tolhurst may form a view that it is appropriate to buy one or other stock and Mr Howard might give different advice to his clients. Mr Howard also said that he is sometimes involved in raising capital for companies by way of new share issues and, in the case of a placement, he may organise the share issue and have the capital raised before telling anyone at Tolhurst about the matter.

12. Mr Howard said that he maintained reasonably regular working hours from 8.20am to about 4.00-5.30pm each day, although he was able to work whatever hours he chose and from whatever location he chose. He said that Tolhurst did not give him any direction as to when he should be at work, or the days to work or as to when and how much annual leave he might take. He said that when he went on leave he normally arranged with another investment

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adviser to look after his clients and told his clients, or at least those of them who were likely to telephone him during the time away, of the arrangement he had made with the other adviser.

13. He said he did not get clients referred to him by Tolhurst and he did not refer clients to Tolhurst or to employees of Tolhurst. Furthermore, although Tolhurst frequently publishes investment information through its analysts he said he had the option as to whether to circulate that information to his clients and from time to time there were publications which he chose not to send to his clients. He said that he maintained an up to date list of clients, with their names and addresses. However, the list was also maintained on the Tolhurst computer system under his name.

14. Mr Howard also deposed at some length to the mechanics of writing business on behalf of Tolhurst. He said that Tolhurst provides him with access to a desk, telephone and computer screen and the telephone can be accessed directly by clients, or through the Tolhurst switchboard, and because of the requirements of the Australian Stock Exchange a contract note for the purchase or sale of securities must always be issued by Tolhurst. The procedure is that the client telephones the adviser either directly or through the Tolhurst switchboard and may or may not seek advice in relation to a proposed purchase or sale. The client may then place an order with the adviser for the purchase or sale of securities. Thereafter the adviser completes an order which shows the name of the client, the time at which the order was taken, the securities to be acquired or sold and the number. It also shows any instructions given by the client as to price, whether the client has been given advice in relation to the acquisition or sale and how the brokerage is to be calculated. Once the order has been filled a contract note is issued by Tolhurst. The contract note is checked by the adviser and mailed to the client. If the contract note is a purchase order, the client normally draws a cheque in favour of Tolhurst for payment of the stock. The adviser receives a daily sheet showing the payments received and the outstanding amounts in relation to his or her clients. It is up to the adviser to follow up clients if they have not paid. In the event that a client does not pay for the stock to be purchased the transaction is reversed. An investment advisers' meeting is held each morning between 8.30am and 9.00am but attendance is not compulsory. During the meeting there is an exchange of information and opinions, a review of overnight news and a general discussion of information and research. Like Mr Head, Mr Howard also deposed that Tolhurst deducts PAYE from his percentage of brokerage, at his direction.

15. The Commissioner called two witnesses. They gave evidence which was to a considerable extent consistent with the evidence on behalf of Tolhurst, although it did reveal something new about the circumstances in which investment advisers first came to be retained on a contract basis in lieu of the salaried employment basis which had previously obtained.

16. Leslie Keith Crisp gave evidence that he joined Tolhurst in 1988. At first he was engaged as a permanent employee investment adviser and paid a fixed salary. That arrangement changed, in 1991 or 1992, when a memorandum was sent by Tolhurst to each of the employee investment advisers at Tolhurst, to the effect that Tolhurst had decided to re- constitute all employee investment advisers as contractors and that from a set date salaries would no longer be paid, all accrued holiday leave and over employee benefits would be paid out and thenceforth contractors would be paid a percentage of the brokerage on each deal written. Mr Crisp said that there were approximately 7 or 8 employee advisers at the time at which the memorandum was circulated and that all 7 or 8 of them made the change from fixed salary employee to contractor, although there was no change in the duties which any of them performed, nor in the way in which they performed them. As Mr Crisp put it, they continued to operate much as they had before the change. Mr Crisp was asked whether the requirement which now applies to Tolhurst contractors, that they make good losses suffered in a deal, was different from the regime which had applied to employees before the change. Mr Crisp replied that even before the change from employee to the contractor structure, there was a general understanding that employee advisers would make good losses which were suffered.

17. The other witness called by the Commissioner was Hugh Lauder Wallace. Mr Wallace had had a long and varied career in the stock brocking industry, starting in 1954 and working at several levels, including as a

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member of the old firm of GE Carrington & Co, before coming to Tolhurst as an investment adviser. Mr Wallace said that he had his own client base and did not rely on Tolhurst for any clients, although if he were unavailable to deal with one of his clients another Tolhurst contractor investment adviser would look after the client. He also said that he has not been trained by Tolhurst and did not receive any oral or written instructions as to how to perform his work or duties, other than training by Tolhurst on how to use the computer in the office. However, he added that, although his services are provided to the public in general and he seeks and chooses his own clients, he promotes himself at all times as a representative of Tolhurst and that, when approached, he represents to clients that he works for Tolhurst. He emphasised the point by noting that all the contract notes, all the necessary letters, business cards, newsletters and general telephone numbers ``all pertain... to Tolhurst'' and it is Tolhurst that renders the account to the client.

Findings

18. On the basis of the agreed facts and the evidence to which I have referred I find that some if not all of the 13 investment advisers the subject of this reference have their own following of clients and that, to a considerable extent, the investment advisers are left by Tolhurst to their own devices as to how they may service those clients and attract new clients. I also find, however, that whilst in one sense the investment advisers perceive themselves to be conducting their own businesses, the fact, like the position at law, is that the business which each investment adviser transacts with his or her clients is the business of Tolhurst. If a client enters into a contract, the client enters into a contract with Tolhurst. If the adviser enters into a contract, the adviser so enters as the agent of Tolhurst. The adviser is the conduit through which the investment advisory services of Tolhurst are delivered by Tolhurst to prospective buyers and sellers of securities. The adviser is Tolhurst's factotum. The position cannot be otherwise at law, because of the requirements of the Corporations Law, and as was shown by the evidence, in particular that which was given by Mr Crisp and Mr Wallace, the position is not otherwise in fact.

19. Moreover, although advisers are afforded a considerable degree of freedom in their operations, there are limits. The advisers are bound to observe the law. They are also bound, by contract and by practice, to observe the policy of Tolhurst. The advisers enjoy considerable trust and freedom of operation but, as it appears to me, no more than many professionals who choose to work for others. In the end I am left in no doubt that the advisers must defer to Tolhurst's corporate requirements just as much as any employee solicitor or accountant must obey his or her principal's directives. The advisers are remunerated in a fashion which, at first, appears redolent of a profit splitting arrangement or joint venture. However, closer examination shows that appearance to be misleading. In truth, each of the advisers is paid a commission on business written by the adviser on behalf of Tolhurst and that commission, as with many commissions paid to agents, is calculated on the basis of a predetermined percentage of the value of business written.

20. Finally, whilst the advisers receive virtually no benefits other than commission remuneration, and are not entitled to any sum certain amount of income like that enjoyed by salaried employees, the advisers are almost all wage and salary earners for the purposes of the Income Tax Assessment Act 1936.

Common law employees

21. Against that background I turn to the first question of whether the Tolhurst investment advisers are employees of Tolhurst as such. On balance I think that they are. Although the relationship between advisers and Tolhurst is one whereby Tolhurst engages the advisers as contractors, to write business in the name of and on behalf of Tolhurst, and in consideration of the advisers' services agrees to share with the advisers the commission payable on each transaction, the degree of control exercised by Tolhurst over the advisers, the fact that the advisers represent Tolhurst exclusively and the fact that the advisers are held out and act in all things as representatives of Tolhurst, lead me to the view that the advisers are employees.

22. Mr De Wijn referred me to a number of authorities which he submitted compelled a contrary conclusion. Mr Berglund also brought to my attention some authorities which he conceded tend in that direction. Thus in
Neale (DFC of T) v Atlas Products (Vic) Pty Ltd (1955) 10 ATD 460; (1955) 94 CLR 419, the question was whether remuneration paid to

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contractors engaged by the taxpayer to fix roofing tiles was salary or wages within the meaning of s. 221C of the Income Tax Assessment Act 1936. For that purpose ``salary or wages'' were defined to mean ``salary wages commission bonus or allowances paid... to an employee as such and includes... payments made under a contract which is wholly or substantially for the labour of the person to whom the payment is made''. The High Court held that the remuneration paid to the roofing contractors was not salary or wages within the meaning of that definition because the contractors were independent contractors. The reason given was that:

``... There was nothing to show that the tilers are not, in fact, free to perform the contractual work themselves or to employ other labour to carry out or assist in the carrying out of that work. Nor was there anything to establish that any form or degree of control appropriate to the relationship of master and servant was ever exercised. The circumstance that one job succeeded another with regularity and that more or less regular payments were made to the tilers did not furnish any safe basis for ignoring what was quite clearly said to have been the basis of their contractual relationships.''

^[4] ibid at ATD p 463; CLR p. 428.

23. Similarly, in
Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 (PC), in which the facts were that AMP had appointed Chaplin as one of its representatives upon terms which expressly provided that the relationship between them would be one of principal and agent and not master and servant, a question arose as to whether Chaplin was entitled to long service leave under the Long Service Act and in turn that raised a question of whether Chaplin qualified as a worker within the meaning of the relevant statutory definition on the basis of being ``a person employed under a contract of service... (including) a person so employed who is remunerated wholly or partly by commission''. Lord Fraser, who delivered the judgment of the Judicial Committee, held that Chaplin was not an employee, essentially for two reasons: first, because of the express provision that Chaplin was not an employee (which was regarded as important although not determinative); and, secondly, because the power given to Chaplin to delegate the performance of his work to one or more sub- agents was regarded as being almost conclusive against the contract being a contract of service. His Lordship observed ^[5] at (1978) 18 ALR 385 at p. 391. that:

``The unlimited extent of the power of delegation is one consequence of the striking absence of any express obligation upon the respondent (Chaplin) to perform any particular duties or to work any particular hours, or indeed to do any work at all on behalf of the Society. The assumption is that the payment of commission will be sufficient inducement to do some work. Payment wholly by commission is not by itself fatal to the respondent's claim having regard to the definition of `worker' in the Act, but the absence of an obligation to do any work for the Society is, in their Lordships' opinion, a strong indication that he is not their servant.''

24. To the same effect, in
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) Aust Torts Reports ¶80-000 at p 67,445-67,446; (1985-1986) 160 CLR 16 at p. 24 Mason CJ said:

``... 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. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it...

But the existence of control, whilst significant, is not the sole criterion by which to gauge 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 the 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.''

Mason CJ then went on, on the basis of those tests, to hold that [Aust Torts Reports 67,446-67,447]:

``... neither Stevens nor Gray was the employee of Brodribb. The facts, as I have related them, do not support an inference

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that Brodribb retained lawful authority to command either Stevens or Gray in the performance of the work which they undertook to do.... they 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....

What is more, Brodribb and the men, including Stevens and Gray, regarded their relationship as one of independent contract, not one of employment, an attitude evidenced in the case of Gray by his employment of his son as a driver. The power to delegate is an important factor in deciding whether a worker is a servant or an independent contractor (
Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at p. 391)''

25. Mason CJ also made reference to what His Honour described as the ``so called organisation test'', which is to say the test of whether a putative employee is carrying on a business for himself on his own behalf and not merely for a superior, and said [Aust Torts Reports 67,448]:

``... For my part I am unable to accept that the organisation test could result in an affirmative finding that the contract is one of service when the control test either on its own or with other indicia yields the conclusion that it is a contract for services.''

26. Again, in
World Book (Australia) Pty Ltd v FC of T 92 ATC 4327; (1992) 27 NSWLR 377, Meagher JA of the New South Wales Court of Appeal observed:^[6] 92 ATC 4327 at p 4330; (1992) 27 NSWLR 377 at p. 381.

``Obviously enough, the High Court was spanking only of the section as it stood in 1954. At that time it did not contain paragraph (2)(b), which was not introduced into the Act until 1983. What the High Court was saying was surely this: in order to be caught by the Act a payment must be a payment either to an employee in the strict sense, or alternatively to a person who is engaged under a contract that is wholly or principally for his labour; where a contractor has the right to delegate his contractual tasks (whether or not he exercises that right) he does not come within that alternative description;...''

(Emphasis added).

27. Similarly, in the more recent decision of the New South Wales Court of Appeal in
Vabu Pty Limited v FC of T 96 ATC 4898, the Court held that couriers were not employees at common law because the couriers were treated as contractors and left to provide for themselves in matters which would be provided for by the employer in an employer/employee relation- ship. Meagher JA put the matter in these terms:^[7] 96 ATC at p. 4900.

``Whilst it is almost never an easy task to decide whether a given person is an employee or an independent contractor, there is no doubt what the legal tests are. The old test `control' is now superseded by something more flexible. This is made clear by the judgment of Mason CJ in
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) Aust Torts Reports ¶80-000; (1985-1986) 160 CLR 16, and in the earlier judgment of Dixon J in
Queensland Stations Pty Ltd v FC of T (1945) 8 ATD 30; (1945) 70 CLR 539.

Learned senior counsel for the respondent, Mr Trew Q.C., stressed, in the course of his submission that the couriers were employees, that the company always retained a considerable amount of control over the couriers. Thus, the documents to which I have referred provide that operatives are to be neat and tidy, are to wear uniforms provided by the Company, are to replace their vehicles when the company considers them to be unsatisfactory, to observe a starting time, to work a prescribed number of hours, not to use foul language on the telephones. They must accept work allocated to them by the Company, deliver goods in the manner which the company directs, accept re-routing if told to by the Company, and to take no more leave than is permitted. The cumulative effect of these conditions certainly gives the Company a deal of control over its courier. However, a man may supervise others without becoming their employer.

And there are several considerations which make me think that on balance the couriers are not employees. In the first place, they supply their own bicycles, motorbikes, cars, utilities or vans (be they bicycles, motorbikes, cars, utilities or vans). They

ATC 2190
have to bear the expense of providing for and maintaining these vehicles: they pay for running repairs, petrol, insurance and registration. The company provides telephones, uniforms and signage. The couriers' expenses are very considerable. Again, to quote McKenna J in
Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance (1968) 2 QB 497 at 526:

`the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are his and not the company's'

a consideration which points to the couriers being independent contractors.''

28. Sheller JA said ^[8] 96 ATC at p. 4902-4903. that:

``At Aust Tort 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 or business expenses of any significant proportions and the payment to him of remuneration without deduction for income tax.

`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 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.''

^[9] Special leave to appeal to the High Court was refused: see (1997) 35 ATR 340.

29. Finally, reference may be made to the recent decision of Hill J in
Deluxe Red and Yellow Cabs Co-Operative (trading) Society Ltd & Ors v FC of T 97 ATC 4770 in which His Honour held that taxi drivers operating in Sydney, Perth, Melbourne and Brisbane under State legislation regulating taxis were not employees of what may be described collectively as taxi-cab operators. The agreement between the operators and drivers was found to be one of bailment and not one of employment because, although no single factual matter was said to be determinative, the cumulative weight of the following facts led to that conclusion: the driver paid the owner and not the other way around; in those cases where there was agreement in writing, the agreement was one of bailment and not specifically of employment; although some control was exercised, the control was only such as was necessary to ensure compliance with legislation concerning taxis, rather than such as to signify an employment relationship; drivers were free to obtain their work and did so; drivers provided their own change and directories and paid for petrol consumed and the cost of keeping their cars clean; and although State legislation required payment of long service leave, sick pay and workers' compensation premiums, the legislation had to be read in light of the many decisions in which it had been accepted that the relationship between a cab driver and taxi company is one of bailment and not employment.

30. But the authorities are not all the one way. For example, in
Roy Morgan Research Centre Pty Ltd v Commr of State Revenue (Vic) 96 ATC 4767,^[10] Sec also Mulhall v Roberts (unreported CA (NSW), CA 40009/1994, 19 July 1995) p. 4. Byrne J, having observed that:

``The law in this area is well settled; it has recently and authoritatively been expounded by the High Court in
Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16. My task is to examine the entirety of the relationship between the parties and, by reference to those features which have traditionally been regarded as significant, to discern what is the essence of the relationship.''

ATC 2191

went on to decide that although the relationship between the taxpayer and interviewers it engaged was a contractual relationship, and the matter was not free from doubt, the interviewers were under such close control by the taxpayer that the relationship between the taxpayer and the interviewers was that of employer and employee.

31. Mr Berglund submitted that the conclusion to be drawn from the many authorities is that there is no single determinative factor to be considered in ascertaining whether a relationship is one of employer and employee or principal and independent contractor. Rather, it is the totality of the relationship between the parties which must be considered and (within the totality) relevant indicative factors. Mr Berglund then directed attention to what he submitted were the relevant indicative factors in this case. The first of those, he submitted, was the fact that the investment advisers have no business beyond the business of Tolhurst. That is to say, whilst they think of the clients with whom they deal as their own clients, and deal only with their own clients, all of those clients are clients of Tolhurst and all of the business which is transacted with those clients is transacted on behalf of Tolhurst. Thus it was submitted, and I agree, if one applies what is sometimes called the ``whose business test'' to the facts of this case, it yields the answer that the business which is conducted by the advisers is the business of Tolhurst: cf. Stevens, supra at Aust Torts Reports p 67,452; CLR p. 35;
Market Investigations Ltd v Minister of Social Security [1969] 2 QB 173 at pp. 184-185;
Bailey v Victorian Soccer Federation [1976] VR 13 at pp. 32-33.

32. The second consideration to which Mr Berglund directed attention was that of control. He referred to the decision of Stephen J in
FC of T v Barrett & Ors 73 ATC 4147; (1973) 129 CLR 395, in which salesmen retained by a firm of land agents in South Australia and paid by commission on sales, were held to be employees even though there was very little supervision of the work which they performed. The substance of Mr Berglund's submission was that the case shows that control is a protean concept and hence that the question of whether a principal exercises control must be assessed in light of the sort of work which is performed by the retainer. Hence, if the sort of work which is performed is of a kind which might be performed by a process worker, one would expect to see a high degree of control before it should be concluded that there was an employer/employee relationship at work. On the other hand, if the sort of work which is performed is like that of an estate agent, or of a professional like a solicitor or an accountant or a stockbroker, the nature of the work is such that a much lesser degree of control would suffice on which to base the conclusion that there was an employer/employee relationship at work. I agree. The submission finds support In the following passage from the judgment of Stephen J in Barrett's case at 73 ATC at p 4151; (1973) 129 CLR at p. 404:

``The third matter concerns what was, I think, the factor regarded by the majority as decisive, namely that in this case the employers had at least equal skill and knowledge to that possessed by their land salesman and yet voluntarily refrained from the exercise of control over those salesmen, relying instead upon the existence of mere `self-governing' conventions and giving the salesman `almost total freedom', the most striking instance of which was their ability to take extended leave without prior permission.

It is, to my mind, of little significance that these employers, when dealing with persons working for them who are remunerated by commission, do not, in the particular circumstances of this case, impose upon those persons what the majority refer to as `a detailed regimen'. When the work involved is that of the persuasion of buyers the manner in which it is performed must perforce vary from salesman to salesman; each employs his preferred techniques which experience has taught him and any attempted imposition of a uniform method of work might well prove very disadvantageous in the outcome. The nature of the work is precisely of that kind in which it might be expected that an employer would deal with his expert and experienced salesmen in very much the way the respondents did; I would not for that reason regard those salesmen as other than employees.

What the respondents have done, and with what appears to be marked success - it was said in evidence that their firm handles two-

ATC 2192
thirds of the sales of vacant land in Adelaide - is to give to their salesmen great scope for individual initiative because by that means they are best able to use their individual talents; yet at the same time these salesmen remain very much a part of the respondents' organisation and are subject to control in respects to which I will shortly refer and which affect the way in which they perform their work.''

33. It is true, as Mr De Wijn submitted, that in Barrett the clients were found and directed to the salesmen by the employer whereas, in this case, it would appear, most if not all of the clients are found by the advisers themselves. That does make a difference. But I do not think it detracts from the conclusion that the degree of control which is exercised by Tolhurst over the investment advisers is relatively high having regard to the nature of the work which those advisers perform. As Mr Berglund submitted, that is a necessary consequence of the fact that Regulation 7.3.02 of the Corporations Regulations casts upon Tolhurst an obligation to ensure that the representatives are adequately supervised in the performance of the duties they are required to perform; are sufficiently trained in relation to those duties before acting as representatives; and keep up to date in relation to those duties by means of continuing programs. It is also true as Mr De Wijn submitted that in
Siu v Brick Securities Ltd (1987) 5 ACLC 714 at p. 715, Rogers J said that a dealer's representative not only does not have to be an employee of the dealer, but he does not even have to act ``for'' the dealer; it is sufficient if he acts by arrangement with the dealer. However, that appears not to be the case here, for here, as I think was ultimately accepted by Mr De Wijn, all of the business which is transacted by investment advisers is transacted on behalf of Tolhurst; which is to say ``for'' Tolhurst.

34. Mr Berglund submitted that, by their very nature, investment advisers are persons who provide to investors the benefit of their personal experience and knowledge. They operate in individual ways which vary according to the circumstances with which they are presented and accordingly their task is such as not to be conducive to the exercise of control in particular instances. Nevertheless, it cannot be doubted that because of the liability imposed upon Tolhurst for the actions of the advisers', ultimate control does lie with Tolhurst. He submitted, and I agree, that in this sense Tolhurst has sufficient control over the advisers to satisfy the control test.

35. The final consideration to which Mr Berglund made specific reference was the intention of the parties. He accepted that the way in which the parties describe the relationship into which they enter is an important consideration and, to that extent, because the parties have gone to such lengths in this case to describe the relationship between them as one of independent contractors, weight should be given to the intention so expressed. Something of the same thought finds expression in the judgment of Hill J in Deluxe, as Mr De Wijn submitted. But however that may be the appellation which parties ascribe to a relationship cannot override reality. Thus it was in
Narich Pty Ltd v Commr of Pay-roll Tax 84 ATC 4035; (1983) 50 ALR 417 (PC), in which it was held that the relationship between a Weight Watchers franchisee and the persons whom it engaged to deliver lectures was one of employment, despite an express stipulation to the contrary in the terms of the contract between them. Lord Brandon who delivered the judgment of the Judicial Committee said at ATC p 4039; ALR p. 421:

``The third principle relates to cases where the parties have, as in the present case, included in their written contract an express propulsion 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. With regard to a clause of this kind Lord Fraser of Tullybelton said in the AMP case (18 ALR 389-90):-

`Clearly cl 3, which, if it stood alone, would be conclusive in favour of the Society, cannot receive effect according to its terms if they contradict the effect of the agreement as a whole. Nevertheless, their Lordships attach importance to cl 3, and they consider that the following statement by Lord Denning MR in
Massey v Crown Life Insurance Co [1978] 1 WLR 676 correctly states the way in which it can properly be used: ``The law, as I see it, 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

ATC 2193
of that relationship by putting a different label upon it.''...'''

(Emphasis added)

36. In the end it is a matter of perception. But my perception, based on all of the evidence and the authorities to which I have been referred, is that the investment advisers are employees of Tolhurst as such.

Section 3C

37. I turn now to the question of whether s. 3C applies. The Commissioner contended that it does. The argument is that each investment adviser supplies services to Tolhurst under a contract between the adviser and Tolhurst: the services supplied being the totality of those things which the adviser does as the agent of Tolhurst in transacting business with clients; and the contract under which Me services are provided being the contract whereby Tolhurst and the adviser agreed that the adviser should be a dealer's representative of Tolhurst. Thus it was contended by the Commissioner that s. 3C(1)(b)^[11] Section 3C(1) provides: ``For the purposes of this section, a reference to a relevant contract in relation to a financial year is a reference to a contract under which a person during that financial year, in the course of a business carried on by him— (a) supplies to another person services for or in relation to the performance of work; (b) has supplied to him the services of persons for or in relation to the performance of work; or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for resupply of the goods to the first-mentioned person or, where that person is a member of a group within the meaning of section 9A, to another member of that group— but does not include ...'' applies, in that Tolhurst has supplied to it the services of persons for or in relation to the performance of work and that Tolhurst is thereby deemed to be an employer, by s. 3C(2)(a)(ii),^[12] Section 3C(2) provides: ``(2) For the purposes of this Act— (a) a person— (i) who during a financial year under a relevant contract supplies services to another person; (ii) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work; or (iii) who during a financial year, under a relevant contract, gives out goods to other persons— shall be deemed to be an employer in respect of that financial year; and (b) a person who during a financial year— (i) performs work for or in relation to which services are supplied to another person under a relevant contract; or (ii) being a natural person, under a relevant contract, re-supplies goods to an employer— shall be deemed to be an employee in respect of that financial year; and (c) amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract shall be deemed to be wages paid or payable during that financial year; and (d) where an amount referred to in paragraph (c) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract or the re- supply of goods by an employee under the relevant contract may be prescribed by the regulations; and (e) an amount paid or payable for or in relation to the performance of work under a relevant contract is deemed to include any payment made by a person who is deemed to be an employer under a relevant contract in relation to a person who is deemed to be an employee under the relevant contract that would be a superannuation benefit if made in relation to a person in the capacity of an employee.'' in that it is a person to whom during a financial year under a relevant contract the services of investment advisers are supplied for or in relation to the performance of work.

38. Tolhurst contended that s. 3C(1)(b) does not apply, either because the advisers do not supply services to Tolhurst or because, if they do, they do not supply them for or in relation to the performance of work. Alternatively, it was said, if the investment advisers do supply services to Tolhurst for or in relation to the performance of work, they do not do so under a contract.

39. In my view the investment advisers do provide services to Tolhurst, namely, the services of acting as the agent of Tolhurst in advising clients on the purchase and sale of securities and in selling and purchasing securities on behalf of clients as the agent of Tolhurst. I also think it to be clear that the services which the investment advisers supply to Tolhurst are properly to be described as services for or in relation to the performance of work. The provisions of s. 3C are very similar if not identical to s. 9 of the Accident Compensation 1985 which fell for consideration by the High Court in
Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641. In dealing with an argument which had been advanced in that case about the meaning of the words ``for or in relation to the performance of work'', the Court said:

``It is a mistake to read the expression `for or in relation to the performance of work', where it appears in s. 9(1) and elsewhere, as doing anything more than qualifying the content or scope of the word `services'. All that the expression is saying is that `services' must be work-related; it is not stipulating Hat the services are not wholly distinct from the work or that the supplier of the services is a person other than the performer of the work.''

40. There is then the question of whether the services supplied by the investment advisers to Tolhurst are supplied ``under a contact''. In my view that question is also to be answered affirmatively. The same question arose in Accident Compensation Commission v Odco, supra. It was not doubted that the services supplied in that case by the tradesmen to the labour organisation were services provided under a contract within the meaning of s. 9 of the Accident Compensation Act. The Court said at 95 ALR 641 at 652:

``The language of s 9(1) in its application to these contracts raises several problems for consideration. First, there is the question whether the tradesman supplies services to TSA. There is no definition of `services' except in so far as s 9(6)(d) provides that a reference to services includes a reference to `results (whether goods or services) of work performed'. Once it is accepted that there was (1) an agreement between TSA and the builder for the supply of a tradesman to the builder to do certain work on terms that the builder was to remunerate TSA for supplying the tradesman and for the work which he did, and (2) an agreement between TSA and the tradesman whereby the tradesman agreed to perform work at the site at the builder's direction for remuneration to be paid by TSA, it follows as a matter of plain language that the tradesman supplies services to TSA by attending at the site and doing work there. By attending there and doing work, he supplies services to TSA for the purposes of its business, notwithstanding he also at the same time supplies the same services to the builder for the purposes of its business.''

ATC 2194

41. I cannot see why the result here should be any different. ``Services'' has the same meaning under this Act as it had under the Accident Compensation Act 1985: see s. 3C(6)(d) and, under this Act, ``contract'' includes an agreement, arrangement or understanding, whether formal or informal and whether express or implied: ibid. There can be no doubt that there was an agreement or arrangement or understanding between Tolhurst and each of the advisers that the advisers would render services to clients as the agent of Tolhurst, at the client's request. In my view it follows, as a matter of plain language, that the advisers supplied services to Tolhurst by servicing the needs of the clients. By so doing they supplied services to Tolhurst for the purpose of its business, notwithstanding that they also at the same time supplied services to the clients.

Conclusion

42. For the reasons I have set out I consider that the investment advisers are employees as such and, in any event, are deemed by s. 3C to be employees. It follows that I consider that the Commissioner was correct in assessing to tax as wages the shares of brokerage and other amounts paid by Tolhurst to the advisers.

43. Accordingly, the order of the Tribunal will be that the assessment under reference be affirmed. However, it was not suggested that I should make any order as to costs and therefore I do not do so.

Footnotes

^[1] See Division 3 of Pt 7.3 of Chapter 7 of the Corporations Law .
^[2] Because it was the licensed dealer.
^[3] See Corporations Regulations , Reg. 7.3.02.
^[4] ibid at ATD p 463; CLR p. 428.
^[5] at (1978) 18 ALR 385 at p. 391.
^[6] 92 ATC 4327 at p 4330; (1992) 27 NSWLR 377 at p. 381.
^[7] 96 ATC at p. 4900.
^[8] 96 ATC at p. 4902-4903.
^[9] Special leave to appeal to the High Court was refused: see (1997) 35 ATR 340.
^[10] Sec also Mulhall v Roberts (unreported CA (NSW), CA 40009/1994, 19 July 1995) p. 4.
^[11] Section 3C(1) provides: ``For the purposes of this section, a reference to a relevant contract in relation to a financial year is a reference to a contract under which a person during that financial year, in the course of a business carried on by him— (a) supplies to another person services for or in relation to the performance of work; (b) has supplied to him the services of persons for or in relation to the performance of work; or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for resupply of the goods to the first-mentioned person or, where that person is a member of a group within the meaning of section 9A, to another member of that group— but does not include ...''
^[12] Section 3C(2) provides: ``(2) For the purposes of this Act— (a) a person— (i) who during a financial year under a relevant contract supplies services to another person; (ii) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work; or (iii) who during a financial year, under a relevant contract, gives out goods to other persons— shall be deemed to be an employer in respect of that financial year; and (b) a person who during a financial year— (i) performs work for or in relation to which services are supplied to another person under a relevant contract; or (ii) being a natural person, under a relevant contract, re-supplies goods to an employer— shall be deemed to be an employee in respect of that financial year; and (c) amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract shall be deemed to be wages paid or payable during that financial year; and (d) where an amount referred to in paragraph (c) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract or the re- supply of goods by an employee under the relevant contract may be prescribed by the regulations; and (e) an amount paid or payable for or in relation to the performance of work under a relevant contract is deemed to include any payment made by a person who is deemed to be an employer under a relevant contract in relation to a person who is deemed to be an employee under the relevant contract that would be a superannuation benefit if made in relation to a person in the capacity of an employee.''

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