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The impact of this case on ATO policy is discussed in Decision Impact Statement: Qian and Commissioner of Taxation (2017/3327, 3329).
Qian v FC of T
Members:PW Taylor SC SM
Tribunal:
Administrative Appeals Tribunal, Sydney
MEDIA NEUTRAL CITATION:
[2019] AATA 14
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PW Taylor SC (Senior Member):1. In circumstances not revealed in the evidence, Mr Qian obtained an ABN, and first registered for GST, on 26 September 2004. He later caused that registration to be cancelled, and did not re-register for GST until 9 May 2016. At around that time he borrowed money to fund the purchase of a Renault Master van, and entered into an agreement with HF Express Group Pty Ltd ("HF Express"). He used the van in working as a courier driver.
2. The essential controversy in the present proceedings is whether, in the quarter ended June 2016, Mr Qian worked in his own business
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enterprise, or as an employee. Resolution of that controversy will effectively determine his eligibility for GST registration, and entitlement to input tax credits claimed in his Business Activity Statement ("BAS") for that quarter.3. The essential facts relevant to Mr Qian's GST registration status after May 2016, and to the contentious BAS, can be shortly stated:-
- (a) 5 October 2016 :- Mr Qian lodged his June 2016 BAS
- (b) 19 October 2016 :- The Commissioner advised Mr Qian of a review of the June 2016 BAS
- (c) 5 December 2016 :- On completion of the audit the Commissioner advised Mr Qian he had concluded that Mr Qian (i) had been employed by HF Express and, (ii) had not been carrying on an enterprise. As a result of those conclusions the Commissioner said he would cancel Mr Qian's GST registration and issue a revised assessment for the June 2016 quarter.
- (d) 7 December 2016 :- The Commissioner cancelled Mr Qian's GST registration, with effect from 30 June 2016.
- (e) 7 December 2016 :- The Commissioner issued an Amended Assessment for the June 2016 quarter.
- (f) 8 December 2016 :- The Commissioner formally notified Mr Qian of the audit decision.
- (g) 22 December 2016 :- Mr Qian lodged an objection to the Commissioner's cancellation decision and to the revised assessment. The objection (i) asserted Mr Qian's "contractor" relationship with HF Express up to 13 September 2016, (ii) made no mention of Mail Call Commercial Pty Ltd ("Mail Call") (see paragraph 21(e) below), (iii) made no mention of a 14 September 2016 agreement with Easy Connect Group Pty Ltd ("Easy Connect") (see paragraph 49 below) but, (iv) disclosed his 7 November 2016 incorporation of Morgan Express Pty Ltd:- see paragraph 51 below.
- (h) 2 May 2017 :- The Commissioner disallowed Mr Qian's objection.
THE AMOUNT IN DISPUTE
4. The $3,940 GST amount in dispute for the June 2016 quarter is comparatively modest. Its derivation is apparent from the following summary:-
| As Lodged | Revised A/ment | |
| Label: Description | $ | |
| G1: Total Sales | 7,539 | 7,539 |
| G10: Capital Purchases | 46,370 | 46,370 |
| G:11 Non-capital purchases | 5,896 | 5,896 |
| IA: GST on Sales | 685 | 0 |
| IB: GST on Purchases | 4,625 | 0 |
| 9: Net Amount | -3,940 | 0 |
5. Notwithstanding the comparative modesty of the disputed amount, resolution of the underlying controversy is significant to Mr Qian, and may also inform the approach to his circumstances in the September 2016 quarter. Furthermore, given the apparently standard form nature of the arrangements to which he was a party, resolution of the present matter may be relevant to the circumstances of other, similarly engaged, taxpayers.
GST REGISTRATION - LEGISLATIVE PROVISIONS
6. Under the relevant provisions of A New Tax System (Goods and Services Tax) Act 1999 (Cth) ("GST Act"):-
- (a) an entity's GST registration eligibility relevantly depends on their conduct of an "enterprise" (i.e., a business, or an activity in the nature of trade, carried out in a capacity other than as an employee):- see GST Act ss 9-20(1), 9-20(2)(a), 23-5, 23-10(1).
- (b) a registered entity that is not carrying on an enterprise must, within 21 days of the business cessation, apply to have their
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registration cancelled:- see GST Act s 25-50(1). - (c) the Commissioner must cancel the GST registration of an entity that (i) is not carrying on an enterprise and, (ii) is unlikely to do so for at least 12 months:- see GST Act s 25-55(2).
INPUT TAX CREDIT ENTITLEMENT
7. A taxpayer is entitled to input tax credits for any "creditable acquisition" they make:- see GST Act s 11-20. The criteria for such an acquisition are that:-
- (a) the supply was taxable
- (b) the taxpayer
- (i) provided consideration for the supply
- (ii) was either registered, or required to be registered, for GST (i.e., carried on an enterprise and their GST turnover (in effect, the value of their taxable supplies - GST Act s 188-15) met the $75,000 registration threshold:- see GST Act s 23-15 & A New Tax System (Goods and Services Tax) Regulations 1999 (Cth) r 23-15.01), and
- (iii) made the acquisition for a "creditable purpose":- GST Act s 11-5.
8. A supply is taxable if it is neither GST free nor input taxed (see GST Act s 9-30(2) and Division 40) and:-
- (a) the supplier is either registered, or required to be registered, for GST:- GST Act s 23-5, and
- (b) the supply is
- (iv) made for consideration,
- (v) in the course or furtherance of the enterprise carried on by the supplier, and
- (vi) connected with the indirect tax zone (i.e., delivered in Australia - GST Act s 9-25, 195-1):- GST Act s 9-5.
9. An acquisition satisfies the "creditable purpose" criterion if:-
- (a) the supply is neither "input taxed" nor of a private or domestic nature, and
- (b) it was acquired for the purpose of carrying on the taxpayer's enterprise:- GST Act s 11-15.
10. The amount of any input tax credit entitlement equals the GST payable on the supply to the taxpayer:- see GST Act s 11-25. That entitlement is attributable to particular "tax period(s)":- GST Act s 29-10. Ordinarily, and in Mr Qian's case, that attribution relates to particular quarterly "tax periods":- see GST Act s 27-5. Where a taxpayer reports on a cash basis, the entitlement is attributable to any tax period in which they provided any part of the consideration for the supply, subject to the taxpayer holding a tax invoice for the supply at the time of submitting their GST return for that period:- see GST Act s 29-10(2)&(3)(a). If a taxpayer did not then hold such a tax invoice, the entitlement is attributable to the first tax period after they have obtained such an invoice:- see GST Act s 29-10(b).
11. Where a document does not satisfy the tax invoice criteria:-
- (a) a taxpayer recipient may treat a document as a tax invoice, if all the required information can be clearly ascertained from other documents the supplier has provided to the taxpayer:- see GST Act s 29-70(1A)
- (b) the Commissioner may exercise a statutory discretion to treat a document as a valid tax invoice:- see GST Act s 29-70(1B).
EMPLOYMENT CHARACTERISATION CRITERIA
12. The parties conducted the review proceedings on the basis that Mr Qian's work as a courier driver was capable of constituting carrying on an "enterprise", unless his role was that of an employee.[1]
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [6]. Indeed, the distinction has been described as "amorphous" and one that ultimately usually involves "a very subjective matter of individual impression":-
Connelly v Wells (1994) 55 IR 73 per Gleeson CJ;
Commissioner of Pay-roll Tax v Mary Kay Cosmetics Pty Ltd [1982] VR 871 at 878 per Gray J.
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13. The ultimate characterisation of the nature of work engagement is not determined by the parties formal self-characterisation of their relationship, whether they consider it to be one of independent contracting:-
AMP Society v Chaplin (1978) 18 ALR 385 at 389 & 392;
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [189]-[293]; or of employment:-
Mersey Docks and Harbour Board v Coggins & Griff[inodot]th (Liverpool) Ltd [1947] AC 1. Self-characterisation may be of little significance in the absence of satisfaction that it is either informed or the product of a genuinely intended consensus:- see
Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd [2004] SASC 288; (2004) 90 SASR 12 at [9] & [10]. Nevertheless the parties' consensual characterisation of their agreement is a potentially important consideration, and it can properly inform the differentiation between employment and independent contracting:-
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37 at [194];
ACE Insurance Ltd v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146 at [32]-[36];
Australian Air Express Pty Limited v Langford [2005] NSWCA 96 at [13], [67]-[71] - citing both Chaplin (at 390) and
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 26 & 37.
14. The criteria to which regard ought be had in making the required assessment have been frequently discussed in the many decided cases:- e.g.,
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 per Mason CJ at 23-24 and Wilson & Dawson JJ at 36-37; see
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [217]-[220] per Bromberg J. They are also usefully outlined in various Taxation Rulings. Taxation Ruling TR 2001 / 8 focussed on the concept of "personal services income" (a concept that excludes income received as an employee) and suggested (in paragraph [110]) that there were at least 11 relevant considerations. They included (i) the contractual obligations, and particularly the specificity of any contractual task, (ii) the individual's discretion about the hours, place and method of work, and about the identity of the actual work performer, (iii) the mode of payment and, in particular, the nature of any performance contingency affecting the payment entitlement, (iv) the contractual obligations in relation to the provision of equipment, and responsibility for expenses and risk and, (v) the diversity of the putative worker's engagements.
15. Taxation Ruling TR 2005 / 16 is concerned with an employer's PAYG withholding obligations and provides guidance on the criteria material to the distinction between work as an employee (under a contract of service) and the conduct of a business by an independent contractor (under a contract for services):- see paragraph [17]. Superannuation Guarantee Ruling SGR 2005 / 1 addresses the criteria relevant to the characterisation of a person as an "employee" for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth). Under s 12 of that legislation the concept of employment carries both its ordinary meaning, and various extended meanings - including treating a person as an employee where they work under a contract that is wholly or principally for their labour.
16. Taxation Ruling TR 2005 / 16 and Superannuation Guarantee Ruling SGR 2005 / 1 both discuss (and in almost identical terms) six main factors they describe as "key indicators" of the employee / independent contractor distinction. They include (i) the degree of control exercised, or capable of being exercised, by the putative employer, (ii) the extent to which the individual worker operates "on their own account" or in the business of the putative employer, and (iii) whether the worker had been engaged to undertake "the production of a given result":- see TR 2005 / 16 paragraphs [28] to [35].
17. In discussing these various indicators TR 2005 / 16 comments that:-
- (a) in relation to control, the important consideration is the capacity to control, rather than the actuality of its exercise (at paragraphs [26] to [31]). A capacity to exclude task delegation, and to insist on work performance by a particular individual can be a significant indicator of an
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employment relationship (at paragraphs [41] to [43]) - (b) the answer to the question whether a person worked "in" the putative employer's business depends on regard to the practical realities of the relationship (at paragraphs [32] to [34]). This includes consideration of (i) the significance of any work related equipment and materials that the putative worker provided (at paragraphs [45] to [50]) and (ii) the extent to which the person was required to wear or display the livery of the putative employer (at paragraph [52])
- (c) in relation to the question whether payment for "results" necessarily excluded characterisation of the relationship as one of employment:-
- [36] The phrase "the production of a given result" means the performance of a service by one party for another where the first-mentioned party is free to employ their own means (such as third-party labour, plant and equipment) to achieve the contractually specified outcome. Satisfactory completion of the specified services is the "result" for which the parties have bargained. The consideration is often a fixed sum on completion of the particular job as opposed to an amount paid by reference to hours worked. If remuneration is payable when, and only when, the contractual conditions have been fulfilled, the remuneration is usually made for producing a given result
- …
- 39. While the notion of 'payment for a result' is expected in a contract for services, it is not necessarily inconsistent with a contract of service. The High Court in FC of T v. Barrett & Ors (73 ATC 4147 at 41531) found that land salesmen who were engaged by a firm of land agents to find purchasers for land entrusted to the firm for sale and who were remunerated by commission only were employees and not independent contractors. Likewise, the High Court in Hollis v. Vabu (
(2001) 207 CLR 21 at 44) considered that payment to the bicycle couriers per delivery, rather than per time period engaged, was a natural means to remunerate employees whose sole purpose is to perform deliveries. Further, the Full Court of the Supreme Court of South Australia in Roy Morgan
[2004] SASC 288 found that interviewers who were only paid on the completion of each assignment, not on an hourly basis, were employees and not independent contractors.
18. Despite its discussion of "key indicators" Taxation Ruling TR 2005 / 16 emphasises that no individual aspect of the contentious relationship is likely to be determinative of its appropriate characterisation. Furthermore, the comparative weight of relevant aspects of the relationship may vary according to the particular circumstances. Regard must be had to the "totality" and "substance" of the relationship, with a view to determining "whether, on balance, the worker is an employee or independent contractor":- see TR 2005 / 16 at paragraphs [17]-[19]. That "on balance" characterisation of the "substance" of the relationship is required by authority:-
Hollis v Vabu (2001) 207 CLR 21 at [24], [47] & [57] (bicycle couriers - employees);
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [88]-[200] ("freelance" interpreters - employees);
Commissioner of State Taxation v The Roy Morgan Research Centre Pty Ltd [2004] SASC 288; 2004 ATC 4933; (2004) 57 ATR 147 (survey interviewers - employees).
19. In
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 Bromberg J described the required "reality" assessment as involving a "multifactorial" consideration and an "intuitive" conclusion (at [204]). But His Honour recognised that describing the task in this way revealed its "problematic" nature and did not provide "a simple and clear definition" to inform its performance. His
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Honour suggested that the focus of the consideration should be on a distinction drawn from the reasoning in Hollis v Vabu andSweeney v Boylan Nominees Pty Ltd [2006] HCA 19; (2006) 226 CLR 161; 227 ALR 46 at [30]-[32]. Bromberg J expressed that distinction in the following terms:-
- [207] … the distinction between an employee and an independent contractor is rooted fundamentally" in the fact that when personal services are provided to another business, an independent contractor provides those services while working in and for his or her own business, whereas an employee provides personal services while working in the employer's business. Unless the work is being provided by an independent contractor as a representative of that entrepreneur's own business and not as a manifestation of the business receiving the work, the person providing the work is an employee"
- [208] Simply expressed, the question of whether a person is an independent contractor in relation to the performance of particular work, may be posed and answered as follows:
Viewed as a "practical matter":
- (i) is the person performing the work an entrepreneur who owns and operates a business; and,
- (ii) in performing the work, is that person working in and for that person's business as a representative of that business and not of the business receiving the work?
If the answer to that question is yes, in the performance of that particular work, the person is likely to be an independent contractor. If no, then the person is likely to be an employee.
- [209] The question which this approach poses appears to me to be the central question in the application of the totality test. The question provides the focal point around which the indicia thrown up by the totality test may be examined. The central question has two elements. The first is whether the person has a business. The second is whether the work or the economic activity being performed is being performed in and for the business of that person.
20. Twenty five years earlier, in
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 36 Wilson and Dawson JJ had framed the ultimate question in much the same way when they said:-
the question is whether the degree of independence overall is sufficient to establish that a person is working on his own behalf rather than acting as the servant of another, … putting it that way does at least indicate that the question is one of degree for which there is no exclusive measure.
THE INITIAL OBSCURITY OF MR QIAN'S DESCRIPTION OF HIS COURIER WORK
21. The circumstances in which Mr Qian began, and undertook, his contentious courier work in the June 2016 quarter are disappointingly opaque:- see paragraph 55 below. The Commissioner attempted on several occasions to obtain the relevant details. Those attempts involved requests:-
- (a) in October 2016, as part of the BAS review process, for details of Mr Qian's accounting system and the basis of the amounts contained in the June 2016 BAS
- (b) in February 2017, for copies of Mr Qian's "employment" contract, any other contract relating to his "subcontracting" business, and clarification of the grounds of Mr Qian's 22 December 2016 objection
- (c) on 10 March 2017, enquiring whether Mr Qian had worked for anyone other than HF Express Group Pty Ltd
- (d) on 22 March 2017, for details of the equipment Mr Qian used in his work, and the amount of a "guarantee" referred to in his agreement with HF Express
- (e) on 23 March 2017, for an explanation of "shortfall" amounts shown on "payment summaries", and of handwritten reconciliations that Mr Qian had provided to the Commissioner. (The "payment summaries" had been issued by another entity - Mail Call). I describe the contents of these summaries, and other related documents later in these reasons:- see paragraph s34(a) & 34(b) below.)
22.
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The accounting service assisting Mr Qian responded to the Commissioner's requests. But the responses were incomplete and ambiguously expressed. They also varied in their content. The deficiencies in the responses were highlighted by:-- (a) a 3 May 2016 reference from a courier company (Direct Couriers (Aust) Pty Ltd) that Mr Qian had been offered "employment" as a "full time sub-contractor" - with a "minimum guarantee" of $280 daily, plus a "fuel levy" and GST - "for a 3 pallet 2 tonne van"
- (b) the 9 May 2016 brief form of "agreement", between Mr Qian and HF Express, whose contents I set out later in these reasons:- see paragraph 25 below.
- (c) an unattributed 9 May 2016 "Notice", whose contents I also set out later in these reasons:- see paragraph 27 below
- (d) the absence of a specific response to aspects of the Commissioner's October 2016 request
- (e) the absence of reference in Mr Qian's 22 December 2016 objection to the 9 May 2016 "agreement", the "Notice" or the "payment summaries"
- (f) a failure to respond to the Commissioner's specific request to explain the significance of documents attached to Mr Qian's objection notice
- (g) a failure to respond meaningfully to the Commissioner's 23 March 2017 enquiry about the content of the Mail Call "payment summaries".
23. In his oral evidence Mr Qian described himself as a professional driver. That description conveys the impression he had previous experience as a courier / delivery driver but, apart from a general assertion that he had been self-employed for many years, it was not an impression complemented by any specific evidence. The review application proceeded on the basis that Mr Qian's involvement with HF Express (and with Mail Call) began in May 2016, as a result of his response to internet advertising, and because he hoped to benefit from contacts HF Express would be able to provide.
24. The actual timing and content of Mr Qian's involvement with HF Express, Direct Couriers and Mail Call were not explored in significant detail, and certainly not with precision. They appear to have involved the following matters:-
- (a) pre 3 May 2016 :- Mr Qian made an initial approach to HF Express and attended a meeting with them. He was informed that HF Express could arrange for him to work with any of three of their courier company clients. He indicated that he would be looking to obtain a minimum daily payment of $300 and would prefer to work with just one courier company. After discussion he agreed to accept $280 per day plus a fuel levy (of an amount that the evidence did not detail).
- (b) around 3 May 2016 :- Mr Qian said that HF Express took him to, and showed him around, the premises of both Direct Couriers and Mail Call. The effect of his brief and imprecise evidence was that he gained some understanding of each of their methods and terms of operation. (The fact of some such meeting and discussion likely explains the date and content of the Direct Couriers reference to which I earlier referred.)
- (c)
pre 9 May 2016
:- Notwithstanding the 3 May 2016 reference from Direct Couriers, Mr Qian said he decided to work with Mail Call. He said this was because they "had the best contract[4]
There was no evidence about any such “contract”. I infer that Mr Qian was alluding to his understanding of the rates Mail Call paid for courier work. and easiest system of operation". - (d) 9 May 2016 :- Mr Qian arranged the purchase of the Renault van (apparently replacing a smaller van that he already owned), and again attended HF Express' office. There he signed the "contract" documents.
- (e) 10 May 2016 :- Mr Qian started to do courier work for Mail Call. The precise circumstances in which he did so were not the subject of specific evidence.
- (f)
25 May 2016
:- HF Express transferred the first of its payments to Mr Qian's bank account. It was presumably at about that time he began to receive the Mail Call payment
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summaries.
THE "CONTRACT" DOCUMENTS
25. Mr Qian said that the 9 May 2016 "agreement" and "Notice" documents were the only written records indicating the nature and terms of his work engagements. The single page 9 May 2016 agreement was an apparently standard form, but certainly not an elaborate, document. It asserted its status as an agreement between HF Express and Mr Qian. It then set out the following text:-
All contractors who with ABN (with GST) or ACN (with GST) agreed HF EXPRESS GROUP PTY LTD will have (18%) surcharge on each payment for the management fee.
All contractor agreed to stay and attend to work with HF EXPRESS GROUP PTY LTD at least 12 months period otherwise HF EXPRESS GROUP PTY LTD has the power to deduct $2000+gst from their pay for the penalty.
After 12 months period all contractor agreed to give 2 weeks notes before resign from HF EXPRESS GROUP PTY LTD otherwise HF EXPRESS GROUP PTY LTD has the power to deduct $2000+gst from their pay for the penalty.
All contractors agreed to arrange their own working Compensation and Superannuation by themselves HF EXPRESS GROUP PTY LTD will not provide and cover any working Compensation and Superannuation for all contractors.
26. The following terms in the preceding extract merit specific comment:-
- (a) Surcharge / deduct :- Notwithstanding the stipulation that contractors "agreed to stay and attend to work" the agreement neither imposed an obligation on Mr Qian to do any work, nor any payment obligation on HF Express. Instead, the agreement's references to "pay" that was subject to a "surcharge" and from which HF Express was authorised to make deductions, convey the impression that Mr Qian's "pay" entitlement arose outside the terms of the agreement, and that HF Express was to receive the "pay" on his behalf, and as his manager.
- (b) Contractors :- This term appears to have been used to emphasise that the contractual relationship offered by HF Express (i) was not confined to individuals and, (ii) was not intended to be one of employment.
- (c)
ACN
:- This is an obvious abbreviation for the "Australian Company Number" allocated by the Australian Companies and Securities Commission on the registration of a corporation.[5]
See Its inclusion in the standard form agreement document evidences HF Express' willingness to contract with corporate entities, its consequential indifference to the particular legal status of any of its contractors and, at least arguably, its indifference to the identity of the individuals who performed work. Neither the agreement itself, nor the evidence, established that HF Express' business was wholly confined to contract couriers. Nevertheless, Mr Qian's oral evidence indicated that couriers were a significant part of HF Express' business, and it may reasonably be assumed that the standard terms in the 9 May 2016 agreement were those it generally applied to all its contract courier clients. A contemplation that a contracting party could be a corporate entity tends against the contract being one of employment:- seeCorporations Act 2001 (Cth) ss 118 and 601BD.
ACE Insurance Ltd v Trifunovski [2013] FCAFC 3; (2013) 209 FCR 146 at [25]. - (d)
Working Compensation and Superannuation
:- This alludes to the statutory liabilities of employers in relation to (i) workplace injuries, (ii) maintaining insurance for their workplace injury liabilities and, (iii) payment of the superannuation guarantee amount.[6]
The relevant workers compensation obligations in NSW arise under the On one view the inclusion of these matters in the standard form HF Express agreement is merely a repetitive emphasis that the character of the intended contractual relationship was not one of employment. On another view, the inclusion implicitly acknowledges that "contractors" may themselves be "employers" (as corporate contractors will likely be) with their own statutory obligations in relation to workers' compensation and superannuation. On that view, the purpose of this part of the agreement was to make clearWorkers Compensation Act 1987 (NSW) ss 9 & 155. In relation to the superannuation guarantee, employers have a statutory liability for the superannuation guarantee charge where they fail to pay a stipulated percentage of employees’ salaries to an approved superannuation fund:- seeSuperannuation Guarantee (Administration) Act 1992 (Cth) ss 17, 19, 22 & 23.
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that HF Express' 18% "management fee" surcharge was not intended to include any components relating to those aspects of a contracting courier's liabilities as an employer.[7]Both the contemplation that a contracting courier might be a corporation, and that they bore all responsibilities relating to workers’ compensation and superannuation, were indicators that the intended relationship was that of independent contractors rather than employment:- Sweeney vBoylan Nominees Pty Ltd [2006] HCA 19 ;(2006) 226 CLR 161
27. The "Notice" document was apparently signed by Mr Qian on 9 May 2016, at the same time as the agreement. The Notice, which was obviously also a standard form of wording, contained the following provisions:-
- 1. For the payment, the third week is pay for first week's pay
- 2. If driver take holiday more than one week, we have a power to hold your last 2 weeks' pay, until you come back on that week Thursday, we will release your pay
- 3. All driver have to work for minimum five days and log on before 7am every morning otherwise couriers company have power to stop your guarantee for the whole week.
- 4. If that week got public holiday, couriers company will only pay guarantee base on how many working day for that week.
- 5. If you got your personal issue and take a day off, couriers company will not pay guarantee for that all week.
- 6. If driver reject the job or make serious mistake, couriers company will not pay guarnatee (sic) for that week.
- 7. No holiday between October to end of December.
- 8. No guarantee after Christmas Day until 1st of February every year.
- 9. If driver lose the items or PDA unit driver have to pay $500 assess fee.
- 10. Couriers company don't pay gaurantee (sic) for first 2 weeks if driver too slow.
- 11. All driver have to attend to work minimum five days a week, otherwise we have power to stop the contract and deduct your pay for $2000+GST.
- 12. All driver have to attend to work minimum from 7am to 6pm every day otherwise couriers company have power to stop your guarantee for the whole week.
28. As can be seen, the Notice did not use the term "contractor(s)", but it spoke in the first person plural ("we"), and was apparently directed at "you". In its various statements it referred to "driver", "your" guarantee, and "couriers' company". In those statements it tended to assume that "driver" and "you" were interchangeable expressions directed at a natural person, not a corporation. It also assumed (consistent with Mr Qian's evidence, and perhaps most clearly in the differences between clauses 11 and 12) that "we" and "couriers company" were distinct entities, and not merely interchangeable expressions.
29. Other than very limited, and vaguely expressed, obligations of timeliness and accuracy, the Notice did not impose any performance standard nor express any terms and conditions other than attendance for work and unfailing acceptance of all jobs. But even those matters were expressed in terms that arguably stopped short of imposing actual obligations to do any work. Thus:-
- (a) Although the "driver" had to "log on" at 7:00 am, work a minimum of 11 hours a day, not reject any jobs, and work at a satisfactory pace in the first two weeks, the sanction for default was not dismissal or forfeiture of any right to remuneration, but merely that the "couriers company will not pay guarantee" for the whole week.
- (b) The provision that the driver had to "attend" to work for a minimum five day week was inherently ambiguous (despite its potential sanction that HF Express could "stop the contract" and deduct $2,200 from a driver's "pay") as to whether it involved only availability for work, or required its actual performance. It was also ambiguous as to whether the "contract" was (a) the 9 May 2016 agreement, (b) any contract that Mr Qian may have made with the "couriers' company" in relation to his work and rates of pay, or (c) any subsequent contract under which HF Express engaged Mr Qian to perform work for a "couriers company".[8]
The possibility of a contract of the latter kind arises because of the analysis of the nature of the agreements, and the circumstances involved in the making of contracts for work, in a typical tripartite “labour hire” arrangement. Those circumstances involve the episodic offer of particular work assignments by the labour hire firm, the contractor’s acceptance of the specific offer, and the consequential making of the work contract as a result of that acceptance:- see Accident Compensation Commission vOdco Pty Ltd [1990] HCA 43 ;(1990) 95 ALR 641 Drake Personnel Ltd vCommissioner of State Revenue [2000] VSCA 122 ;(2000) 2 VR 635
30. The form and inelegant wording of the Notice would permit its characterisation as having the hybrid function of (i) stipulating HF Express' contractual payment obligations and powers (see clauses 1, 2 & 11) and, (ii) informing the contractor of the relevant conditions governing the courier
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company's payment obligations (see clauses 3-6, 8, 10 & 12). But the obvious purpose of the latter kind of information would be to ensure that any limitation on the courier company's payment obligations also applied to restrict the contractor's entitlement to be paid by HF Express. Accordingly, I will proceed on the basis that the Notice document, with all of its provisions, was intended to form part of the HF Express agreement.31. A particularly notable matter that the 9 May 2016 "Notice" did address was that if the "driver" lost any consigned items, or the "PDA unit", they had to pay a $500 "assess fee". This provision was notable for three reasons. First it suggested that the "PDA unit" was the only item that would be supplied to the driver. Second, by grouping the "items" with the "PDA unit" it suggested that both would be provided by the "couriers company". Thirdly, it involved a glaringly obvious omission, in that neither the Notice nor the agreement addressed Mr Qian's responsibility to provide and operate the courier vehicle at his own cost.
32. The available inferences from the terms of the "contract documents", against the background of Mr Qian's evidence about circumstances in which he came to do the Mail Call courier work, are as follows:-
- (a) despite the contents of the standard from HF Express agreement document, the general contemplation was that all of HF Express' courier driver contractors would be natural persons.
- (b) all driver contractors had to provide and operate their own vehicles.
- (c) since no rates of pay or guarantee amounts were stated in either the agreement or the Notice they were either (i) the subject of some complementary agreement with HF Express, (ii) the subject of some complementary agreement with the courier company, or (iii) unilaterally determined by the courier company, and reflected their standard practice:- see paragraph 34(b) below.
- (d) HF Express had no express and unconditional primary payment obligation, but was authorised to receive a driver's "pay", and deduct from it the 18% management fee.
THE REALITIES OF MR QIAN'S COURIER ACTIVITIES
33. Although the "contract documents" did not clearly reveal the true nature and terms of Mr Qian's relationship with either HF Express, Direct Couriers (Aust) Pty Ltd ("Direct Couriers") or Mail Call, the Mail Call "payment summaries" were rather more detailed. Consequently, some additional insight into those relationships can be derived from those summaries, the tax invoices that accompanied them, and from the bank statement, and some handwritten reconciliations Mr Qian provided to the Commissioner.
34. The significant aspects of those documents were:-
- (a) The Mail Call payment summaries contained a daily listing of courier jobs Mr Qian had performed. (The listing indicated the "job number" and included details of the geographical origin and destination of each job, the distance travelled and the various components (travel, flag fall and fuel) of the total job cost.)
- (b) A note at the end of the "payment summary" explained that "some jobs will attract pay rates less than normal" and that "any courier" could obtain information about applicable rates by interrogating a computer terminal Mail Call provided at its premises. This note (given the absence of any more specific information) conveys the impression that Mail Call unilaterally determined both the rates it charged its clients and the corresponding courier payment entitlement (subject to the minimum payment provision).
- (c) A "recipient created tax invoice" provided by Mail Call and ambiguously attributed to "driver 573 HF Express" as the supplier. The invoice's delivery destination was Mr Qian's residential address, but it used HF Express' ABN (rather than that of Mr Qian). The invoice amount reflected the total amount of the job and fuel costs in the corresponding Mail Call payment summary, plus a "shortfall" adjustment.
- (d) A tax invoice created by Mail Call, addressed (with the same ambiguities as the "recipient created tax invoice") to "driver 573" and "HF Express" and relating to both "intermec"[9]
“Intermec” is a brand name for a “mobile Data Collection Terminal”. I assume that is the “PDA” referred to in the “Notice” document, and that this insurance relates to such a device. and public lability insurance coverage. - (e) A statement of the amount of Mail Call's cheque payment (apparently to HF Express).
- (f) A handwritten statement of the amounts HF Express actually transferred to Mr Qian's bank account (82% of the Mail Call cheque payment amount).[10]
I note there was no evidence of the provenance of these handwritten reconciliations and no evidence of HF Express having issued an invoice to Mr Qian in relation to its 18% “management” charge.
35. The practical effect of the payment related information contained in those various documents is summarised in the following Table:-
| Mail Call - Payment Summary | HF Express | |||||||||
| Week | Days | Job | Fuel | Shortfall | Gross | Ins'nce | Net | Invoice | Fee | Payment |
| (ending) | 18% of net | to Qian | ||||||||
| 15-May-16 | 4 | 726.65 | 29.09 | 0 | 755.74 | 24.58 | 731.16 | 755.74 | 131.61 | 599.55 |
| 22-May-16 | 5 | 1,008.80 | 40.35 | 1,077.99 | 2,127.14 | 24.58 | 2,102.56 | 2,127.14 | 378.46 | 1,724.09 |
| 29-May-16 | 5 | 1,214.83 | 48.65 | 338.12 | 1,601.60 | 24.58 | 1,577.02 | 1,601.60 | 283.86 | 1,293.15 |
| 5-Jun-16 | 5 | 1,072.79 | 42.89 | 485.92 | 1,601.60 | 24.58 | 1,577.02 | 1,601.60 | 283.86 | 1,293.15 |
| 12-Jun-16 | 5 | 1,024.81 | 40.99 | 535.80 | 1,601.60 | 24.58 | 1,577.02 | 1,601.60 | 283.86 | 1,293.15 |
| 19-Jun-16 | 4 | 1,009.24 | 40.41 | 231.63 | 1,281.28 | 24.58 | 1,256.70 | 1,281.28 | 226.21 | 1,030.49 |
| Total | 28 | 6,057.12 | 242.38 | 2,669.46 | 8,968.96 | 147.48 | 8,821.48 | 8,968.96 | 1,587.87 | 7,233.58 |
36. The Table shows that neither the HF Express invoice, the Mail Call gross amount, nor the HF Express payment total reconciles precisely with the Total Sales reflected in Mr Qian's June 2016 BAS:- see paragraph 4 above. It is (arithmetically) obvious that the "GST on Sales" amount shown in the 2016 BAS has been derived from an approximation of the HF Express payment amount - rather than from the actual invoice total amount.
37. The basis for the various components of the "job cost" shown in the payment summaries was not detailed in the 9 May 2016 agreement or the Notice. Neither was it otherwise explained in the evidence. Mr Qian, in explaining that he did not personally issue any invoices for the individual deliveries he affected, stated that there were standard charges. (I infer that those "standard charges" were determined by Mail Call:- see paragraph 34(b) above.) There is no evidence that he issued (or received any recipient generated) invoice in relation to the HF Express payment amounts. Nor is there any evidence that he received a tax invoice from HF Express in relation to its "management fee".
38. Similarly, the nature and calculation basis of the "shortfall" amount was neither explained in, nor readily discernible from, the
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payment summaries. The fact of some minimum daily payment is indicated by the "guarantee" reference in the "Notice" document. An amount ($280 per day plus GST = $308, plus a fuel levy) was referred to in the "Direct Couriers" reference document of 3 May 2016 and in a March 2017 email from the applicant's accounting service. However, that does not seem to be the amount that was actually used in calculating the payments Mail Call / HF Express made. The following Table correctly allocates the shortfall amounts for the first two payments to the relevant work week, and adjusts the payment summary and payment information accordingly. (The $1,077 shortfall amount recorded in the first Table covered the two week period from 10 to 22 May 2016.)| Mail Call - Payment Summary | Shortfall | |||||||
| Week | Days | Job | Fuel | Shortfall | Gross | Ins'nce | Net | $Gross/pd |
| (ending) | "actual" | "actual" | "actual" | calculated | ||||
| 15-May-16 | 4 | 726.65 | 29.09 | 525.54 | 1,281.28 | 24.58 | 1,256.70 | 320.32 |
| 22-May-16 | 5 | 1,008.80 | 40.35 | 552.45 | 1,601.60 | 24.58 | 1,577.02 | 320.32 |
| 29-May-16 | 5 | 1,214.83 | 48.65 | 338.12 | 1,601.60 | 24.58 | 1,577.02 | 320.32 |
| 5-Jun-16 | 5 | 1,072.79 | 42.89 | 485.92 | 1,601.60 | 24.58 | 1,577.02 | 320.32 |
| 12-Jun-16 | 5 | 1,024.81 | 40.99 | 535.80 | 1,601.60 | 24.58 | 1,577.02 | 320.32 |
| 19-Jun-16 | 4 | 1,009.24 | 40.41 | 231.63 | 1,281.28 | 24.58 | 1,256.70 | 320.32 |
| Total | 28 | 6,057.12 | 242.38 | 2,669.46 | 8,968.96 | 147.48 | 8,821.48 | 1,921.92 |
39. When the payment information is presented in that fashion, it indicates the following
- (a) the "job" amount total was always much less than that recorded as Mr Qian's "total gross remuneration" entitlement for his work with Mail Call
- (b) Mr Qian's actual "gross" amount simply reflected the payment of a daily amount - unrelated to the value of the jobs he carried out
- (c) his actual "gross" appears to have been based on a fixed daily rate of $320.32 - rather than a "guarantee" amount calculated in accordance with the contents of the "Direct Couriers" reference document of 3 May 2016.
THE PRACTICAL WORKING OF THE HF EXPRESS AGREEMENT
40. A reasonable inference from the contract documents, the payment summary information and invoices, and one Mr Qian confirmed in his evidence, was that HF Express operated as either a type of "labour hire firm", an employment agency or broker, or a mere payment manager and facilitator of arrangements between a driver and the particular courier company with which they worked. Accurately penetrating that obscurity is hampered by the absence of evidence of any contractual arrangements HF Express had with Mail Call. And although the content of the payment summary and invoice documents I outlined earlier suggest some understanding existed between Mail Call and HF Express, there is little evidence to establish the nature and content of that understanding with any degree of confidence. Mr Qian himself described HF Express' role as that of recommending courier companies to drivers. He agreed with a proposition that, in response to a recommendation a driver "had to go off and make your own arrangements with (the courier company) as to whether or not they would accept you, or you would accept them". That evidence does not necessarily suffice to clarify the precise nature and content of the "arrangements", but it does contribute to the likelihood that HF Express did not itself conduct any courier business. Indeed the evidence is bereft of any specific information that, apart from recommending drivers to a courier company, HF Express had any significant role in contributing to the conduct of any courier business. There was certainly no specific evidence about the existence and terms of any contract between HF Express and Mail Call.
41. In working exclusively for Mail Call Mr Qian was allocated a "driver number" and supplied with (i) a PDA (personal digital / data assistant) unit, (ii) the company's uniform, and (iii) a stick-on graphic for his van. Mr Qian wore the company uniform when he worked. He also installed the company graphic on his van. The graphic bore Mail Call's name and its contact information. The graphic was the only business identification on the van. Mr Qian believed that he would not have been permitted to display, and he did not display, his own personal details.
42. Mr Qian said he normally worked a full working day, for five or six days a week.[11]
43. Mail Call allocated all jobs via messages sent to Mr Qian's PDA unit.[12]
44. In that context, I note that the second of the payment Tables I set out earlier reveals that Mr Qian was in fact always paid a "shortfall" amount. This suggests that, despite the contents of paragraphs 3, 5 and 6 of the Notice document (see paragraph 27 above), Mr Qian's practice of rejecting some jobs did not result in the loss of his minimum daily payment amount.
45. Mr Qian said he personally carried out all the delivery jobs for Mail Call, and never delegated or sub-contracted the work to anyone else. Each job involved collecting goods at their point of despatch, logging or acknowledging the collection on the PDA unit, and driving to the required destination. At the destination the delivery and receipt of the goods would also be logged or acknowledged on the PDA.
46. I infer that the activities allocated on the PDA unit supplied to Mr Qian, and his subsequent "logging" of their performance, provided the basis for the "job" information subsequently included in the various payment summaries and invoices. Mr Qian did not himself issue any separate invoices for the work he did. He said such a practice would have been impractical. Neither did he operate any separate business bank account.
47. In relation to the various invoices for insurance (see paragraph 34(d) above), Mr Qian explained that (as he understood the position) HF Express arranged the insurance, and deducted the premium payment from the
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amount payable to him. However, the insurance invoices suggest that the insurance had in fact been arranged by Mail Call, and that it deducted the premium cost from the amounts it paid to HF Express. Mr Qian said he believed the policies were in his name, but he conceded that he had left it "with the company" to organise and that he never saw either the policy documents or any certificates of insurance.MR QIAN'S ACTIVITIES AFTER 19 JUNE 2016
48. Despite the fact he did not provide any evidence of having received payment summaries for the period after 19 June 2016, Mr Qian said he had continued to work for HF Express / Mail Call after that date. A while later, the precise timing of which he could not recall, Mr Qian started to work for Direct Couriers. He could also not specifically recall whether he had continued to work with Mail Call once he had started to work for Direct Couriers. He conceded however that normally he would wear the uniform of the company that he was working for, and also display their logo on his van. That normal practice tends to suggest the likelihood that the substance of the contractual arrangements was that, in any given period, he worked exclusively for the one courier business, and did no work on his own account.
49. On 14 September 2016 Mr Qian entered into a written agreement with Easy Connect. This agreement seems to have replaced, and at least in its length and wording, significantly differed from, the 9 May 2016 agreement with HF Express. Under the terms of this agreement Easy Connect was described as a "freight broker" and Mr Qian as a "contract courier". Both were said to have been appropriately "authorised" by Mail Call Couriers Pty Ltd,[13]
50. The September 2016 Easy Connect agreement recited that Mr Qian was "authorised" by Mail Call, Direct Couriers and two other businesses, and held himself out to the public as a contract carrier for them. Since Easy Connect was said to be similarly authorised to arrange for courier deliveries by the same businesses, the stipulation that Easy Connect was Mr Qian's "agent" seems incongruous. Its apparently intended purpose was to characterise Mr Qian as the principal in every carriage contract, notwithstanding Easy Connect's stated payment obligation. That appearance comes from the additional stipulation that, in the event of non-payment by a consignor, Mr Qian agreed to transfer and assign his right to payment "for the purposes of collection and recovery by the responsible party(s)".
51. The business practice suggested by the various parts of the Easy Connect agreement is far more explicit than the "contract documents" Mr Qian proffered in relation to his work activities in the June 2016 quarter. If the Easy Connect agreement reflected reality, it would add some force to the argument that it involved a true relationship of independent contracting, irrespective of the character of Mr Qian's previous arrangement with HF Express and Mail Call. But there was scant evidence about the way the Easy Connect arrangement worked. At one point Mr Qian said that after the 14 September 2016 agreement he had continued to work much the same as before, save for changing (uniform and signage) from Mail Call to Direct Couriers. At another point he said that Easy Connect was a broker for individual jobs and that he was paid daily, according to the jobs he had done that day. This limited evidence is too imprecise to justify positive satisfaction that the nature and character of Mr Qian's work arrangements materially altered at any time after 30 June 2016. Consequently I find that Mr Qian's courier work was conducted in substantially the same manner for the whole period from the time of his May 2016 commencement with Mail Call / HF Express until the time of the November 2016 incorporation of Morgan Express Pty Ltd. Mr Qian explained that he took the step of incorporating that company on the advice of his accountant, and after that he had started to accept work from other companies and having "upgraded" his business. Subsequently Morgan Express Pty Ltd entered into an agreement with a large transport company (Capital Transport) and began to provide transport services to that company.
MR QIAN'S ARGUMENT
52. Mr Qian conceded the obscurity of the information originally provided to the Commissioner, particularly in so far as it conveyed the impression that HF Express operated as a courier business, rather than as a labour hire firm / payment intermediary. However, having provided that explanation of HF Express' activities, and emphasising his dealings with Mail Call, Mr Qian contended that proper consideration of the six "key indicators" in TR 2005 / 16 led to the conclusion that he had been conducting an enterprise, and was not to be classified as an employee. The specific arguments advanced in relation each of the "key indicators" were to the following effect:-
- (a) Control :- The minimum attendance requirements in the Notice (11 hours a day and five days a week) were not probative of a relevant degree of control. They were merely a threshold condition of eligibility for the guarantee amount. The contractual stipulation that the guarantee amount would not be payable "for the first two weeks" if a driver was "too slow" ought not be regarded as determinative. In relation to the actual courier work, Mr Qian was in fact free to accept or reject individual jobs. He was also unsupervised and unaccountable in relation to the manner in which he worked. He chose his own routes and timing, and the practices he used in loading and unloading.
- (b) Independence (integration or organisation) :- He was essentially operating his own business because (i) he was able (subject to foregoing compliance with the eligibility conditions of the guarantee entitlement) to determine what days and hours he worked, (ii) he was able to accept or reject individual jobs and, (iii) he had no payment or benefit entitlement, other than for the performance of each individual job he accepted - subject to the minimum payment entitlement. He was not a "representative of the companies he worked with". The fact that he worked only for Mail Call / HF Express in the June 2016 quarter was a matter of self-interested preference, not an obligation that informs the proper characterisation of the relationship.
- (c) Basis of payment (results) :- The fact that the contract provided for a minimum daily payment is not relevantly informative of an employment relationship. It needs to be understood against a background that Mr Qian had negotiated a minimum daily payment amount (assertedly $280 plus GST and a fuel levy). In reality it was not a "time based" payment entitlement, and was inconsistent with an employment type of relationship.
- (d) Delegation :- There was no contract provision that precluded Mr Qian from subcontracting or delegating his work. The acknowledged fact that Mr Qian did not delegate was a matter of preference and practicality, not prohibition. It is, therefore, uninformative of the true character of the relationship.
- (e) Commercial risk :- Neither Mail Call nor HF Express provided workers' compensation or superannuation benefits. Mr Qian bore "all commercial risks". He provided, and was consequently responsible for, all the transport equipment - other than the PDA unit.
- (f) Equipment :- The most significant item of equipment Mr Qian used was his own van. The importance of the van, especially in the light of its approximate $46,000 cost, contributes to the conclusion that he was carrying on his own enterprise.
53. In addition to the arguments about the proper characterisation of his relationship with HF Express up to 30 June 2016, Mr Qian also contended that his September 2016 agreement with Easy Connect demonstrated his status as an independent contractor. That demonstration was said to preclude the satisfaction required by the GST Act s 25-55(2(b) (i.e., satisfaction on reasonable grounds that he was not likely to carry on an enterprise within the ensuing twelve months). I have rejected the substance of this argument - for the reasons I gave earlier:- see paragraph 51 above.
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INDEPENDENCE, DELEGATION AND PAYMENT
54. Mr Qian's submissions on these topics discount the reality of his required identification with Mail Call in the work he did in the June 2016 quarter. He was liveried as a representative of that company. There was no external indication that he was working to any extent in his own enterprise. In addition, whilst Mr Qian may have had some freedom to accept or reject individual jobs, the basis on which he did so was really a matter of objective practical efficiency. That efficiency served both his own interests and those of Mail Call (having regard to its potential "guarantee" liability). For that reason, the discretion has an equivocal significance in informing the characterisation of the arrangement. More significantly, all jobs were generated and then allocated by Mail Call. So far as it appears from the evidence, it controlled the rates and the total cost for each job. It also controlled the accounting system that recorded the relevant rates and (no doubt) generated the payment summaries and invoices I have described.
55. In addition, Mr Qian was presented, because of his required personal and van livery, as part of Mail Call's business. There are cases where such a presentation has not been regarded as a determinative consideration:- see paragraphs 75, 76, 80 & 81 below and
Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19; (2006) 226 CLR 161 at [8] & [14]-[16]. But the reality is that in the present case Mr Qian's putative "enterprise" lacked many, indeed most, of the features regarded as characterising an activity that properly merits characterisation as a business:- see
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 per Bromberg J at [217].[14]
56. But those considerations are not themselves determinative. That is partly for the reason alluded to in the second sentence of the previous paragraph. It is also because a demonstrated desire to carry on a business that substantially involves personal work, and an express acknowledgement of the intention and its application to the activity under consideration, may be regarded as relevantly probative:- see
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37 at [194]. In that context, potentially significant considerations, pointing against the employment characterisation, were (i) the reference to workers' compensation and superannuation in the HF Express agreement:-
ATC 7928
see paragraph 26 above, and (ii) the appearance that, as a result of the details in the payment summaries, Mr Qian paid for his own public liability insurance:-Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19; (2006) 226 CLR 161 at [31].
57. The proposition that Mr Qian was free to delegate performance of courier work is consistent with the observations I made earlier about the content of the standard wording in the HF Express agreement:- see paragraph 26 above. It is not contradicted by any express provision in the Notice. On the other hand, an unrestricted ability to delegate does not seem likely to reflect the practical reality of the relationship Mr Qian had with Mail Call and HF Express. The Notice document consistently describes the work role as that of a "driver", and contemplates that the "driver" should be available for the 11 hour a day / five days a week, work period. Similarly, the various "payment summaries" and invoices identify Mr Qian's role as a "driver". All of those indications contribute to an inference that the underlying reality of the arrangements was that Mr Qian would personally be performing all of the courier work. The conceivable, but unexpressed, contractual permissibility of delegation does not meaningfully inform the character of the relationship where (as in the present matter) the objective circumstances tend to contradict its likely, or likely to be tolerated, (other than occasional) occurrence:- see
On Call Interpreters and Translators Agency Pty Ltd v Commissioner of Taxation (No 3) [2011] FCA 366; (2011) 214 FCR 82 at [283] per Bromberg J at [283].
58. Mr Qian's submissions emphasised the daily "guarantee" amount was something he had negotiated at the outset of his dealings with HF Express, and appeared to focus on that circumstance as the principally relevant consideration. Implicit in that emphasis was the proposition that, despite the minimum daily "guarantee", Mr Qian had a direct potential interest in the performance of individual contracts of carriage he completed on Mail Call's behalf.
59.
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The information summarised in the Tables set out earlier in these reasons shows that Mr Qian was only ever paid at a rate that reflected a set daily amount. Moreover, the "payment summaries" never calculated Mr Qian's actual daily total "job" value or shortfall. Neither did they convey any meaningful information about how the total "shortfall" amounts had been calculated. The expressed pre-condition to the guarantee entitlement was commitment to an 11 hour working day. The Notice document threatened the sanction of a total loss of the "guarantee" (for an entire working week) in the event of any non-attendance, or job rejection. Despite that threatened sanction, and notwithstanding Mr Qian's asserted rejection of some jobs, he was nevertheless paid at the "shortfall" rate. Against that background the practical reality of the situation is most appropriately viewed as one where Mr Qian was simply paid a daily rate for his commitment to an 11 hour working day, and was not, in any relevant sense, paid for the actual individual courier tasks that he performed.60. The objective reality of Mr Qian's actual payments is consistent with an employment relationship where he was paid at an agreed rate for the time he worked.[15]
61. Throughout the whole 28 week period of Mr Qian's work for Mail Call in the June 2016 quarter his weekly total "Job" value was always much less than his total "Gross Remuneration". That fact prompts some scepticism about the reality of the proposition that his payment was genuinely intended as a "minimum" (as distinct from a fixed) entitlement. But, despite their obscurity, the "payment summaries" do reflect a systematic process of recording and reporting individual jobs and identifying their specific components. Moreover, the proportions of "Job" to "Gross Remuneration" reported in the payment summaries varied widely - from about 56% (in the first week) to almost 79% (in the last week). In those circumstances the limited evidence does not permit a conclusion that the "minimum payment" agreement underlying the "shortfall" components recorded in the payment summaries was not a genuine arrangement, and one probative of Mr Qian's direct interest in the individual "Jobs" allocated to him.
THE CONTROL ISSUE
62. Taxation Ruling TR 2005 / 16 (at [26]) describes "control" as the classic criterion for differentiating between employment and independent contractual arrangements. That may be accepted in the contrast between the unskilled labourer engaged in full-time work, and the skilled tradesman engaged episodically to perform specific tasks:- see e.g.,
Sweeney v Boylan Nominees Pty Ltd [2006] HCA 19; (2006) 226 CLR 161. But its actual utility as a determinative consideration is confounded where either the practical scope for control is limited by the skilled nature of the worker's role, or where a contractor's task involves close identification with the principal's business and integration with their workforce. In the former case, it is said that "what matters is lawful authority to command so far as there is scope for it". But that proposition is complemented by the (perhaps not entirely informative) rider "and there must always be some room for it, if only in incidental matters":-
Zujis v Wirth Brothers Pty Ltd (1955) 93 CLR 561 at 571. Even an extensive degree of integration, and prescriptive control over a contractor's activities, may be characterised as no more than a reflection of the practical necessity for "the efficient and profitable conduct" of the principal's business:- see paragraph 73 below. These different emphases point to the importance of careful examination of the evidence about the practicability of control, its actual assertion and its contractual source.
63. The terms of the Notice document suggest that the substance of Mr Qian's arrangement with Mail Call, as the relevant contract courier, was that he was effectively limited to working exclusively for it. In so doing, and as a matter of practical necessity, he used their business systems for obtaining, and recording his performance of, individual courier tasks. In addition, although this requirement was not expressed in the Notice document itself, he had to present both himself and his van, as representing Mail Call.
64.
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In relation to the manner in which he worked in loading, transporting and delivering individual job loads, Mr Qian typically operated away from Mail Call's premises and was not in fact directly supervised. To that extent he had a substantial degree of practical autonomy. However, it would be naive to regard the brief 9 May 2016 Agreement and the inelegantly expressed Notice as reflecting the totality of the terms of the relationship between Mr Qian, Mail Call and HF Express. Their incompleteness (in omitting any reference to either the use of Mr Qian's own vehicle, material aspects of his payment entitlement and the livery requirements Mail Call imposed) tend to illustrate that point. Furthermore, the "authorisation" and the instruction compliance obligation in the 14 September 2016 Easy Connect contract (see paragraph 49 above) are likely merely to have expressed mutually understood features of the previous arrangement between Mr Qian and Mail Call.[17]65. However, there is little basis for satisfaction that Mail Call's ability to control Mr Qian's manner of working had a contractual, as distinct from practical, basis. In that context the likely reality of Mail Call's actual and potential practical control is not significantly influential in the characterisation of the relationship. In expressing that view I am influenced by the observation of Dixon J in in
Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 552 that the reservation of a right to direct or superintend the performance of a task cannot transform into a contract of service what is essentially an independent contract. (That case involved a cattle droving contract, and might be characterised as partly analogous to the work of an urban vehicle courier.) I am also influenced by the observation of Wilson and Deane JJ (in
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 37 & 38 that "even the most independent of contractors is subject to some direction in the performance of his work".
THE SIGNIFICANCE OF THE EQUIPMENT
66. So far as the evidence revealed, Mr Qian provided any equipment and material required to perform the courier work he undertook, with the exceptions of the PDA unit, his uniform and the graphic displayed on his Renault van. His van purchase was wholly financed by a $47,000, 5 year loan, involving monthly payments of $898 and a total interest cost of about $6,500. Consequently, the total vehicle acquisition cost approximated $54,000, and involved a significant commitment. Relying on its monetary significance (and the nature of the van as a commercial vehicle) Mr Qian's argument invoked what has been described as the "conventional view" that a transport contractor who supplies their own motor vehicle is not to be characterised as an "employee". This conventional view has been reflected in various decisions, including
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 25, 36 & 38;
Queensland Stations Pty Limited v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539;
Humberstone v Northern Timber Mills (1949) 79 CLR 389.
67. The factual circumstances involved in the Humberstone decision, and the different views of Latham CJ and Dixon J about them, highlight the impressionistic nature of the task involved in the characterisation of any particular work relationship involving the carriage of goods. Mr Humberstone was a licenced carrier. In earlier years he had conducted his own business and worked for the public generally. However, for many recent years although he continued to operate (at his own expense) a truck that bore only his name, he had worked exclusively for the Timber Mills (apart from occasional odd jobs). In this situation Latham CJ thought that the proper conclusion was that Mr Humberstone carried on a business on his own account "but found that the requirements of the firm kept him fully occupied with all the work which he wished to do" (at 396). On the other hand, Dixon J rejected the idea that Mr Humberstone was conducting an independent trade or business, but nevertheless concluded that the work relationship was not one of master and servant. His Honour said this (at 404 - 405):
"The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions. In the present case the contract by the deceased was to provide not merely his own labour but the use of heavy mechanical transport, driven by power, which he maintained and fuelled for the purpose. The most important part of the work to be performed by his own labour consisted in the operation of his own motor truck and the essential part of the service for which the respondents contracted was the transportation of their goods by the mechanical means he thus supplied. The essence of a contract of service is the supply of the work and the skill of a man. But the emphasis in the case of the present contract is upon mechanical traction. This was to be done by his own property in his own possession and control. There is no ground for imputing to the parties a common intention that in all the management and control of his own vehicle, in all the ways in which he used it for the purposes of carrying their goods, he should be subject to the commands of the respondents." (emphasis added)
68. That view was influential in the subsequent decision of the High Court in
Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16. That case concerned the status of a "snigger" and a truck driver
ATC 7931
engaged by the sawmilling company to load and carry felled trees as part of its logging operations. Both men were engaged on a seasonal basis, provided their own trucks and tractors, operated them at their own cost, determined their own hours of work, were paid according to the volume of timber they handled, and were free to do other work when not required by the sawmilling company. In those circumstances, notwithstanding the overall role of the sawmilling company's on site supervisor, Mason CJ (like Wilson, Dawson and Brennan JJ) thought that there was "no basis for inferring an intention that (the supervisor) should have authority to direct … the management and control of their equipment" (at 26).69. The substance of Mr Qian's argument was that the "conventional" view - exemplified by the earlier cited passage from the judgment of Dixon J in Humberstone - was correct, and had been effectively endorsed by the majority decision of the High Court in the "bicycle courier" case -
Hollis v Vabu Pty Ltd (2001) 207 CLR 21. That endorsement was said to be a necessary consequence of the qualification expressed in the second sentence of paragraph [47] of the plurality judgment. There, after criticising the NSW Court of Appeal for having "made too much" of the circumstances that the Vabu couriers provided their own bicycles, the judgment continued:-
- [47] … Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might, for example, be appropriate where the investment in capital equipment was more significant, and greater skill and training were required to operate it. The case does not deal with situations of that character. The concern here is with the bicycle couriers …
70. In the same case McHugh J has said that because the Vabu couriers were subject to "extensive control and direction", if the couriers had only been bicycle couriers, there would have been much to be said for their characterisation as employees. But His Honour opined that "given the course of authority in this court concerning workers who provide their own equipment, it seems impossible to say that those couriers who provide their own motor vehicles were employees":-
(2001) 207 CLR 21 at [71].[18]
71. The bicycle courier decision in
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Hollis v Vabu Pty Ltd (2001) 207 CLR 21 has an informative history. Five years earlier the New South Wales Court of Appeal had decided that all of Vabu's couriers (some of whom provided their own light commercial and passenger type motor vehicles) were independent contractors for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth):-[19]
Vabu Pty Ltd v Federal Commissioner of Taxation (1996) 33 ATR 537. In that matter, notwithstanding the existence of detailed prescriptive "work conditions" and "rules" that governed the couriers' work (see 207 CLR 21 at [17]&[18]) Meagher JA (with whom Sheller and Beazley JJA agreed) relied on the fact that Vabu's couriers bore the "very considerable" expenses of "providing, maintaining and insuring their own vehicle" (and other ancillary equipment) as indicating they were independent contractors:- see
(1996) 33 ATR 537 at 538.
72. But neither that decision, nor a concession to the same effect made in both the trial and appeal proceedings, was regarded as determinative of the status of the bicycle courier who injured Mr Hollis. In the High Court decision in
Hollis ((2001) 207 CLR 21 at [16] & [22]) the majority observed that the evidence in the 1996 taxation decision had only concerned Vabu's motor vehicle couriers. They pointed out that Meagher JA's characterisation of the couriers as having borne "very considerable" expenses, had to be understood in that context. Without expressing a concluded view, the majority suggested that the taxation decision might have been different in relation to bicycle couriers - because "the purchase and maintenance of a bicycle could hardly be termed a 'very considerable' expense" (at [22]). The majority judgment in the High Court then went on to address the factors that were positively influential in characterising the relationship between Vabu and its bicycle couriers as one of employment. Those factors included the following:-
- (a) the bicycle courier's work required no particular skill or qualifications - at [48] & [49]
- (b) in the light of Vabu's detailed work prescriptions, including the express prohibition against refusing work, the bicycle couriers had little control over the work they did - at [49] & [50]
- (c) the couriers were liveried as representatives of Vabu and were required to adhere to its appearance standards - at [52] - [54]
- (d) Vabu managed the courier's finances, and they had little scope to bargain their remuneration rate - at [55]
- (e) the couriers had no practical ability to pursue any other business activities - at [55]-[56]
- (f) the capital outlay for the bicycles was small and ambiguous in its purpose - at [57].
73. In coming to this conclusion the plurality in Hollis distinguished the position of Vabu's bicycle couriers from that of the motor vehicle couriers considered by the New Zealand Court of Appeal in
TNT Worldwide Express (NZ) Ltd v Cunningham [1993] 3 NZLR 681. In the TNT case the drivers had to provide (and bear the costs of operating) their own vehicles, present them in TNT's livery, and work exclusively for TNT. They were paid on the basis of a schedule of rates, subject to an assured minimum monthly payment (save for December and January). Despite those aspects of the relationship the plurality in the High Court in Hollis regarded the TNT case as one where the drivers were only subject to the degree of control "necessary for the efficient and profitable conduct" of the courier business, and that their relationship with TNT should be characterised as that of an independent contractor:- see
(2001) 207 CLR 21 at [58].
74. The Commissioner's response to Mr Qian's reliance on the "conventional" view (given its arguable endorsement in the Hollis decision) was that the circumstances of his work were not materially distinguishable from those of Vabu's bicycle couriers. Particularly relevant similarities were said to be (i) the "take it or leave it" payment rates, (ii) the allocation of work by the putative employer company and the limited scope for "bidding" for individual jobs, (iii) the provision of equipment (i.e., the PDA unit), (iv) the required use of the company provided livery and, (v) the inflexible deduction of insurance premiums from payments:- see
Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [4]-[6], [18]. Given that essential similarity of the work circumstances, the fact of Mr Qian's use of his own van did not alter the otherwise appropriate characterisation of Mr Qian's work status.
75. The different emphasis the parties placed on Mr Qian's van ownership, its work use and his presentation in Mail Call's livery, repeated the opposing positions that had been resolved, albeit in a different context, by the New South Wales Court of Appeal in a 2005 decision involving a motor vehicle owner / driver engaged in courier work:-
Australian Air Express Pty Limited v Langford [2005] NSWCA 96; (2005) 147 IR 240. The controversy involved Mr Langford's potential entitlement to common law damages in connection with a July 1999 workplace injury. If his status was that of an employee, his right to common law damages would have been restricted by provisions of the Safety, Rehabilitation and Compensation Act 1988 (Cth). Mr Langford worked solely for Australian Air Express, a wholly owned subsidiary of Qantas and Australia Post. His work was the subject of a formal written (and union approved) agreement that (amongst other things) described him as an independent contractor and set out specific "piece rates" governing his payment entitlements, including a minimum weekly amount. Under the agreement Mr Langford supplied his own vehicle, and was solely liable for its associated costs. He was obliged to be available for 10 hours a day, perform the work allocated by Australian Air Express and comply with their systems, practices and instructions. In performing his work he used their office equipment, and their yard personnel and equipment for his work. He also liveried himself in an Australian Air Express uniform, and displayed their signage on his vehicle.
76. In rejecting the proposition that Mr Langford was an employee of Australian Air Express McColl JA made findings to the
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following effect:-- (a) (based on both the qualification in the plurality judgment in Hollis and the different reasoning in the judgment of McHugh J) the provision of a substantial item of work equipment could be determinative of the relationship characterisation, notwithstanding the extent to which the person could be regarded as working "in" the employer's business and presented as the employer's representative (at [27] - [31])
- (b) The courier's uniform and vehicle livery, and their obligation to comply with instructions, practices and procedures, reflected nothing more than the basic requirements for the proper conduct of the principal's business, and was not probative of an employment relationship (at [43]).
77. McColl JA's reasoning in Australian Air Express explicitly rejected the proposition that the value and significance of the equipment provided by the putative employee could not be determinative of the character of the relationship. Her Honour noted two decisions (both dated prior to the High Court decision in Hollis) involving owner drivers who had been held to be employees because of the degree of control to which they had been subject. But drawing on both the reasoning in Humberstone and the reservation expressed in the plurality judgment in Hollis, McColl JA said the underlying consideration was that ownership of the principal means of contractual performance tended to be inconsistent with the ability of the putative employer to control the manner of its use. That inconsistency was determinatively greater where the equipment in question was of significant value:-
[2005] NSWCA 96 at [36]-[39].
78. Against that background McColl JA considered that Mr Langford's entitlement to a minimum weekly sum was not determinative of the character of the relationship. Drawing on the decisions to the like effect in both TNT and in
Ready Mixed Concrete (South east) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497 at 526, McColl JA said that such a provision was "consistent with the notion of a retainer to ensure the continued availability of the respondent's truck and services even in periods where the appellant's business was not as busy as usual":-
[2005] NSWCA 96 at [74].
79. Similarly McColl JA did not regard Mr Langford's limited ability to delegate his role as a driver (it applied only when he wanted to take leave and was subject to approval) as conclusive of his status as an employee. On the contrary, McColl JA though that the ability to delegate performance of the work, despite its limited extent, tended to reinforce the importance of the vehicle for the performance of the contractually required work, and was a recognition of the extent of his responsibility, as an independent contractor, for (a) all the costs associated with the vehicle and its operation and, (b) organising, compensating and insuring any delegated driver that he recruited:- see
[2005] NSWCA 96 at [[64].
80. The circumstances considered in
Ready Mixed Concrete (South east) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497 involved the engagement of approximately 700 "owner drivers" under a standard form of contract. The significant provisions of the standard contract were to the following effect:-
- (a) each contract was for a fixed period, which varied from two to five years
- (b) the contracted owner driver had to provide his own truck and was responsible for its maintenance and insurance expenses, including any repairs directed by Ready Mixed and the insurance it arranged
- (c) the driver was to attend Ready Mixed's premises, where he was allocated delivery loads (on the basis of an agreed system of rotation), and could be required to drive for the maximum lawfully permitted daily hours
- (d) the driver had to comply with directions whilst on Ready Mixed's premises, but was not subject to direction about the routes to be followed or as to the practices to be followed in effecting deliveries
- (e) the driver had to operate the vehicle himself, subject to an ability to hire a replacement - during periods of incapacity and subject to Ready Mixed's consent
- (f) the driver had to present the truck in Ready Mixed's colours, wear the company's uniform, comply with the company's rules and not otherwise operate as a carrier.
- (g) the driver was paid at a rate per volume of delivered concrete, subject to a minimum annual total payment (and subject to the driver being available for a specified minimum number of days in each year).
81. In Ready Mixed MacKenna J held that the contracted owner drivers were independent contractors rather than employees. But the judge's reasoning was slightly different from that of McColl JA about the significance of contractor's provision of the vehicle. Whereas McColl JA regarded that as a consideration pointing to the unlikelihood of the putative employer's relevant control, MacKenna J thought that was not consistent with the actual contractual provisions that evidenced a significant degree of control. The more significant point to MacKenna J was the substantial role of the vehicle in performing the contractual obligations, and the owner driver's contractual responsibility for its operating and maintenance costs. Those considerations justified the conclusion that the substance of the arrangement was for the provision of the truck, rather than for the service of the driver:-
[1967] 2 QB 497 at 523 & 525.
82. In relation to the potential significance of Ready Mixed's ultimate ability to influence the way in which the contractors discharged their contractual obligations MacKenna J said this (at
[1967] 2 QB 497 at 526):-
It is true that the company are given special powers to ensure that he runs his business efficiently, keeps proper accounts and pays his bills. I find nothing in these or any other provisions of the contract inconsistent with the company's contention that he is running a business of his own. A man does not cease to run a business on his own account because he agrees to run it efficiently or to accept another's superintendence:.
83. In a further attempt to rebut Mr Qian's reliance on the significance of his van purchase and operation, notwithstanding the qualification expressed in Hollis and the decision in Langford, the Commissioner relied on observations in three subsequent decisions:-
Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448;
ACE Insurance v Trifunovski (2013) 209 FCR 146 and
Re Trustee for SR & K Hall Family Trust and Commissioner of Taxation (2013) 96 ATR 930.
84. The 2010
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Roy Morgan decision involved market researchers who worked for a well-known market research organisation. It was one of a series of cases that had addressed the contractual status of interviewers the company engaged to conduct market research. InRoy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (Vic) (1997) 37 ATR 528 the evidence was that Roy Morgan provided all materials required for the work, other than telephones and a vehicle. But the company provided all the other material requirements for the work, and paid for their travel expenses (either for taxi fares or at a fixed rate per kilometre travelled). The Victorian Court of Appeal noted that the nature of Roy Morgan's market research business resulted in the interview task being very controlled and prescriptive. In concluding that the relationship was one of employment, Winneke P said this (at 538):-
In my opinion, on no sensible view of the evidence could it be said that the interviewers were conducting such a business on their own account, as distinct from participating in the business of the appellant. In truth they were engaged by the appellant to conduct interviews on behalf of the appellant in a manner and form strictly controlled by the instructions given to them by the appellant. Accordingly, they were told to represent themselves to respondents as engaged in a "Morgan" research programme to give credibility to their task. If the function was not performed in accordance with the instructions given the sanction was that no further assignment would be made available. Close conformity with instructions was essential to the appellant in order that it could comply with its own obligation to its customers to provide accurate survey results.
85. The South Australian Full Court dealt with essentially the same question, involving payroll tax liability, in
Commissioner of State Taxation v Roy Morgan Research Centre Pty Ltd [2004] SASC 288; (2004) 90 SASR 12. That case proceeded on the same factual understanding as the earlier Victorian decision, with the perhaps added information that Roy Morgan (i) reimbursed interviewers for all their travel and telephone expenses, (ii) informed interviewers that they were not employees and no PAYG tax instalments would be deducted from their remuneration and (iii) told interviewers that the company abided by "all legal requirements such as superannuation". Given the essentially similar facts, the South Australian Supreme Court came to the same result as the Victorian Court of Appeal Court.
86. The third Roy Morgan case (
Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448) involved the question as to whether the company's interviewers were employees for the purposes of the Superannuation Guarantee (Administration) Act 1992 (Cth). The factual circumstances relating to the interview task, and the terms under which the interviewers were engaged, were substantially the same as those involved in the previous matters. Again the Court held that the relationship was one of employment. In relation to the significance of the fact that interviewers used their own vehicles in travelling to and from interviews, Full Court said this:-
- [40] Roy Morgan contended that the tribunal failed to take into account the significance of the fact that interviewers were required to have their own transport. The tribunal found that interviewers were required to have their own reliable vehicle in which their documents could be safely stowed while they were working in the field. Interviewers were paid travel expenses at a rate per kilometre. Having a motor vehicle was obviously not a blanket rule, because the tribunal also found that those who did not have a vehicle could in certain circumstances be reimbursed for taxi or public transport costs in lieu of car expenses. The tribunal did not fail to take the provision of transport into account, and referred to it briefly in its conclusion at [126], saying that because interviewers were reimbursed for their travel expenses, and half the cost of a street directory, they invested little, if anything, other than their time and persuasive and recording skills.
- [41] Roy Morgan's reliance on McHugh J's observations about the couriers' motor vehicles in Hollis at [71] does not assist. His Honour's was a lone voice on this issue. In any event there is a distinct difference between a requirement that a courier have a motor vehicle in order to be able to carry goods from one place to another, which is the essence of a courier's job, and a flexible requirement that an interviewer have a vehicle in which to keep documents secure while working in the field. More relevant are the observations of the majority at [56]. Their Honours were of the view that bicycles are not tools that are inherently capable of use only for courier work, but provide a means of personal transport. The same may be said of motor cars. In the cases relied on by McHugh J at [71], the vehicles in question were specialised conveyances: trucks for carrying timber and gravel respectively in Humberstone v Northern Timber Mills
(1949) 79 CLR 389; [1949] ALR 985 and Wright v Attorney-General (Tas)
(1954) 94 CLR 409.
87. The Federal Court decision in Trifunovski involved commission remunerated insurance sales agents who had been engaged by a general insurance company under contracts that stipulated they were not employees. The agents disputed that characterisation of the nature of their engagement, and successfully claimed benefits to which their status as employees was a precondition. One aspect of their circumstances was that the sales agents had typically claimed tax deductions for the depreciated cost, and operating expenses, of their motor vehicles. Whilst that consideration was not regarded as determinative of the characterisation of their status, it is reasonably apparent that in Trifunovski Buchanan J specifically acknowledged the significance of the qualification expressed in Hollis (about the potential significance of the responsibility for the cost and operation of a motor vehicle in informing an assessment of the nature of the relationship). After referring to the High Court and the New South Wales Court of Appeal decisions about the Vabu bicycle courier, and also the Roy Morgan decision, Buchanan J said (at [83]) "the use of the vehicles as a conveyance for goods in [Vabu] must be given due weight". His Honour went on to state that the High Court's qualification in Hollis, restricting its concluded view to the circumstances of the bicycle couriers was "a potentially important one" (at [95]). Finally (at [120]) Buchanan J expressed the view that a strong feature suggesting the sales agents' engagement was one of employment was that it required their "personal service". The selling of insurance was an activity that "was required to be carried out through the personal efforts of individual agents and only by them" - because of legislative provisions governing the lawful provision of financial services.
88. The circumstances in
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Re Trustee for SR & K Hall Family Trust and Commissioner of Taxation [2013] AATA 681; (2013) 96 ATR 930 also involved controversy over superannuation contributions relating to a small number of assertedly independent contractor plumbers who formed part of a total workforce that included 13 full time employed plumbers. Both the employed and contracted plumbers appear to have worked in a substantially identical manner, and typically had any materials supplied by the employer. The contracted plumbers worked substantially the same hours, did not quote on any jobs, did not invoice for their work and were simply paid on the basis of the hours they worked. Typically the contracted plumbers used some of their own tools, and their own vehicles, but there were occasions when, depending on the particular job, they used a vehicle supplied by the employer. Without referring to the qualification expressed in Hollis, or the observations in either Roy Morgan or Trifunovski, about the potential significance of vehicle provision obligations, but obviously influenced by the particular features of the relationship, the Tribunal concluded that the contracted plumbers were properly to be characterised as employees.
"ENTERPRISE" CONCLUSION
89. As both McHugh J (in Hollis) and McColl JA (in Air Express) observed, there is a significant bias in the authorities in favour of the proposition that an arrangement where a contractor is responsible for the provision, operation and maintenance of a significant piece of equipment that is essential to the remunerated activity (as in the carriage of goods), is best characterised as one of independent contracting. That characterisation may be questioned (as it was in Hollis and in the passage set above from the 2010 Roy Morgan decision) where the contractor is required to present themselves as an apparent part of the principal's organisation, and is ultimately subject to direction by the principal. However, those aspects of the relationship are not necessarily sufficient to require a negative answer to the question "whether the putative employee is most appropriately to be regarded as providing a service in the conduct of their own business":- see per Wilson and Dawson JJ cited at paragraph 20 above. In the present case, primarily influenced by analogy with the approach adopted in Ready Mixed, Air Express, the tax decision in Hollis, and the qualification expressed in the High Court decision in Hollis, there is a considerable basis for characterising Mr Qian as conducting his own business in providing his vehicle and acting as a driver in carrying out the courier activities allocated by Mail Call in the June 2016 quarter. Notwithstanding the details that show the significant factual parallels between the circumstances of Mr Qian's involvement with Mail Call, and the bicycle couriers with Vabu (in Hollis v Vabu), the fact of Mr Qian's responsibility for the provision and operation of the van, its apparent character as a commercial transport vehicle, the apparently possibility of his income and profit being influenced by his own endeavours and efficiency, and the form of the regular accounting in the "payment summary" documents, combine to favour the conclusion that Mr Qian was conducting an enterprise as an independent contractor.
90. But it is also important to bear in mind that the characterisation of an activity as an enterprise for the purposes of the GST Act, does not require the activity to be a business. The definition in GST Act s 9-20(1)(a)&(b) treats the concepts of a "business" and an activity "in the form of an adventure or concern in the nature of trade" as disjunctive criteria. The implicit distinction between the two concepts is that the latter does not necessarily connote the requirements of regularity, organisation or record keeping that are typically associated with the conduct of a business. Awareness of that disjunctive treatment in GST Act s 9-20(1) re-enforces my view that the considerations I addressed in the preceding paragraph warrant the characterisation of Mr Qian's activities with Mail Call as the conduct of an enterprise, and not as an employee.
THE RELEVANCE OF HF EXPRESS
91.
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The conclusion I have expressed above does not depend on any definite view about whether Mr Qian's relevant contractual relationships were with HF Express, Mail Call or both. Neither does it address the question of whether, apart from the significance of Mr Qian's motor vehicle obligations and expenses, either of those relationships should properly be characterised as ones of employment. It is unnecessary to reach a definite view on either of those matters for the purpose of considering Mr Qian's eligibility for GST registration. But the correct identification of the characterisation of his contractual relationships, particularly the entity to which he provided his services and to which he was entitled to look for payment, are relevant to the proper assessment of his June 2016 BAS.92. The Commissioner contended that Mr Qian had been engaged exclusively by HF Express and that Mail Call was simply acting as an intermediary. That contention glossed over the details, and the likely reality, of the arrangements. Earlier in these reasons I noted that the "GST on sales" amount in that BAS had been derived from a "Total Sales" value approximating the HF Express payments into Mr Qian's account. It did not reflect either the "Job" or the "Invoice" amounts included in the Mail Call "payment summaries":- see paragraphs 35 & 36 above. The difference between the "Invoice" amount and the actual payment Mr Qian received from HF Express, was the 18% "surcharge on each payment for the management fee" described in the 9 May 2016 Agreement:- see paragraph 25 above. It is necessary to understand whether, on proper analysis, Mr Qian's payment entitlement for the work he did was to the invoice amount, rather than to the net amount he received from HF Express.
93. The 9 May 2016 agreement identified Mr Qian and HF Express as the contracting entities. But the effect of Mr Qian's evidence was that it was his decision to work for Mail Call and it was never intended that HF Express would have any direct role in the tender, allocation or performance of any courier work. That understanding of the arrangements is partly corroborated by the content of the Notice document - with its distinction between the "driver", the "courier company" and "we" (inferentially, HF Express). It is also partly corroborated by the "payment summary" documents - which suggest a transaction structure in which (i) Mail Call generated the ambiguously addressed invoice for the "total gross remuneration", (ii) Mail Call issued a similarly ambiguous invoice for the insurance it "supplied to" Mr Qian and, (iii) HF Express paid Mr Qian, after deducting 18% plus GST from the amount invoiced by Mail Call. Such a structure is consistent with a "labour hire" arrangement under which the operative contractual arrangements were complementary dealings between the contentious contractor and the labour hire agency, on the one hand, and between that agency and its recipient client or "host" entity.
94. In complementary arrangements of that kind the relationship between the labour hire agency and a putative worker may be characterised as either one of employment or independent contract. Sometimes the employment character of the relationship between the agency and the worker will be uncontentious:-
Mason & Cox Pty Ltd v McCann [1999] SASC 544; (1999) 74 SASR 438. Where it is contentious, the different characterisation will often depend on the detailed circumstances of the relationship. If the labour hire agency effectively maintains a pool of individual workers (and especially where they deal exclusively with it), arranges / supervises their work assignments, assumes a primary obligation for their remuneration, and accepts the ordinary tax, superannuation and entitlement benefit obligations ordinarily associated with employment, the relationship will readily be characterised as one of employment:-
see Drake Personnel Ltd v Commissioner of State Revenue [2000] VSCA 122; (2000) 2 VR 635 at [5], [38], [51]-[57]. If the agency acts more as an intermediary, does not require exclusivity from its contractors, and makes no attempt to supervise contractors who undertake work for "host" entities, expressly disavows an employment relationship in its dealings with its contractors, and does not require them to present themselves as agency representatives, the arrangement between them will more likely be characterised as one of independent contract, even if the agency has a contractual obligation to pay the worker:-
Building Workers Industrial Union v Odco (1991) 29 FCR 104; (1991) 99 ALR 735 at 752-756;
Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217; [2004] ICR 1437; [2004] IRLR 358 at [64]. If the particular circumstances fall between these two illustrative comparisons, the categorisation presents the kind of intractable problem to which I referred earlier. But if the arrangement is one where the agency acts as a pure intermediary, and it either has no obligation to pay the worker, or the obligation is conditional on payment by the agency's "host" client, then the contractual arrangement between the agency and the worker is not one of employment:-
Wilton v Coal & Allied Operations Pty Ltd [2007] FCA 725 at [160];
(2007) 161 FCR 300; 162 IR 264;
Building Workers Industrial Union v Odco (1991) 29 FCR 104; (1991) 99 ALR 735 at 748-749, 753, 756.
95. I pointed out earlier in these reasons that the parties' self-characterisation of their relationship as one of independent contract cannot be regarded as determinative, but is nevertheless a relevant consideration:- see paragraph 13 above. In the present case the apparently intended role of HF Express as an intermediary between Mr Qian and Mail Call, with the functions indicated by the "contract documents", the "payment summaries", the invoices and Mr Qian's evidence, introduces a significant point of difference from the kinds of direct arrangements involved in the cases I have regarded as influential in arriving at my conclusion on the GST registration question.
96. In other contexts (noticeably the question whether income generated by contractors involved in "labour hire" arrangements should be regarded as "personal services income" and income for "producing a result" (for the purposes of Income Tax Assessment Act 1997 (Cth) Divisions 84 & 85) it has been accepted that the proper approach is to "look through" the contracting arrangements, and examine the economic reality of the work done and the remuneration entitlement that its performance attracts:- see
IRG Technical Services Pty Ltd v DCT [2007] FCA 1867; (2007) 165 FCR 57; 69 ATR 433. There is some parallel between that encouragement and an analysis that requires satisfaction arrangements between a contractor, a labour hire company and a "host" enterprise are not a mere "sham" that disguises the reality of an underlying employment relationship:- see
Fair Work Ombudsman v Ramsey Food Processing Pty Ltd (2011) 198 FCR 174; [2011] FCA 1176 at [102]-[117]. Even if the labour hire contractual arrangements are genuine, their characterisation depends on the features of the particular relationship, assessed as matters of substance rather than form:-
Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217 at [52] per Mummery LJ;
Damevski v Giudice [2003] FCAFC 252; (2003) 133 FCR 438 - especially at [77];
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37 at [142]-[148].
97. I remarked earlier on the following aspects of the "contract documents", the "payment summaries" and the circumstances in which Mr Qian came to work for Mail Call:-
- (a) The appearance that Mr Qian approached Mail Call as a result of HF Express' recommendation and introduction, but made his own decision about Mail Call's "contract", and about arrangements with Mail Call:- see paragraph 40 above
- (b) The absence of any specific provision obliging Mr Qian to perform work for HF Express:- see paragraph 29 above
- (c) The ambiguity of the various invoices Mail Call generated, in using HF Express' ABN number, but Mr Qian's residential address:- see paragraph 34 above.
- (d) The absence of any specific evidence of any contractual agreement between HF Express and Mail Call:- see paragraph 40 above
- (e) The absence of any express provision requiring HF Express to pay Mr Qian, and the appearance that it was merely authorised to receive and make deductions from his "pay":- see paragraphs 26(a), 32(b) & 32(c) above.
98.
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Each of those matters arouses scepticism about the reality of the payment structure, and the content of the payment obligations, sought to be evidenced by Mail Call's "payment summary" documents. That scepticism highlights the difficulties in regarding Mr Qian as an employee of HF Express. The evidence tends to establish that HF Express had no real control over Mr Qian's work, and was not, to any extent involved in that work.[20]Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217; [2004] ICR 1437; [2004] IRLR 358 at [64]. More importantly, HF Express' payment obligation to Mr Qian was nowhere expressly stated and, under the terms of the Notice document, appears to have been understood to be contingent on payment by Mail Call to HF Express. There is no satisfactory basis to conclude that HF Express was relevantly either a recipient of Mr Qian's work, or entitled to receive payment for it (other than on Mr Qian's behalf).
99. In relation to Mail Call, the general approach taken in the cases that have considered the characterisation of a relationship where a labour hire entity provides a "host" clients with workers, and is exclusively liable for the worker's remuneration, is that the relationship between the "host" and the "worker" is not one of employment:- see
Damevski v Giudice (2003) 133 FCR 438; 202 ALR 494; [2003] FCAFC 252 at [173];
Brook Street Bureau (UK) Ltd v Dacas [2004] EWCA Civ 217 [2004] EWCA Civ 217; [2004] ICR 1437; [2004] IRLR 358 at [2];
Forstaff Pty Ltd v Chief Commissioner of State Revenue (2004) 144 IR 1 at [106]-[118];
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37 at [167]-[171].
100. This general approach assumes the absence of any direct contract between the worker and "host" entity. It also assumes that, in contracting with the "host" entity, the agency was not acted as the worker's contractual agent. The significance of the former point was discussed in
Mason & Cox Pty Ltd v McCann [1999] SASC 544; (1999) 74 SASR 438 the agency had provided a worker for a host company's manufacturing business. There was no written contract between the host company and the agency. Nor was there any evidence of a contract between the worker and the host entity where he worked. The case proceeded on the uncontested basis that the worker was an employee of the agency. The point in contest was whether or not the worker was also relevantly an employee of the host company. The contention was that the worker's compliance with the host company's requirements was probative of its employment of the worker. In rejecting that contention the SA Full Court acknowledged that the host company effectively controlled the worker's activities, but said that the critical question was whether or not that control arose from a contractual right as between the host and the worker. In answering that question Perry J stated:
- [101] Most of the decided cases proceed on the premise that there was a contract between the parties, the central question being whether or not the terms of the contract and other relevant indicia point to the characterisation of the contract either as one of service or for services.
- [102] Here, the problem is quite different, in that a central question is whether or not there was a contract at all as between [the worker] and the [host company] … It was as to this aspect of the matter upon which the learned judge at first instance founded his conclusion that [the host company] was not the employer … . In particular, he was of the view that there was no contract in existence between [the host company] and [the worker].
- [103] In my view, he was right in reaching that conclusion. It seems to me that a correct characterisation of the relationships between the various parties leads to the view that [the worker] was engaged pursuant to a contract with the agency. It was a term of that contract that he agreed to work at the direction of the agency's customer, upon being placed with the customer. There was a separate contract between the agency and each customer to whom the agency supplied labour, which included implied terms to the effect, inter alia, that the work to be performed by the workers supplied by the agency would be subject to the direction and control of the client.
101.
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A similar approach and conclusion were evident inWilton v Coal & Allied Operations Pty Ltd [2007] FCA 725 at [160];
(2007) 161 FCR 300; 162 IR 264. That case involved coal mine workers provided to Coal and Allied through a labour hire arrangement. The practice was that Coal and Allied would request the agency for workers, the agency would provide a list of names and Coal and Allied would select from the nominees. The selected nominees would then attend Coal and Allied's mine site and work, subject to direction and supervision, as part its workforce. In so doing they operated Coal and Allied's mining plant, and worked according to its rostering arrangements.
102. The essential matter in dispute in Wilton was whether the combined effect of (i) each worker's integration into the Coal and Allied workforce and (ii) the longevity of their engagement, operated to characterise them as employees of Coal and Allied. Conti J answered that question in the negative. His Honour regarded two matters as determinative. The first was the absence of any evidence of an express contractual arrangement between Coal and Allied and the individuals. The second was the evidence establishing that it was the labour hire agency, rather than Coal and Allied, that had the obligation to pay the workers. Conti J (at [91] & [162]) regarded the exclusivity of that payment obligation and entitlement as precluding characterisation of the workers as employees of Coal and Allied. In arriving at that conclusion Conti J had followed the approach taken to a typical labour hire arrangement in
Building Workers Industrial Union v Odco (1991) 29 FCR 104.
103. Prior to the decision in Wilton, the Full Court of the Federal Court had addressed a situation where reality contradicted the form of the apparently complementary labour hire arrangements. In
Damevski v Giudice [2003] FCAFC 252; (2003) 133 FCR 438; 202 ALR 494 at [37], [38]. the plaintiff was an employed cleaner who had been provided with a van, uniform and equipment by his employer. The employer decided to change its operations to involve a "labour hire" company. It encouraged the worker to resign, and itself entered into a contract with the labour hire company. The latter thereafter paid the worker, but there was no written contract (and perhaps no oral contract) between the worker and the labour hire firm. Apart from those changes, the worker's activities, including the motor vehicle and equipment provided by the previous employer / "host" company, as well as the determination of his remuneration, remained unchanged. The Full Court of the Federal Court held that the relationship between the employer/"host" company and the worker was specific to their particular circumstances, and was one of employment. This was because the circumstances showed the substantial continuation of the previous relationship, in which Mr Damevski had clearly been an employee and had not been conducting his own business.[21]
[2003] FCAFC 252 at [2], [5] & [6] per Wilcox J, [89]-[96] per Marshall J; [172]-[174] per Merkel J.
104. The idea that the circumstances of a labour hire arrangement might give rise to an implied contract directly between the
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"host" entity and the worker" has both its supporters and detractors. In Wilton Conti J reviewed a number of relevant UK decisions[22]Tilson v Alstom Transport [2010] EWCA Civ 1308; [2011] IRLR 169. In that case (addressing the asserted significance of the worker's absorption within the "host" entity's organisation) his Lordship said:-
'the mere fact that there is a significant degree of integration of the worker into the organisation' and 'control over what is done' does not give rise to an implied contract between the worker and the host company because it is entirely consistent with, and explicable by reference to, the contracts that are in place between the agency and the host company and the agency and the worker respectively
105. In
Homecare Direct Shopping Pty Ltd v Gray [2008] VSCA 111 at [67] Forrest AJA of the Victorian Court of Appeal said that the reasoning in Dacas and subsequent UK cases on the implied contract of employment is consistent with Australian law. The issue was more recently considered in
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; (2015) 228 FCR 346; 321 ALR 404 a decision of the Full Federal Court. North and Bromberg JJ referred to the UK line of cases and preferred the approach taken in Homecare (over that in Wilton) to these cases.
106. In the present case the major ground of objection to the existence of an implied contract between Mail Call and Mr Qian is undermined by the absence of any specific evidence of either the existence, or the terms, of any contractual relationship between HF Express and Mail Call. And even if the fact and content of Mail Call's various "recipient generated" invoices justified an inference that some such contractual relationship did exist, the inherent ambiguity of the invoice (given its address to both Mr Qian and HF Express) tends to preclude satisfaction that it evidences an arrangement under which HF Express had the exclusive contractual entitlement to payment by Mail Call in relation to Mr Qian's work. Furthermore, the evidence (albeit limited) was that Mr Qian (i) made his own arrangements direct with Mail Call and, (ii) satisfied himself about the Mail Call "contract", before committing himself to work with Mail Call. A penultimate consideration is that the terms of the Notice document tended to convey a mutual understanding that it was the "couriers company" that had the primary obligation to pay the worker for the tasks they undertook. Finally, the terms of the 9 May 2016 agreement, rather than expressly obliging HF Express to remunerate Mr Qian for his work, merely authorised HF Express to "surcharge" any payment to which he was entitled and to deduct a management fee. All of these considerations combine to suggest that (on the currently available evidence) it was likely Mail Call, rather than HF Express, that incurred the contractual obligation to remunerate Mr Qian for his work. It did so either because Mr Qian had made his own direct contractual agreement with Mail Call about his rates of payment, or because HF Express should be regarded as having contracted with Mail Call, as Mr Qian's agent, in arranging for his performance of courier work.
THE ACCURACY OF THE JUNE 2016 BAS / AMENDED ASSESSMENT
107. The 7 December 2016 amended assessment decision was based wholly on the determination that Mr Qian had not been conducting an "enterprise" in the June 2016 quarter. It did not address (and in the light of Mr Qian's lack of meaningful response to the October 2016 request) it could not meaningfully address, the accuracy of the contents of the contentious BAS. On the other hand, there are reasons to doubt the accuracy of the BAS contents, and at least some aspects of Mr Qian's input tax credit entitlement. Those reasons include:-
- (a) The discordance between the "Total Sales" and the arithmetical total of the HF Express payments:- see paragraphs 35 and 36 above
- (b) The use of the HF Express payments (rather than the "Invoice" amount) as the "Total Sales" value. The use of the former appears to have been erroneous, at least as far as the currently available evidence reveals.
- (c) The unexplained / unexamined basis for the "GST on Purchases" value.
108. Since none of these matters was apparently addressed in the Amended Assessment decision, the appropriate course is to set aside the Amended Assessment decision and remit that aspect of the matter to the Commissioner.
DECISION
109. The 7 December 2016 decision cancelling Mr Qian's GST registration with effect from 30 June 2016 should be set aside. In substitution for that decision Mr Qian's GST registration was not cancelled on 7 December 2016.
110. The 7 December 2016 decision involving the issue of an Amended Assessment for the June 2016 quarter, based on the finding that Mr Qian was an employee of HF Express, and not carrying on an enterprise, should be set aside. In substitution for that decision the assessment of Mr Qian's BAS for the June quarter is remitted to the Commissioner for reconsideration. In any such reconsideration neither the Commissioner nor Mr Qian would be bound by the findings I have made (based on the currently available evidence) in my reasons for setting aside the Amended Assessment.
Footnotes
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