Queensland Stations Pty Ltd v. Federal Commissioner of Taxation
70 CLR 539(Judgment by: Latham CJ)
Queensland Stations Pty Ltd
v. Federal Commissioner of Taxation
Judges:
Latham CJRich J
Dixon J
Subject References:
Taxation and revenue
Pay-roll tax
Droving contract
Employee or independent contractor
Legislative References:
Pay-roll Tax Assessment Act 1941 No 2 - s 3
Judgment date: 3 August 1945;
Sydney
Judgment by:
Latham CJ
The question for decision upon this case stated is whether payments to drovers in pursuance of certain contracts are payments of wages within the meaning of the Pay-roll Tax Assessment Act 1941-1942 in respect of which tax is payable. It was decided by the Commissioner of Taxation that the moneys paid were wages, and his decision was upheld by a Board of Review. The appellant company has appealed to this Court (Pay-roll Tax Assessment Act 1941-1942, s. 40).
The contention for the Commissioner is that the contracts created the relation of employer and employee, as was decided in the case of a substantially identical contract by the Supreme Court of Queensland in Gilchrist, Watt & Cunningham v Logan [F1] , affirmed in this Court [F2] , and that payments made to drovers thereunder were therefore payments of wages.
The contracts provide that the drover is to serve the owners of certain cattle in the capacity of drover and is to drove them to a destination, to obey and carry out all lawful instructions, and to devote the whole of his time, energy and ability to droving the stock. He is to report from time to time as to the number and condition of the stock. The owners have the right to terminate the agreement for breach of covenants "and in such event the drover shall accept instant dismissal." The drover is bound to "find all men and plant horses and rations necessary and sufficient for the safe droving of the cattle and pay all wages in connection therewith." The remuneration of the drover is a fixed sum per head of cattle duly delivered at the specified destination.
The case includes by way of typical illustration the terms of a particular contract made with one Arthur Bryant. The case states: "The drover Arthur Bryant in order to carry out his said agreement would require (a) to employ about 4 men, (b) to provide about 30 horses, (c) to provide about eight sets of riding gear consisting of saddles and bridles, and also hobbles for the horses, (d) to provide one wagonette, one pair of wagonette horses and their harness, (e) to provide other equipment such as camping gear and cooking gear, and (f) to provide rations for himself and his employees for 14 days."
The payment per head of cattle constitutes the reward to the drover for droving the cattle and doing all the things mentioned in this statement.
If the work to be done by one person for another is subject to the control and direction of the latter person in the manner of doing it, the person doing the work is a servant and not an independent contractor, and prima facie his reward would be wages. An independent contractor undertakes to produce a given result, but is not, in the actual execution of the work, under the order or control of the person for whom he does it (Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd [F3] )-and cf. Federal Commissioner of Taxation v J. Walter Thompson (Aust.) Pty Ltd [F4] , at p. 229. In Logan's Case [F5] this Court based its decision upon provisions in the contract which are also to be found in the contracts now under consideration which showed that the owner had "a constant right to intervene and full right of control," and upon the provision with respect to "dismissal." It was held that the drover was the servant of the owner, who was therefore liable for a trespass by his sheep while in charge of the drover under the contract.
Liability for trespass by attended cattle lawfully upon a highway depends upon negligence (Gayler & Pope Ltd v B. Davies & Son Ltd [F6] ; Halsbury's Laws of England, 2nd ed., vol. 1, p. 547; Pollock on Torts, 14th ed. (1939), p. 397). The liability falls upon an owner who is in possession of the cattle (Winfield's Text-book of the Law of Tort, (1937), p. 547, citing Dawtry v Huggins [F7] ).
In England droving is regarded as ordinarily being an independent occupation: see the comparison between a contract drover in Australia and a licensed drover in England per Macrossan S.P.J. in Gilchrist, Watt & Cunningham v Logan [F8] , at p. 191. Persons following the occupation of droving may be droving animals belonging to several owners at the same time. There would be obvious difficulties in treating such drovers as the servants of all the persons who simultaneously employed them. Thus, as a general rule, they are independent contractors, and the cattle in their charge are treated as in their possession under a bailment (Halsbury's Laws of England, 2nd ed., vol. 22, p. 115, and cases there cited). But a drover, even though licensed to carry on his occupation, may nevertheless be the servant of the owner of cattle which he is droving-as was held in Turnbull v Wieland [F9] .
But if a consideration of all the circumstances shows that the owner retains control so that there is no bailment, he remains responsible to third parties for damage caused by negligence in the management of his chattels (Samson v Aitchison [F10] , and other cases cited in Halsbury's Laws of England, 2nd ed., vol. 1, p. 777). In Logan's Case [F11] (and in the present case) control was retained by the owner by the express terms of the contract, and accordingly he could be held liable for trespass by cattle in the charge of a drover under such a contract independently of whether the drover was the servant of the owner. The decision in Logan's Case [F12] can therefore be supported upon this ground.
But even if Logan's Case [F13] be accepted as requiring the Court to hold that the relationship of master and servant exists in the present case between the owner and the drover, it does not follow, in my opinion, that the payment made to the drover in consideration of the fulfilment by him of his contract was a payment by way of wages.
The application of the Act, as I said in Federal Commissioner of Taxation v J. Walter Thompson (Aust.) Pty Ltd [F14] , depends upon the existence of an employer-employee-i.e. a master-servant-relation. This is shown by the fact that "wages" is defined so as to include only payments made "to any employee as such." But "employer," for the purposes of the Act, is not defined so as to bring all employers within this term. "Employer" is defined (s. 3) as meaning "any person who pays or is liable to pay wages." Unless the moneys payable to the drovers are "wages," such moneys are not liable to tax.
"Wages" is defined in the Act, s. 3, as meaning "any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to any employee as such" and as including payments under certain contracts and the provision of meals or quarters by way of consideration for the employee's services. The payment in the present case cannot be said to be a salary, a commission, a bonus or an allowance. The only question is whether it can be held to be wages in the ordinary sense of that term.
A person may be an employee and yet payments made to him by an employer may not be wages. It is necessary to examine all the terms of the relationship between the parties before determining whether or not a payment is wages in the ordinary sense of remuneration for services rendered.
One person may hire the services of another simpliciter, so that the relation constituted between them is completely described as that of master and servant. The position is the same if, for example, a workman is hired and he is to bring his own tools, but is to work under the direction as to the manner of doing the work. In both of these cases the reward paid would be wages. But if A were to make an agreement with B that B should provide a fleet of motor cars and manage them as a hiring business for PD100 per week, it could hardly be said that the money paid by A to B was wages. Similarly in the present case the payment made to the drover represents much more than a payment for his work. Payments under the contracts in question are not wages in the ordinary sense and do not otherwise fall within the statutory definition of wages. They are therefore outside the Act.
The questions in the case are:
- (1)
- Are the moneys paid to drovers under the said agreements wages within the meaning of the Pay-roll Tax Assessment Act 1941-1942?
- (2)
- Is the appellant liable to pay pay-roll tax in respect of any part of such payments, and if so what part?
In my opinion both questions should be answered-No.