Narich Pty. Ltd. v. Commissioner of Pay-roll Tax (N.S.W.).

Judges:
Woodward J

Court:
Supreme Court of New South Wales

Judgment date: Judgment handed down 6 November 1981.

Woodward J.

The plaintiff was incorporated in the State of New South Wales on 2nd April 1969. It is and has been at all material times the registered proprietor in Australia of the registered business name ``Weight Watchers'' and has carried on business under that name in New South Wales pursuant to a franchise agreement between it and Weight Watchers International Inc. (``Weight Watchers'') which is a corporation incorporated in Virginia in the United States of America and carrying on business in the State of New York. A franchise agreement was made on 1st June 1969 and has been varied from time to time. The agreement has imposed upon the plaintiff certain obligations. The continuance of the franchise depends upon the observance by the plaintiff of the terms of this agreement. To a large extent observance of the terms of the agreement is in the hands of the company's employees and staff, particularly the lecturers. The obligations to observe the terms of the franchise agreement must therefore, in some way, be imposed upon those persons in whose hands is reposed the obligation of observing them. How this is done is a matter for the plaintiff. If this can be done effectively only by the plaintiff imposing obligations upon persons which render those persons employees, this does not avoid the necessity of pay-roll tax being paid by the plaintiff in respect of such persons.

The first franchise agreement recited that Weight Watchers was engaged in the business of helping people to reduce excess weight and maintain weight losses. To do this Weight Watchers and its franchisees have conducted classes in which people (called ``members'') are taught how to change their eating habits. A unique programme (called ``the programme'') developed and prescribed by Weight Watchers is presented in a unique manner in these classes. It has developed an extensive network of classes throughout America and several areas elsewhere. It has expended a large amount of time and money to develop valuable trade secrets and techniques relating to the operation of such classes. Certain of such trade secrets and techniques have been disclosed in confidence to the plaintiff and others will be disclosed to it in the future. Weight Watchers owns and has registered various trade-marks and service marks throughout the world.

The document further recited that Weight Watchers classes were conducted by ``lecturers'' specially trained in the use of the franchisor's unique methods and these methods and the products and services marketed by it are closely identified by the public with Weight Watchers. This has been attained as the result of extensive expenditure of time, effort and money resulting in the attainment of great value for the goodwill they represent.

Weight Watchers markets specially prepared foods, literature and materials, publishes a unique magazine of special interest to people concerned with weight control, and is continually engaged in

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investigating and developing various business activities designed to enable people to enjoy normal activities while fully adhering to the programme.

By the agreement Weight Watchers granted to the plaintiff a non-assignable franchise to use the trade-marks, trade secrets and techniques referred to. Weight Watchers classes were to be conducted by the plaintiff only at locations within the geographical area described (at that time comprising New South Wales and Victoria in Australia). While the agreement remained in effect the franchisor would not conduct classes within the territory nor give anyone other than the franchisees the right to do so. The franchise granted was limited to the operation of Weight Watchers classes. The plaintiff had no right to use any of the trade-marks, trade secrets, methods or techniques for any other purpose whatsoever or to grant sub-franchises or sub-licences (cl. 1).

The plaintiff recognised the validity, originality, value, goodwill and the sole ownership by the franchisor of the methods, systems, ideas and programmes now or hereafter used. The plaintiff agreed to use the trade-marks in connection with the conduct of the business with respect to which the franchise was granted and undertook not to use, print or authorise the printing of any literature or material of any kind containing the trade-marks except with the franchisor's written permission. Upon termination of the agreement the plaintiff agreed to discontinue immediately all use of the trade-marks, etc. (cl. 5).

In order to maintain uniform standards of operation, which were essential for the protection of (i) the goodwill of the Weight Watchers Organisation, (ii) the value of any of the trade-marks, and (iii) the members of the public who became members of Weight Watchers, the plaintiff agreed to comply with a number of conditions of which the following are relevant:

(A) Only the unique programme and techniques developed by the franchisor to help people lose and control weight shall be presented in classes conducted by the plaintiff.
(B) Such presentation is to be made strictly in accordance with the Licensee Rules and Regulations promulgated from time to time by the franchisor.
(C) The plaintiff will not represent itself, directly or indirectly, to be an authority in the field of medicine or nutrition nor give any medical or nutritional advice or aid and will only disseminate information about the programme, menus, recipes and other information which conforms to the programme.
(D) No products or services will be sold, offered for sale, or distributed without charge in classes operated by the plaintiff other than products or services substantially similar to those sold, offered for sale or distributed without charge in Weight Watchers classes.
(E) The plaintiff will utilise only the Lecturers' Manual and the Clerks' and Weighers' Manual published by the franchisor for the guidance of the employees of the plaintiff.
(F) No advertising or promotional materials or methods will be used in newsletters distributed by the plaintiff unless first approved in writing by the franchisor.
(G) The plaintiff will cause each of its employees to be given the special training prescribed in the Licensee Rules and Regulations, and to execute non-competition agreements in the prescribed form.
(H) The plaintiff will issue a membership attendance book prenumbered by the franchisor to each member who joins classes and will follow the uniform prescribed attendance system.
(I) The plaintiff will maintain a uniform system of book keeping records and permit representatives of the franchisor to enter its premises to perform inspections of its operations and records.
(J) The plaintiff will comply fully with all relevant rules and regulations.
(K) The plaintiff will supervise the business the subject of the franchise by appointing as managing director a person possessing certain qualifications. Such person will personally supervise the operations of the business.

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(L) The personal weight of each employee of the plaintiff coming in contact with the public, including, inter alia, each lecturer will not exceed 2 pounds more than the ``goal weight'' prescribed for such employee for more than fourteen consecutive days (cl. 6).
The plaintiff concedes recognition of the fact that any classes conducted by it are part of a large network and so failure by the operator of a single class to comply with the terms of the agreement between that operator and the franchisor could cause irreparable damage to all other Weight Watchers classes. Therefore in the event of a breach or threatened breach, and, if the agreement has been terminated, the franchisor will become entitled to an immediate injunction (cl. 20).

The business carried on by the plaintiff in Australia and the franchisor and the performance of the work by ``lecturers'' cannot easily be classified. In some way it resembles Alcoholics Anonymous.

Weight Watchers has for some years carried on in America a business of encouraging overweight persons to pursue a course of conduct resulting in such persons (called members) losing excess weight. Persons are encouraged to become members of Weight Watchers and in return for the payment of a fee are advised and encouraged by lecturers in meetings to pursue a programme resulting in weight reduction and continuing to maintain such reduced weight. It was as a result of the agreement referred to that the plaintiff was able to establish a similar programme in Australia with certain resultant financial benefits.

It appears that the philosophy upon which Weight Watchers was developed in the United States was that it was essential in the conduct of the Weight Watchers Programme that those involved at all levels should also have had an over-weight problem which they had resolved by following a programme of behaviour. It was part of the programme that the persons who sought to lose weight should meet regularly and encourage one another to persist with it.

Since the programme has been developed it has been refined and improved as a result of developments in nutrition related to weight control. To some extent such development and refinement in this country has been achieved by the distribution by Weight Watchers to the plaintiff of literature and other material produced by or on behalf of Weight Watchers.

Richard Bruce Jamieson became a director of the plaintiff company on 27th September 1974, and is now the chairman of directors of that company.

In 1968-1969 Jamieson and Nancy Manning attended a training course for franchisees conducted by Weight Watchers in New York during which course instruction was given in all aspects of the Weight Watchers Programme and the conduct of the plaintiff's business pursuant to the proposed franchise agreement. Instruction was received from the Training Director of Weight Watchers, nutritionists and dietitians, medical practitioners and psychologists. The course comprised theoretical instruction and practical work and experience.

Since the execution of the franchise agreement referred to, Jamieson has been in constant communication with Weight Watchers on behalf of the plaintiff. He has met representatives of Weight Watchers two or three times each year, and on a number of occasions at meetings between representatives of the plaintiff and of Weight Watchers, the franchise agreement and the operation of the plaintiff pursuant to it has been reviewed in considerable detail.

Constant communication has been maintained between the plaintiff and Weight Watchers on approximately three or four times a week by telephone, letter or telex. Seminars have been conducted by Weight Watchers in the United States and these have been attended by Jamieson on behalf of the plaintiff on a number of occasions.

Since the franchise agreement was first executed the plaintiff has received from Weight Watchers a continuous supply of printed material dealing with recent developments, discoveries and changes in the Weight Watchers programme which it has been required to implement.

The plaintiff has engaged the services of a number of lecturers who give lectures to members in New South Wales and other

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States of the Commonwealth encouraging such members to continue in the Weight Watchers programme with a view to weight reduction and to the ultimate financial benefit of the plaintiff.

A considerable quantity of printed material is distributed by the plaintiff to its lecturers comprising material supplied to the plaintiff for that purpose by Weight Watchers or printed by the plaintiff under licence from Weight Watchers. In addition the plaintiff produces and distributes to its lecturers other printed material much of which is first approved by Weight Watchers.

Lecture handbooks are distributed by the plaintiff to its lecturers and during the period 1st November 1973 to 30th June 1977, all such handbooks so distributed were first received by the plaintiff from Weight Watchers.

During this period the plaintiff conducted the training of its lecturers according to a method communicated by Weight Watchers to the plaintiff and set out in the training handbook given by the plaintiff to its lecturers.

During the said period which is the period the subject of these proceedings (the relevant period) the plaintiff conducted a Weight Watchers programme by engaging lecturers who conducted meetings attended by persons who were over-weight (called members). Lecturers were recruited from persons, who were still members and who had qualified as lifetime members, who had succeeded in losing weight by following the Weight Watchers programme and who received additional special training from the plaintiff.

The plaintiff's business pursuant to the franchise agreement during the relevant period, was conducted by various area managers responsible to the general manager. In addition supervisors and clerical staff were employed by the plaintiff in the business. It has not been disputed that such persons are employees.

The lecturers engaged by the plaintiff have been required to sign an agreement to which I will subsequently refer. Throughout the period lecturers recruited other members to become lecturers. As and when required, such members, if considered suitable by supervisors employed by the plaintiff, were invited to become trainee lecturers. Such persons then received instructions on how to conduct meetings, or classes by one or more of the training managers, the area manager or a supervisor. Such trainee lecturers attended a training workshop at the plaintiff's office in Sydney or at some other suitable place on one night a week for about two months.

During attendance at the training workshop the trainee lecturers were given lectures and demonstrations and participated in lecturing practices. They were taught the technique of conducting Weight Watchers meetings and were given instruction in public speaking. They were also taught the Weight Watchers system of weight reduction and control and the programme to be followed by members wishing to reduce their weight and maintain it at their respective goal weights. This is known as the Weight Watchers programme.

The trainees were instructed in the use to be made of various publications and literature supplied by the plaintiff, as previously stated. This material was extensive and the trainees were instructed in the use of all the relevant documents.

From time to time during the relevant period much of this material was replaced and upon replacement was distributed to lecturers in substitution for that previously supplied. Similar new material was also distributed to lecturers.

Trainee lecturers were not paid for their attendance at training workshops although travelling and other expenses incurred by them in attending the workshop were reimbursed. Except as hereafter mentioned lecturers rarely attended the plaintiff's office in Sydney.

During the relevant period the number of meetings held per week throughout New South Wales varied. In the last week of the period there were 200 meetings conducted by approximately 89 lecturers throughout the State and slightly more than 8,400 members participated in the programme and attended those meetings. The lecturers were mainly female. Most of the meetings were conducted during the evening substantially by persons who either engaged in full time employment or attended to domestic duties during the rest of the day.

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Lecturers usually conducted meetings in suburban locations in church and school halls and similar places. From time to time the plaintiff held re-training workshops, their purpose being to communicate new information and techniques about which the plaintiff had been advised by Weight Watchers. The lecturers received no remuneration for attending such workshops but persons coming some distance were sometimes reimbursed for their expenses.

Each month except December, the plaintiff conducted a lecturers' meeting for about two hours. Most but not all lecturers attended those meetings, they were weighed and if they were over their goal weight by two pounds they were not permitted to conduct meetings until they reduced their weight to their goal weight. Common problems were discussed at such meetings and new training material was also distributed.

If a lecturer became unable to conduct a Weight Watchers meeting he or she was not always but sometimes replaced by another lecturer. Mostly this was done by arrangement between the lecturers. If this could not be arranged then the help of a supervisor was sought. In that event the supervisor found a replacement and no payment was received by the lecturer in respect of the lecture that he or she was unable to conduct.

The fees for members' subscriptions were collected at the meeting by the lecturer. The lecturer was assisted by a weigher and by a recorder. The hiring fee for the premises where the meeting was conducted was often paid by the lecturer deducting the fee from the members' subscriptions collected at the meeting. Where a meeting was conducted at the plaintiff's offices or other premises hired by the plaintiff no hiring fee was deducted and paid by the lecturer.

The method of conducting the meetings was provided for in documents issued to the plaintiff pursuant to the franchise agreement and distributed to lecturers at the training workshops. And also from time to time by direct supply.

The number of persons attending each meeting varied but usually ranged from approximately fifteen to fifty. The recorder and weigher were members of the class present at a meeting who were appointed by the lecturer from time to time. The lecturer paid their weekly fees at the end of each meeting in the form of an honorarium for their services. As each member joined a programme he or she was given an attendance book by the recorder. Thereafter, at each meeting attended, the member presented the membership book to the recorder and paid the weekly fee which varied depending upon the status of the member.

The recorder stamped the member's attendance book to verify attendance. Payment of the weekly fee entitled the member to attend as many classes as desired in the week whether conducted by the same or another lecturer. Members were required to pay weekly whether they attended or not. There was no contractual obligation incurred by any member to continue paying once attendance at meetings was discontinued.

The recorder also recorded the members' attendance on a card kept by the lecturer for that purpose. A supply of such cards was made available to each lecturer from time to time by the plaintiff. The recorder then handed the card to the member who presented himself to the weigher.

Scales were supplied to the lecturer by the plaintiff and the weigher supervised the weighing of each member on those scales. The plaintiff had obtained the scales from an American company approved by Weight Watchers. As each member was weighed the weight was recorded on the member's attendance book and on the attendance card kept by the lecturer.

The plaintiff supplied to each lecturer a tally sheet and as members arrived at the meeting the recorder completed such sheet. This document was based upon a document supplied to the plaintiff by Weight Watchers. The recorder completed on the tally sheet details of attendance of members, the amount of their subscriptions, any money paid by them for purchases made by them of food scales approved by Weight Watchers and reading matter given to the lecturer by the plaintiff for sale on consignment. That reading matter was either published by Weight Watchers or under licence from it. The recorder calculated the commission payable to the lecturer and the recorder in respect of such sales as well as the honoraria

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paid to the lecturer, the weigher and the recorder.

The conduct of each meeting followed a pattern no doubt set by the plaintiff and although supervisors in the early stages of a lecturer's training attended and offered criticism it would appear that generally the lecturer was left to conduct the meeting in accordance with a scheme propounded to the lecturer by the plaintiff. There is no doubt that if a lecturer failed to conduct a meeting in accordance with standards set by the plaintiff a report from the supervisor might well have resulted in the lecturer ceasing to occupy the position. There is however nothing to suggest that the lecturer was required to conduct a meeting in a particular fashion. On the other hand the very scheme of the Weight Watchers programme was such that it must be adhered to and lecturers would be required to adhere to it for the conduct of the meetings.

The lecturer presented various awards to members who had reached certain stages in the course of their weight reduction. At some stage in the proceedings the lecturer provided encouragement for members by reading the members' cards noting their weight loss if any since the previous meeting. Although the lecturer prepared a theme for discussion at the meeting that theme was in accordance with the directions of the plaintiff. She or he displayed products that were regarded as ``legal foods'' and often used other visual displays prepared by her or him.

Upon reaching 10 lbs. above goal weight the lecturer handed to the successful member a document called a levelling plan and instructed him or her in its use. This was designed to aid the member in the loss of the last few pounds until goal weight was attained.

At the conclusion of each meeting the recorder usually handed the lecturer the tally sheet for checking and signature. The lecturer then signed the tally sheet. Following the meeting the lecturer paid the hiring fee for the hall where necessary, and, after making all due deductions, deposited the balance of moneys collected by him or her at the meeting to a bank branch for transmission to the credit of the plaintiff at its bank. Thereupon the lecturer posted the duplicate deposit slip together with the completed tally sheet and any new member cards to the plaintiff at its Sydney office.

Lecturers did not receive any payments from the plaintiff but deducted any honoraria and commission payable to them in respect of their Weight Watchers meeting from the membership subscriptions received at the meetings conducted by them.

In late 1975 Weight Watchers introduced an ``Eating Management Techniques Programme'' consisting of twelve ``modules''. Each module was a document which contained matter to be discussed at each meeting by the lecturers. Weight Watchers gave that programme to the plaintiff to be used by its lecturers. Shortly after the introduction of this programme the plaintiff conducted a number of training workshops attended by its lecturers at which the use of the modules was explained. Training guides were distributed to the lecturers. The plaintiff received these guides from Weight Watchers and printed additional copies for distribution. Replacement pages were received by the plaintiff from time to time from Weight Watchers for distribution to the lecturers and this was effected.

At each alternate Weight Watchers meeting a copy of the module to be discussed at that meeting was distributed by the lecturers to the members present. Cue cards were supplied by Weight Watchers to the plaintiff for the lecturers. The purpose of these cards was to help the lecturers direct their minds to the salient features of the module while they conducted their meetings.

In the intervening week the lecturer conducted what was called a ``Feed Back'' session and, instead of introducing a module, the lecturer discussed with the members their experiences in following out the programme specified in the module that the lecturer had introduced in the preceding week. It took each lecturer approximately six months to complete the presentation of the modules that made up the programme.

Previous reference has been made to agreements signed by lecturers engaged by the plaintiff. A somewhat detailed examination both of the agreements and their history is necessary.

From 1st November 1973 until some time in 1977 lecturers were engaged by the

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plaintiff who signed agreements in similar form.

The agreement was expressed to be made between the plaintiff, trading under the registered business name of ``Weight Watchers'' and the particular lecturer. In the recitals it referred to the acquisition by the plaintiff of skill and information in relation to the techniques, systems, methods, principles, programmes and lecture courses concerned with weight reduction of individuals and the business techniques, promotion, publicity, and administrative procedures connected therewith and the group therapy techniques and the controlled eating plans developed, used and propagated in relation thereto, collectively referred to as Weight Control Skills. It referred to the fact that the lecturer had agreed to act as a lecturer at Weight Watchers classes and the company had agreed to make available to the lecturer the Weight Watchers Lecturers Handbook containing material, including the programme food plan, for use as a Weight Watchers Lecture which contained information which the lecturer agreed was and remained the property of the plaintiff and formed part of weight control skills. The recitals also referred to the agreement of the lecturer that the weight control skills included confidential information and matters of confidence the disclosure and the use of which, outside the business of the company, could cause substantial loss and damage to it.

The agreement provided in numbered paragraphs as follows:

(a) The lecturer will herself or by a substitute approved by the plaintiff lecture one or more Weight Watchers classes as may from time to time be agreed between the parties to be held at such times and places as the company may arrange.
(b) The engagement shall be terminable on one week's notice in writing given by either party and expiring at any time.
(c) If the lecturer fails or refuses to carry out her duties or obligations as a lecturer in a proper manner or the weight of the lecturer exceeds her goal weight the company may terminate her engagement without notice.

2. The company will instruct the lecturer in weight control skills as may be appropriate to the skill experience and ability of the lecturer from time to time.

3. The company will pay the lecturer a fee for each lecture and agreed ancillary tasks calculated in the manner stated in the clause. Dependent upon the experience of the lecturer with the company the fee increases from $9 to $16 and in addition the lecturer receives 10c for every paying member in excess of 40 attending the class.

4. The lecturer is not an employee of the plaintiff and shall perform her duties free from the direction and control of the plaintiff providing she follows the Weight Watchers Lecturers Handbook distributed by Weight Watchers of New York and she will attend without payment one Saturday meeting of lecturers per month at which she will, inter alia, be weighed.

5. The lecturer shall to the best of her ability

(a) deliver the lectures and teach the programme and levelling and maintenance plans,
(b) select and train sufficient recorders and weighers to properly conduct the lectures,
(c) ensure that the classes are properly organised and controlled,
(d) report to the company upon the functioning of each class,
(e) pay her recorders and weighers and rental for the hall from the receipts of the class,
(f) account to the company for fees and dues received from the members of each class at which she lectures and in this regard the lecturer shall be the company's agent for collection and shall as soon as possible thereafter deposit the net receipts to the credit of the company's account at a nominated bank,
(g) conduct the class so as to advance the welfare of the members according to the principles of Weight Watchers International Inc.,
(h) contact by 'phone or call on

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members who have been absent from meetings.

6. The lecturer undertakes that forthwith on the termination of her engagement for whatever reason, she will immediately return to the company her Weight Watchers Lecturers Handbook and all other documents supplied to her in connection with such engagement and any copies thereof.

7. The lecturer shall not without the express written permission of the plaintiff use, copy, reproduce or distribute or disclose to any person not entitled thereto certain specified information.

Clause 8 of the agreement contains a number of covenants restricting the behaviour of the lecturer both during the term of the agreement and following its termination.

This agreement continued in force until 1977. It could be terminated in one of two circumstances. Either party could terminate it on one week's notice in writing expiring at any time or without notice by the plaintiff if the lecturer failed or refused to carry out her duties or obligations as a lecturer in a proper manner or if the weight of the lecturer exceeded her goal weight. So far as the plaintiff was concerned the difference was not significant. With justification the agreement could be terminated without notice and if no justification existed or the plaintiff did not purport to rely upon justification, termination required one week's notice expiring at any time.

During 1976 it was ascertained that a number of lecturers had executed a form of agreement prepared by an employee of the plaintiff but without the plaintiff's authority. Investigation revealed that there were only nine such lecturers and only nine such agreements were signed. None of the agreements were executed on behalf of the company and the existence of those documents is not relevant to the present problem.

During April 1977 the plaintiff reviewed the form of lecturers' agreement and adopted a form of agreement which was varied somewhat from the form previously in use.

The differences between the two agreements are as follows:

1. In the recitals in two instances some additional words were added. In the recital referring to the Weight Watchers Lecturers Handbook, from the previous statement that the company had agreed to make the book available to the lecturer, the book being stated to contain material which was then enumerated, the recital is altered to read that the company has agreed to hire to the lecturer the handbook containing material ``for guidance only''.
2. Clause 1(a) contains the following addition:

``The lecturer shall ensure that any such substitute carries out all the obligations which this agreement imposes on the lecturer and shall be responsible for arranging payment of the substitute from the fees and dues received from the members of the class.''

3. Clause 1(b) of the former agreement has been deleted and the former cl. 1(c) has become cl. 1(b) with the addition of the following words:

``or, with the company's permission she may arrange a substitute lecturer until these deficiencies have been corrected.''

4. The provisions for payment in cl. 3 have been amended to include provision for a payment of $18 fee after more than six years' experience, and cl. 3 has become cl. 2.
5. Clause 2 of the earlier agreement has been deleted and cl. 2, 3 and 4 deal with the subject matter previously dealt with in the earlier agreement by cl. 3, 4 and 5.
6. The earlier cl. 4, which has become cl. 3 and which commenced with the statement that the lecturer is not an employee of the company has added after that statement the words ``but is an independent contractor''. The earlier clause also has deleted from it the words ``provided she follow the Weight Watchers Lecturers Handbook distributed by Weight Watchers International Inc. of New York''.
7. Clause (e) has been taken from para. 5 and becomes a separate paragraph

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numbered 5 in the new agreement. The phraseology has been slightly altered so as to state that ``the lecturer shall be responsible for paying''.

The other alterations to which I need not refer are not relevant to the present problems.

An assessment was made in accordance with sec. 18(2) of the Pay-roll Tax Act, 1971, against the plaintiff in respect of tax claimed to be due to the defendant for the period from 1st November 1973 to 30th June 1977. Such assessment was made on 26th June 1978.

On 24th August 1978, an objection to the payment of such tax was lodged on the grounds that no part of the moneys upon which the assessment was based were wages, salary, commission, bonuses or allowances paid or payable to an employee or to an employee as such, not being wages within the meaning of sec. 3 of the Pay-roll Tax Act, 1971. It was further claimed that if the said moneys or any part of them were wages or wages liable to pay-roll tax or taxable wages within the meaning of the said Act (which was denied) no part of such moneys was paid or payable by the plaintiff as the employer.

The tax is claimed by the defendant to arise from the payment by the plaintiff to certain ``lecturers'' as employees of the plaintiff as consideration paid by it to such lecturers in respect of duties performed by them in the employ of the plaintiff in the course of its business.

Evidence was given on behalf of the plaintiff by one Beatrice Santea, a design draftswoman and lighting designer in full employment, who has been a lecturer conducting Weight Watchers meetings since September 1976. When she commenced lecturing she signed an agreement in terms similar to that of the document annexed to the affidavit of Mr. Jamieson and marked with the letter ``C'' and similar to the agreement the terms of which I have first described. Mrs. Santea deposed to the contents of an affidavit on 23rd October 1979 which was filed on behalf of the plaintiff.

She in late 1975 became a member of Weight Watchers and, following a course of meetings extending over a period of about six months and having reached her goal weight, accepted an invitation by the plaintiff to become a lecturer and to conduct her own Weight Watchers meetings or classes.

Before she commenced lecturing she was instructed by the plaintiff's training manager how to conduct meetings or classes and received this instruction at the plaintiff's city office on one night a week for eight weeks. This course was known as a training workshop. It was attended by other persons preparing to become Weight Watchers lecturers. During the training workshop she was given lectures and demonstrations and participated in lecturing practice. She was taught with others how the meetings were to be conducted and given instruction in public speaking. She, with others, was instructed in the Weight Watchers system of weight reduction and control, and the food programme to be followed by persons wishing to reduce their weight and maintain it at their respective goal. This procedure was known as the ``programme'' and during the course of the instruction she was given a copy of the ``Weight Watchers Program Handbook''.

During this training period she received instruction in the presentation of ``modules'', she also received various lecture notes and was instructed that the procedures and techniques referred to in the lecture notes were to be regarded as an outline only and that she was to be at liberty to develop her own techniques and methods of delivering lectures. She was told that she should draw on her own experience and use incidents from that experience or from her observations in delivering lectures. At the completion of the training workshop she received a cheque for $10 as reimbursement for travelling and other expenses incurred by her in attending the workshop.

After she commenced lecturing to Weight Watchers meetings she received various bulletins, circulars, magazines and other materials dealing with the subject matter of the lectures that she was conducting. She regarded the material she received as useful aids to her in conducting her lectures but did not consider that she was under an obligation to use every item of material in delivering her lectures.

In about March or April 1977, she received

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a book entitled ``Lecturers' Handbook'', another one called ``Weight Watchers Program Handbook'' and a ``Lecturers Program Teaching Guide''.

When she first commenced holding Weight Watchers meetings she conducted them about once a week for two or three months in a church hall at Collaroy Plateau at about 7 p.m. for approximately one hour. From about November 1976 until 30 June 1977 she conducted the meetings once a week at about 5.30 p.m. in the boardroom in the Blockhouse Building of the University Union at the University of New South Wales, Kensington. To the best of her information and belief the hiring fee for the church hall at Collaroy Plateau was paid by the plaintiff. She began the meetings which were held at the University of New South Wales in about November of 1976. Her husband, who worked at the University and was then a lifetime member of Weight Watchers, secured the use of the premises at the University. When the meetings began he acted as her recorder and weigher. No hiring fee was paid for the use of the room in the University Union.

When Mrs. Santea commenced conducting meetings it took her longer to prepare than it subsequently did. At first it took her varying times to prepare for the meetings, sometimes as long as five hours. As she became more experienced the preparation time diminished. She did not receive any fee from the plaintiff for the period that she spent in preparations. She was not at any time directed by the plaintiff as to the time to be used in or at which she should prepare for her Weight Watchers meetings. Before each meeting time was spent in setting up the premises. Her time of arrival at the premises varied and depended upon her judgment of what was needed to be done prior to commencement of the meeting at the pre-arranged time. She was not paid by the plaintiff any fee for the time spent in setting up weighing scales and displaying literature prior to the commencement of each meeting. She has, at no time, been required to cancel any meeting because of indisposition on her part. The average number of people who have attended a meeting lectured by her has been about fifteen. She described the procedure adopted at meetings.

As each member joined a Weight Watchers class the lecturer determined the appropriate goal weight by reference to material provided by Weight Watchers. It was considered an achievement to attend meetings for sixteen weeks and lose a minimum of ten pounds of weight. Any such person was presented with an award. Other awards were also presented from time to time where considered appropriate and in accordance with certain guidelines. The conduct of the meetings was varied from time to time so as to diminish the boredom of the members. Other meetings were held intermittently throughout the period and in all the presentation of a series of modules took approximately six months.

As a member's weight reduced he or she was handed a document called a levelling plan which was prescribed by the plaintiff and in which the member received instruction from the lecturer. As goal weight was reached a member received a booklet entitled ``Weight Watchers Maintenance Plan'' on which the lecturer gave additional instruction.

At the completion of each meeting the recorder handed the tally sheet to the lecturer for completion.

The lecturer did not receive any payments directly from the plaintiff but deducted any fees payable to her in respect of the meetings that she conducted from the membership fees received at each meeting as previously described. These were calculated in accordance with the relevant agreement.

A supervisor employed by the plaintiff attended a Weight Watchers meeting conducted by Mrs. Santea to the best of her recollection once only during the period ended on 30th June 1977. That supervisor took no part in the meeting. At the end of the meeting the supervisor and Mrs. Santea discussed the conduct of the meeting and the supervisor made some suggestions about the lecturer's technique and suggested that the lecturer consider them but did not suggest in any way that she was required to adopt any of them.

From time to time during the period ending 30th June 1977 Mrs. Santea attended conferences, seminars and workshops conducted by the plaintiff at which new information and techniques developed by or

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for it were presented and explained to her and other lecturers. She was not paid for attendance on these occasions. The plaintiff did not deduct instalments for the payment of her income tax from the fees that she received for conducting the lectures. She received a commission from the plaintiff for selling cook books and other material at Weight Watchers meetings. She also received a commission for introducing people to the Hoy Lake Hotel at Leura. She was not required by the plaintiff to promote any of these other activities but did so as and when she wished. She deducted her commission from the membership fees received by her at the meetings.

She concluded her affidavit by saying:

``I do not regard myself as an employee of the plaintiff. I regard what I do as a hobby.''

Mrs. Santea was called to the witness box. At her full-time occupation she worked approximately thirty-six hours per week. In the course of preparing herself for the lectures which she gave on behalf of the plaintiff company she purchased books on human behaviour and made an effort to obtain nutrition information. She also, for the purposes of the lectures, prepared what she described as ``visuals'' which are documentary illustrations prepared with a view to holding the attention of the members in the course of a meeting and rendering more easy to absorb the information which she was imparting to them. She referred to a number of the modules issued by the plaintiff and supplied to her for the purpose of her lectures. One visual was produced which had been used by her in the course of her explanation to the members in meetings of the significance of the modules and how they together formed a programme. The preparation of these documents and of her lectures was done in her own time and she received no payment in respect thereof from the plaintiff. She spent money in the purchase of magazines and time in reading them and also in the preparation of tapes which she used and prepared for the recording of her lectures. She explained in some detail the time and attention given by her to the preparation of material for and the lectures at which it was used. At no time did she ever pay the rent of the hall used by her for the purposes of any meeting. The expenses of travelling to and from lectures were her own responsibility.

She was cross-examined at considerable length by counsel for the defendant. Much of this was directed at establishing that in the course of her occupation as a lecturer she was directly under the control, supervision and direction of the plaintiff. This was disputed both by the plaintiff and by her. She had originally been a member of Weight Watchers and had attended classes as a result of which she succeeded in weight reduction. She was invited to and did, in September 1976, become a lecturer.

The class income collected by her from which after making deductions for her own fee and other authorised matters she regarded as belonging to the plaintiff. She did not consider herself employed by the plaintiff and the money she received was payment for services rendered. It was her belief that the money received by her from which her entitlement was deducted belonged originally to the plaintiff. During the period following her engagement the area manager was Lynne Harris who trained her and Estelle Gough was one of the supervisors. Her only contact with Lynne Harris was when she gave the lectures on how to conduct her lectures in the course of the training workshop.

A lecturers' meeting was held once a month and this was attended by the witness. Only once was she supervised during a meeting and that was by one Joy Covell. On that occasion Miss Covell sat in the class and, at the conclusion and not in the presence of the members, offered suggestions of a constructive nature in relation to the conduct of the class.

The witness was shown a lecturers' programme teaching guide which was part of the material supplied to her for the purposes of her lecturing. From time to time she was notified in relation to permissible foods some of which were included on what she referred to as ``the unlimited list''. She had no discretion of her own to add foods to this list, she not being a nutritionist. The information supplied to her was as the result of research conducted by Weight Watchers. She had no authority to inform the class as to the advantages concerning foods of her own initiative nor would she do so. She said that

ATC 4371

the choice of food was something that was important in weight loss and as she received the information she would pass it on to the members. It was different however with other portions of the lecture. In answer to a suggestion that she was obeying orders she replied that she was passing onto the members the information that was given to her.

She provided to the classes from time to time recipes of her own. She did not seek permission for this but the relevant officers of the plaintiff were aware of the situation.

She dealt with the modules in an order in accordance with the directions of the plaintiff but this was an order that was applied and followed for the whole of Australia. The purpose of this was that if a member should move from one area to another he or she could attend another class in the knowledge that in that class the modules were being dealt with in the same order as before. She agreed that there was a schedule of modules and the order in which they were dealt with was laid down by the plaintiff for the whole of Australia.

There were generally three types of meetings held in the course of the lectures. One meeting dealt with the particular module in the order in which it was intended to deal with it. The following week was what was called a Feed Back meeting and discussion was had resulting from the experience of the members following the previous meeting at which a module was discussed. Every alternate meeting thereafter dealt firstly with a module and then the following meeting with a feed back. She was not free to depart from the practice as directed by the plaintiff of having a feed back meeting at the class immediately following the module meeting.

She had been taught in her training that there were different procedures to be followed in respect of the two different types of meetings. These directions however as to how to carry out the two different types of meetings were skeleton directions only.

There was a third type of class referred to as a Link Up meeting. The purpose of this was to link up and review a number of modules which had already been discussed. In all there were about eighteen meetings dealing with modules interspersed with a similar number of feed back meetings. There were then at appropriate intervals about six link up meetings at each of which approximately three module classes and three feed back classes were dealt with and ``linked up''.

Extensive instructions were given as to the development in a lecture of a module, the use of visuals, cue cards and other material. Much of the instruction was to some extent elementary and the purpose of the cross-examination was to establish, and it did, that in the preparation of the visual aids and in the presentation of the material at each lecture the lecturer was confined to and was acting in accordance with instructions from which there was no right of deviation.

Some of the instruction appeared to me to be necessary in order to produce a person competent to convey the necessary information in a lecture, in the fashion, advised by the plaintiff, the officers of which from experience were satisfied was the best method in which to achieve the required object. No doubt the proof of the pudding was in the eating. The failure or success of the lecture must become apparent to the plaintiff and if the lecturer was not achieving success then under the terms of the agreement the services of that lecturer could be terminated. There was nothing to suggest, however, that the plaintiff by any of its officers, be they area manager or supervisor, sought to interfere from time to time, by the issue of directives with the method in which the lecturers conducted the meetings. It did no more than to say, in effect, to the lecturers, ``We have had experience in this field. This is what we tell you you should do in order to achieve success. It is up to you to follow it. If you are not successful then we can dispense with your services upon a week's notice. If you follow our instructions you will succeed. If you succeed your services will not be terminated''. If, therefore, the lecturers in following the instructions given to them in their training had success it must be because they had complied with the directions because they, the lecturers, had realised from the results that the outlines and instructions given to them were capable of producing the required results. I am satisfied that the plaintiff had the right or power to direct the lecturers how to conduct their classes.

ATC 4372

It may be said that there was no difference between the directions, instructions and advices given by the plaintiff and the advice given in a number of publications dealing with the subject of how to win friends and influence people and that to accord with those instructions produced a result which in the end was a satisfactory one.

It may be said that the lecturers were employees because having been directed to have a module class followed in the next week by a feed back class with the procedure repeated for six weeks at the end of which it is followed by a link up class they had, in following that procedure, accepted the situation that they were bound to observe the directions of the plaintiff. On the other hand it may well be that what appeared to be given in the form of a direction was nothing more than advice which the plaintiff realised would be found by the lecturer to be good advice once it was given an opportunity to work and that to conform with it thereafter was nothing more than an admission that it was the best way, in the circumstances, to conduct the lectures. That does not, in my view, turn the relationship existing between the plaintiff and the lecturer from that of employer and employee.

That the procedure was both logical and sensible because amongst other reasons it enabled a person joining the programme to be sure of continuity if moving about the State, or indeed Australia, was not the only reason why the lecturer adhered to it. Perhaps the lecturer felt he or she had little alternative but to do so.

Much of the cross-examination dealt with the minutiae of the instructions given in the handbook. The lack of supervision at the meetings rather indicated an assurance on the part of the plaintiff that it needed only to tell the lecturers what they should do in order to secure adherence to the directions. Many of the directions were to some extent elementary and unnecessary. For example to be told that the class was to begin on time would seem to be a fundamental instruction not likely to be ignored without instruction if the lecturer was determined to make a success of his or her obligation. To be told to welcome new members, to welcome them by name, to encourage older members in their successes, to sympathise with them in their failures, would, to most people, seem unnecessary. However the constant repetition of this would ensure no doubt, in the long run, that there would be no failures that would do harm to the programme.

The suggestion that cue cards be used is one that need not be made to any successful public speaker. It might not be the first thing to occur to an embryonic lecturer on the subject of how to lose weight but does not amount to such direction and control as to make the person the author of the suggestion the employer of the person to whom the suggestion is made.

In the course of the cross-examination reference was made of the use of the word ``instruction''. If the word is used as meaning a direction to a person which must be obeyed it is different from the use of the word in a sense which suggests that a person is being instructed in the use, for example, of a mathematical formula, a public relations approach or a musical instrument.

The witness expressed the view that much of what was called instruction was really the provision of a guideline and this was a way in which it could be viewed.

Many lecturers in teaching institutions have the right to determine the manner in which they are to deliver the lectures on the particular subject matter allotted to them. They cannot choose the place or time and, once the subject matter is determined, on what they are to deliver the lecture. However that does not make them employees of the institution. They do not receive detailed instruction on how to give the lecture. With a lecturer engaged by Weight Watchers however an assumption cannot be made that such person knows the subject matter until taught and, amongst other things, it is important that they be taught the elements of delivering the lecture, maintaining the interest of the members and the goodwill of the programme and obtaining the results that are essential for the programme which, after all, is, from the point of view of the plaintiff, an exercise in making profit.

Whether the lecture fee is described as an honorarium, an ex gratia payment or in another neutral fashion is of no consequence. There is no doubt that it was the intention both of the plaintiff and the

ATC 4373

lecturer that the lecturer be not labelled an employee of the plaintiff. What the plaintiff sought to do was, by a series of instructions and supply of information, to ensure that its operation, which had then proved to be successful, would continue to be so, that its popularity would increase, that it would have considerable goodwill and support in the area in which, to it, such support would be profitable and that that object be achieved by encouraging its lecturers upon whom such success depended to behave in a fashion which would do nothing to diminish the likelihood of such success. The payment of pay-roll tax as such was no concern of the lecturers. The agreement was not intended as a sham. The lecturers were not parties to a sham.

Mrs. Santea said that she did not regard herself as being an employee of the plaintiff. Her cross-examination ended with the following questions being put to her:

``Q. In relation to the various classes that we have discussed, the module presentation, the feed back and the link up classes there is a series of defined segments that you have been instructed to carry out in your class, is that correct? A. Yes.

Q. I suggest the arrangement between you and Narich is that you should conduct those classes in accordance with the directions that I have referred you to in relation to module presentation, link up classes and feed back classes? A. Yes, according to the outline...

Q. You told me you were not free to vary without permission the day or time of the class? A. Of course not.

Q. You also told me you were not free to vary the particular module scheduled for presentation at a particular class? A. For the members' benefit.''

She conceded that some of the duties performed by her were not free from the direction or control of the plaintiff company.

Richard Bruce Jamieson the chairman of directors of the plaintiff company also gave evidence. He had deposed to the contents of an affidavit which had been filed on behalf of the plaintiff. He gave evidence concerning the use of agreements that had been signed by the lecturers to which reference has already been made. He said that an agreement was introduced because certain unions in New South Wales had attempted to induce the lecturers to become members and indeed had insisted upon addressing a meeting of the lecturers on one occasion. The lecturers rejected the approach and the witness then contacted the Hospitals' Union. The procedures involved however were such as to make it from his point of view and from that of the lecturers undesirable to have the lecturers join the union. He investigated other courses including what the English Weight Watchers had been doing. He said that virtually the English format was copied. Another reason for changing the documentation was because of the delay involved in the lecturers receiving their money if it had to be sent to them from the company after the collections at the meetings had been forwarded to the head office. These were part of the reasons for the statement in the original document in cl. 4 that the lecturer was not an employee of the company.

The franchise agreement to which I referred earlier referred, in the recitals, to the conduct of classes by lecturers specially trained in the use of the franchisor's unique methods. The plaintiff in it agreed, inter alia, that the personal weight of each of its employees coming into contact with the public, including each lecturer, would not exceed a limit prescribed for such employee for more than fourteen consecutive days. This reference could have occurred at a time when the distinction between employee and independent contractor was not important in relation to lecturers.

In 1973 agreement was produced as a result of the meeting in Sydney with the union officials. Also the organisation was growing, spreading to country areas and problems arose in the paying of these people. By allowing them to collect the fees and deduct their money they got it quicker and he said it was felt that as independent contractors they would have more responsibility. This would help them to do their job better. To employ the lecturers and pay them salaries involved substantial cost delay in getting their money and there were complaints at times about cheques going astray.

ATC 4374

Jamieson made enquiries from the English Weight Watchers and as a result of a letter from them dated 6th July, 1973, their system was adopted almost exactly. To adopt a PAYE system of deduction was a costly affair and would have involved a large amount of work for the small quantity of money involved. Moreover as a result of a judgment of Helsham J. on 4th November, 1971, problems arose about enforcing the restrictive covenant. The scheme of engaging the lecturers as independent contractors was not done with any desire or intention to avoid pay-roll tax.

Because of the probability of union problems if the lecturers were to remain employees advice was sought from Mr. Dey, of counsel (as he was then) as to the method of engagement of the lecturers as independent lecturers. It was only after the engagement of Mr. MacIntyre as an accountant that following his advice the plaintiff ceased any further to pay pay-roll tax until ultimately assessed by the Commissioner in relation to the lecturers. Thereupon pay-roll tax ceased to be paid in respect of the lecturers, the recorders and the weighers and their assistants.

From 1973 to 1977 Mr. Jamieson made it a practice to attend meetings given by the lecturers. He generally stayed for the course of the meeting. He was aware of the contents of the lecturers' handbook. While attending a lecture he did not interfere with the lecturer during the course of it. If a mistake was made or if the sequence was not followed as recommended in the handbook or if there was some other deviation he would speak to the lecturer after the meeting but on no occasion was action of a disciplinary nature ever taken against the lecturer. Nor did he interrupt the proceedings with a view to correction. He frequently attended lecturers' monthly meetings. All lecturers in New South Wales could not regularly attend such lectures but those that could did. They were encouraged to attend but not penalised for not attending. If lecturers' reports were not completed they would be questioned about them but no disciplinary action was taken.

If a supervisor attended a lecturers' meeting she would on occasions report back to head office concerning the meeting. As a rule no action would be taken on any such report. The module system was introduced in 1975 and was resisted by a number of the lecturers in the early stages of such introduction. Efforts were made to try and encourage the lecturers to accept it and it was realised that a lot of patience would be required to introduce it properly. It was a long process to convert all the lecturers into accepting the situation but at no time was any weight brought to bear on the lecturers to do so. Efforts were made however to encourage lecturers to believe in what they were doing and so improve their delivery of the module to the meeting. At no time was any lecturer threatened with termination of services of agreement. There are still a few of the lecturers who do not accept the module system. They however are still with the company.

Instructions have been given from time to time to the supervisors to try and encourage the lecturers to follow instructions given in the handbook. Despite all this there are still some who do not follow it as it should be followed. The instructions in the handbook are, as with all the teaching there, to be used as a guide.

The time and place of lecturers' meetings could be altered although instructions were given at times laying down the hours. The starting time of a meeting could however be varied to suit the general public coming to the meeting - such variation would be within reason.

Only the lecturers were required to sign the non-competition agreements. Staff members were not.

Directions were given for example that the lecturer should stand while lecturing and that she should not smoke during it. This might be viewed as a reasonable request rather than an instruction failure to comply with which might result in dismissal.

The times of the meetings could be altered but as Mr. Jamieson pointed out it was basically commonsense to hold the meetings on the dates and as near as possible to the times advertised. Permission does not have to be sought to change the time so long as the head office was notified. This avoids head office giving out wrong information when questioned about the time of the meeting. If a hall became unavailable for the meeting the

ATC 4375

lecturer would endeavour to find another one although may seek the assistance of a supervisor who perhaps had more information. Factually it appeared to me from the evidence of Mr. Jamieson that these lecturers were in a position somewhat different from that of an employee. The instructions generally that were given to them would be accepted by reasonable persons in the position of the lecturers as commonsense advice as to how to make a success of what they were doing.

Pay-roll tax was introduced by the Federal Parliament in the Pay-roll Tax Assessment Act, 1941 which was described as ``an Act relating to the Imposition, Assessment and Collection of a Tax upon the Payment of Wages''.

The Act provided that unless the contrary intention appears:

```employer' means any person who pays or is liable to pay any wages and includes -

(a) The Crown in the right of State;

(b) A Municipal corporation or other local Government Body or a public authority constituted under any State award;

(c) Any public authority constituted under any Act or under any law in force in a territory of the Commonwealth the wages paid by which are not paid out of the consolidated revenue fund; and''

```wages' means 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, without limiting the generality of the foregoing, includes -

(a) Any payment made under any prescribed classes of contracts to the extent to which that payment is attributable to labour;

(b) Any payment made by a company by way of remuneration to a director of that company;

(c) Any payment made by way of commission to an insurance or time-payment canvasser or collector; and

(d) The provision by the employer of meals or sustenance or the use of premises or quarters as consideration or part consideration for the employee's services;.''

Section 12 provides that a tax imposed by the Pay-roll Tax Act, 1941 shall be levied and paid on all wages paid or payable by any employer in respect of any period of time occurring after 30th June, 1941. Pay-roll tax shall be paid by the employer who pays or is liable to pay wages.

In 1971 the New South Wales Government enacted the Pay-roll Tax Act No. 22 of 1971 which was described as:

``An Act to impose a tax upon employers in respect of certain wages; to provide for the assessment and collection of the tax; and for purposes connected therewith.''

Section 3 of that Act provided that in the Act, except in so far as the context or subject matter otherwise indicates or requires:

```employer' means any person who pays or is liable to pay any wages and includes the Crown in right of the State of New South Wales;''

and

```wages' means 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 an employee as such and, without limiting the generality of the foregoing, includes -

(a) any amount paid or payable by way of remuneration to a person holding office under the Crown in right of the State of New South Wales or in the service of the Crown in right of the State of New South Wales;

(b) any amount paid or payable under any prescribed classes of contracts to the extent to which that payment is attributable to labour;

(c) any amount paid or payable by a company by way of remuneration to a director or member of the governing body of that company;

(d) any amount paid or payable by way of commission to an insurance or time-payment canvasser or collector; and

ATC 4376

(e) the provision by the employer of meals or sustenance or the use of premises or quarters as consideration or part consideration for the employee's services.''

Section 6 provides that the wages liable to pay-roll tax under the Act are wages that are paid or payable by an employer after the month of August, 1971.

Section 7 provides for the imposition of the relevant tax.

The instant litigation involves a determination of whether the lecturers having entered into agreements with the plaintiff are employees and, as such, recipients of wages within the meaning of the Pay-roll Tax Act, 1971 so as to render the plaintiff liable to the payment of pay-roll tax assessed upon the payments received by those persons from the plaintiff.

It is relevant to determine whether the Act requires the existence of the relationship of employer and employee between the plaintiff and the recipients of the moneys referred to. The title of the Act states that its purpose is to impose a tax upon employers in respect of certain wages. Although employer and wages are defined by sec. 3 of the Act, no definition is given of employee and the only relevant appearance of that word is in the definition of wages when it refers to certain payments being paid or payable ``to an employee as such''. An employer means any person who pays or is liable to pay any wages. Wages is defined to mean ``any wages, salary, commission, bonuses or allowances paid or payable... to an employee as such''. The definition is then extended without limiting the generality of the foregoing, to include five categories.

An early difficulty is confronted in determining the significance of the use of the word ``employer''. It has on occasions been contended that in order to render a person liable to pay-roll tax under the Act, there must exist between him and the person in respect of whom the tax is chargeable a relationship of master and servant or as it is now more commonly known employer and employee.

The matter first received the attention of the High Court in a reported decision of
F.C. of T. v. J. Walter Thompson (Australia) Pty. Limited (1944) 69 C.L.R. 227. That case concerned the application of the provisions of the Federal Pay-roll Tax Assessment Act 1941-1942 and contained provisions substantially similar to the ones relevant to this case. The definitions both of employer and wages are similar in all material respects.

In Thompson's case a company presenting radio plays engaged for each play artists suitable for the various parts and made with each artist a contract whereby the artist was to receive a fee for the performance but no fees for rehearsals and was obliged to attend rehearsals, and a right to cancel was reserved to the company if the artist's work should not be satisfactory to the producer. The production of the plays required extensive control of the artists during both rehearsals and the final performance. The Commissioner decided that the payments were wages within the meaning of the Act. The Board of Review unanimously held that the relation between the company and the artists was that of master and servant not of independent contractors. The majority held however that the payments were not wages within the meaning of the Act. The High Court held that the relationship between the company and each artist was that of employer and employee and not that of independent contractors and that the fee paid to him was wages as defined by the Act. Tax under the Act was therefore payable in respect of such fees. Whether it was assumed that the relationship of employer and employee was requisite or that no attention was given to this matter is not clear.

Latham C.J. at p. 229 said:

``The application of the Act depends upon the existence of an employer-employee relation - a relation which I am unable to distinguish from that of master and servant.''

His Honour then at length dealt with the provisions therein involved in the test necessary to be applied in order to determine whether a man be a servant or an independent contractor. In the course of his judgment his Honour referred to the definition of a servant in the American Restatement of the Law, Vol. 1, Agency, p. 483 which definition he found to be in accordance with the law of this country (p. 233).

ATC 4377

In dealing with the question as to whether the moneys paid to the artists were or were not wages his Honour reached the conclusion that in the Act the word ``wages'' should be held to include any remuneration paid or payable to an employee as a reward for his service as an employee (p. 234).

In the following year a similar point arose before the High Court in
Queensland Stations Pty. Limited v. F.C. of T. (Drovers' case) (1945) 70 C.L.R. 539. In that case a drover agreed with the owner of cattle to serve in the capacity of a drover, to drove certain cattle to a place of destination, to obey and carry out instructions and devote the whole of his time, energy and ability to droving the stock. His remuneration was a fixed sum per head of cattle delivered. As drover he was bound to find the men, plant, horses and rations necessary and pay all wages in connection therewith. It was held that the payments made to the drover were not wages within the meaning of the Act of 1941 and that the company was not liable to pay-roll tax in respect of these payments. The Court appears to have reached the conclusion that the relationship between the owner and the drover was that of ``employer and independent contractor''. That there was some doubt about the accuracy of the judgment in a previous decision of
Logan v. Gilchrist Watt & Cunningham (1927) 33 A.L.R. 321 is of no consequence to the matter now under discussion. It was contended for the Commissioner that the contract created the relationship of employer and employee and that payments made to the drovers thereunder were therefore payments of wages. Latham C.J. followed his statement in Thompson's case that application of the Act depended upon existence of an employer-employee - that is a master-servant relationship.

Dixon J. (as he then was) also gave attention to the question (pp. 551-553) and came to the conclusion that the contract did not create the relation of master and servant or employer and employee but appeared rather to be a contract for the performance of a service for one party by another. He referred to a number of authorities in support of his conclusion. At no time in the proceedings did there appear to be any doubt that in order for the Commissioner to succeed such relationship had to be established. It is difficult to believe that the Court in either of the two cases to which I have referred would have overlooked the proposition that the existence of such a relationship was unnecessary.

The matter again came to the High Court before Stephen J. in
F.C. of T. v. Barrett and Ors. 73 ATC 4147; (1973) 129 C.L.R. 395. That was an appeal under sec. 40 of the Pay-roll Tax Assessment Act 1941 and the question to be decided was whether a firm of land agents in South Australia who retained salesmen to find purchasers for land entrusted to the firm for sale was liable to pay-roll tax in respect of commissions paid to the salesmen. His Honour held that in the circumstances the salesmen were employees of the firm and hence the payments of commission to them were wages within the meaning of the Act.

His Honour stated the definition of wages (at ATC p. 4148; C.L.R. p. 400) and then said:

``Since the remuneration of salesmen is by way of commission, a form of payment specifically referred to in the definition of `wages', the only question is whether amounts of commission paid to salesmen are paid to persons who bear to the respondents the relationship of employees; if so those amounts will be paid to employees `as such'.''

His Honour then at some length discussed the application of the principles which have been evolved in determining over the years whether the relationship between an employer and those engaged in working for him is that of master and servant or employer and independent contractor. He referred to the two cases already quoted by me and to the decision in
Zuijs v. Wirth Bros. Pty. Limited (1955) 93 C.L.R. 561 in dealing with the application of the test of control over the manner in which work is done.

He adverted to the decision of the Board of Review and before discussing it said (at ATC p. 4150; C.L.R. p. 403):

``The Act is entitled `An Act relating to the imposition, assessment and collection of a tax upon the payment of wages' and central to its operation is the selection of an `employer' as the person liable to tax

ATC 4378
and of `all wages paid or payable' as the subject matter of the tax. `Employer' is defined in terms of he who pays wages and `wages' are in turn defined as various types of payments paid `to any employee as such'.''

His Honour then at some length discussed what he described as a number of circumstances which pointed to the conclusion that the salesmen were employees and so he ultimately decided.

In the course of argument reference has been made to some of the dicta in the case of
Murdoch & Ors. v. Commr. of Pay-roll Tax (Vic.) (1980) 54 A.L.J.R. 502 [also reported at 80 ATC 4424 under the name of Trustees of the Estate of George Adams v. Commr. of Pay-roll Tax (Vic.)]. In that matter a testator by his will directed that there be distributed amongst employees of a business in such proportions as his trustees should think fit a certain sum of money. The trustees of the will conducted the business and as such were the employers of the recipients of the benefits provided by the directions in the will. The respondent Commissioner assessed the appellant to tax in respect of these payments as being wages within the meaning of sec. 3 of the appropriate Victorian Act. Its terms resembled those of the New South Wales similar Act. It was held by the majority of the Court (Gibbs J. as he then was dissenting) that the payments in question were wages within the meaning of sec. 3 of the Act. The appellants were in fact the employers of the persons to whom the payments were made and these payments were made from net profits only to employees of the business. The criteria adopted by the appellants in making the payments supported a conclusion that these were paid to employees ``as such'' within the meaning of the definition. It was not material that in making the payments the appellants acted in obedience to a trust contained in a will. The payments also answered the description of bonuses as the term was used in the definition of wages in the section. It was therefore held that the Commissioner was correct in assessing the payments as subject to pay-roll tax.

Gibbs J. dissented on the basis that the Act was not intended to tax payments made under trusts generally created and that a payment made to a beneficiary who is an employee cannot rightly be characterised as remuneration for services rendered. In the early part of his judgment his Honour said (at ATC p. 4426; A.L.J.R. p. 503):

``In the present case the appellants, who made the payments, were the employers of the recipients. It is therefore unnecessary to consider the effect of the definition of `employer' as any person who pays `wages', which seems to make it unnecessary that the relationship of employer and employee in accordance with common law principles should exist between the payer and the payee. Where that relationship does exist, however, the critical question is `whether the payment is one which the employer makes to the employee because of something done in the service of the employer'.
W.A. Flick & Co. Pty. Ltd. v. F.C. of T. (1959) 103 C.L.R. 334 at p. 339.''

In a joint judgment Mason, Murphy and Wilson JJ. said at ATC p. 4431; A.L.J.R. p. 507:

``In our opinion, the solution to the problem is to be found in the application of the provisions of the Act to the particular circumstances of the case. In our opinion, such legal character of the payments as may be deduced from the terms of the will are not determinative. In other words, the Act, like all taxing statutes, takes a pragmatic line. So understood, in order to attract the tax the payments must satisfy three requirements: they must be paid by the employer; they must answer the description of `wages' as defined; and they must be paid to employees as such. Mr. Merralls drew attention to the definition in the Act of `employer' as tending to denude the term of any significance beyond the fact that it refers to any person by whom wages are paid. On the other hand, the concept of `wages' would seem necessarily to ground the relationship of payor and payee in that of master and servant. In any event, we find the first requirement to be satisfied. The appellants were in fact the employers of those who received the payments, and it is not to the point that in doing so they may have acted in obedience to a trust.''

ATC 4379

The comments of Gibbs J. which I have quoted express nothing more than a doubt in his mind as to whether the relationship of employer and employee in accordance with common law principles should exist. His was the only dissenting judgment and in placing any reliance upon the comments quoted it must be remembered that they are no more than obiter. The joint judgment which I have quoted in the statement which was also obiter seemed to entertain less doubt in requiring the relationship of payor and payee to be grounded in that of master and servant.

In
Sentry Life Assurance Limited v. Commr. of Pay-roll Tax (N.S.W.) 79 ATC 4586 the question for decision was whether payments to insurance agents by way of commission were wages within the meaning of the Federal Act. Sheppard J. held that the relevant Act was principally aimed at imposing tax on wages and salaries in the true sense and the paragraphs of the definition of ``wages'' are best construed as covering payments to persons who carry on activities which have a similarity to those of true employees. The only decision of those to which I have referred to above that was cited by his Honour in judgment was that of Stephen J. in Barrett's case. From that decision the Commissioner appealed to the Court of Appeal which upheld the Commissioner's appeal: 81 ATC 4011; (1980) 2 N.S.W.L.R. 898. It held that the definition of wages expressed to include ``any amount paid or payable by way of commission to an insurance or time payment canvasser or collector included persons working under a contract as well as employees strictly so called''. Such a finding prompted counsel for the Commissioner in the instant litigation to contend that a finding of the existence of the relationship of employer and employee at common law was not necessary to impose liability upon the plaintiff for pay-roll tax and that the plaintiff could still be so liable without such a finding as the definitions of employer and wages covered situations where there was no relationship of employer and employee in accordance with the common law principles.

In the Sentry Life Assurance case the only decision above referred to that was cited in the judgments was Murdoch's case to which Reynolds J.A. referred. Although Barrett's case was cited in argument no reference was made to it in the judgment. It appears to have been conceded that in none of the instances included in the agreed statements of fact in that case was the recipient of the commission an employee of the payee in accordance with common law principles. His Honour said at ATC p. 4013; N.S.W.L.R. p. 900:

``It was argued to this Court that as properly understood the definition of `wages' only covers cases where the payment is made to an employee as such. I am unable to perceive any substance in this submission. It appears to me that the plain intendment of the definition is that in certain cases payments made to persons who are not employees in accordance with common law principles are intended to fall within the definition.

I respectfully agree with the observation of Gibbs J. in Murdoch's case [also known under the name of Trustees of the Estate of George Adams v. Commr. of Pay-roll Tax (Vic.)]...''

His Honour quoted portion of such observations which I have already set out above.

It would appear that the earlier decisions of the High Court were not brought to the attention of the Court of Appeal and although Barrett's case was cited to the Court it was not dealt with in the judgment. Reynolds J.A. must have taken the view that it was not significant that the observations of Gibbs J. to which he referred were obiter and not supported by the other Judges of the Court. Although the comments in the joint judgment of Mason, Murphy and Wilson JJ. were also obiter it is clear that it was the view of their Honours that in order to attract tax the payments must be paid by the employer to employees as such. Undoubtedly it was their view that the concept of wages seemed necessarily to ground the relationship of payor and payee in that of master and servant. Their Honours may not have taken the view that there was no substance in the submission made to the Court of Appeal. Glass J.A. did not give an independent judgment on this aspect of the case but merely stated that for the reasons given by Reynolds J.A. he held that the paragraph included ``persons working under a contract as well as employees strictly so called''. That

ATC 4380

decision I understand is under appeal to the Privy Council.

It seems to me that on the point raised by Mr. Young I am bound by the decisions of the High Court. For the reasons which I have referred to above in relation to the decision of Stephen J. in Barrett's case and the obiter expressed by the majority of the Court in Murdoch's case and with respect to the decision of the Court of Appeal I would in any event if I had the freedom to do so prefer the conclusion which I have reached. I therefore reject the submission of Mr. Young and hold that the relationship that must exist between the payor and the payee of the money sought to be brought to tax is that of employer and employee and not any other. In so holding I mean that the existence of the relationship must be found in accordance with the principles of common law.

This brings me then to the question of whether or not the relationship between the plaintiff and the lecturers engaged by it was that of employer and employee. If it was not, whether it was one of independent contractor or falls within some other classification is not for me to decide. The law as it now stands requires me to decide in the first instance, if the Commissioner is to succeed, that the relationship of employer and employee exists.

The existence of such relationship has been the subject of dispute for a long time and numerous tests have been stated in a number of decisions both in this country and in England. In
Performing Right Society Limited v. Mitchell & Booker Limited (1924) 1 K.B. 767 McCardie J. said that in order to determine whether a man be a servant or an independent contractor ``the final test, if there be a final test, and certainly the test to be generally applied, lies in the nature and degree of detailed control over the person alleged to be a servant''. This was the test applied by Latham C.J. in Walter Thompson (supra).

In the Drovers' case (supra) where it was held that the relationship between the owner and the drover was that of ``employer and independent contractor'' Latham C.J., at p. 545, after referring to the relevant facts said:

``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.''

Even if the relationship had been that of master and servant it was held that the payment could not be said to be a salary, a commission, a bonus or an allowance.

At p. 546 his Honour said:

``But even if `is required' the court to hold that the relationship of master and servant exists in the present case... it does not follow... 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... depends upon the existence of an employer-employee, i.e. a master-servant relationship. 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 (sec. 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.''

And further on p. 547:

``A person may be an employee and yet payments made to him by an employer may not be wages.''

Dixon J. (at p. 551) was of the view that the contract did not create the relationship of employer and employee.

In 1949 the test of the existence of the relation of master and servant in relation to an application under the Workers' Compensation Act was still whether the contract placed the supposed servant subject to the control of the employer in the course of executing the work not only as to what he should do but how he should do it. The question was not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervisor or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work was in the employer so that he was subject to the latter's order and directions:
Humberstone v. Northern Timber Mills (1949) 79 C.L.R. 389 at p. 404;

ATC 4381

approved in Zuijs (infra).

In Zuijs v. Wirth Bros. Pty. Limited (1955) 93 C.L.R. 561, an acrobat was engaged by the proprietors of an itinerant circus for an indefinite period at an agreed weekly sum to give, with a companion, an acrobatic display on the trapeze at each performance and to appear in the grand parade. It was held that a finding that by reason of its nature the work was performed under an independent contract and not under a contract of service could not be sustained. The provisions of the Workers' Compensation Act therefore applied. It was further held that, in the circumstances, the arrangement presented elements characteristic of a contract of service.

In its judgment the Court dealt at some length with the criteria relied upon in determining whether the arrangement was a contract of service or an independent contract. A distinction was made between a contract for services and a contract of service. It was said that the law does not use the appropriate test in order to ascertain whether in fact the employee's work to be done is susceptible of control and direction by the employer; it is in order to ascertain whether a relation exists between the two men. It was concluded that in the instant case what had been proved in evidence all pointed to the conclusion that the relation between the parties was that of master and servant. This may follow from the power of selection, the form of the remuneration (wages), the right in the master to suspend or dismiss, the right to superintend and control the manner in which the servant fulfils his obligation. All pointed to the existence of the relationship.

In the last quoted case it was said that a weekly hiring for an indefinite period to do a defined task (a trapeze artist) on the premises of the other party as an integral portion of a spectacle under his general management and control would appear to present elements characteristic of a contract of service (p. 569). The Court stated that a false criterion was involved in the view that if, because the work to be done involves the exercise of a particular art or special skill or individual judgment or action, the other party could not in fact control or interfere in its performance, that shows that it was not a contract of service but an independent contract (at p. 570). No difference in principle existed between the situation of a teacher in a school or a trained hospital nurse. It was a totally wrong application of principle to distinguish between them. They were both working under a contract of service. In that case, it was said, the test to determine whether a contract of service existed was not in order to ascertain whether in fact the employee's work to be done was susceptible of control and direction by the employer but in order to ascertain whether a relation existed between the two men. What matters is lawful authority to command so far as there is scope for it. Although from its very nature an acrobatic performance must be executed upon the unhampered responsibility of the performers that does not remove the relationship from the category of master and servant (p. 571).

In Zuijs' case the following provided indicia of the employee situation: The power of selecting the person engaged existed in the master. The fact that the remuneration took the form of wages. The right in the master to suspend or dismiss for misconduct. The right to superintend and control the manner in which the servant fulfilled his obligation. The act took a place in the programme as directed by the defendant. The measures of safety to be observed, the number, time and the manner of the rehearsals, the costumes of the performers, the place where they dressed and their conduct both before the audience and otherwise were all matters naturally calling for control.

The fact that the performance of a task depends on a natural gift or on some acquired accomplishment does not necessarily mean that the performer cannot be a servant. The nature of the task is not conclusive (see pp. 572-573).

In
Neale v. Atlas Products (Vic.) Pty. Limited (1954) 94 C.L.R. 419 it was relevant to ascertain whether roof tilers who were paid under a contract to fix roof tiles received payment of salary or a wage from which amounts should be deducted by the payee to cover income tax liability. It was held that the tilers were independent contractors. Referring to similar cases the Court said (at p. 426):

``In many such cases the payments

ATC 4382
stipulated for may be said to be payments made under a contract wholly or substantially for the labour of the person to whom the payments are made, though it is a simple matter to conceive examples of the former class where remuneration might be said to be substantially for the hire of plant or equipment: see, e.g. Humberstone v. Northern Timber Mills (supra) and
Wright v. Attorney-General for the State of Tasmania & Ors. (1954) 94 C.L.R. 409.

In any such cases, however, the critical question will be one of fact, but no such question arises in the present case for if the tradesmen, in any of the instances under review, were free to carry out the contractual work themselves or to engage others to perform it for them, either in whole or in part, the payments received by any particular tradesman were in no sense made under a contract for his labour.''

It is suggested that because the duties of the lecturer may be performed by a substitute the relationship does not exist. However the substitute must be approved by the plaintiff and while no guideline is given it would be clear that the plaintiff is not required to approve any nomination made by the lecturer. No doubt latitude would be given by the company in relation to times and places of the classes but the lecturer is bound on the face of the agreement to lecture to a class at a time and place arranged by the plaintiff.

The lecturer must carry out her duties or obligations as a lecturer in a proper manner and cannot fail to do so without control and without the risk of her engagement being terminated. Her weight must not be excessive.

While the company undertakes to instruct the lecturer in ``weight control skills'' it is only in such skills as the company may consider appropriate to the skill experience and ability of the lecturer from time to time.

Whether there is to be placed upon the relationship a particular label consequent upon the statement in the agreement that the lecturer ``is not an employee of the company'' is not relevant in the circumstances there being no ambiguity or uncertainty as to the true relationship which does exist. (See
Massey v. Crown Life Insurance Co. (1977) W.L.R. 676;
Australian Mutual Provident Society v. Chaplin (1978) 52 A.L.J.R. 407.) The statement that the lecturer shall perform her duties free from the direction and control of the company is subject to a proviso which renders the statement of such freedom valueless. The price of such freedom is that she follows the Weight Watchers Lecturers Handbook distributed by the American company and will attend without payment once per month at a Saturday meeting of the lecturers at which she will be weighed.

The duties imposed upon her by the agreement are set out in cl. 5 and these I have stated above.

It is not denied by the plaintiff that it has sought to avoid the relationship arising between it and the lecturers for reasons some of which are dissociated from the obligation to pay tax. The requirement in cl. 5 that the lecturer is to select and train recorders and weighers whom she is to pay does not make them her employees or her an independent contractor. Her obligation is not to pay both those persons and the rental for the hall but to do so from the receipts of the class. She cannot be said to rent the hall when the lectures are being held for the benefit of the plaintiff which arranges the time and place of the lecture and is entitled to the balance of the receipts of the class after deducting therefrom the fees payable to her, the recorders and weighers and those where appropriate for the rental of the hall. If by any chance the receipts from the class were insufficient to meet all those payments no obligation is imposed upon her to make those payments either then or at any subsequent time out of her own pocket. It is to be noted also that for the receipt of fees and dues from the members she is nominated as the company's agent for collection.

In Barrett's case (supra) Stephen J. at ATC p. 4150; C.L.R. p. 402 said:

``A new test has been applied which involves the question whether or not a man's work is done as an integral part of another's business or is only accessory to it; whether, to put it in slightly different terms, the person in question is performing the relevant services as a person in business on his own account; it suffices to refer to the judgment of

ATC 4383

Pennycuick V.C. in Fall v. Hitchen (1973) 1 W.L.R. 286, in which recent authorities are reviewed and to the article in the Modern Law Review Vol. 31 (1968) p. 408. Whether or not this new test, which still involves the question of control as a factor, does more than restate the question rather than providing an answer to it may be open to doubt - Atiyah on Vicarious Liability (1967) p. 38.''

If one were to apply that test there could be no doubt that in this case the relationship of employer and employee is established. However it does not require the application of that test to establish such.

Admittedly the lecturer is not engaged to work for a minimum period or during specific hours or for a regular salary. While the plaintiff may not have, in the true sense, first call upon the services of the lecturer, it is inherent in the arrangement that the lecturer would be required to be available for regular meetings for the purpose of maintaining control over the attendance and activities of the members of particular classes. The plaintiff provides all the teaching aids although the lecturers are encouraged to inject individuality into the method of presentation of some of the material to the members at lectures. Whilst I do not in the circumstances of this case favour the choice of an alternative between the relationship being that of employer and employee on the one hand or independent contractor on the other, it seems to me that the lecturer cannot be said to be a person who is performing services in business on her own account and, with respect to counsel for the plaintiff, I see no real indicia of this. With respect, I agree with Pennycuick that the expression ``contract of service'' appears to be coterminous with the expression ``employment'' and that therefore the plaintiff is an employer of each lecturer within the meaning of the Act.

As in Barrett's case while the lecturers are given scope for individual initiative they remain very much a part of the plaintiff's organisation, they are subject to control in respect of the matters I have referred to. As Stephen J. found in that case, I am satisfied in this case that while there is little evidence of detailed supervision:

``... its absence is not so much an indication of lack of the right to control as of an efficiently organised business in which financial incentives and good relations with responsible, carefully selected staff take the place of close supervision but without in any way affecting the subsisting relationship of employer and employee.''

(ATC p. 4152; C.L.R. 405.)

Contrary however to the facts in that case there is not a great deal of resemblance between the salesmen there and the lecturers in this case in relation to the relationship of employment. This however is principally due to the fact that there is considerable distinction between a real estate salesman and a lecturer in Weight Watchers and little imagination is required to perceive where the difference lies. I have refrained from referring to the matter of their remuneration until I come to deal with the meaning of the expression ``wages'' in the Act.

Stephen J. in
Barrett's case (ATC p. 4150; C.L.R. p. 402), in dealing with the test that I have earlier referred to involving the question of whether the work done is an integral part of another's business or is only ancillary to it, referred to a comment made by Mackenna J. in
Ready Mixed Concrete (South East) Limited v. Minister of Pensions and National Insurance (1968) 2 Q.B. 497. In that case the point in issue was whether the owner of a motor truck used to carry concrete for a company marketing and selling concrete was an employee or an independent contractor. The contract between the parties declared the truck owner to be an independent contractor and provided for payment at mileage rates in return for which the truck owner would carry concrete at his own expense. The relevant Minister determined the truck owner to be an employed person and from this finding he appealed. It was held by Mackenna J. that if the contractual rights created the relationship of master and servant, a declaration by the parties that it was otherwise was irrelevant. It was further held that if (a) the servant agreed in consideration of a wage or other remuneration to provide his own work and skill in the performance of some service for his master, (b) the servant agreed expressly or impliedly that, in performance of the service he would be subject to the control of the other party sufficiently to make him the

ATC 4384

master, and (e) the other provisions of the contract were consistent with it being a contract of service, a contract of service existed. An obligation to do work subject to the other party's control was not invariably a sufficient condition of a contract of service, and, if the provisions of the contract as a whole were inconsistent with the contract being a contract of service, it was some other kind of contract.

In relation to the agreement of the servant to provide his own work and skill his Lordship took the view that freedom to do a job either by one's own hands or by another's was inconsistent with a contract of service although a limited or occasional power of delegation may not be. The control referred to in the second condition included the power of deciding the thing to be done, the way in which it should be done, the manner to be employed in doing it and the time when and the place where it was to be done. Such right need not be unrestricted.

Although the third condition was expressed in the positive namely that the other provisions were consistent with it being a contract of service his Lordship interpreted it as meaning that there existed no provisions inconsistent with the nature of a contract of service.

With respect to his Lordship I do not agree that the existence of provisions inconsistent with the nature of a contract of service is sufficient. They must be, as a whole, inconsistent with the existence of such a contract. This I think his Lordship recognises when he says (at p. 517):

``If the provisions of the contract as a whole are inconsistent with its being a contract of service, it will be some other kind of contract and the person doing the work will not be a servant.''

In dealing with the case in question his Lordship concluded that if the obligations on the driver were more consistent with a contract of carriage than a contract of service, the relationship was not that of employment. If he has the ownership of the assets, a chance of making a profit, and the responsibility to risk the loss, he, to that extent, would be unlike a servant. If as in that case the owner of the truck chose another driver the question could arise and may be solved by the answer to the further question of whom was that other driver the servant. The only other comment of his Lordship that may be thought to be relevant to my conclusion is that payment by results may tend to prove independence and payment by time the relationship of master and servant.

During the relevant period one hundred and forty-six were engaged by the company who signed an agreement in the form of that referred to above.

There was imposed upon every lecturer a number of obligations as to the manner in which the lecture was to be conducted, the information to be imparted to the members and an obligation not to exceed a specified weight. With the right to terminate such as it was the plaintiff was clearly able to control not only the task allotted to the lecturer but the manner in which the task was performed. It is of no consequence in my mind that disciplinary steps were not taken on occasions when they could have been. Whether the plaintiff had the view that it was in a better position by not taking disciplinary action against a lecturer who did not ``toe the line'' is of no consequence. The authorities show that insofar as control is necessary to establish the relation of employer and employee, it is the right to control that matters although the ``employer'' may never need to exercise it. It is the existence of the right which probably enables the employer to ensure that the employee will accept the control.

Having decided that the relationship existing between the plaintiff and the lecturers was one of employer and employee, there still remains for decision the question of whether the plaintiff was a person who paid or was liable to pay any wages (as defined) to any employee as such. There is no doubt that although the relationship may exist the payment need not necessarily be wages (Drovers' case (supra) per Latham C.J. at p. 547). In Thompson's case (supra) Latham C.J. referred to the fact that the majority of the Board of Review, though of opinion that the relation between the company and the artists was not that of independent contractor, were nevertheless of the opinion that the moneys paid were not wages. As was the position in this case the money paid was described as a ``fee'' and

ATC 4385

that it was paid for ``a single performance (after rehearsals)''. His Honour referred to the definition of wages in Stroud's Judicial Dictionary, 2nd ed. (1903) Vol. 3, p. 2206 where it was stated ``it would therefore seem that `wages' are the personal earnings of labourers and artisans''.

``The use of the word `fee' cannot be regarded as more than one element to be taken into account in determining the true character of the payments made. If a fee is really a reward for services rendered by a servant then it falls within the category of wages or possibly salary. Where the engagement is for a period, is permanent or substantially permanent in character, and is for other than manual or relatively unskilled labour, the remuneration is generally called a salary. But no precise line can be drawn between wages and salary. The fees in the present case would not naturally be called salaries but, in my opinion, remuneration for the services of a servant which is not salary is comprehended within the term `wages'...

In my opinion, in the Pay-roll Tax Assessment Act (Federal) the word `wages' should be held to include any remuneration paid or payable to an employee as a reward for his services as an employee.''

(Per Latham C.J. ibid. pp. 233-234.)

In my view the moneys received by the lecturers in respect of their services rendered at each meeting were moneys paid by the plaintiff as employer of each of them to each of them as employees in respect of services rendered by them as such and come within the ordinary definition of wages. I therefore disallow the plaintiff's Notice of Objection Against Assessment dated 4th August 1978. I dismiss the summons and I order the plaintiff to pay the defendant's costs.

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