Legal database - View: Cases: Whitby v ZG Operations Australia Pty Ltd

Whitby v ZG Operations Australia Pty Ltd
[2018] FCA 1934

The impact of this case on ATO policy is discussed in Decision Impact Statement: Jamsek v ZG Operations Australia Pty Ltd (No 3) (NSD 332 of 2022 S27/2021 (High Court) NSD 495 of 2019 (Full Federal Court) NSD 2023 of 2017 (Federal Court)).

(Judgment by: THAWLEY J)

Whitby v. ZG Operations Australia Pty Ltd

Court:

Federal Court

Legislative References:
Fair Work Act 2009 (Cth) - s 12; s 13; s 15(1); s 44; s 45; s 87(1); s 90(2); s 96; s 99; s 116; s 118; s 357; s 550
Long Service Leave Act 1955 (NSW) - s 3(1); s 4(1); s 4(5)
Superannuation Guarantee (Administration) Act 1992 (Cth) - s 12
Road Transport and Distribution Award 2010 - 13.3; 14.1; 15; 21.2; 27.1; 29.1; 29.2; 30 32

Case References:
ACE Insurance Ltd v Trifunovski - (2011) 200 FCR 532
ACE Insurance Ltd v Trifunovski - [2013] FCAFC 3
Australian Air Express Pty Limited v Langford - [2005] NSWCA 96; 147 IR 240
Australian Communications and Media Authority v Mobilegate Ltd (No 8) - (2010) 275 ALR 293
Briginshaw v Briginshaw - (1938) 60 CLR 336
Climaze Holdings Pty Ltd v Dyson - (1995) 13 WAR 487
Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd - (2015) 230 FCR 298
Damevski v Giudice - [2003] FCAFC 252
EZY Accounting 123 Pty Ltd v Fair Work Ombudsman - [2018] FCAFC 134
Fair Work Ombudsman v Devine Marine Group Pty Ltd - [2014] FCA 1365
Fair Work Ombudsman v Ecosway Pty Ltd - [2016] FCA 296
Fair Work Ombudsman v Grouped Property Services Pty Ltd - [2016] FCA 1034
Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd - [2015] FCAFC 37
Fair Work Ombudsman v South Jin Pty Ltd - [2015] FCA 1456
Hall (Inspector of Taxes) v Lorimer - [1992] 1 WLR 939
Hollis v Vabu Pty Ltd - (2001) 207 CLR 21
Humberstone v Northern Timber Mills - (1949) 79 CLR 389
Marshall v Whittaker's Building Supply Company - (1963) 109 CLR 210
On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) - (2011) 214 FCR 82
Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation - (2010) 184 FCR 448
Stevens v Brodribb Sawmilling Company Pty Ltd - (1986) 160 CLR 16
Tattsbet Limited v Morrow - (2015) 233 FCR 46
Vabu Pty Ltd v Federal Commissioner of Taxation - (1996) 33 ATR 537
Wright v Attorney-General (Tas) - (1954) 94 CLR 409

Hearing date: 18-20 September 2018, 28 November 2018
Judgment date: 30 November 2018

Sydney

Judgment by:
THAWLEY J

REASONS FOR JUDGMENT

THAWLEY J:

1 On 15 November 2017, Mr Robert Whitby, Mr Martin Jamsek and Mr Robert Robinson commenced proceedings in this Court against six respondents: ZG Operations Australia Pty Limited, Mr Juergen Koprio, Mr Ken Dick, Mr Chris Dixon, Mr Nick Giitsidis and ZG Lighting Australia Pty Ltd.

2 On 7 August 2018, Mr Robinson filed a notice of discontinuance with respect to the whole of the proceeding. On the same day, Mr Whitby and Mr Jamsek filed an amended originating application, which had the effect of abandoning their case against Mr Koprio and Mr Giitsidis.

3 The matter was set down for a three-day hearing commencing 18 September 2018. On 20 September 2018, orders were made by consent dismissing the proceedings against Mr Dick. The matter was listed for further hearing on 28 November 2018 between the remaining parties, namely:

•: Mr Whitby as first applicant;
•: Mr Jamsek as second applicant;
•: ZG Operations as first respondent;
•: Mr Dixon as third respondent; and
•: ZG Lighting as fourth respondent.

OVERVIEW

4 The most important question arising in the dispute concerned the nature of the relationship between the applicants and the respondent companies, ZG Operations and ZG Lighting, in particular whether the applicants were, at relevant times, "employees" within the meaning of the Fair Work Act 2009 (Cth) (FW Act) or the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act). A further question was whether the applicants were "workers" under the Long Service Leave Act 1955 (NSW) (LSL Act).

5 The applicants sought various declarations and orders against ZG Operations and ZG Lighting for claimed contraventions of ss 44, 45 and 357 of the FW Act, and s 4(5) of the LSL Act.

6 The applicants also sought orders under s 550(2)(c) of the FW Act against Mr Dixon, who was the "Supply Chain Manager" of ZG Operations and Thorn Lighting Pty Ltd from March 2008 and the "Operations Manager Australia" of ZG Operations from February 2013, on the basis that he was knowingly involved in the alleged contraventions of the FW Act.

7 The final pleadings were contained in an amended originating application and further amended statement of claim. In substance, the applicants advanced the following contentions, as summarised by the respondents and accepted by the applicants as an accurate statement of the claims:

(1): Pursuant to s 87(1) of the FW Act and cl 29.1 of the Road Transport and Distribution Award 2010, the applicants were each entitled to four weeks paid annual leave for each year of their (alleged) employment, and they were not given any such paid leave by ZG Operations and/or ZG Lighting.
(2): Pursuant to cl 29.2 of the Award, ZG Operations and/or ZG Lighting were required to pay the applicants a loading of 17.5% of the minimum rate specified in cl 15 of the Award.
(3): ZG Operations and/or ZG Lighting breached s 90(2) of the FW Act by failing to pay the applicants upon termination of their (alleged) employment amounts owing for leave accrued and not taken in the period 1 January 1986 (or alternatively 25 August 1993) to 20 January 2017.
(4): Pursuant to s 96 of the FW Act and cl 30 of the Award, the applicants were each entitled to 10 days of personal leave per year for each year of service. ZG Operations and/or ZG Lighting failed to pay them in respect of their outstanding personal leave entitlements in breach of s 99 of the FW Act and cl 30 of the Award.
(5): In breach of s 116 of the FW Act and cl 32 of the Award, ZG Operations and/or ZG Lighting failed to pay the applicants for certain designated public holidays each year on which they absented themselves from work, specifically 2 days in 2011, 9 days in each of the years 2012 to 2014, 8 days in 2015, 9 days in 2016 and 1 day in 2017.
(6): Pursuant to cl 27.1 of the Award, the applicants were entitled to be paid overtime for all hours worked outside of ordinary working hours, being 7 hours 36 minutes each day over five days, Monday to Friday. ZG Operations and/or ZG Lighting contravened s 45 of the FW Act and cl 27.1 of the Award by failing to pay the applicants overtime, calculated at a rate of $66.88 per hour for the first two hours of time worked outside of ordinary hours, and $88.88 per hour for overtime in excess of two hours.
(7): ZG Operations and/or ZG Lighting contravened cl 13.3 of the Award by failing to give the applicants a total of 10 days of paid time off work to search for another job during their 10-week notice period.
(8): ZG Operations and/or ZG Lighting failed to pay the applicants 12 weeks of redundancy compensation, calculated at their weekly contract rate, in breach of s 118 of the FW Act and cl 14.1 of the Award.
(9): Pursuant to cl 21.2 of the Award, ZG Operations and/or ZG Lighting were obliged to make such superannuation contributions for the applicants' benefit to avoid being required to pay the superannuation guarantee charge. ZG Operations and/or ZG Lighting failed to make such superannuation contributions in breach of cl 21.2 of the Award.
(10): In contravention of s 357 of the FW Act, ZG Operations and/or ZG Lighting put a contract to the applicants in or about December 2000 (which was subsequently entered into by the applicants' respective partnerships in 2001), which identified the applicants as independent contractors, not employees.
(11): ZG Operations and/or ZG Lighting did not permit the applicants to take long service leave in accordance with the LSL Act during the period they were "workers", and on termination of their (alleged) employment, ZG Operations and/or ZG Lighting were obliged to pay to the applicants an amount equal to the value of their long service leave accrued over 33.8 weeks and calculated at the weekly contract rate prevailing upon termination.
(12): To the extent they were not principal contraveners of the FW Act or the Award, ZG Operations and ZG Lighting, as well as Mr Dixon (for the period 21 November 2011 to 30 April 2015), were each knowingly concerned in or party to the contraventions of the FW Act or the Award for the purposes of s 550(2)(c) of the FW Act. Accordingly, they were taken to have personally contravened the FW Act.

8 The respondents' case was, in summary, that the applicants were independent contractors, and not employees of ZG Operations or ZG Lighting. Nor were they "workers" within the meaning of the LSL Act.

9 On three occasions from 1985 to 2017 the business in respect of which the applicants carried out their delivery activities (the business) was transferred to a new corporate entity. The owner from time to time of the business is referred to in these reasons as the company or collectively as the companies. On each occasion that the business was transferred, the nature of the work the applicants were engaged in for the relevant company did not materially change. Mr Whitby and Mr Jamsek continued to perform their work without immediately entering into a new written agreement with the company to which the business had been transferred.

10 For reasons which follow, Mr Whitby and Mr Jamsek were not employees of:

(1): ZG Operations (which had previously been called Thorn Lighting Pty Ltd);
(2): ZG Lighting (which had previously been called Zumtobel Lighting Pty Limited);
(3): Thorn EMI Pty Ltd; or
(4): Associated Lighting Industries Pty Limited (ALI),

at any relevant time after purchasing their delivery trucks from ALI in late 1985 or early 1986 and entering into a new working relationship with ALI at that time.

11 Accordingly, neither ZG Operations nor ZG Lighting contravened ss 44, 45 or 357 of the FW Act by failing to pay the applicants any amounts in respect of annual leave, annual leave loading, personal leave, redundancy, overtime or payments due for public holidays, or any amounts in respect of superannuation contributions or leave for the purposes of searching for new employment.

12 Likewise, I do not consider ZG Operations or ZG Lighting contravened s 4(5) of the LSL Act for any failure to pay the applicants amounts in respect of long service leave.

FACTS

13 Mr Jamsek started working as an employee of ALI on 7 September 1977. In his affidavit, he stated he worked for 12 months as a storeman, then for one or two years as an offsider with a driver on deliveries. He then became a delivery driver. In his oral evidence, he said he commenced as a driver in 1977. In any event, he was a driver for ALI at the latest by 1980.

14 Mr Whitby began working for ALI in October 1977, initially in the company's paint shop. He became a delivery driver in 1980.

15 Both Mr Jamsek and Mr Whitby wore an ALI uniform and drove trucks with and an ALI logo.

16 There was no dispute that, at least up until the events next described in late 1985 and early 1986, the applicants were employees of ALI.

17 For most of the period that the applicants were drivers, warehouse staff "picked and packed" the orders for delivery and moved them to a despatch area of the relevant warehouse. They were sorted in that area before being loaded into the trucks.

18 Both Mr Whitby and Mr Jamsek would move the products around on the back of their trucks using a pallet jack to ensure their safe transit. While the products were being "picked and packed", the drivers would wait in a canteen and have a cup of tea or something to eat.

The 1986 Contract

19 In late 1985, ALI was looking to move the NSW branch of its business to Silverwater. Mr Jamsek and another driver, Mr Robinson, asked ALI's manager, Mr Vittens, for a pay rise to compensate them for the extra travel time. The request was rejected. Mr Jamsek and Mr Robinson (who were members of the Transport Workers' Union and were union representatives) reported this rejection to the remaining drivers. At the time there were five drivers.

20 After a couple of weeks and immediately before Christmas 1985, Mr Vittens confirmed that ALI would not offer a pay rise but would offer the opportunity for the drivers to "become contractors". The drivers, including the applicants, were told: "If you don't agree to become contractors, we can't guarantee you a job going forward". The proposal was for the drivers to buy the trucks they were using and be paid "carton rates" with a minimum of $120 per day. The drivers would cover all expenses of operating and maintaining the trucks.

21 Each of the five drivers took up the offer to become contractors.

22 Mr Whitby and Mr Jamsek executed a written contract, I infer on behalf of their respective partnerships, with ALI, probably around 1 January 1986 (1986 Contract). A copy of this contract could not be located and was not in evidence. However, the applicants recalled that it was in similar terms to later contracts entered into (described below) with the exception that the pay was on a "per carton" rate (with a minimum daily payment of $120). The partnerships were identified as parties to each of the later written contracts.

23 In addition to executing the 1986 Contract, Mr Whitby and Mr Jamsek purchased delivery trucks from ALI. I infer that these trucks, like trucks acquired later, were purchased on behalf of their respective partnerships.

24 Mr Whitby purchased a 4 tonne truck from ALI for $21,000. He borrowed money in order to fund that purchase. Mr Whitby gave oral evidence that he would not have committed to buying the truck and taking out a loan if he did not know that there would be sufficient work and income to repay the loan and cover the expenses associated with the truck.

25 Mr Jamsek purchased an Isuzu Pantech 4 tonne truck from ALI for $15,000. He also borrowed money in order to fund the purchase. He and his wife approached a bank to obtain finance before agreeing to purchase the truck. He only agreed to the purchase once he had secured funding.

26 The applicants were responsible for the registration, maintenance and other costs associated with the upkeep of the trucks which they had purchased.

27 Mr Whitby was paid out his accrued annual leave at this time. He understood this was paid out because his employment with ALI had come to an end.

28 Before entering into the 1986 Contract, Mr Whitby was earning approximately $410 a week.

29 The 1986 Contract provided a minimum of $600 per week ($120 per working day). The amount in fact earned each week built up over time. Mr Whitby gave oral evidence that he understood that a significant portion of the increase in earnings over $410 turned on the fact that he was now providing a truck at his expense to the company as well as his labour.

30 Mr Whitby took advice from his accountant, I infer in late 1985 or early 1986, and set up a partnership in which he and his wife were partners. Mr Whitby was advised that one of the advantages of setting up a partnership was the tax advantage of splitting the income of the partnership between himself and his wife. It was an agreed fact that the partnership existed from 1 January 1986, and that Mr Whitby was a member. The later written contracts, which were said to be in substantially the same form as the 1986 Contract (except for the "per carton" payment) were between the relevant company and the partnership, R&D Whitby. The income generated from Mr Whitby's activities was received and declared as business income of the partnership up until 30 June 2012. From 1 July 2012, his income was declared as business income personally derived from a transport operation or courier service business.

31 Mr Jamsek took advice from an accountant, I infer in late 1985 or early 1986, and also set up a partnership with his wife. It was an agreed fact that Mr Jamsek was a member of the partnership, MJ & PT Jamsek, from 1 January 1986. His income was received and declared as partnership income until his working arrangement with the relevant company ceased in 2017.

32 The partnerships paid all expenses associated with the trucks they had purchased, including interest on the funds borrowed to finance the purchase of the trucks.

Change in ownership of the business in 1986 From ALI to Thorn

33 I infer that at some point in early 1986, after the 1986 Contract was executed and before 31 May 1986 when ALI was deregistered, ALI transferred the business to Thorn EMI Pty Limited (from 19 August 1996, named Thorn Australia Pty Limited).

34 The applicants did not enter into a new written agreement with Thorn. There was no material change in the conduct of the delivery activities of Mr Whitby or Mr Jamsek.

35 From 1988, after the company installed two-way radios in the trucks, the applicants communicated from time to time with warehouse staff using the two-way radios, and later by mobile phone, in relation to urgent pick-ups or to accommodate a priority delivery or pick-up.

Purchases of new trucks in 1989 and 1990

36 R&D Whitby acquired (either purchased or leased) a 6 tonne truck in 1989 for $70,000. The partnership obtained finance in order to do so. The truck was registered in the names of the partners. The partnership did not negotiate with Thorn as to the type or model of truck which was purchased.

37 In 1990, Mr Jamsek acquired (either purchased or leased) an Isuzu Flat Top 10 tonne truck for an amount between $70,000 and $80,000. It was financed, and paid back over 10 years. He was asked to, and did, install a tarpaulin on it bearing a Thorn logo. He also arranged to have the truck painted.

38 At some time between 1990 and 1993, the partnerships began invoicing at an hourly rate, rather than on a "per carton" basis.

39 Thorn Lighting was incorporated on 17 May 1993. It changed its name to ZG Operations Australia Pty Ltd on 28 September 2015.

The 1993 Contract

40 In 1993, Mr Whitby and other drivers approached Thorn and negotiated or discussed a new arrangement with a minimum 9 hour day, but on the understanding that the number of hours could be more or less than that. Mr Jamsek agreed that Mr Whitby was to negotiate or discuss on his behalf.

41 Around 1 July 1993, the applicants on behalf of their respective partnerships executed a written agreement entitled "Contract Carriers Arrangement" with "Thorn Lighting", described as a division of Thorn EMI Pty Limited (1993 Contract).

42 The rate which was agreed included an allowance for annual leave, public holidays and sick days. It guaranteed 9 hours of pay each day, even though it was anticipated that the drivers might not necessarily have to work 9 hours per day.

43 The 1993 Contract included the following terms:

2.

THORN LIGHTING and the Contractors have agreed:

(1)

The Contractors will:

a): Undertake carriage of goods as reasonably directed
b): Comply with all Acts, Ordinances, Regulations and By-laws relating to the registration, third party insurance and general operation of the vehicle within New South Wales.
c): Pay all legal costs, such as tax and duty, payable in respect of the vehicle and keep the vehicle in a mechanically sound, road worthy and clean condition.
d): Be responsible for the vehicle equipment and gear, the safe loading of the vehicle and the securing and weather protection of the load.
e): Exercise all reasonable care and diligence in the carriage and safe keeping of the goods in their charge. Account for all goods by use of run sheets and return of signed delivery dockets or similar documents.
f): Hold at all times and on request produce for inspection, a current driver's licence issued in respect of a vehicle of the class of the vehicle in use and immediately notify THORN LIGHTING if the licence is suspended or cancelled.
g): Not engage or use the services of a driver for the vehicle without prior and continuing approval by THORN LIGHTING. Such driver is to be correctly licensed, suitably dressed, and in all other respects entirely to the satisfaction of THORN LIGHTING.
h): Obtain and maintain a public liability insurance policy for an amount of $2,000,000 or greater in respect of any liability incurred by the Contractor in performance of work for THORN LIGHTING.
i): Obtain and maintain a comprehensive motor insurance policy over the vehicle including cover for amount of $5,000,000 or greater for third party property damage in respect of one accident.
j): Immediately report any accident to the person in charge of the N.S.W. Branch Warehouse and to attend to any legal requirements at the scene or subsequent to the accident.
k): Not offer his vehicle for sale with any guarantee of either continuity of work for THORN LIGHTING, or implied acceptance by THORN LIGHTING of the purchaser.

...

3.

ANNUAL LEAVE:

a)

Each Contractor is entitled to four weeks annual leave without pay.

It is normally expected that each Contractor will take at least two weeks over the January factory reduced output period. The leave dates to be determined on a roster basis which ensures that no more than two trucks are off at the same time. The roster details to be arranged between the Contractors and the person in charge of the NSW Branch Warehouse.

More than two weeks annual leave at that time must be agreed between the Contractor and THORN LIGHTING.

If THORN LIGHTING should decide to extend the reduced output period to more than two weeks or the NSW Branch close for a longer period, and as a consequence the Contractors have no work during that period, they will be paid on the following formula:

i): Notice of the change given before October 31st, no payment will be made.
ii): Notice given between November 1st and December 18th: the Contractors affected will be paid an amount of $18.92 per hour for a 9 hour day. During that period, the Contractors will be available on call.
iii): No notice given before December 19th, then the Contractors will be paid at their usual weekly rate and must attend either THORN LIGHTING Wetherill Park or Smithfield sites and work as directed.

...

7.

PAY RATES:

a): The pay package has been based on trucks over one year old with a carrying capacity of not less than 5 tonnes but less than 8 tonnes. As at 5th July, 1993, the current running rate is $34.33 per hour and standing rate is $18.92 per hour.; Contractors will not be paid for any annual leave, public holidays, and sick days as an allowance has been made within the above rates.; However, if industrial action by THORN LIGHTING employees creates a situation where the Contractors have no work, then the standing rate of $18,92 per hour will be paid,
b): The Contractors and THORN LIGHTING have agreed to a standard nine hour working day with a usual starting time of 6 a.m., both parties accepting that the actual hours may vary due to work load fluctuations.
c): On the basis of (a) and (b), the full weekly pay rate for Contractors doing metropolitan work is $1544.85 per week.
d): The full weekly pay rate for country work, including two trips to Canberra, two trips to Central Coast/Newcastle, and one trip to South Coast is $2250.; As the country work is done on a set day in each area basis, it is possible that the timing of a public holiday may cause no consignments being available for country delivery on the next working day. In this situation, the country run Contractor will be available for metropolitan work and for that day be paid at the metropolitan rate.
e): If the metropolitan work load requires an earlier start than 6 a.m., an hourly rate of $34.33 will apply.
f): THORN LIGHTING agree to review these rates with the Contractors annually, in June of each year, any changes to apply from the 1st of July. If during the period prior to the review an unexpected increase in vehicle costs should arise, then THORN LIGHTING agree to an earlier review date.
g): The Contractors will present invoices for work ·carried out during the preceding week on the following Monday. THORN LIGHTING will pay by direct bank method on the following Thursday.; ...

9.

OPERATIONAL POINTS:

...

d): THORN LIGHTING recommend that as each Contractor, is responsible for their own sickness and accident liabilities, they carry appropriate insurance including General Carriers Liability, in addition to any other insurances set out previously in this document.

44 Mr Jamsek stated that around the time of the 1993 Contract he was supplied with Thorn uniforms, to replace the ALI uniforms he had previously worn. I accept that around this time, the drivers were provided with various items of clothing which bore a Thorn logo.

45 Mr Jamsek stated, and I accept, that in about 1993 a Thorn Lighting manager stated to him "you can't include any additional hours worked unless it is a special delivery which we have agreed".

1993 transfer of business to ZG Operations

46 On 25 August 1993, the business name "Thorn Lighting" was registered by Thorn Lighting Pty Ltd (later called ZG Operations Australia Pty Ltd). I infer that around that time the business was transferred from Thorn EMI Pty Ltd to Thorn Lighting Pty Ltd (that is, ZG Operations). No new written contract was entered into between the partnerships and the new owner of Thorn Lighting until 1998.

Purchase of new truck in 1993

47 In 1993, R&D Whitby traded in the truck acquired in 1989 and leased a 6 tonne tabletop Mitsubishi. The leased Mitsubishi was treated as an asset of the partnership and deductions were claimed on the costs of the lease, running costs and for depreciation. Mr Whitby did not negotiate with Thorn as to the type or model of truck acquired. A company manager told Mr Whitby "we want you to fix a new tarp on the truck". Mr Whitby purchased a tarpaulin that Thorn installed and to which it affixed company logos.

The 1998 Contract

48 In 1998, Mr Whitby approached Mr Paul Higgins, the New South Wales State Manager of Thorn Lighting, on behalf of all the drivers and proposed an increase in the rate provided in the 1993 Contract. The genesis of this was a concern, at least on the part of Mr Whitby, about increased costs, including fuel costs, registration and insurance costs.

49 Mr Whitby and Mr Jamsek, on behalf of their respective partnerships, executed a further "Contract Carriers Arrangement", dated 1 October 1998, with Thorn Lighting (that is, ZG Operations) (1998 Contract). The 1998 Contract provided for an increased rate, which had been approved by Mr Higgins' manager.

50 In around 1998, Mr Higgins told Mr Jamsek: "You will need to install a new tarp on your truck, but you need to paint the truck first". Mr Jamsek complied.

The 2001 Contract

51 In 2001, Mr Whitby and Mr Jamsek executed, on behalf of their respective partnerships, a further "Contract Carriers Arrangement" (2001 Contract) with Thorn Lighting. Mr Whitby had again approached Mr Higgins and proposed on behalf of the drivers that they be given an increase in their rate of pay. Mr Jamsek gave oral evidence that he had discussed what rate of pay he would require with Mr Whitby. The increase was approved by Mr Higgins' managing director.

52 Mr Whitby gave the following evidence:

COUNSEL: ...Now, in 2001, you again approached Mr Higgins on behalf of the drivers?

MR WHITBY: Yes, that's correct.

COUNSEL: Yes. And you discussed with Mr Higgins an increase in rates?

MR WHITBY: Yes, that's correct.

COUNSEL: Yes. And Mr Higgins later provided you with another contract?

MR WHITBY: Yes, that's correct.

COUNSEL: And you took that away and over the following days you signed that and returned it?

MR WHITBY: Yes, that's correct.

COUNSEL: Yes. Now, when you approached Mr Higgins on behalf of the drivers, it was to secure a collective agreement on rates, wasn't it?

MR WHITBY: That's correct – correct, yes.

...

COUNSEL: ... The partnership was operating a business at that time, correct?

MR WHITBY: That's correct, yes.

COUNSEL: Yes. And you wanted that business to be profitable?

MR WHITBY: That's correct, yes.

COUNSEL: And whether or not it was profitable depended in part on the amount of income to be derived from putting that vehicle to use, correct?

MR WHITBY: That's correct, yes.

COUNSEL: And the cost of running that vehicle?

MR WHITBY: That's correct, yes.

COUNSEL: And what I was suggesting to you, in seeking to increase the rates you were trying to secure or improve the profitability of the partnership business?

MR WHITBY: That's correct, yes.

53 At the time of signing the 2001 Contract, the partnerships were invoicing for the services provided and charging goods and services tax (GST) to Thorn Lighting. The GST system commenced on 1 July 2000.

Events from 2001

54 By 2001, Mr Whitby lived in Bungonia, about 160 kilometres from Wetherill Park where the warehouse was then located. Mr Whitby would, relatively frequently, drive home after making his last delivery rather than return to the warehouse. Mr Whitby structured his deliveries such that he made the deliveries closest to the warehouse first and ended with the deliveries furthest away from the warehouse.

55 From at least 2001, Mr Whitby primarily delivered product in the east Sydney metropolitan area, but would occasionally deliver to Canberra or Wollongong. The drivers agreed amongst themselves their respective delivery areas.

56 Mr Jamsek delivered primarily into the north west of the Sydney metropolitan area. He occasionally delivered to Newcastle and Wollongong.

57 The drivers were given delivery dockets which were to be signed. This had been the case since the applicants first commenced being delivery drivers from at least 1980. Despite the reference in cl 2(1)(e) of the 1993, 1998 and 2001 contracts to "run sheets", the evidence was to the effect that these were first introduced after 2001. In any event, at some time after 2001, the applicants were asked to complete a "manifest run sheet" each day. This practice, although what precisely was involved altered from time to time, continued up until the termination of the applicants' relationship with the company. One of the purposes of the run sheet was to outline the deliveries to be completed that day and allow the warehouse manager or other managers to identify where the drivers would be at certain times.

58 The drivers would complete run sheets in the morning before leaving the warehouse. The run sheets were also generally signed by each customer at delivery, along with a delivery docket. The run sheets generally recorded the driver's arrival at the warehouse in the morning, and the time that the driver had completed the deliveries for the day. The run sheets were returned to the warehouse either at the end of the day or the next morning depending on whether the driver went straight home after their last delivery for the day. Other than the run sheets, the applicants were not required to fill out any other document similar to a timesheet.

59 Around 2002, Thorn supplied and installed a new tarpaulin on the truck used by Mr Whitby. R&D Whitby paid for half the cost of the new tarpaulin. Thorn Lighting paid for the other half of the cost of the tarpaulin and for the cost of Thorn logos which were added after the tarpaulin had been installed.

60 Around 2006 a manager had told Mr Whitby "you need to start sorting out which runs are going on the trucks". This had previously been the job of people in the warehouse. After six months, Mr Whitby was told by employees in the warehouse that he was not to sort runs inside the warehouse and should sort his own run outside. From that time, as had been the practice before, warehouse employees brought deliveries on pallets to Mr Whitby's truck. If Mr Whitby needed to sort any of the runs he would do so outside under an awning attached to the warehouse. The warehouse manager advised Mr Whitby how the trucks should be loaded.

61 Mr Whitby gave the following evidence:

COUNSEL: And warehouse staff picked and packed the orders for delivery and moved them by forklift or pallet jack to the dispatch area at the warehouse?

MR WHITBY: Yes. That's correct.

COUNSEL: And they were then loaded onto your truck by warehouse staff?

MR WHITBY: Loaded up to the back of the truck, yes ...

COUNSEL: Yes. And once the goods were on your truck it was then a matter for you to sort them in a way that reflected the way you wanted to make the delivery?

MR WHITBY: Once – no, we sorted them outside on the ground before they came to the truck and then the warehouse staff would bring them up to the truck in the order we sorted them.

COUNSEL: You used a pallet jack on the truck, didn't you, to move – shift the ...

MR WHITBY: That's correct. Yes.

COUNSEL: ... the goods around?

MR WHITBY: Yes.

COUNSEL: And you were shifting them around – is this right – to ensure the safe transit of the goods. Was it a safety reason that you might need to shift them?

MR WHITBY: That's correct. Yes. Whichever way we packed them on the truck was for safety reasons, yes.

COUNSEL: I see. Because as a driver you had obligations in relation to ...

MR WHITBY: That's correct. Yes.

COUNSEL: ... safe transit. Now, while the loads were being picked and packed in – and placed in dispatch you would normally go to the canteen?

MR WHITBY: We were instructed to go to the canteen, yes.

62 Around 2007, ZG Operations and ZG Lighting merged their warehousing and manufacturing divisions, maintaining separate sales divisions. ZG Operations undertook all distribution, transport and delivery of products for both sales divisions, with the costs of ZG Lighting's distributions invoiced back to them by ZG Operations.

63 Mr Chris Dixon was employed by ZG Operations as a Supply Chain Manager from 31 March 2008.

64 In 2008, Mr Whitby made another request for an increase to the drivers' rate of pay. This request was made to Mr Hayward. The request was supported by a letter Mr Whitby wrote on behalf of his partnership, Mr Jamsek's partnership and Mr Robinson. It included (emphasis in original):

CONTRACT CARRIERS AGREEMENT RATE REVIEW

23rd May 2008

RE.
MJ & PT Jamsek of 6 Korimul Crescent, Sth Penrith;   (31 years service)

R & D Whitby of 1576 Mountain Ash Road, Bungonia;   (31 years service)

R Robinson of 24 Hacking Drive, Narellan;   (32 years service)

Mr. Graham Hayward

Graham as it has been over 2 years since our last rate adjustment, we feel we are justified in approaching Thorn for an increase in our rates; we appreciate that it is [quiet] at the moment and that is why we have not approached Thorn earlier 'however we can no longer absorb the ever increasing fuel cost (from $1.38 at last review to $1.80, a 30% increase and with no immediate end to the increases) because of that and the following reasons we must increase our rates by 7.2%, (an increase of $2.97 per hr). From the [date] the new rate will take affect [sic] ...

Please note ...
1. We together have served Thorn Lighting for a combined 94 years.

2. Outside transport carriers have had numerous increases upward of 4.5% + over that 2 year period and add a fuel levy to their rates.

3. We have never had a dispute or [withdrawn] our service [to] Thorn as Contractors.

4. Fuel up a huge... 30% ($1.38 to $1.80). And still increasing.

5. More use of tolls and increases in toll costs fixed to the CPI.

6. Due to increase in fuel our maintenance cost are up; oil, tyres, greases etc.

7. Increases in registration and insurances .e.g. green slip 07/08 $1078 to 05/06 $1145 (NRMA)

8. Parking fines and fines in general have [increased] and are enforced more severely.

9. Increase use of mobile phones to customers and job sites.

10. We still have been helping in the warehouse in the mornings as to ensure the deliveries are pulled.

11. Advertising on trucks.

12. General cost of living up over this period.

Over the years we have served Thorn Lighting we have always giving the best service we could or were allowed to give. We have outstanding relations with Thorns valued customers and are a source of feedback for Thorn on what the customer are thinking and of any problems they are having of which we do not hesitate to inform Thorn. We feel this increase is justified and fair.

65 An increase was agreed.

66 Mr Jamsek stated in his affidavit of 27 July 2018 that he approached a representative of the company on 3 or 4 occasions from 1985 and gave them a document setting out an argument for an increase in rate, the document set out above being an example.

67 Around 2008 or 2009, Thorn supplied and installed a black tarpaulin bearing both Thorn and Zumtobel logos on Mr Whitby's truck.

68 In 2009, the drivers approached Mr Dixon and submitted a proposal to quote for non-metropolitan deliveries and Mr Dixon agreed to "give it a go" if it was cheaper or the same amount as what they were paying others to make those deliveries. From time to time, I infer from 2009, Mr Dixon would approach the drivers to see if they were interested in a non-metropolitan delivery and, if the driver was interested, they would quote for that job and do it, if approved.

69 In 2010, Mr Whitby purchased a one tonne "Rodeo" tray back utility vehicle (ute), initially for private use, but which was later used for making deliveries. This enabled Mr Whitby to do smaller deliveries in locations like the CBD where it was difficult to drive a larger vehicle. He notified the company in a letter to Chris Dixon dated 13 May 2010 that he had purchased the ute and intended to use it for some deliveries. The letter stated:

Chris, as discussed my area mostly covers the central city area and a lot of cost is wasted on couriers to service this area I have now purchased a [1 tonne] rodeo trayback Ute to service and cut the cost to this area. I will also be available for small, height restricted deliveries in other areas. It also has been pointed out to me the [outrageous] cost of 'must ride deliveries to country areas and [I] will [be] available to help in this area also.

My 6 tonne truck will also be stripped down to tray top as discussed for long extrusion deliveries when needed.

70 Mr Whitby was able to use the ute to perform deliveries that ZG Operations had otherwise been engaging external couriers to perform. He had the ute for approximately 4 years before purchasing another one. The second ute was also used for deliveries. Neither ute bore a Thorn logo.

71 In 2010, Mr Whitby disassembled the gates and tarpaulin on his truck so that it would become a 'flatbed'. From that point onwards it did not bear a company logo.

72 After 2010, Mr Whitby used the ute, rather than the truck, a substantial amount, if not most, of the time. Mr Whitby decided which vehicle he would use based on the nature or size of the products to be delivered. It was more profitable for Mr Whitby's business to use the ute rather than the truck. There were some items that could not be delivered with the ute. Generally, it was left to Mr Whitby to decide which vehicle to use.

73 The manifest run sheets, at least from around 2012, included the time of arrival at the customer's place of delivery and the time of departure. Mr Whitby stated in his affidavit sworn 2 August 2018 that around 2011 or 2012, the warehouse coordinator at the time, Shelly Newton, told him:

We want you to start photocopying the run manifest. Leave the original in the warehouse. When you come back in the afternoon, put the delivery documents with the run manifest in the correct order, scan the delivery documents and pick up the slip documentation and give it to the warehouse staff.

74 Mr Whitby stated that this task took approximately 15 minutes a day. He performed this task daily until his termination.

75 Mr Jamsek stated in his affidavit of 27 July 2018 that he was told in August 2012 by the warehouse foreman "you have to start scanning the delivery dockets". Mr Jamsek stated that he told the warehouse foreman that it was not a part of his job, but was told he had to do the clerical work. He complied.

Working hours and leave

Mr Whitby

76 Mr Whitby gave the following evidence in relation to his working hours from 2001:

COUNSEL: And it wasn't the case in that same period that you were regularly working nine-hour days?

MR WHITBY: That's correct. Towards the end of the contract.

COUNSEL: Indeed, what I want to suggest to you is that in those latter years, 2014, 15, 16 you would rarely work nine hours in a day?

MR WHITBY: I would not agree with that, no.

COUNSEL: All right. You've read the respondent's affidavits, haven't you?

MR WHITBY: I have, yes.

COUNSEL: And you've dealt with those affidavits in your reply affidavit?

MR WHITBY: That's correct, yes.

COUNSEL: And where you have taken issue with the respondent's evidence you've dealt with it in that reply affidavit?

MR WHITBY: I believe so, yes.

COUNSEL: Now, you – there were many occasions in that period where, after you completed your last delivery, you would drive straight home; do you agree?

MR WHITBY: Yes. I agree. Yes.

COUNSEL: There were occasions that you might be called back for an urgent project deliver, for example?

MR WHITBY: Yes, that's correct. Yes.

COUNSEL: That would be where you needed to come back to the warehouse, collect another item or items...

MR WHITBY: Yes

COUNSEL: ... and urgently deliver it?

MR WHITBY: That's correct. Yes.

COUNSEL: But other than that, the practice was you would finish a delivery and drive back to Bungonia?

MR WHITBY: Not, not all the time. No. We were instructed to bring back pick-ups and that too by Shelly Newton on the same day and that was done for a while. No. I would not agree with that – what you're saying.

COUNSEL: But those occasions varied, didn't they...

MR WHITBY: They did vary.

COUNSEL: ...over the course of time?

MR WHITBY: And also, Shelly was getting me to pick up documentation for their export deliveries and that from Sydney after – and it wouldn't be ready till 3 pm in the afternoon.

COUNSEL: But it's not the case, do you accept, that you were regularly, throughout that period, working nine hour days?

MR WHITBY: That's not the case I was. No, it's not.

77 Up until around 2009, Mr Whitby regularly arrived at the warehouse at 6am.

78 From about 2014, Mr Whitby would typically arrive no earlier than 7am and leave to perform his deliveries after 9am. Until that time, he would sit in the canteen.

79 The finishing time varied. There were occasions, but not many, on which there was no delivery work. Relatively frequently deliveries would be finished before 3pm.

Mr Jamsek

80 In the year 2000, Mr Jamsek took six or seven weeks of leave. Over this period, a friend of Mr Jamsek drove his truck and Mr Jamsek's partnership paid him for his work. Mr Jamsek's partnership received payment for the provision of the partnership's truck and the services of the driver, Mr Jamsek's friend, in accordance with the 1998 Contract.

81 Mr Jamsek took two weeks annual leave over Christmas each year. He took five or six weeks off in 2010 and handed his run to the other two drivers to perform. If they could not do it, "external" couriers delivered the goods.

82 In the period 2012 to 2016, Mr Jamsek was not starting work regularly at 6am, although he would start early if there were urgent deliveries. In and after 2012, he would typically drive straight home after the last customer delivery. In the later years, his deliveries would finish fairly regularly before 3pm.

83 In 2015 and 2016, Mr Jamsek arrived at work between 7am and 7.30am. There were occasions in the years 2014, 2015 and 2016 when there was no delivery work to be done.

84 Mr Jamsek took two weeks leave in 2012 to travel to Singapore, 10 days of leave in 2014 to go on a cruise and he took leave from October 2016 to 7 November 2016.

2015 Restructure

85 ZG Operations and ZG Lighting executed a 'Restructure Deed' on 28 September 2015 which restructured the companies by separating the sales and operations functions such that ZG Lighting Australia Pty Ltd (which had previously been called Zumtobel Lighting Pty Limited) would be solely responsible for sales and ZG Operations (which had previously been called Thorn Lighting Pty Ltd) would be responsible for the balance of the business functions.

86 Staff of certain divisions of ZG Operations were transferred to ZG Lighting on 1 October 2015.

87 The applicants received a document, "Organisational Announcement – Business Name Changes" dated 22 September 2015, explaining that Thorn Lighting would be renamed ZG Operations and Zumtobel Lighting Pty Limited would be renamed ZG Lighting. The memo also stated that there would be no impact on employment entitlements.

88 At the same time, letters were sent by ZG Lighting and ZG Operations to suppliers advising of the changes. It is not clear whether or not these were provided to the drivers, although it was submitted on their behalf that they were.

89 In October 2015, the drivers were instructed that their invoices would need to be made out to ZG Lighting. From 1 October 2015, Mr Whitby issued invoices to ZG Lighting and MJ & PT Jamsek did likewise.

Stocktakes and cleaning

90 Mr Jamsek stated in his affidavit sworn 27 July 2018 that twice a year when the business did a stocktake, he would be told to clean up outside the back of the warehouse. Occasionally he would not do this if there was an urgent delivery, but the majority of the time he was told to stay at the warehouse and clean up outside the warehouse. Mr Dixon gave oral evidence that a stocktake did not occur each year over Mr Dixon's tenure. Further, Mr Dixon denied that Mr Jamsek had cleaned up outside the warehouse while the stocktake was occurring.

91 In his affidavit sworn on 2 August 2018, Mr Whitby stated:

At one stage in about 2013 Chris Dixon said to me "There are no deliveries due because of stocktake. Clean up the rear of the warehouse."

92 Mr Dixon, in his affidavit sworn 24 August 2018 denied making that statement.

93 Mr Whitby stated in the same affidavit that on a few occasions from 1993 to 2001 he was told to do the stocktake. However, on each of these occasions a warehouse employee would tell Mr Whitby that "the union does not want you to do the stocktake". He stated that a manager told him to "just go and clean up the yard" on these occasions. He stated that he would clean up the yard from when he finished his deliveries (if he had any) until 4pm.

94 I conclude that there were at least some occasions on which Mr Whitby and Mr Jamsek, at the request of employees of the relevant company, assisted in cleaning up whilst a stocktake was being undertaken. Neither assisted in the actual stocktake.

95 I do not draw any conclusion about credibility arising from the differing recollections of the relevant events.

96 Both Mr Whitby and Mr Jamsek used their trucks on occasion to help move the location of the factory or warehouse. They were paid their usual rate for helping with the relocations.

Branded clothing

97 While working for ALI up until 1986, Mr Jamsek and Mr Whitby wore a uniform with an ALI logo which was supplied by ALI.

98 From time to time thereafter, the companies provided or made available to the drivers items of clothing bearing branding of the business or company. Mr Jamsek usually wore a high visibility shirt bearing the relevant company branding and shorts (without branding). In 2014 or 2015 he was provided with a high visibility vest which he was told to wear in the warehouse.

99 Ms Newton's recollection was that Mr Jamsek and Mr Whitby wore company clothing from time to time, but primarily wore their own clothes without company logo. I conclude that the drivers wore a mix of clothing provided by the company (bearing branding or logos) and their own clothing. At least from 2014, the drivers were required to, and did, wear high visibility vests in the warehouse.

Pallets

100 From time to time until 2016, Mr Whitby and Mr Jamsek picked up and returned empty pallets to the warehouse. They charged the company and were paid for these.

Termination by ZG Lighting on 20 January 2017

101 Both Mr Whitby and Mr Jamsek's contracts were terminated by ZG Lighting on 20 January 2017. They received a letter on 14 November 2016 which stated that the termination of the 2001 contract was the product of financial conditions and the need to reduce costs. By this date they were earning $1995.95 a week for 9 hours a day, for 5 days.

Accounting Arrangements

Mr Whitby

102 In all financial years from 1 July 1986 until 30 June 2012, the income from the work performed by Mr Whitby under the various contracts was declared as partnership income. Deductions were claimed in respect of the partnership expenses. At all times up until 30 June 2012, R&D Whitby's income was split between his wife and himself as partners.

103 R&D Whitby also claimed deductions, in certain years, in respect of a rental property used to save the partnership running costs from Mr Whitby travelling between the warehouse and his home. Mr Whitby gave this evidence:

COUNSEL: ... And was the – do you recall the partnership making claimed deductions in respect of business premises?

MR WHITBY: Yes. That's correct. Yes.

COUNSEL: What was the business premises?

MR WHITBY: It was when I started to stay up in Smithfield at a small flat to save running costs to and from Goulburn and back and, yes, I claimed that as a business expense, yes.

COUNSEL: Right. And so that was an initiative the partnership took to reduce or cap its costs?

MR WHITBY: That's correct. Yes.

104 After the introduction of GST, the partnership provided Thorn Lighting with tax invoices and charged GST for the supplies made.

105 Tax returns for the 1987 to 2010 years were not in evidence.

106 The 2011 partnership tax return claimed deductions for rent ($6,930), depreciation ($2,409), motor vehicle expenses ($14,758) and other expenses ($14,758).

107 The 2012 partnership tax return claimed deductions for rent ($6,900), depreciation ($1,688), motor vehicle expenses ($23,267) and other expenses ($10,772).

108 R&D Whitby was dissolved with effect from 30 June 2012 and the partnership ceased to be registered for GST. Mr Whitby commenced invoicing for his services using his own Australian Business Number. Mr Whitby continued his work as previously.

109 In his 2013, 2015, 2016 and 2017 tax returns Mr Whitby declared income from, and claimed deductions in respect of, carrying on either a 'transport operation' or a 'courier service'. He declared he was carrying on a business. The information in those returns included:

•: In the year ended 30 June 2013, Mr Whitby claimed deductions of $10,800 for rent expenses. In that year, motor vehicle expenses were $18,040. He also claimed depreciation (in relation to a ute) of $1,181 and other expenses totalling $4,826.
•: In the year ended 30 June 2015, Mr Whitby claimed deductions of $7,698 for rent, motor vehicle expenses of $17,647, depreciation of $1,659 and other expenses totalling $4,325.
•: In the year ended 30 June 2016, Mr Whitby claimed deductions of $5,188 for rent, motor vehicle expenses of $14,361, depreciation (in relation to a ute) of $2,730 and other expenses totalling $4,209.
•: In the year ended 30 June 2017, Mr Whitby claimed motor vehicle expenses of $8,046, depreciation of $945, repairs and maintenance of $2,416 and other expenses totalling $7,665 (which included home office expenses of $4,259). He claimed a loss on sale of a ute of $1,370.

Mr Jamsek

110 MJ & PT Jamsek's tax returns and financial statements evidence that from 1997 the income derived by the partnership was split, generally evenly, between Mr and Mrs Jamsek. I infer this occurred from 1 January 1986.

111 There were no tax returns or financial statements in evidence for the 1987 to 1996 years.

112 The 1997 Financial Statements recorded expenses of almost $34,000 and income of almost $75,000. Motor vehicle expenses were over $25,000. There was an expense of $1,200 for "casual labour". Depreciation was claimed on a commercial motor vehicle (the truck). It was also claimed on a typewriter, a truckport, a truck canopy and a desk.

113 The 1998 Financial Statements and partnership and individual income tax returns contained the same kinds and levels of deductions and claims for depreciation. The expense for "casual labour" was $1,000.

114 The 1999 Financial Statements and partnership and individual income tax returns also contained the same kinds and levels of deductions and claims for depreciation as in the 1997 year. The expense for "casual labour" was $200. Depreciation was also claimed in respect of a "capital improvement – driveway" which appears to have occurred on 9 March 1999 at a cost of $2,180.

115 There were no tax returns or financial statements for the 2000 to 2006 years in evidence.

116 The 2007 Financial Statements recorded the income and expenses as follows:

2007 Financial Statements recording income and expenses

117 Depreciation was still being claimed on the typewriter, truckport, truck canopy and desk. Depreciation was also claimed on the truck and a truck radio and the "improvement to driveway".

118 The 2008 to 2017 Financial Statements and partnership and individual income tax returns record similar kinds and levels of expenses and depreciation as indicated above in relation to the 2007 year.

119 MJ & PT Jamsek insured Mr Jamsek's vehicles, met all the running costs and maintained public liability insurance and comprehensive motor vehicle insurance after the 2001 Contract was entered into. I infer such insurances were maintained at all relevant times.

120 The partnership charged GST in relation to the services it supplied, which it invoiced as "Labour and Equipment" and claimed input tax credits on partnership purchases.

WERE THE APPLICANTS EMPLOYEES?

121 The parties agreed that the claimed breaches of the FW Act could only be made out if either applicant was an "employee" within the meaning of the relevant provisions and, in this respect, "employee" bore its ordinary meaning.

122 Whether or not a person is an employee requires an objective assessment of the nature of the relationship between that person and the other party. The 'totality' of the relationship between the parties is to be considered and this is informed by their work practices and the system under which their relationship operated: Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [24].

123 The distinction between an employee and an independent contractor is "rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own": Hollis at [40] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ, citing Marshall v Whittaker's Building Supply Company (1963) 109 CLR 210 at 217 per Windeyer J.

124 There is no exhaustive list of relevant factors that might inform the answer as to whether a putative employment relationship falls on one side or the other. In ACE Insurance Ltd v Trifunovski (2011) 200 FCR 532 at [29], Perram J observed that "a number of indicia have accreted over time in the authorities which are thought to throw light to varying degrees on the outcome without being determinative", and identified some of them in the following passage:

... the terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party 'represents' the other; for the benefit of whom does the goodwill in the business inure; how 'business-like' is the alleged business of the putative employee – are there systems, manuals and invoices; and so on – the list is neither exhaustive nor short: see Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at 24 per Mason J and 36-37 per Wilson and Dawson JJ; for application see Hollis at [48]-[57] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ; Sweeney at [30]-[33] per Gleeson CJ, Gummow, Hayne, Heydon and Crennan JJ ...

125 Mummery J said in Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944:

The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.

126 It is inapt to resolve the issue of whether a person is an employee by first examining whether they were engaged in the conduct of their own business: Tattsbet Limited v Morrow (2015) 233 FCR 46 at [61], per Jessup J (with whom Allsop CJ and White J agreed); Fair Work Ombudsman v Ecosway Pty Ltd [2016] FCA 296 at [78], per White J. In essence, the point which was being made was that it is important to approach the matter by asking the question: "is the person an employee?", rather than: "is the person conducting a business?". Jessup J said:

[The trial Judge] ultimately saw the question as one which involved, in effect, a dichotomy between a situation in which the putative employee works in the business of another and a situation in which he or she conducts his or her own business as an "entrepreneur". To view the matter through a prism of this kind is, however, to deflect attention from the central question, whether the person concerned is an employee or not; or, perhaps, as Mason J put it in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1;(1986) 160 CLR 16, 28, to "shift the focus of attention" to a no less problematic question. As Buchanan J put it in ACE Insurance, "[w]orking in the business of another is not inconsistent with working in a business of one's own" [2013] FCAFC 3; (209 FCR 146, 182 [128]). On the other hand, if the putative employee's circumstances exhibit the characteristics of a business, that will undoubtedly be a matter proper to be taken into account in determining the question at hand, so long as sight is not lost of the question itself. The question is not whether the person is an entrepreneur: it is whether he or she is an employee.

127 For the reasons which follow, neither Mr Whitby nor Mr Jamsek were employees.

Entering into the 1986 Contract and formation of partnerships

128 Upon the advice of his accountant, Mr Whitby set up a partnership with his wife from 1 January 1986. He signed the 1986 Contract, I infer on behalf of the partnership, with ALI.

129 Mr Jamsek signed a written contract with ALI in late 1985 or early 1986, I infer on behalf of the partnership between Mr Jamsek and his wife, MJ & PT Jamsek. Mr Jamsek had received advice from an accountant. MJ & PT Jamsek was established on 1 January 1986.

130 Mr Whitby was paid out his accrued annual leave. There is no reason to suppose that the other drivers, including Mr Jamsek, were not likewise paid out their accrued employment-related entitlements at the end of 1985 or early 1986 when the structure of their relationship with ALI altered.

131 Neither Mr Whitby nor Mr Jamsek sought or obtained legal advice.

132 It may be accepted that a circumstance which led Mr Whitby and Mr Jamsek to set up a partnership, purchase a truck each, borrow money to fund that purchase and agree to contractual arrangements to provide a truck and services in exchange for a "per carton" payment was the prospect of redundancy. That circumstance explains why certain decisions were made and a new structure commenced.

133 The matters just referred to point to a mutual intention that significant aspects of the existing relationship would come to an end, and that the arrangements would change. That does not mean that the new relationship is not properly regarded as an employment relationship. It is, however, relevant that all parties clearly intended certain aspects of their relationship to change such that the drivers would cease being employed in the way they were and would commence carrying out delivery services, which they had previously carried out with trucks owned by ALI, with trucks which they purchased from ALI, and would carry out those activities according to new contractual arrangements agreed between them in the 1986 Contract.

The conduct of the partnerships and the sole trading activities of Mr Whitby

134 MJ & PT Jamsek existed through the whole period in which a truck and services were provided to the companies. The partnership returned the income received and claimed deductions and depreciation, in the manner described earlier.

135 R&D Whitby existed until 30 June 2012 and returned the income received and claimed deductions and depreciation, in the manner described earlier. From 1 July 2012, Mr Whitby continued the same acquisitions but as a sole trader.

136 Upon the commencement of the GST system on 1 July 2000, the partnerships charged GST and remitted GST to the Commissioner. The partnerships registered for GST, obtained an ABN and claimed input tax credits in respect of GST paid on acquisitions. After Mr Whitby's partnership came to an end, he charged GST and issued invoices under his own ABN and remitted GST and claimed input tax credits on acquisitions.

137 As Katzmann J observed in Fair Work Ombudsman v Grouped Property Services Pty Ltd [2016] FCA 1034 at [48]:

To qualify for an ABN, one needs to be carrying on an enterprise (as defined in A New Tax System (Goods and Services Tax) Act 1999 (Cth), s 9-20) in Australia or, in the course or furtherance of doing so, make supplies that are connected with Australia: see A New Tax System (Australian Business Number) Act 1999 (Cth), s 8. A person is not entitled to an ABN if the only work the person performs is in someone else's enterprise.

138 It is, of course, necessary to observe that the GST was introduced after the partnerships commenced and only once the parties were performing the relevant contracts. The weight to be afforded to this issue might not be as significant as the situation in which a decision was made, after careful consideration of available alternatives, to commence operations in a particular manner such that GST was to be charged for the relevant supplies.

139 In ACE Insurance Ltd v Trifunovski [2013] FCAFC 3 at [37] (the appeal from Perram J's decision referred to at [124] above), Buchanan J said:

It is also difficult, in my view, to give much independent weight to arrangements about taxation, or even matters such as insurance cover or superannuation. These are reflections of a view by one party (or both) that the relationship is, or is not, one of employment. For that reason, in my view, those matters are in the same category as declarations by the parties in their contract (from which they often proceed). They may be taken into account but are not conclusive. These matters are less important than the adoption by the parties (where this occurs) of rights and obligations which are fundamentally inconsistent with basic requirements of a contract of employment, such as the ability to delegate the discharge of obligations under a contract to another person, or where there is a lack of control over how work is done.

140 On the other hand, in Tattsbet at [70]-[71], Jessup J (with whom Allsop CJ and White J agreed) said:

70. Fifthly, in contemporary Australia, it is impossible to ignore, and difficult to depreciate, the taxation implications of the mode of operation which parties to a relationship have voluntarily adopted. In the past, the deduction of what are now called PAYG instalments was always treated, uncontroversially, as indicative of an intention that the relationship in question was one of employment. To any suggestion that the absence of such instalments tended to point to the relationship being one of principal and independent contractor, it was often rejoined that such an argument was circular, in the sense that a consequence of the relationship being one of employment was, under legislation, that such instalments had to be deducted. In contemporary times, however, there are legislative markers on both sides, as it were. It is no longer just the absence of PAYG deductions that may make it more difficult to characterise the relationship as one of employment, it is the presence of GST collections by the putative contractor, and his or her compliance with the regulatory requirements which apply to the provision of services by persons who are not employees, that point quite strongly against the relationship being characterised in this way. These observations are made, of course, in the context of the present case, where there is no suggestion that the respondent's participation in the GST system did not reflect her own conscious, well-informed, intentions.

71. There was nothing tokenistic about the respondent's participation in the GST system. Not only did she collect, and forward to the ATO, GST in the amounts referred to at [48] above, but, over the course of a year, she invested about 90 hours of her own, or of her accountant's, time in the preparation of the relevant BAS returns and the collection of the necessary information: the equivalent of more than two weeks work for a normal wage-earner. There would be something conspicuously at odds with the reality of the respondent's own actions, and the assumptions which those actions implied, were it now to be held that the respondent's participation in the GST system was undertaken because of her own mistaken characterisation of her relationship with the appellant.

141 In Australian Air Express Pty Limited v Langford [2005] NSWCA 96; 147 IR 240, McColl JA noted that authorities did not deal consistently with the significance of the way in which a person was treated for tax purposes, saying at [49]:

The authorities have not dealt consistently with the significance of a person being treated for tax purposes as if he or she was an independent contractor. In Stevens (at 37) Wilson and Dawson JJ referred to the payment of remuneration without deduction for income tax as indicating a contract for services. In Hollis the majority did not regard this factor as material. McHugh J, on the other hand, (at [69]) regarded the fact that a finding the bicycle couriers were employees would "make employers retrospectively guilty of a number of statutory offences", including those relating to compliance with taxation legislation, as militating against that conclusion.

142 Her Honour ultimately concluded that it was a significant matter on the particular facts of the case before the Court: at [54], [55].

143 In Climaze Holdings Pty Ltd v Dyson (1995) 13 WAR 487 at 495F, Steytler J said:

It seems to me that the whole concept of rendering invoices for work done (more particularly by a partnership comprising two persons trading under a business name) is quite foreign to an ordinary employment relationship. Equally, the deduction, from the invoiced amounts, of payments made pursuant to the Prescribed Payments System, rather than the deduction of PAYE instalments, points strongly towards the existence of a sub-contract relationship. ...

144 The fact that the parties conducted their affairs for many years on the basis that the partnerships were making supplies in respect of which GST was payable, without any suggestion that the partnerships were not engaged in business or should not be charging GST, is a relevant factor, even taking into account the fact that GST was introduced after the structure of the parties' relationship had been established.

145 It is also relevant that there was a conscious decision to set up partnerships in 1986, taken after receiving accounting advice. The partnerships purchased assets, claimed deductions, made decisions about expenditure which affected profitability and conducted their affairs as one would expect of a business. The partnerships' taxation affairs as a whole were conducted in a business-like manner and as one would expect of couples conducting a small business in which one member of each couple performs the majority of the services.

146 The fact that the activities were conducted through a partnership, and the adoption by the parties of a structure which required the partnerships to invoice for work as independent contractors, did not only affect the taxation affairs of the partnerships. The company which was invoiced by the partnerships must have known that it was not withholding tax on the basis that Mr Whitby and Mr Jamsek were employees. The relevant company presumably claimed input tax credits in respect of the GST invoiced by the partnerships.

147 The profitability of the partnerships turned in large measure on the costs associated with operating the vehicles purchased by the partnerships, including the costs associated with the substantial purchase price of the vehicles. Costs included fuel, fines, road tolls, financing costs, maintenance and comprehensive motor vehicle insurance. All of those were met by the partnerships. It is no answer to state, as the applicants did, that the costs were under 50% of the gross income. The fact is that the costs, and therefore the profitability of the activities, were in the control of the partnerships.

148 Mr Whitby and Mr Jamsek could, and did, collect pallets and include a charge for them in the invoices which were submitted to the companies for payment. The applicants submitted that this was not "entrepreneurial" and merely reflected an incentive one might expect to see in an employment relationship. I accept that one might see such an arrangement in an employer-employee relationship. One might also see a simple direction to bring back or collect pallets. There was no evidence, for example, that there had been such a direction and that payment for the pallets was therefore introduced as an incentive. This particular aspect of the parties' arrangements tends to indicate a relationship of client and independent contractor. On 15 January 2009, before there was any suggestion by the applicants that they might be employees, Mr Dixon wrote an internal memo which noted the three "contract drivers collect 'used pallets' and sell back to Thorn as an additional revenue stream". The evidence did not establish how this aspect of the parties' relationship commenced.

149 The partnerships bore the risk of not being profitable or of reduced profitability. The partnership insured against some of the risks. When expenses increased, Mr Whitby and Mr Jamsek sometimes sought increased rates so that their partnerships' profit could be preserved. The partnerships maintained public liability insurance. The partnerships did not bear the same risks as Mr Whitby and Mr Jamsek would have faced as employees. They bore significantly higher risks.

150 I do not regard the partnerships as being equivalent to employee-owned corporations incorporated, as a matter of substance, for the predominant purpose of receiving remuneration for the services provided to an entity by an employee – cf: ACE Insurance. The role of the partnerships was not limited to the receipt of remuneration. The role was broader. The partnerships entered into contracts, owned substantial assets, met the substantial running costs, conducted their accounting and taxation affairs on the basis they operated businesses, collected and remitted GST, claimed input tax credits on purchases and issued tax invoices.

151 It was submitted that the applicants' work did not involve or result in the development of goodwill. However, the partnerships could have sold their businesses if they had wished and such a sale may have included goodwill. The applicants referred in this regard to cl 2(1)(k) of the relevant contracts, which provided:

The Contractors will:

...

(k) Not offer his vehicle for sale with any guarantee of either continuity of work for THORN LIGHTING, or implied acceptance by THORN LIGHTING of the purchaser.

152 This provision did not prohibit the sale of a business. In fact, if anything, this provision suggests the parties contemplated that the relationship was not one of employment and that Mr Whitby and Mr Jamsek might have something over and above the truck to sell. In any event, there are many businesses which do not generate goodwill and which cannot effectively be sold. This factor is of little weight in the circumstances of this case.

Vehicles

153 In addition to forming partnerships and entering into the 1986 Contract, the partnerships acquired trucks in early 1986. R&D Whitby purchased a truck for what was then, and especially in the context of Mr Whitby's historical earnings, a significant sum of $21,000. The partnership borrowed to fund the purchase. MJ & PT Jamsek purchased a truck from ALI for $15,000 which was funded by the partnership borrowing funds.

154 In 1990, a further truck was purchased by MJ & PT Jamsek. Mr Jamsek was not asked to buy a new truck. He stated:

I was worried that if I didn't buy a bigger truck the deliveries would go to someone else who could carry more. The cost of the new truck was between $70,000 - $80,000. I obtained finance for the truck and paid it off over 10 years.

155 R&D Whitby acquired other vehicles to use to carry out the contractual arrangements and did so without direction from, or negotiation or consultation with, the relevant company. This occurred in 1989, 1993, 2010 and 2014. The utes acquired in 2010 and 2014 enabled the partnership until 30 June 2012, and Mr Whitby from 1 July 2012, to operate more profitably.

156 The provision by the partnerships (and, from 1 July 2012, by Mr Whitby) of trucks (and, in the case of Mr Whitby, utes) to perform the delivery work is a matter of significance in considering the 'totality' of the relationship, especially given the substantial value of the trucks and utes in this case. In Australian Air Express at [18] and [19], McColl JA (with whom Ipp JA and Tobias JA agreed) stated:

18. Although the characterisation of a work relationship turns on a consideration of the totality of the relationship, the "conventional view" is that "a person (who) has to provide equipment such as a motor vehicle" is not an employee: Hollis, at [71], per McHugh J.

19. The decisions to which McHugh J referred as supporting the "conventional view" were Queensland Stations Pty Limited v Federal Commissioner of Taxation (1945) 70 CLR 539; Wright v Attorney-General (Tas) (1954) 94 CLR 409. In Humberstone Dixon J said (at 404-405):
"The essence of a contract of service is the supply of the work and the skill of a man. But the emphasis in the case of the present contract is upon mechanical traction. This was to be done by his own property in his own possession and control. There is no ground for imputing to the parties a common intention that in all the management and control of his own vehicle, in all the ways in which he used it for the purposes of carrying their goods, he should be subject to the commands of the respondents."

157 It is necessary to record why her Honour was examining what McHugh J (who was in the minority) had described as the "conventional view". This is made clear by paragraph [16] of her Honour's reasons, namely that it was probative of the distinction between an employee and an independent contractor which has been said to be "rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own": Marshall at 217.

158 Her Honour carefully addressed the whole of the decision in Hollis (which concerned vicarious liability for the purposes of negligence). In that case, a majority of the High Court held that the New South Wales Court of Appeal had fallen into error in Vabu Pty Ltd v Federal Commissioner of Taxation (1996) 33 ATR 537 in concluding that bicycle couriers were independent contractors and had made "too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of maintaining them and supplied many of their own accessories". The majority observed at [47], in a passage set out by McColl JA at [24] (italicised emphasis in original, underlined emphasis added):

Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might ... be appropriate where the investment in capital equipment was more significant and greater skill and training were required to operate it. The case does not deal with situations of that character. The concern here is with the bicycle couriers engaged on Vabu's business. A consideration of the nature of their engagement, as evidenced by the documents to which reference has been made and by the work practices imposed by Vabu, indicates that they were employees.

159 Her Honour then stated at [26]:

The majority [in Hollis] noted (at [58]) that their conclusion differed from that reached by the Court of Appeal of New Zealand "upon somewhat similar facts" in TNT Worldwide Express (NZ) Limited v Cunningham [1993] 3 NZLR 681 (TNT). They distinguished TNT, however, on the basis that in that case the "owner/driver" vehicle courier held to be an independent contractor was, in effect, running a business on his own account.

160 At [44] and [45], her Honour stated (emphasis added):

44. There is a consistent line of High Court authority supporting the "conventional view" that owners of expensive equipment such as the truck owned by the respondent are independent contractors. As MacKenna J said in Ready Mixed (at 526), such ownership indicates a contract of carriage rather than one of service because "the ownership of the assets, the chance of profit and the risk of loss in the business of carriage are [the owner/driver's] and not the company's". That proposition was referred to with approval by Meagher JA in [Vabu] (at 151).

45. Although [Vabu] was disapproved by the majority in Hollis insofar as it related to bicycle couriers, it retains its force insofar as it concerns the significance of the ownership of expensive capital equipment such as motor vehicles. It is therefore, an earlier decision of this Court which, to that extent, remains binding.

161 One of the important aspects of the reasoning in Vabu was that the individual bicycle couriers made no great investment in, or commitment to, a "business" of their own – see: ACE Insurance at [94]. Questions of scale are important. In ACE Insurance at [95], Buchanan J said:

The restriction of analysis and conclusions to the circumstances of bicycle couriers is, in my view, a potentially important one. It seems to suggest that questions of scale may be important, and even decisive.

162 The applicants relied upon Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation (2010) 184 FCR 448, which concerned a company engaged in conducting market research. It engaged interviewers to conduct surveys of members of the public and did not treat those interviewers as employees or make superannuation contributions. It was submitted to the Full Court that the Tribunal had failed to take into account the significance of the fact that the interviewers were required to have their own transport. The Full Court stated at [41]:

Roy Morgan's reliance on McHugh J's observations about the couriers' motor vehicles in Hollis 207 CLR 21 at [71] does not assist. His Honour's was a lone voice on this issue. In any event there is a distinct difference between a requirement that a courier have a motor vehicle in order to be able to carry goods from one place to another, which is the essence of a courier's job, and a flexible requirement that an interviewer have a vehicle in which to keep documents secure while working in the field. More relevant are the observations of the majority at [56]. Their Honours were of the view that bicycles are not tools that are inherently capable of use only for courier work, but provide a means of personal transport. The same may be said of motor cars. In the cases relied on by McHugh J at [71], the vehicles in question were specialised conveyances: trucks for carrying timber and gravel respectively in Humberstone v Northern Timber Mills (1949) 79 CLR 389 and Wright v Attorney-General (Tas) (1954) 94 CLR 409. The Tribunal did not err in treating the flexible requirement to provide a vehicle in the way it did.

163 McHugh J was a "lone voice" in reaching the conclusion that the bicycle riders in Vabu were independent contractors, which he did in substantial part because other couriers were providing their own motor vehicles and, he concluded, they could not be employees. That is what the Full Court in Roy Morgan is referring to in the second sentence of the passage set out above. The majority in Hollis expressly restricted their analysis to the bicycle riders and recognised at [47] that "[a] different conclusion might ... be appropriate where the investment in capital equipment was more significant and greater skill and training were required to operate it". The majority in Hollis then expressly stated: "The case does not deal with situations of that character".

164 In the third sentence in the passage from Roy Morgan set out above, the Full Court expressly recognised that there was "a distinct difference between a requirement that a courier have a motor vehicle in order to be able to carry goods from one place to another, which is the essence of a courier's job, and a flexible requirement that an interviewer have a vehicle in which to keep documents secure while working in the field".

165 Each of the other cases relied upon by the applicants on this issue involve very different facts and do not involve the provision or use of equipment such as is involved in the present case:

(1): On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82 concerned a company (On Call) which provided interpreting and translating services to its clients. To conduct that business, On Call engaged individuals skilled in interpreting and translating. The work involved in interpreting and translating required little or no equipment. Interpreters and translators typically had their own dictionaries, mobile phones, computers and a "rudimentary" home office. "Beyond that, the use of equipment by interpreters and translators in the carrying out of their functions was insignificant": at [111].
(2): Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd (2015) 228 FCR 346 concerned a company (Quest) which operated a business of providing serviced apartment accommodation. Quest entered into a labour-hire arrangement with a third party which was engaged to "convert" Quest's existing workforce (specifically, housekeepers and receptionists) from employees to self-employed independent contractors. The workers continued to perform the same services for Quest after the "conversion" and, relevantly, "continued to wear the uniform provided by, and use the equipment supplied by, Quest": at [46].
(3): Tattsbet concerned an individual (the respondent) who entered into an agency agreement with Tattsbet Ltd to operate a shopfront betting agency. Under the agency agreement, Tattsbett agreed to provide certain specified plant, equipment, items and systems for the operation of the agency. The respondent agreed to use only "such tickets, betting slips, forms, other stationery, display material, furniture and fittings" as provided or authorised by Tattsbet. In fact, the evidence was to the effect that Tattsbet levied a charge on the respondent for the use of some or all of the plant, equipment items and systems – see [44]. The respondent also provided, apparently at her own expense, staff amenities such as a refrigerator and tea and coffee-making facilities.

166 I do not approach the matter on the basis that there is a presumption (or "convention", if that word is intended to convey a particular starting point) that the partnerships were independent contractors because they owned the trucks used to undertake the deliveries. Rather, in assessing the 'totality' of the relationship, the fact that the partnerships owned the trucks, which were substantial assets under the control of the partnerships and which were central to the profitability of the partnerships' (and from 1 July 2012 Mr Whitby's) activities, is a factor which weighs in favour of the conclusion that the applicants were not employees. It is significant that each partnership made its own decisions about acquiring new vehicles. It was a matter for each what sort of expenditure to incur in the acquisition of a truck (or ute) and how to finance the acquisition. These decisions, which were wholly within the province of the partnerships, affected to a significant extent the profitability of the activities. Increases in rates from time to time were sought in substantial part because of the costs associated with operating the trucks.

167 The ownership of the trucks, the manner in which the goods were secured in them by Mr Whitby and Mr Jamsek, and the manner in which they were operated and maintained indicate that the companies did not have the control over the activities of the drivers which might be expected if the drivers were employees. I deal with "control" in further detail below.

168 The ownership of the trucks by the partnerships indicates that the contracts as performed were ones for the provision of equipment in addition to services.

The terms of the 1986, 1993, 1998 and 2001 Contracts

169 The terms of any agreement between the parties will not be, in and of themselves, determinative: Hollis at [58]; Damevski v Giudice [2003] FCAFC 252 at [77] and [78]. North and Bromberg JJ stated in Quest at [148] to [149]:

148. Even in the absence of a sham or pretence, the parties' characterisation of their relationship, whether direct (by the application of a label) or indirect (as in Autoclenz) may not be given effect according to its terms, because that characterisation contradicts the nature of the relationship the parties have actually created: Curtis v Perth and Fremantle Bottle Exchange Company Ltd (1914) 18 CLR 17 at 25 (Isaacs J); Garnac Grain Company Inc v HMF Faure & Fairclough Ltd [1968] AC 1130 at 1137 (Lord Pearson); Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 at 409; 18 ALR 385 at 389 (the Court) (AMP Society), citing Lord Denning MR in Massey v Crown Life Insurance Company [1978] 1 WLR 676 at 678-679; Hollis at [58] (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ). In that situation, the character of the relationship created by the contract will be revealed by all the terms of the contract (AMP Society at 408-409; 388-389), examined in the light of the circumstances surrounding the making of it: Narich Pty Ltd v Commissioner of Pay-roll Tax [1983] 2 NSWLR 597 at 601 and 606 (Lord Keith of Kinkel, Lord Elwyn-Jones, Lord Roskill, Lord Brandon of Oakbrook and Lord Templeman); ACT Visiting Medical Officers Association at [24] (the Court).

149. In other cases, the disparity between what was recorded on the face of the contract and what is demonstrated to have occurred by reference to the subsequent conduct of the parties may be explained by the recognition that, by their conduct, the parties have impliedly varied their contract by adding to or modifying its terms: Narich Pty Ltd at 601 and 604; AMP Society at 410-411; 392 ...

170 Mr Jamsek, on behalf of MJ & PT Jamsek, signed the 1993, 1998 and 2001 Contracts. I infer he signed the 1986 Contract on behalf of the partnership. So did Mr Whitby on behalf of R&D Whitby. In each of those contracts, MJ & PT Jamsek and R&D Whitby were described as "Delivery Contractors".

171 Mr Whitby regarded the partnership as being a party to the contracts. His subjective views are probably of less significance than the objective facts. Nevertheless, when one takes account of the fact that he was paid out his annual leave, purchased a truck for a substantial sum, financed it, set up a partnership with his wife, started invoicing ALI for services and commenced claiming deductions in respect of substantial costs, it is difficult to think that Mr Whitby would not have thought that his employment with ALI had come to an end and that he had commenced, in partnership with his wife, a business providing a truck and delivery services to ALI. His subsequent written communications with the companies confirm this.

172 Mr Jamsek agreed that he signed the 1998 Contract and the 2001 Contract on behalf of the partnership.

173 The applicants submitted the contracts should be construed as contracts with the individuals rather than the partnerships. I do not construe them that way. It may be accepted that the parties always anticipated that the driving of the trucks owned by the partnerships would be carried out by Mr Whitby and Mr Jamsek. That does not require the construction for which the applicants contend. The terms of the contract are clear in identifying the partnerships as the parties. The parties in fact conducted their activities on the basis that the partnerships were supplying equipment and services.

174 The 1993, 1998, and 2001 Contracts between Thorn Lighting and the partnerships contained a number of common features (and I infer that the 1986 Contract did likewise), including:

(1)

The applicants were responsible for the vehicle equipment and gear, the loading of the vehicle, and the securing and weather protection of the load.

(2)

The applicants were not to engage the services of an alternative driver for the vehicle without prior and continuing approval from Thorn Lighting.

(3)

The applicants were to have both public liability insurance as well as comprehensive motor insurance.

(4)

The applicants were not to offer their vehicle for sale with any guarantee of continuity of work for Thorn Lighting, or implied acceptance by Thorn Lighting of the purchaser.

(5)

The applicants were entitled to four weeks unpaid annual leave. Leave was factored into the rate payable. Any more than two weeks leave in the December/January factory reduced output period required agreement between the parties to the contract.

(6)

Grounds for termination of the drivers (in the 1993 Contract and, I infer, in the 1986 Contract) or guidelines for termination of the arrangement for either party (in the 1998 and 2001 Contracts) included:

(a): unsatisfactory performance;
(b): serious change or downturn in "Thorn" business;
(c): adoption by Thorn Lighting of a different distribution system;
(d): the contractor wishing to cease doing "Thorn Lighting work"; and
(e): the contractor selling their vehicle (this guideline was expressed in the same terms as (4) above in the 1998 Contract and the 2001 Contract).

(7)

An agreed standard/average working day of 9 hours, with a usual starting time of 6am. The parties accepted that the actual hours might vary due to work fluctuations.

175 The 1986 Contract provided for pay rates on a "per carton" basis, with a $120 per day minimum. This was later varied by the parties to an hourly rate. The 1993, 1998, and 2001 Contracts provided for pay rates which were "based on" the age of the trucks (that they be over one year old) and their carrying capacity (between 5 and 8 tonnes), as well as a standard weekly rate. The rate of pay under the 2001 contract was $1,745.20 a week for 9 hours on 5 days, plus GST.

176 Mr Whitby and Mr Jamsek did not obtain legal advice before entering into any of the contracts.

177 This is not a case where the parties entered into a written contract which gave the appearance of a relationship which did not truly exist between them. The parties clearly intended to alter the structure of their relationship in 1986. They did so. The fact that one important consideration for choosing to do so was the potential for redundancy underscores that the parties intended to alter their relationship.

178 The applicants relied upon the terms of the contracts as indicating "control". The terms particularly relied on are referred to, and the arguments dealt with, next when dealing with the issue of "control".

179 The applicants submitted that there were periods of time where no written agreement governed their working relationship. This was said to be important because that would be more consistent with the applicants being employees. It was noted that new written contracts were not executed by the applicants with the companies to which the business was transferred. The plaintiffs submit that no written contract governed their work during the periods:

(1): between about May 1986 (the transfer of the business from ALI to Thorn EMI) and 1 July 1993 (the date of the 1993 Contract);
(2): between 25 August 1993 (the date of the transfer of the business from Thorn EMI to Thorn Lighting) and September 1998 (the date of the 1998 Contract); and
(3): between about 1 October 2015 (the date of the transfer of the business to ZG Lighting) and 20 January 2017 (the end of the applicants' employment).

180 The parties always conducted themselves on the basis that the written contracts governed their relationship and it is to be inferred from the parties' conduct that there was an agreement between them in the terms of the written contracts even during the periods identified above.

181 The effect of the contractual arrangements, whether governed by written contract or not, was that the partnerships agreed in return for a fee to supply delivery services and equipment, namely vehicles.

182 In the context of the relationship between the relevant parties, I do not regard the fact that there may have been periods where no written contract in fact applied as tending to suggest that the applicants were employees.

Working hours, length of service, control and activities at the warehouse

183 The applicants properly emphasised the length of service and the fact that each, as a matter of substance, earned their income from a single source for nearly 40 years. They worked more or less regular hours with a relatively constant set of working arrangements. The applicants submitted that, given these matters alone, the suggestion that the applicants were engaged in business bordered on the fanciful. These matters are clearly relevant and typical of many employment relationships.

184 Further, it may be accepted that it is common for businesses to derive income from multiple sources. However, a business can serve a single customer and such business relationships can exist for lengthy periods of time. The parties' conduct here evidenced a desire to alter the employment relationship from 1986. That does not necessarily mean that the new relationship was not one of employment. However, the circumstances in which the new relationship was formed, and the parties' actions at the time, is relevant to characterising the relationship between them. The structure of that new relationship had, as an essential element, the fact that the partnerships would be responsible for the provision (and cost of providing) not only labour but substantial equipment. This transferred risk and opportunity to the partnerships.

185 Whilst the applicants did not serve other customers, and that is relevant in assessing the 'totality' of the relationship, it is also relevant to note that, in principle, there was no reason why the applicants could not have served others in the hours available to them outside of the hours in which they had contracted to provide services to the companies. The partnerships owned their vehicles and there was no contractual restriction preventing them from choosing, if they wished, to earn further income by providing delivery services to others. Further, there was no restriction in principle on them engaging others to drive their trucks for other customers, for example on weekends.

186 The applicants prepared a "Table of Indicia" which outlined factors which it was contended indicated an employment relationship and included a reference to evidence supporting a contention that the companies exercised "control".

187 It was submitted that the applicants worked fixed, full time hours. The number of hours worked varied (as described above). Nevertheless, there was undoubtedly an expectation (expressly referred to in the 1993, 1998 and 2001 Contracts) that the applicants would, or be available for, work for 9 hours per day. The number of hours in fact worked and the flexibility around returning home once all deliveries were completed, rather than being required to return to the warehouse, perhaps to perform other work, indicates a relationship of less control than might be expected of a typical employer-employee relationship.

188 I accept that Mr Whitby and Mr Jamsek wore branded clothing to varying degrees over the years. They would wear a mix of personal and branded clothing. I do not accept that they wore what might be described as a full uniform. They were not instructed by the companies to wear a uniform.

189 The companies did not own their own trucks. The companies had no real control over the way in which Mr Whitby and Mr Jamsek managed and operated their trucks. The contracts expressly required the "Delivery Contractor" to "exercise all reasonable care and diligence in the carriage and safe keeping of the goods in their charge". The companies did not purport to exercise control in any way in respect of the decisions to purchase trucks or maintain them. They requested, on occasions, that tarpaulins be added to which company logos were affixed.

190 The applicants relied on the fact that they were told what to deliver. This is not an indicia which necessarily characterises the relationship as one of employment. As the respondents correctly submitted, any external courier would necessarily be told precisely the same thing. The applicants were notified by two-way radio and later by mobile phone for urgent deliveries, further deliveries or recalls. They were not, however, directed how to carry out their deliveries. This kind of communication is equally consistent with what one might expect if the deliveries were being provided by any courier. A notification of what to deliver or collect is quite different to a direction as to how to conduct the delivery activities.

191 The respondents did not have the authority to direct the management and control of the trucks, which were partnership assets – see: Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 at [26]. I reject below an argument put by the applicants that a clause of the written contracts gave the respondents such authority.

192 The applicants were not in fact directed in how to conduct their deliveries. In Humberstone v Northern Timber Mills (1949) 79 CLR 389 Dixon J stated at 404-405:

... The most important part of the work to be performed by his own labour consisted in the operation of his own motor truck and the essential part of the service for which the respondents contracted was the transportation of their goods by the mechanical means he thus supplied. The essence of a contract of service is the supply of the work and skill of a man. But the emphasis in the case of the present contract is upon mechanical traction. This was to be done by his own property in his own possession and control. There is no ground for imputing to the parties a common intention that in all the management and control of his own vehicle, in all the ways in which he used it for the purpose of carrying their goods, he should be subject to the commands of the respondents.

In essence it appears to me to have been an independent contract and I do not think that it was open to the Board to find otherwise.

193 That passage was approved by Webb J in Wright v Attorney-General (Tas) (1954) 94 CLR 409 at 414 and most of it was set out by Kitto J at 418. Most of the passage was set out with approval by Mason J in Stevens at 26, and the decision was referred to with approval by Wilson and Dawson JJ at 38.

194 Mr Whitby and Mr Jamsek secured their own loads and used company pallet jacks to move cargo around inside their trucks once loaded. The "picking and packing" was all performed by company employees and Mr Whitby and Mr Jamsek were not allowed to perform that work and would wait in the canteen whilst it occurred. Mr Whitby and Mr Jamsek were not supervised in loading their trucks or in unloading them and delivering product. They used their own skill and judgment.

195 Mr Whitby was not generally given directions about when to use his ute. There was no evidence of any direction at all up until 2015. He gave evidence that, on one occasion in 2015, after Mr Dixon had left he was instructed by Mr Giitsidis (who had recently commenced) not to use his ute because he was "contracted with a truck". Ms Cattell gave clear evidence on this issue to the effect that Mr Giitsidis had wanted, and she (Ms Cattell) had also said to Mr Whitby, that the flatbed truck should be used for long-length deliveries. Mr Whitby produced a photo of a long-length delivery secured to his flatbed truck which was taken after a conversation with Ms Cattell. The lack of general directions being given is consistent with an independent contractor relationship. The isolated directions in relation to carrying a long-length item by truck rather than by ute is consistent with an employer-employee relationship, but is also consistent with what one might expect in a client-contractor relationship. It is not difficult to imagine, when regard is had to the photograph of the lengthy item secured to the truck, that a client who had contracted to pay for delivery on a flatbed truck would want an item of that length delivered in that manner rather than by ute. The matter of most weight, however, is that overall and for many years, it was overwhelmingly a matter for Mr Whitby and Mr Jamsek as to how they secured their deliveries and then carried them out.

196 The applicants relied upon cl 2(1)(a) of the written contracts which indicated that the company and "contractors" had agreed that the contractor would "undertake carriage of goods as reasonably directed". The applicants contended that this extended to directions as to "how" the carriage of goods was to be undertaken. That is not the meaning of the clause read in context, in particular with cll 2(1)(d) and (e), which provided:

(1) The Contractors will:

...

d) Be responsible for the vehicle equipment and gear, the safe loading of the vehicle and the securing and weather protection of the load.

e) Exercise all reasonable care and diligence in the carriage and safe keeping of the goods in their charge. Account for all goods by use of run sheets and return of signed delivery dockets or similar documents.

197 Mr Whitby and Mr Jamsek were not in fact directed in how to carry out their delivery activities, with the exception of the events described above at [195].

198 The applicants also relied upon cl 5(1) of the 1998 and 2001 Contracts (in similar terms to cl 5(a) of the 1993 Contract) which provided:

By unsatisfactory performance of a Contractor, THORN LIGHTING can summarily terminate a Contractor for misconduct, lack of care with consignments, failure to carry out usual functions or direction, or theft.

199 The applicants submitted that "it was a grounds for termination for the applicants not to carry out 'usual' directions – thus making it clear that the companies did have authority to direct the applicants in respect of their work". The better construction of this clause, read in context, is that it was a grounds for termination if the "contractors" failed to carry out the deliveries which they were directed to make. The fact that the contractors would be directed to make a delivery is consistent with a client-contractor relationship as well as an employer-employee relationship.

200 The applicants relied upon cl 2(1)(e) which required the contractors to account for goods. This is consistent with both an employee-employer relationship and one of contractor-client.

201 The applicants relied on the contractual dispute resolution clause, cl 4. This provided (in the 1998 and 2001 Contracts, and in similar terms in the 1993 Contract):

4. DISPUTES PROCEDURE:

In the event of a question, dispute, or difficulty arising:

i) The Contractor concerned shall negotiate with the person in charge of the NSW Branch Warehouse;

ii) If not resolved, the Contractor shall take the matter up with the NSW State Manager.

iii) If THORN LIGHTING have a concern, the person in charge of the NSW Branch Warehouse will discuss the matter with the Contractor involved. If not resolved, the matter should be taken to the NSW State Manager for decision.

202 However, this clause does not establish relevant control. Indeed, if anything, and particularly when read with cl 5 dealing with the right on the part of either party to terminate, this contractual dispute resolution clause is, if anything, more consistent with a contractor-client relationship.

203 The applicants referred to cl 8(c) of the 1998 and 2001 Contracts and cl 9(b) of the 1993 Contract which provided:

If the need arises where THORN LIGHTING request a Contractor to return to base to pick up an extra job, the Contractor will assess the effect on deliveries already on board and advise, if in his opinion, the extra work cannot be performed without causing late deliveries to those already onboard points. THORN LIGHTING will then decide the priorities and accept responsibility for any customer inconvenience.

204 Again, this clause is not indicative of "control". Indeed, the clause is more consistent with a contractor-client relationship, for example, in its reference to Thorn Lighting accepting "responsibility for any customer inconvenience".

205 There was significant flexibility about whether or not to return to the warehouse after deliveries were complete. Mr Whitby and Mr Jamsek chose their respective routes and the run sequence which they would adopt. The drivers collectively agreed amongst themselves which areas of metropolitan Sydney they would deliver to.

206 I accept the evidence of Ms Newton and Ms Cattell that there were occasions on which they would contact the applicants to request a delivery and were told that they were unavailable due to a doctor's appointment or some such event. I did not understand either applicant to deny that occurred on occasion.

207 The requirement to complete and return run manifests is consistent with the relevant company needing to keep administrative records, such as proof of delivery. It is also consistent with what might be required of an employee. For many years, there was no requirement to keep such records and the drivers were simply given delivery dockets, consistently with what might be expected of an "external" courier.

208 Aside from the delivery activities, the companies did not control whether or how Mr Whitby and Mr Jamsek collected and returned pallets. If the applicants chose to "sell" generic pallets to the companies, this was of benefit to the companies because it cost them less. It was of benefit to the drivers because it generated a second income stream.

209 I accept that the applicants assisted cleaning the rear of the warehouse on isolated occasions whilst a stocktake occurred. However, this is not a strong indicator of an employment relationship when viewed in the context of the 'totality' of the relationship. These events occurred when there were no deliveries because a stocktake was being conducted. The applicants did not participate in the actual stocktake activities with the company employees. The fact that Mr Whitby and Mr Jamsek performed cleaning work on these isolated occasions is consistent with the give-and-take one might expect to see in the context of the long standing relationship each had with the company.

210 The applicants notified the companies when they wanted to take leave. That was commercially necessary whether the applicants were employees or independent contractors.

211 The fact that Mr Jamsek paid for someone to carry out his delivery activities when he took leave in 2000 weighs against the conclusion he was an employee.

Conclusion

212 Assessing the 'totality' of the relationship, Mr Whitby and Mr Jamsek were not employees for the purposes of the FW Act.

213 The present case is, in my view, an example of partnerships (and from 1 July 2012, Mr Whitby) running businesses of their own. Whilst it is true that the partnerships were working in the business of another entity, that is not inconsistent with working in a business of one's own: ACE Insurance at [121], [128]; see also Tattsbet at [61].

SUPERANNUATION GUARANTEE (ADMINISTRATION) ACT

214 The applicants sought declaratory relief to the effect that they were employees within the meaning of the SGA Act. A question was raised about whether such declaratory relief would have been appropriate even if the applicants were employees.

215 An application was made during final submissions to amend the originating application to alter the terms of the declaratory relief sought. As I would not grant any declaratory relief for the reasons given below, I refuse leave to amend the originating application.

216 Section 12 of the SGA Act includes:

Interpretation: employee, employer

(1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11):
(a) expand the meaning of those terms; and

(b) make particular provision to avoid doubt as to the status of certain persons.

...

(3) If a person works under a contract that is wholly or principally for the labour of the person, the person is an employee of the other party to the contract.

217 It was not suggested that any other subsection was potentially relevant.

218 The applicants were not employees with the meaning of the SGA Act. They do not fall within the "ordinary meaning" of the word "employee" for the reasons given above. They do not fall within any expanded meaning referred to in the provision. Section 12(3) does not apply.

219 First, the relevant contracts were with the applicants' partnerships, although in the case of Mr Whitby's partnership, only until 30 June 2012. I reject the contention that the proper construction of the contractual arrangements was that the parties were the individual drivers, although I accept that, in the case of Mr Whitby, the contractual arrangement was between him and the company from 1 July 2012.

220 Secondly, the contracts were not "principally for the labour of the person". The contracts were for equipment (delivery vehicles) and labour. The applicants submitted that the contracts were "principally for the labour of the person" because "less than 50 percent of the applicants' gross income was used to pay their expenses". I reject that submission. The section focusses on what was provided under the contract, not what cost was associated with the provision of the relevant services and equipment. The contracts were plainly for the provision of substantial equipment and service and, accordingly, not "principally for the labour of the person".

221 In the circumstances, it is not necessary to consider whether declaratory relief would have been appropriate if I had concluded that the applicants were employees.

LONG SERVICE LEAVE ACT

222 The LSL Act provides in s 4(1):

Except as otherwise provided in this Act, every worker shall be entitled to long service leave on ordinary pay in respect of the service of the worker with an employer. Service with the employer before the commencement of this Act as well as service with the employer after such commencement shall be taken into account for the purposes of this section.

223 A "worker" is defined in s 3(1) as follows:

Worker means person employed, whether on salary or wages or piecework rates, or as a member of a buttygang, and the fact that a person is working under a contract for labour only, or substantially for labour only, or as lessee of any tools or other implements of production, or as an outworker, or is working as a salesman, canvasser, collector, commercial traveller, insurance agent, or in any other capacity in which the person is paid wholly or partly by commission shall not in itself prevent such person being held to be a worker but does not include a person who is a worker within the meaning of the Long Service Leave (Metalliferous Mining Industry) Act 1963.

224 This definition turns on a person being "employed". I have concluded that Mr Whitby and Mr Jamsek were not employed. Accordingly, the claim must fail.

SECTION 357 OF THE FAIR WORK ACT

225 In substance, the applicants claimed that:

(1): in putting the 2001 Contract to the applicants for their execution in around December 2000; and
(2): by reason of the 2001 Contract identifying the applicants as independent contractors,; the companies made a representation (said to be a continuing representation) that the applicants would be undertaking their work as independent contractors and not employees, contrary to s 357 of the FW Act.

226 Section 357 provides:

Misrepresenting employment as independent contracting arrangement

(1) A person (the employer) that employs, or proposes to employ, an individual must not represent to the individual that the contract of employment under which the individual is, or would be, employed by the employer is a contract for services under which the individual performs, or would perform, work as an independent contractor.
Note: This subsection is a civil remedy provision (see Part 4-1).

(2) Subsection (1) does not apply if the employer proves that, when the representation was made, the employer:
(a) did not know; and

(b) was not reckless as to whether;

the contract was a contract of employment rather than a contract for services.

227 The claim must fail. The applicants were not employees.

228 It is also to be noted that s 357 came into force on 1 June 2009. Even if the representation was incorrect when it was put in around December 2000, it would not have breached s 357 which was not then in existence. It is unnecessary to consider whether the representation was "continuing" and, if it was, how the provision would apply (assuming it could), given the applicants were not employees at any relevant time.

ACCESSORIAL LIABILITY CLAIMS

229 It is not strictly necessary to deal with this claim given there is no liability on the part of the respondent companies.

230 The applicants submitted that Mr Dixon was, for the purposes of s 550(2)(c), involved in the following contraventions of the FW Act:

(1): a contravention of s 44 in respect of a failure to pay annual leave and public holiday entitlements from 21 November 2011 to 30 April 2015; and
(2): a contravention of s 357 in so far as the "continuing" representations were made during the period 21 November 2011 to 30 April 2015.

231 Section 550 provides:

Involvement in contravention treated in same way as actual contravention

(1) A person who is involved in a contravention of a civil remedy provision is taken to have contravened that provision.
Note: If a person (the involved person) is taken under this subsection to have contravened a civil remedy provision, the involved person's contravention may be a serious contravention (see subsection 557A(5A)). Serious contraventions attract higher maximum penalties (see subsection 539(2)).

(2) A person is involved in a contravention of a civil remedy provision if, and only if, the person:

(a)
has aided, abetted, counselled or procured the contravention; or

(b)
has induced the contravention, whether by threats or promises or otherwise; or

(c)
has been in any way, by act or omission, directly or indirectly, knowingly concerned in or party to the contravention; or

(D)
has conspired with others to effect the contravention.

232 The relevant principles with respect to accessorial liability under s 550 were helpfully summarised by White J in Fair Work Ombudsman v South Jin Pty Ltd [2015] FCA 1456 at [227] to [234]. It is unnecessary to repeat them here.

233 To have succeeded, the applicants would have needed to establish that Mr Dixon intentionally participated in the contraventions. Such claims are to be determined on the Briginshaw standard: Briginshaw v Briginshaw (1938) 60 CLR 336; Construction, Forestry, Mining and Energy Union v BHP Coal Pty Ltd (2015) 230 FCR 298 at [63]-[65].

234 In order for a person to be knowingly concerned in a contravention, that person must have engaged in some act or conduct which involves him or her in the contravention; this has been said to require a "practical connection" between the person's conduct and the contravention: Fair Work Ombudsman v Devine Marine Group Pty Ltd [2014] FCA 1365 at [178], per White J; EZY Accounting 123 Pty Ltd v Fair Work Ombudsman [2018] FCAFC 134 at [33].

235 Courts have also looked at whether the person's conduct is "linked in purpose" with the corporate entity's contravention: Australian Communications and Media Authority v Mobilegate Ltd (No 8) (2010) 275 ALR 293 at [165], per Logan J; EZY Accounting at [33].

236 The applicants submitted that Mr Dixon knew the applicants' relationship with the companies was one of employer-employee rather than client-independent contractor. Even if the applicants were employees (which I have concluded they were not), the evidence did not establish that Mr Dixon knew that they were, and nor was that proposition put to Mr Dixon in cross-examination.

237 It is difficult to see what conduct Mr Dixon engaged in which could be said to have linked him in purpose to the asserted contravention of s 357, or from which a conclusion could be drawn that there was a practical connection between him or his conduct and that asserted contravention. The pleading did not identify the material facts relied upon as establishing the practical connection.

238 The applicants also submitted that ZG Operations and ZG Lighting were knowingly concerned in each other's contraventions, to the extent they were not the principal contraveners. The applicants did not advance any closing submissions on this issue.

CONCLUSION

239 The proceedings are dismissed.

I certify that the preceding two hundred and thirty-nine (239) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Thawley.

Associate:

Dated: 30 November 2018

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