Queensland Stations Pty Ltd
v. Federal Commissioner of Taxation

Judges: Latham CJ
Rich J

Dixon J

Subject References:
Taxation and revenue
Pay-roll tax
Droving contract
Employee or independent contractor

Legislative References:
Pay-roll Tax Assessment Act 1941 No 2 - s 3

Sydney

Judgment by:
Dixon J

The object of this case stated is to obtain a decision upon the question whether, under the Pay-roll Tax Assessment Act 1941-1942, the appellant company is liable to tax upon payments made to drovers for the droving of cattle. The tax is levied on all wages paid or payable by any employer (s. 12). It must be paid by the employer who pays or is liable to pay the wages (s. 13). "Employer" means any person who pays or is liable to pay wages (s. 3 (1)). "Wages" means any wages, salary, commission, bonuses or allowances paid or payable (whether at piece-work rates or otherwise and whether paid or payable in cash or in kind) to any employee as such (s. 3 (1)). The definition is extended to cover, among other things, any payment made under any classes of contracts prescribed by regulations, to the extent to which that payment is attributable to labour (s. 3 (1)).

The drovers in question are paid at rates per head of the cattle driven calculated upon the number delivered at the place of destination. The company uses a form of agreement into which the drover enters. Under its provisions he agrees to "serve" the owners of the cattle in the capacity of a drover and to take charge of the specific cattle described, to drove them to the place of destination named, to obey and carry out all lawful instructions, to use the whole of his time, energy and ability in the careful droving of the stock in his charge, to report from time to time the number and condition of the cattle and to deliver them at the end of the journey. So much of the agreement is consistent with a contract of service. But the form proceeds to require the drover to find all men and plant, horses and rations necessary and sufficient for the safe droving of the cattle, and to pay all wages in connection therewith. It imposes upon him an obligation to take proper care of and to account for the stock and not to dispose of any of them without the owners' consent. It gives the owners a right at any time to terminate the agreement if the drover commits a breach, and in that event the drover must "accept instant dismissal at any time or place without recourse against the owners or any of their agents for such dismissal." Then, in consideration of the drover's well and faithfully performing the foregoing conditions, the owners agree to pay him the stipulated rate per head for all cattle delivered at the destination. The case stated says that in order to carry out his agreement a drover must employ men and provide horses, hobbles, saddlery, a wagonette with horses and harness, camping and cooking gear, and other equipment, and rations for himself and his men. An example is given in which the drover had to provide four men, thirty horses, eight sets of riding gear, that is, saddles, bridles and hobbles, as well as other equipment and rations.

I should not have thought that such a contract created the relation of master and servant, or employer and employee, between the cattle owners and the drover. It appears rather to be a contract for the performance of a service for one party by another who is to employ men and plant for the purpose and is to be paid according to the result. This view is confirmed by a number of cases. In R. v Goodbody ^[F29] a drover was entrusted by a farmer in Huntingdonshire with eight beasts to drive to London and deliver at Smithfield, unless he sold them on the road. He converted six of them and was indicted for larceny, but it was held that he was not a servant, having custody of the cattle; on the contrary they had been delivered into his possession. In R. v Hey ^[F30] , pigs were given into the hands of a drover to take by rail from Newcastle to Leeds and deliver them to a named pig dealer. He sold them and absconded. A conviction for larceny of the pigs was held improper because he had received possession of the pigs. He could not be considered to have the mere custody of the pigs as a servant of the prosecutor, unless in driving them to market he was his servant, and on the whole the judges thought that was not the case.

The fact of his being a drover by trade was one of the matters relied upon for this conclusion. In Milligan v Wedge ^[F31] , a bullock driven from Smithfield ran into a showroom in Portland Road and damaged some articles. The bullock had been placed in the hands of a licensed drover, who employed a boy to drive it. The owner was held not to be liable. Lord Denman said: "He employs a drover, who employs a servant, who does the mischief. The drover, therefore, is liable, and not the owner of the beast" ^[F32] . Coleridge J. said that he made no distinction between the licensed drover and the boy. "The owner makes a contract with the drover that he shall drive the beast, and leaves it under his charge; and then the drover does the act. The relation, therefore, of master and servant does not exist between them" ^[F33] .

In New South Wales in R. v Liffidge ^[F34] , the same view was taken and it was said that the drover has an independent calling and is not in law the servant of his casual employer. It must be remembered that droving has been a well-recognized vocation, both here and in England, where it has a long history. For example, by 5 Eliz. c. 12, drovers must be licensed and they are to be married men and householders; by 3 Car. I. c. 2, they must not ply their trade on Sunday, and, by 29 Car. II. c. 7, s. II, "no Drover ... their or any of their Servants, shall travel or come into his or their Inn or Lodging upon the Lord's Day."

There is, of course, nothing to prevent a drover and his client forming the relation of employee and employer: See, for example, Turnbull v Wieland ^[F35] . But whether they do so must depend on the facts. In considering the facts it is a mistake to treat as decisive a reservation of control over the manner in which the droving is performed and the cattle are handled. For instance, in the present case the circumstance that the drover agrees to obey and carry out all lawful instructions cannot outweigh the countervailing considerations which are found in the employment by him of servants of his own, the provision of horses, equipment, plant, rations, and a remuneration at a rate per head delivered. That a reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract appears from Reedie v London and North Western Railway Co ^[F36] ; Steel v South-Eastern Railway Co ^[F37] ; Hardaker v Idle District Council ^[F38] , per Lindley L.J., at p. 343; per A. L. Smith L.J., at p. 340. See the observations of McCardie J. in Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd ^[F39] , at p. 767, and the passage there quoted from Smith's Law of Master and Servant (1922), 7th ed., p. 238.

However, in Logan v Gilchrist, Watt & Cunningham ^[F40] , upon an analogous contract, this Court held that the owner of sheep stood in relation to the drover in the position of a master, and on that ground was responsible for the drover's allowing the sheep to trespass upon the plaintiff's holding and to depasture thereon. In view of this decision the appellant's counsel did not deny that the relation with which we are now concerned was that of employer and employee.

But the conclusion of the Court in Logan's Case ^[F41] that the relation was that of master and servant was rested upon the power of control reserved to the owner and made enforceable by "dismissal." The judgment was not considered, but was given at the conclusion of the opening of the appellant, and none of the foregoing cases appears to have been referred to. The case is not elsewhere reported. It is true that a considered judgment had been delivered in the Supreme Court of Queensland ^[F42] and this was affirmed. But in that judgment not a little reliance was placed upon a case from Mauritius decided under the Code Civil there prevailing (Serandat v Saisse ^[F43] ), as one in which the relation of master and servant was established, notwithstanding that the person contracting was to employ servants of his own. That this was a misapprehension has been pointed out by Neal Macrossan S.P.J. in Wyatt v Forrester ^[F44] , at pp. 117, 118 - see too the report ^[F45] .

The actual decision in Logan's Case ^[F46] is, I think, correct, and, moreover, the reservation of the right of control serves strongly to support it; not because it shows that a relation of master and servant existed, but because it shows conclusively that the drover's possession of the sheep was not an independent possession in his own right. The case was one of cattle trespass, presumably trespass from the highway. In cattle trespass from a highway the liability of the "owner" is qualified. He is not responsible if the damage was not caused intentionally and could not have been avoided by the exercise on his part of reasonable care and skill: See Glanville Williams on Liability for Animals, p. 372, Gayler & Pope Ltd v B. Davies & Son Ltd ^[F47] , at pp. 79-83. The person responsible as "owner" in cattle trespass is he who has exclusive possession and control: See Glanville Williams, op. cit., p. 178. But where possession is held on behalf of the actual owner and is to be used under his direction and control, his responsibility must remain. He cannot treat the neglect of a drover in possession as his agent as the "act of a third party" (ibid., pp. 170 and 184)-cf. Pinn v Rew ^[F48] . In a note on page 184 Mr. Glanville Williams makes the comment on Logan v Gilchrist, Watt & Cunningham ^[F49] that the arguments assumed either that "act of a third party" is a defence or that the owner of cattle is not liable for them when out of possession.

Upon this state of authority I do not think that we ought to hold that the payments made by the appellant company to the drovers fall within the provisions of the Pay-roll Tax Assessment Act. The words "wages, salary, commission, bonuses or allowances paid or payable ... to any employee as such" are, on the face of them, inappropriate to payments at a rate per head for cattle delivered by a drover employing his own men and plant for the purpose. It is difficult to fit such payments under the word "wages," under "salary," under "commission," and still more to fit them under "bonuses" or "allowances." In a case where the ordinary relation of employer and employee clearly subsisted, a difficulty in fitting the remuneration into one of these five descriptions might not be an insuperable objection to liability to the tax. But here we are asked to begin by giving literal effect to the decision in Logan's Case ^[F50] that a relation of master and servant existed, to apply it blindly to the Pay-roll Tax Assessment Act, although the decision related to the principle commonly denoted by the phrase respondeat superior, and then by way of consequence to drag the payments under one or other of the expressions contained in the words of the definition of "wages."

I think in the state of authority I have described we ought not to follow this course. We should on the contrary consider afresh whether the whole transaction can fairly be brought within the tax. So considering the matter I am clearly of opinion that it cannot.

I think the questions in the case stated should both be answered: No.