Australian Air Express Pty Ltd v Langford

[2005] NSWCA 96

CITATION:	Australian Air Express Pty Limited v Langford [2005] NSWCA 96
HEARING DATE(S):	28 July 2004
JUDGMENT DATE:	4 April 2005
JUDGMENT OF:	Ipp JA at 1; Tobias JA at 2; McColl JA at 3
DECISION:	(1) Leave to appeal granted, but appeal dismissed. (2) Appellant to pay respondent's costs.

CATCHWORDS:	EMPLOYMENT - employee or independent contractor - Commonwealth authority operating courier business - Owner/Driver Agreement requiring driver to provide truck and pay all expenses associated with its operation and maintenance - Prescribed Payment System tax deducted from driver's earnings - No sick leave or holiday pay paid to driver - driver permitted to engage substitute driver (D)
LEGISLATION CITED:	Safety, Rehabilitation and Compensation Act 1988 (Cth)
CASES CITED:	Australian Mutual Provident Society v Allen and Another (1978) 52 ALJR 407 (sub nom. Australian Mutual Provident Society v Chaplin and Another) Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 Hollis v Vabu Pty Ltd t/as Crisis Couriers [1999] NSWCA 334; (1999) Aust Torts Reports 81-535 Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389 JA & BM Bowden & Sons Pty Ltd v Chief Commissioner of State Revenue [2001] NSWCA 125; (2001) 105 IR 66 Konrad v Victoria Police [1999] FCA 988; (1999) 91 FCR 95 Marshall v Whittaker's Building Supply Co [1963] HCA 26; (1963) 109 CLR 210 Massey v Crown Life Insurance Co [1978] 1 WLR 676 National Transport Insurance Limited v Chalker & Ors [2005] NSWCA 62 Paddison v Ultimate Image Pty Ltd t/as Hawkesbury Plasterworks [2004] NSWCA 410 Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539 Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497 Roy Morgan Research Centre Pty Ltd v Commissioner of State Revenue (1997) 37 ATR 528 Sammartino v Mayne Nickless Express t/a Wards Skyroad (2000) 98 IR 168 Scerri v Cahill (1995) 14 NSWCCR 339 Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 TNT Worldwide Express (NZ) Ltd v Cunningham [1993] 3 NZLR 681 Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 Vacik Distributors Pty Ltd v Kelly (1995) 12 NSWCCR 30 Wright v Attorney-General (Tas) [1954] HCA 26; (1954) 94 CLR 409
PARTIES:	Australian Air Express Pty Limited (Appellant) Donald Langford (Respondent)
FILE NUMBER(S):	CA 41183/03
COUNSEL:	G M Watson SC/N J Owens (Appellant) J E Rowe (Respondent)
SOLICITORS:	Ebsworth & Ebsworth (Appellant) Harpers Solicitors (Respondent)

LOWER COURT JURISDICTION:	District Court
LOWER COURT FILE NUMBER(S):	DC 7118/02
LOWER COURT JUDICIAL OFFICER:	Walmsley SC DCJ

CA 41183/03
DC 7118/02

IPP JA
TOBIAS JA
McCOLL JA

Monday, 4 April 2005

AUSTRALIAN AIR EXPRESS PTY LIMITED v Donald LANGFORD

The appellant runs a delivery business in all States and Territories of Australia. The respondent is a delivery driver, who delivered goods on the appellant’s behalf pursuant to an Owner/Driver Agreement, which required him, inter alia, to provide his own truck and bear the expenses of its maintenance and operation. Prescribed Payment System tax was deducted from his earnings. He was permitted to engage a substitute driver approved by the appellant. The respondent suffered an injury when a forklift operated by one of the appellant’s employees ran over his foot. He sued the appellant for damages, claming that it was vicariously liable for an act of casual negligence by its forklift driver. Before the primary judge, the appellant submitted that it was not liable on two bases. First, it denied that its employee was negligent. Secondly, it submitted that the respondent was an employee within the meaning of s 5(1) of the Safety, Rehabilitation and Compensation Act 1988 (“Comcare Act”) and that the Comcare Act regulated any common law right that the respondent may have to compensation. The appellant had been declared to be a “Commonwealth authority” for the purposes of the Comcare Act. The appellant argued that as the respondent had failed to make a written election for damages his damages claim must fail: s 45 of the Comcare Act.

At a trial limited to liability, the primary judge held the respondent was an independent contractor and that he had been injured by the negligent act of an employee for whose conduct the appellant was vicariously liable. The appellant challenged the primary judge’s conclusion that the respondent was an independent contractor.

HELD per McColl JA (Ipp JA and Tobias JA agreeing) dismissing the appeal

1. The primary judge’s decision that the respondent was an independent contractor was correct.

2. Ownership of an expensive item of equipment such as a truck is a significant factor favouring the conclusion that a person is an independent contractor as it tends to indicate that the chance of profit and loss in the business of carriage are the owner/driver’s.

Queensland Stations Pty Ltd v Federal Commissioner of Taxation [1945] HCA 13; (1945) 70 CLR 539, Humberstone v Northern Timber Mills [1949] HCA 49; (1949) 79 CLR 389, Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497, Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, TNT Worldwide Express (NZ) Ltd v Cunningham [1993] 3 NZLR 681, Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537 referred to; Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 distinguished.

3. The fact that a Commonwealth authority treated the respondent as a PPS taxpayer rather than a PAYE taxpayer and thus had not made tax deductions appropriate if he was an employee, favoured the conclusion he was an independent contractor.

Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179, Scerri v Cahill (1995) 14 NSWCCR 339, Vabu Pty Ltd v Commissioner of Taxation (1996) 33 ATR 537, Sammartino v Mayne Nickless Express t/a Wards Skyroad (2000) 98 IR 168, Paddison v Ultimate Image Pty Ltd t/as Hawkesbury Plasterworks [2004] NSWCA 410 referred to.

4. The respondent’s right to substitute another driver was a significant factor favouring the conclusion that he was an independent contractor.

Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497, Australian Mutual Provident Society v Allen and Another (1978) 52 ALJR 407 (sub nom. Australian Mutual Provident Society v Chaplin and Another ), Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, Vacik Distributors Pty Ltd v Kelly (1995) 12 NSWCCR 30 referred to.

ORDERS:

(1) Leave to appeal granted, but appeal dismissed.

(2) Appellant to pay the respondent’s costs.

**********

CA 41183/03
DC 7118/02

IPP JA
TOBIAS JA
McCOLL JA

Monday, 4 April 2005

AUSTRALIAN AIR EXPRESS PTY LIMITED v Donald LANGFORD

Judgment

1 IPP JA: I agree with McColl JA.

2 TOBIAS JA: I agree with McColl JA.

3 McCOLL JA: This was an application for leave to appeal from a decision of Judge Walmsley SC. The Court indicated in the course of argument that the case warranted leave to appeal. Accordingly I refer to the parties as the appellant and the respondent throughout this judgment.

4 The case concerns the question whether the respondent was an employee or an independent contractor of the appellant, Australian Air Express Pty Limited. The primary judge held that he was an independent contractor. The consequence of that decision was that the respondent was entitled to sue the appellant at common law to recover damages for personal injuries he had suffered on 11 June 1999 on the appellant’s premises. The appellant, in turn, was not entitled to rely upon provisions of the Safety, Rehabilitation and Compensation Act 1988 (Cth) (the “Comcare Act”), which significantly curtail an employee’s common law rights to damages.

5 The trial before the primary judge was limited to liability. Having found the respondent was an independent contractor, the primary judge also held that the respondent had been injured by the negligent act of an employee for whose conduct the appellant was vicariously liable. He rejected a submission by the appellant that the respondent had been guilty of contributory negligence. Accordingly, he entered a verdict and judgment for the respondent with damages to be assessed.

6 The appellant does not challenge the primary judge’s findings that it was negligent or that the respondent was not guilty of contributory negligence. Its grounds of appeal are confined to the following:

(1) The trial judge erred in law in finding that the respondent was not an employee of the appellant.

(2) The trial judge erred in law in failing to find that the Safety, Rehabilitation and Compensation Act 1988 prevented the respondent making or maintaining his claim against the appellant.

Statement of the case

7 The appellant does not challenge the primary judge’s factual findings. Its complaint concerns the manner in which his Honour applied the legal principles to the facts found.

8 His Honour’s factual findings, identification of the issues and resolution of the case were expressed succinctly and can conveniently be reproduced:

“1 The defendant is a wholly owned subsidiary of Qantas and Australia Post. It runs a transport business. It has branches in all States and Territories of Australia. In Sydney, on a typical morning, it delivers goods of all kinds throughout the metropolitan area and on a typical afternoon will pick up goods for delivery, from various parts of metropolitan Sydney. The goods are delivered by vans or trucks. It owns some and employs people to drive them. Others are owned and driven by others (owner/drivers). In 1999 the plaintiff was one such owner/driver. …

2 The plaintiff suffered a significant injury to his right foot in the early morning of 11th June 1999. The incident occurred at the defendant’s depot at Silverwater, a Sydney suburb. The injury occurred when a forklift, operated by one of the defendant’s employees, ran over the plaintiff’s right foot. The plaintiff was present at the time through his contractual arrangement with the defendant, under which he operated a cargo delivery and pick up service for it, using his own truck.

3 The plaintiff has sued the defendant for damages for negligence. He says the defendant is vicariously liable for an act of casual negligence by its forklift driver. Alternatively, he says it had a defective system. The defendant denies it or its employee was negligent. But it says there is a more fundamental barrier to a successful common law claim. Its argument proceeds as follows. In 1988 the Commonwealth of Australia passed an Act, the Safety, Rehabilitation and Compensation Act 1988 ( Comcare Act ). By that Act, rights to claim damages by employees as defined in it had their common law rights significantly curtailed. In fact the only substantive right similar to a common law claim permitted was a claim for non-economic loss the upper limit of which was fixed in 1988 at $110,000.00 and never increased. Section 45 of the Comcare Act provides that someone wanting to claim such damages must first make a written election. It is agreed here that no such election was ever made by the plaintiff. Thus, if the Act applies to the plaintiff, this claim is bound to fail.

4 The defendant says the Comcare Act applies to the plaintiff. It relies on the following definition of ‘employee’ in s 5(1)(a) of the Comcare Act :


“ ‘employee’ means:

(a) a person who is employed by the Commonwealth or by a Commonwealth authority …”


5 By Commonwealth of Australia Gazette No S 215 of 30th July 1992 the defendant was declared by the then Minister for Industrial Relations to be a ‘Commonwealth authority’ for the purpose of the Comcare Act . The plaintiff’s counsel conceded the defendant, at the time of the accident, was such a ‘Commonwealth authority’.

6 Before me, the plaintiff argued he was not an “employee” as defined by s 5(1)(a), but a subcontractor or self-employed contractor and therefore outside the reach of the Act’s provisions.

…


The parties’ relationship in this case

8 Most of the terms of the parties’ contract are to be found in a document called “Owner/Driver Agreement”, (the 1995 agreement) providing terms on which the plaintiff did work for the defendant in the period 1st July 1995 to 30th June 1998. Both parties worked under its terms in that period. The document reflected an agreement reached by the defendant with the Transport Workers Union, representing the interests of the plaintiff and other drivers, in 1995. In August 1997 further negotiations occurred with a view to updating some aspects of contractual arrangements. They resulted in the defendant’s sending those it described as “The Owner Driver Subcontractors”, a “Letter of Intent”. It was sent, the letter said, “to formalise in principle, the agreement between [the defendant] and the Subcontractor Drivers in NSW with regards to the new rate structure to be applicable, from no later than the 1st August 1997 for a period of 3 years until the 30th June 2000”. Various new rates of carriage were set out. In short, the agreement as varied provided for piece rates with a maximum number per day, and certain weight and size specifications. The letter provided “formalisation” of the agreement was to occur by 1st August 1997. But no further “formalisation” occurred. I infer that at the time of the accident, 11th June 1999, the parties regarded the terms of the 1995 agreement as varied by the “Letter of Intent” as subsisting. The evidence suggests that is what they did.

9 By the 1995 agreement, the driver was described as “Contractor”; he or she was required to supply and maintain a vehicle, with the defendant’s signage on it paid for by the defendant, obey the defendant’s instructions on documentation, bar coding, weighing and ‘cubing’, be available 10 hours per day beginning at times nominated by the defendant, doing such work on such runs as the defendant specified, to wear uniform supplied by the defendant to be maintained at the driver’s cost; the work was to be paid for at specified rates, involving minimum (but not maximum) weekly sums. The driver could not assign or transfer the defendant’s goodwill upon sale of the vehicle; the driver could appoint a substitute driver, with the defendant’s approval, when the driver wished to take leave. In that event the driver had to take out and pay for insurance for workers compensation or any ‘accident compensation legislation’. The driver had to have comprehensive insurance for the truck, and public liability insurance. The agreement was otherwise silent about workers or other compensation for the driver, if injured. The agreement contained powers in the defendant to discipline the driver.

10 The plaintiff gave evidence of his daily routine. It involved arriving at the defendant’s depot at about 6.00 am, speaking to a supervisor, checking on items to be delivered, putting certain information together using the defendant’s computer, and bar code machine, creating a document with his delivery runs; then delivering. He would take a break, typically from 11.30 to 2.30, which would be his own time but when he remained in contact with the defendant’s depot in case extra jobs were allocated. He would then attend to do ‘pick ups’, report back to the depot, arrange for goods to be unloaded, again use the bar code machine to ‘download’ information about the day’s work, and leave a document with the day’s tally of jobs for the defendant to pay him. Payment was by one payment into his bank account each week.

11 Another owner/driver, Mr Russell, gave evidence from which it is clear his routine was substantially the same as the plaintiff’s. Unlike the plaintiff, he had a company, which had the carriage agreement with the defendant. He was a director of that company.

12 A Mr Bell gave evidence of his routine. He was employed as a driver by the defendant. He drove the defendant’s truck. He was paid a salary of about $50,000.00. (After tax deductible expenses, including truck depreciation of $10,011.00 the plaintiff’s pre tax income in the tax year ended 30 June 1999 was $73,456.88). His daily routine was substantially the same as the plaintiff’s. But he received holiday and sick pay. His income was the same regardless of how many items or what bulk, he delivered. Though he was paid overtime and penalty rates.

13 It was put to me by the defendant that as the jobs all drivers did were substantially the same, and the incidents of employment of employees were substantially the same as for contract drivers, and contract companies with director drivers, the true nature of the relationship between the plaintiff and defendant was one of employee/employer.

14 In favour of his being an employee was as follows:

(a) the defendant required the plaintiff to report to its premises each day at 6.00 am to receive orders for delivery;
(b) though the plaintiff supplied his own truck, the defendant’s name was painted on it, at the defendant’s request and cost;
(c) the plaintiff was supplied by the defendant with livery, consisting of shirts, trousers, shorts and jumpers;
(d) the defendant supplied a radio, at its cost, for installation in the plaintiff’s truck, for communication during the work day, and paid for its maintenance; though when the plaintiff bought the truck he had when injured, he chose not to have the radio installed, instead using his own mobile phone; this arrangement he conceded was for his own convenience;
(e) though he had his own “run” this was chosen for him by the defendant; changes, which the defendant could direct, could result in income loss;
(f) loading of goods for delivery and unloading, on the truck’s return, was performed using forklift machines supplied by the defendant and operated by its employees;
(g) the plaintiff used the defendant’s telephone at its depot, its software for records, its computer printer, fax machine, amenities room, and toilets;
(h) the plaintiff attended computer and safety lectures, work barbecues and Christmas functions, organised by the defendant;
(i) the defendant supplied him with a photographic identification card and he carried it at the defendant’s request, producing it as needed, on occasions, in the course of his work;

(j) he carried no personal accident insurance;

(k) no reference was made in the contractual documents to workers compensation or the need for self-insurance for sickness and accident;
(l) he had to produce medical evidence if he claimed to have been sick;
(m) he applied for and received Comcare workers compensation benefits when he suffered the subject injuries, (as he had done for other injuries) only commencing these proceedings when Comcare declined further liability, asserting, contrary to its earlier view, that he was not an employee of the defendant when injured, but an independent contractor;

(n) it is clear from the contractual documents that the defendant maintained a high degree of control, including powers to discipline; this control was contrary to the position in Humberstone v Northern Timber Mills (1949) 79 CLR 389; however though there was at least a degree of control over how the work was to be done, insofar as skill and experience was concerned, which did not require or permit control, in the case of an experienced and skilled worked in a specialised field, control is of less importance: Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561.


15 In favour of his being an independent contractor was as follows:
(a) he supplied his own truck, and met all running expenses for it;
(b) he was paid on piece rates – the more deliveries or pickups he did, the more he was paid – though there were some limits; it is said however that payment by piece rates casts little light on the relationship: Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395 at 405 (per Stephen J);

(c) the only tax deducted from his earnings was PPS tax. This was 25%, 20% being compulsory, the additional 5% at his own request;
(d) communication with him when on the run was by his mobile phone, the cost of which he met; though it could have been by a radio supplied by the defendant; this was the same however for Mr Bell;
(e) he was not required to work all day: once his morning deliveries were finished, and before his pick ups started (usually no earlier than 2.30 pm) his time was his own and he could, if he chose, go to the beach, though he took the phone with him; however this also was available to Mr Bell;
(f) he could, if he chose, not do the work, but employ another, provided his choice was agreed to by the defendant. On one occasion he went overseas for 3 months, leaving in his place a substitute, for whom he took out a workers compensation policy, and to whom he paid a salary not fixed by reference to pieces of work performed;
(g) the defendant supplied him, each week, with a summary of his earnings, in which he was described as a “subcontractor”; though labels are not, and cannot be, determinative: Hollis at [58];
(h) there was no ‘clocking on’ or off, though there was for Mr Bell, who worked the same hours;
(i) though he had no sickness and accident insurance he said (and I accept) this was because his health, consistently with the early deaths of his parents, and an earlier unsuccessful attempt, would not permit it; Mr Russell, whose company had the agreement with the defendant paid for his own sickness and accident cover, though he said that was to fill gaps not covered by Comcare;
(j) he paid his own union fees annually, by personal cheque;
(k) he was paid no sick leave, no holiday pay, and no superannuation, apart from as provided by the 1995 agreement: see cl 30. This appears to have been less than what Commonwealth legislation requires for an employee and would appear not to have been paid to satisfy such legislation. Mr Bell, however was paid for holiday and sick leave;
(l) though the defendant’s employees received silver and gold awards for 5 and 10 years service respectively, he did not: he did say he had once received $200.00 from the defendant but could not recall what it was for and there was no other evidence about it; it was obviously different from what the defendant’s employee, Mr Bell, received. As to the gold and silver awards, Mr Bell said he thought they were just for “company drivers”;
(m) theoretically he could have worked for others as the 1995 agreement did not forbid him from doing so: though the hours he was required to be available to the defendant, and having the defendant’s name on his truck, might have hindered any such ambitions.

16 Though there are powerful agreements in favour of the plaintiff’s having been an employee, I am not so persuaded. First, he supplied and paid for his own truck. Secondly he was not treated as a PAYE employee. Thirdly he had the ability to substitute others to do his work, subject to satisfying the defendant the substitute was appropriate. None of the indicia of employment in [14] above are inconsistent with his being an independent contractor. The factor I find quite inconsistent with his being an employee, is his ability to substitute other drivers. Having looked at the totality of the relationship, I am persuaded the plaintiff was not an employee, but an independent contractor.”

Arguments on Appeal

9 Mr Watson SC who appeared with Mr Owens for the appellant submitted that the primary judge had erred in the following respects. First, by treating the ability to substitute other drivers as “nearly decisive”. The appellant argued that in an exercise which required consideration of the totality of the relationship, no individual factor should be regarded as decisive. Secondly, the appellant contended the primary judge erred by placing undue weight upon the three factors of the respondent’s ownership of his truck, the fact he was not treated as a PAYE employee and the ability to substitute other drivers.

10 Insofar as the ability to substitute other drivers was concerned, the appellant also argued that the primary judge erred in construing the Owner/Driver Agreement as giving the respondent an unlimited power to delegate his work, whereas, properly construed, the Agreement “reflected a flexible arrangement whereby, if [the appellant] was content some temporary arrangement could be made”.

11 The appellant submitted that the primary judge erred in making only “fleeting” reference to Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21 (“Hollis”), in which bicycle couriers working for a courier company were held be employees. The appellant argued Hollis was “a case of [such] striking factual similarity” that the primary judge was, in effect, obliged to reach the same conclusion absent specific and good reason.

12 Finally, the appellant contended that if it established error on the primary judge’s part, this Court was in as good a position as his Honour to determine the issue.

Consideration

13 The appellant accepted that the meaning of the word “employee” in the Comcare Act was to be resolved by having regard to the common law principles which have developed to determine whether a working relationship is one of employer – employee or employer – independent contractor. It was also common ground that although the Owner/Driver Agreement referred to the respondent as “the Contractor” throughout, that is not determinative. The Court is required to consider the totality of the relationship between the parties: Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16 (“Stevens”) at 29 per Mason J; Hollis at 33 [24], 45 [58] Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ.

14 Before turning to the three factors upon which the primary judge appears to have placed greatest weight, some preliminary observations should be made.

15 The first concerns the approach an appellate court should take to reviewing an exercise whose resolution is “one of ‘fact and degree’ in respect of which views might legitimately differ”: Roy Morgan Research Limited v Commissioner of State Revenue (1997) 37 ATR 528 at 533. In such a case it is not enough that an appellate court might have come to a different conclusion - before an appellate court will intervene the appellant must show error on the part of the primary judge: JA & BM Bowden & Sons Pty Limited v Chief Commissioner of State Revenue (2001) NSWCA 125; (2001) 105 IR 66 at 68 [14] per Ipp JA.

16 The second observation concerns the distinction between an employee and an independent contractor. That distinction 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 v Whittaker’s Building Supply Co [1963] HCA 49; (1963) 109 CLR 210 at 217 per Windeyer J. Although this statement was criticised by Wilson and Dawson JJ in Stevens (at 34) as “posing the ultimate question in a different way rather than offering a definition which could be applied for the purpose of providing an answer”, it was referred to with approval by the majority in Hollis (at 38 – 39 [39] – [40]).

17 With those observations in mind, I turn to consider the three factors the appellant argues the primary judge erroneously regarded as indicating the respondent was an independent contractor.

Ownership of a truck

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 49 – 50 [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] HCA 13; (1945) 70 CLR 539; Humberstone v Northern Timber Mills and Wright v Attorney-General (Tas) [1954] HCA 26; (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 .” (emphasis added)

20 Dixon J’s statement in Humberstone was referred to with approval in Stevens in which ownership of the mechanical means used to perform the relevant work was regarded as significant in characterising a relationship as one of employer - independent contractor: see Mason J at 25, Wilson and Dawson JJ at 38.

21 The High Court revisited the ownership of the mechanical means of performing work in the context of characterising a working relationship in Hollis. Hollis concerned the question whether a bicycle courier engaged to deliver articles by Vabu Pty Ltd (“Vabu”), which operated a courier business, was an employee so that the company was vicariously liable for his negligence in injuring a pedestrian. The majority (Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ) held that the courier was an employee of Vabu.

22 In Vabu Pty Ltd v Federal Commissioner of Taxation (1996) 33 ATR 537 (the “Taxation Decision”) this court held that Vabu’s couriers, who included motor vehicle and motorcycle couriers as well as the bicycle couriers, were independent contractors so that Vabu was not liable to pay the Superannuation Guarantee Levy in respect of their services. In Hollis at first instance, the trial judge considered that the Taxation Decision constrained him to conclude that the bicycle couriers were independent contractors and not Vabu’s employees. Before this court on appeal, Mr Hollis also accepted that, in the light of the Taxation Decision, the bicycle couriers were independent contractors: see Hollis v Vabu Pty Ltd t/as Crisis Couriers [1999] NSWCA 334; [1999] Aust Torts Rep ¶81–535 66,562 at 66,566 at [19]. Despite that, the majority in the High Court treated the employee/independent contractor issue as open to be argued: Hollis at 35 [29] – [31].

23 In the Taxation Decision (at 538) Meagher JA (with whom Sheller and Beazley JJA agreed) relied upon the fact that Vabu’s couriers bore the “very considerable” expenses of “providing, maintaining and insuring their own vehicle” as indicating they were independent contractors. In Hollis (at 32 [22]) the majority observed that a different result might have been reached in relation to the bicycle couriers as opposed to the motor vehicle or motorbike couriers as “the purchase and maintenance of a bicycle could hardly be termed a ‘very considerable’ expense”.

24 The majority concluded (Hollis at 41 [47]) that the court fell into error in the Taxation Decision in concluding that the bicycle couriers were independent contractors in “making 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.” They observed (at 41 [47]):

“Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might … 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.” (emphasis added)

25 The majority regarded the following factors as demonstrating that the bicycle couriers were employees of Vabu (at 42 – 45 [48] – [57]):

“[48] … the couriers were not providing skilled labour or labour which required special qualifications, …[49] … the couriers had little control over the manner of performing their work, …[50] … the couriers were presented to the public and to those using the courier service as emanations of Vabu …[52] … the effect of Vabu’s system of business was to encourage pedestrians to identify the couriers ‘as part of [Vabu’s] own working staff’;…[54] … Vabu superintended the couriers’ finances [producing] pay summaries which the couriers were required to dispute by 6.00 pm on Friday of the same week … there was no scope for the couriers to bargain the rate of their remuneration, … Vabu undertook the provision of insurance for the couriers and deducted the amounts from their wages and passed on … any excess to all bicycle couriers … [55] … their engagement by Vabu left the couriers with limited scope for the pursuit of any real business enterprise on their own account, [56] …[the fact that] the capital outlay [for their bicycles] was relatively small and because bicycles are not tools that are inherently capable of use only for courier work but also provide means of personal transport or … recreation …[57] … [the fact that] there was considerable scope for the actual exercise of control … ‘Vabu’s business involved the marshalling and direction of the labour of the couriers, whose efforts comprised the very essence of the public manifestation of Vabu’s business’. ”

26 The majority noted (at 45 [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.

27 McHugh J agreed (Hollis at 48 [68]) with the majority that the bicycle courier was “not an independent contractor in the sense of someone who acts as an independent principal, exercising an independent discretion in carrying out a task for his own business interest and is retained simply to produce a result”. He also acknowledged that certain aspects of the work relationship between Vabu and the couriers suggested “an employer/employee relationship according, to the classical tests”. However, while his Honour accepted (Hollis at 48 [68]) that the couriers were “subject to extensive direction and control by Vabu, were Vabu’s representatives and worked for Vabu’s business interests”, he considered that there were “features of the relationship which are not typical of a traditional employment relationship”. These included the fact that the couriers provided their own equipment, were able to incorporate or form their own business structure, were taxed as independent contractors and the lack of actual provision for annual leave and sick pay benefits.

28 His Honour held the classical tests of employer/employee relationships should not be extended to make the couriers employees of Vabu saying (Hollis at 49 [69], footnotes omitted):

“To do so would be likely to unsettle many established business arrangements and have far-reaching consequences for industrial relations, for workers' compensation law, for working conditions, for the obligations of employers to make superannuation contributions and group tax deductions and for the payment of annual and long service leave and taxes such as payroll tax. It would be likely to make employers retrospectively guilty of a number of statutory offences. It is also arguable that departing from the classical tests or their ordinary application might bring within s 51(xxxv) of the Constitution workers who have traditionally been regarded as outside that power.”

29 Although McHugh J disagreed with the majority’s conclusion that the bicycle couriers were employees, he joined with them in allowing the appeal on the basis that the courier was an agent acting within his authority as Vabu’s representative in carrying out its contractual obligations for its benefit so that Vabu was vicariously liable for his conduct.

30 Callinan J would not have permitted the appellant to argue that the bicycle couriers were employees having regard to the conduct of the trial and the concession made in this Court: Hollis at 66 [113].

31 As will be plain from this account, the appellant’s submission that Hollis was a case of such “striking factual similarity” to the present that the primary judge was obliged to conclude that the respondent was an employee must be rejected. The majority was careful to observe (Hollis at 32 [22], 41 [47]) that the case concerned liability for bicycle couriers, not motor vehicle or motorbike couriers. They also accepted (at 41 [47]) that a significant investment in capital equipment might lead to a different conclusion. However, as Mason P has recently observed, the majority in Hollis regarded a conclusion that the bicycle couriers were independent contractors as “an affront to common sense in the circumstances of that case”: National Transport Insurance Limited v Mark Wentworth Chalker & 3 Ors [2005] NSWCA 62 at [59].

32 Hollis does not, therefore, diminish the weight of the authorities supporting the “conventional view”.

33 Mr Watson sought to argue that the weight those authorities have accorded to the ownership of a vehicle such as a truck was reduced, however, by reference to two cases concerning owner/drivers which arose in an industrial context: Re Porter;Re Transport Workers Union of Australia (1989) 34 IR 179 and Sammartino v Mayne Nickless Express t/as Wards Skyroad (2000) 98 IR 168, neither of which is binding on this Court. The force of those cases he contended, was that in each arrangements factually indistinguishable from that between the appellant and the respondent had been held to disclose an employer/employee relationship.

34 In Re Porter;Re Transport Workers Union of Australia a question arose in an election inquiry about the eligibility of candidates to stand for office in the Victorian Branch of the Transport Workers Union. Eligibility depended in part upon a candidate being “employed in the industry in connexion which the union is registered …”. The returning officer had rejected the nomination of five candidates, who were owner/drivers, on the basis that they were independent contractors. The issue was whether their nominations had been validly rejected. Gray J in the Federal Court rejected an argument based on Humberstone that the major factor indicating the rejected candidates were independent contractors was their ownership of their trucks. He referred (at 185 – 186) to Dixon J’s statement in Humberstone (at 404) that such a contract would be one to provide “mechanical traction” but sought to confine it to the social conditions of 1949, observing:

“The social position of a person owning a truck is likely to be viewed very differently now from 1949, when Humberstone was decided. The enormous increase in the ownership of motor vehicles generally, and the common occurrence of vehicle ownership amongst persons who use their vehicles to earn their livings are likely to have changed the perceptions of many people as to the ‘capitalist’ status of a truck owner. It is true that the amounts of money required to purchase a large truck nowadays may be correspondingly larger than in 1949. There is, however, something rather strange about a legal principle being dependent upon the size of the money involved. The characterisation of the relationship between a person carrying goods and the person providing the carriage work should not depend on whether the former is driving a large and expensive truck, a small van, a motor cycle, or even a bicycle .” (emphasis added)

35 Although Gray J acknowledged (at 192, 197 and 199) the “significant factor of ownership of part of the means required for transporting goods”, he concluded it was outweighed by other factors peculiar to the owner/drivers arrangement. He was particularly influenced (at 192, 196) by a requirement in one owner/driver’s written agreement to “abide by all instructions” as demonstrating a right to control consistent with an employment relationship. It is more difficult, with respect, to discern the reason for his Honour’s conclusion that two other owner/drivers whose arrangements were not governed by a written agreement were employees. In relation to one, Mr Crump, after describing the nature of his work, and accepting the significance of his ownership of his truck and the fact there was no “express term giving a right to control”, his Honour concluded (at 197) that while “the balance is … a fine one … it favours the existence of an employment relationship”. He did not identify the factor which tipped the balance. In relation to the second, he regarded the owner-driver’s evidence on the control issue, that he was expected to “run the company rules and regulations”, as indicating that he “[fell] just on the employee side of the line”.

36 Gray J’s observation that contemporary conditions have diminished the significance of the ownership of the motor vehicle which is the principal means by which a person performs work for another does not, with respect, accord with authority. The rationale of attaching significance to the ownership of an expensive piece of capital equipment, as Dixon J explained in Humberstone, is that such ownership is inconsistent with the right to control the worker. It is, (as, in my view, the majority acknowledged sub silentio in Hollis at 41 [47]) a strong indication that the owner of the vehicle is running their own business or enterprise. Moreover, his Honour’s decision clearly turned to a large extent upon his rejection of the proposition that the value of the owner/drivers’ trucks should influence the decision. In this respect his decision is directly inconsistent with the majority’s decision in Hollis.

37 The second case upon which Mr Watson relied, Sammartino v Mayne Nickless Express t/as Wards Skyroad, concerned the question whether the Australian Industrial Relations Commission had jurisdiction to consider a claim for relief under s 170CE of the Workplace Relations Act 1996 (Cth) by an owner/driver. Jurisdiction depended upon whether the owner/driver had been an employee of Mayne Nickless. The Commission concluded he was an employee.

38 The Commission accepted (at 209 [95], 215 [112]) that the requirement that the owner/driver provide and maintain a vehicle suitable to Mayne Nickless and the fact that Mayne Nickless identified owner/drivers as a distinct class of contract – carriers were significant indicia in favour of finding the owner/driver was an independent contractor. However, it concluded (at 214 – 215 [112]) that “the degree of control exercised by Mayne Nickless over Mr Sammartino's work as a driver discharging his personal contract was of a degree not markedly different from that exercised over employees” and so was the most significant factor in concluding Mr Sammartino was an employee.

39 Although the Commission referred (at 194 – 195 [56]) to Stevens, it did not discuss the line of authority supporting the “conventional view” to which I have earlier referred. In my view Sammartino does not diminish the weight to be accorded to that factor in the present case.

40 The conclusions in Re Porter and Sammartino might be contrasted with the approach to the characterisation of an owner/driver by the New Zealand Court of Appeal in TNT, the case distinguished by the majority in Hollis. In that case Cooke P (at 685) and Casey J (at 697- 698) (with whose judgments the other members of the Court agreed) held that an owner/driver was engaged to perform services and to do so in business on his own account. Accordingly, he was not an employee.

41 There was a written contract between the parties which was in the standard form used by TNT for all owner/drivers. Clause 1 provided that the “Contractor [would] conduct for [TNT] a courier service”. The contract required the “Contractor” to provide and maintain a vehicle of a type and colour scheme approved by TNT at his own expense, affix any signs or advertising TNT required to that vehicle and to provide and wear a company uniform. He was to conduct the courier service in accordance with the directions of the company and not be engaged in the operation of any goods service or passenger service, was entitled to a maximum of 20 working days holiday or sick leave, but had to provide a relief person satisfactory to the company at his expense. There was a restraint of trade clause prohibiting carriage of goods for the company’s customers which applied for twelve months from the termination of the agreement. TNT contracted to pay the “Contractor” at rates set out in a schedule to the contract subject to a guarantee minimum payment per month for ten months other than December and January. TNT could terminate the “Contractor” for cause or on four weeks written notice.

42 Both Cooke P (at 684 - 685) and Casey J (at 697 - 698) regarded the decision in Ready Mixed Concrete (South East) Ltd v Minister of Pensions & National Insurance [1968] 2 QB 497 (“Ready Mixed”) as supporting the conclusion that the owner/driver was an independent contractor despite the control TNT exercised. In that case, MacKenna J said, (at 526):

“A man does not cease to run a business on his own account because he agrees to run it efficiently or to accept another’s superintendence.”

43 Casey J (at 695) characterised the contract as suggesting “that each party was genuinely trading off benefits under one relationship for perceived benefits under the other”. He considered (at 697) that TNT’s ability “to control the presentation of its image to the public by the drivers and their vehicles, and the organisation of … arrangements for collection, sorting and delivery of the parcels and payment by customers … was inevitable for the efficient running of such a business … and to regard it as the decisive feature means that in virtually no circumstances could couriers in this class of business be employed as independent contractors”. He concluded (at 698) that the owner/driver “accepted only that degree of control and supervision necessary for the efficient and profitable conduct of the business he was running on his own account as an independent contractor”.

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 the Taxation Decision (at 538).

45 Although the Taxation Decision 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.

46 It remains to note several facts concerning the respondent’s truck to which the primary judge did not expressly refer. It was purchased for $67,323.00. In the 1998 and 1999 financial years he incurred approximately $26,000 and $32,000 in running expenses to keep it operational. It is clear it represented a considerable investment.

47 In my view the primary judge was justified in holding that the respondent’s ownership of his truck was a significant factor favouring the conclusion that he was an independent contractor.

Tax treatment of the respondent

48 The appellant accepted the fact that the respondent was treated as a PPS taxpayer rather than a PAYE taxpayer might be relevant, but argued it was not conclusive.

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 49 [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.

50 In Scerri v Cahill (1995) 14 NSWCCR 339 an applicant for workers compensation was said not to be “a worker” because (inter alia) his tax return did not give credit for any PAYE deductions, but only for deductions pursuant to the Prescribed Payment System (“PPS”). Bainton AJA (with whom Kirby ACJ and Rolfe AJA agreed) sought to explain (at 403 – 404) the provisions of the Income Tax Assessment Act 1936 (as amended) (Cth) dealing with the PPS and concluded (at 405) that:

“Generally prescribed payments will not include salary or wages paid to an employee as such but … that is not invariably so.”

51 Bainton AJA (at 405) held that the deduction of PPS shown in the applicant’s tax return did not establish that he was carrying on a business on his own account on the basis that (inter alia) “for all that appears the deductor of those payments (and his advisors) may have found the legislation as difficult to follow as I find it” and, in effect deducted amounts by mistake.

52 Gray J expressed a like view in Re Porter (at 185) saying that “to place heavy reliance on [the fact that PPS deductions were made] … is to assume that the payer has acted in accordance with the requirements of income tax legislation in choosing one type of deduction rather than another”. A similar approach was taken in Sammartino (at 212 [104]) where, although the Commission accepted that “access to PPS deductions was founded upon Mr Sammartino not being an employee”, it concluded that “it would be far-fetched to attribute to Mr Sammartino an understanding of the conditions about the use of a PPS Declaration”. It held, accordingly, that the use of PPS Declarations had “little independent weight as an indication of the true character of the contractual relationship”: Sammartino at 212 [105].

53 In other cases the fact that PPS rather than PAYE tax was deducted has been treated as significant. In Paddison v Ultimate Image Pty Limited t/as Hawkesbury Plasterworks [2004] NSWCA 410 at [26] Sheller JA (with whose judgment Santow JA and Levine J agreed) observed that the fact the respondent was making PPS deductions favoured the view that the appellant was self-employed and not an employee. In the Taxation Decision (at 538 – 539) Meagher JA regarded the fact that the gross payment to the couriers was subject to deduction of PPS as important - in particular, the fact that the Commissioner of Taxation acquiesced in the couriers’ description of themselves as independent contractors and taxed them accordingly.

54 For my part I regard the fact that the appellant, a Commonwealth authority, treated the respondent as a PPS taxpayer rather than as a PAYE taxpayer as highly significant. A finding that the respondent was an employee, but that the appellant had not made PAYE tax deductions appropriate to that status, from his income may mean the appellant was in breach of the income tax legislation. That would be a remarkable conclusion to reach in respect of a Commonwealth authority. Certainly it would not attract the benevolent approach displayed in Scerri v Cahill and Re Porter.

55 In my opinion the primary judge was justified in holding that the fact the respondent was not treated as a PAYE employee was a significant factor favouring the conclusion that he was an independent contractor.

Power to delegate

56 The appellant also argued that the respondent’s ability to substitute other drivers could not be regarded as decisive for two reasons. First, the evidence did not disclose that the respondent was able to delegate his work permanently but, rather, reflected a flexible arrangement whereby if the appellant was content some temporary accommodation could be made. Secondly, the appellant drew attention to passages Stevens at 36 – 37 and Vacik Distributors v Kelly (1995) 12 NSWCCR 30 at 35 in which a power to delegate had been held not to be decisive in characterising a work relationship.

57 A contract of employment carries an obligation of personal service. Accordingly a power to delegate the performance of a contract tells against there being an employment relationship. Thus in Australian Mutual Provident Society v Allen and Another (1978) 52 ALJR 407 at 410 (sub nom. Australian Mutual Provident Society v Chaplin and Another), the Privy Council concluded that a power of unlimited delegation was “almost conclusive against the contract being a contract of service”.

58 In Stevens (at 26) Mason J referred to AMP v Chaplin and remarked that “[t]he power to delegate is an important factor in deciding whether a worker is a servant or an independent contractor”. Wilson and Dawson JJ also attached significance to this factor, saying (at 38) that “an unlimited power of delegation of this kind was viewed as being almost conclusive against the contracts being a contract of service in AMP Society v Chaplin”.

59 In Ready Mixed (at 515), however, McKenna J observed that although “[f]reedom to do a job either by one’s own hand or by another’s is inconsistent with a contract of service … a limited or occasional power of delegation may not be”.

60 A power to substitute other workers was considered in Vacik Distributors Pty Limited v Kelly in which this court upheld a finding that a kangaroo shooter who operated a chiller for the appellant and was represented to the public as carrying out services directly for it, was a “worker” for the purposes of the Workers Compensation Act 1987. Clarke JA (with whose judgment Kirby ACJ and Cole JA agreed) regarded (at 34) the “single most important indicium” as the fact that the appellant retained the right to control even though the occasion to exercise it was rare. His Honour opined, without elaboration, that the fact that the worker had a power to appoint substitutes or delegates was not sufficient to displace the conclusion that should be drawn from the right to control. He did not refer to AMP v Chaplin or to the passages in Stevens concerning the power to delegate to which I have referred.

61 Mr Watson argued that the respondent’s ability to delegate work was confined to periods when he was on leave when the appellant permitted him to engage a substitute driver of whom it approved. He submitted that that conclusion flowed from the construction of cl 19 itself as well as the Agreement as a whole. Thus, he argued, subject to cl 19, the Agreement imposed all responsibilities upon the “Contractor” who was the person defined in Schedule 1 - the respondent. He accepted that in circumstances where a substitute driver was permitted the respondent became the employer of that driver.

62 Clause 19 of the Owner/Driver Agreement provided:

“The Contractor may appoint a substitute driver, with the approval of AaE, and shall ensure the substitute driver is suitably qualified to perform the work and complies with the relevant terms of this agreement. The need for a substitute driver shall be determined in consultation between AaE and the Contractor, when the Contractor advises an intention to take leave.”

63 Reference should be made to what was involved when the respondent appointed a substitute driver. In the year ending 30 June 1999 he had expended $17,435.00 engaging a person described in his tax return as a sub-contractor. He engaged that person during a period when he went overseas. He trained the substitute driver and then sought and obtained the appellant’s approval to allow him to take his place. He took out workers’ compensation cover in his own name for the substitute driver. He paid the substitute driver out of moneys the appellant forwarded to him which represented that driver’s work during the week. It was a matter for him to determine what he paid the substitute driver. He called the substitute driver while he was overseas to find out how things were going because he was looking after his business.

64 In my view, even if it be the case that the respondent had only a right to delegate his work during a period of leave, that was, as the primary judge properly held, a significant factor. First, such a right was inconsistent with the personal obligation inherent in a contract of employment. Secondly, it reflected recognition by the parties to the Owner/Driver Agreement of the importance of the respondent being able to keep the capital invested in his truck earning income. This was consistent with the respondent operating his own business in which he bore “the chance of profit and the risk of loss”: Ready Mixed at 526. Thirdly, it reflected a degree of independence in the respondent’s use of his truck. It was his responsibility to take on the obligations of an employer and retain, train, control, pay and insure the substitute driver. None of these activities were controlled by the respondent.

65 I do not accept the appellant’s submission that his Honour erroneously treated the respondent’s right to substitute workers as decisive. His Honour looked at the totality of the relationship and, in what was a finely balanced exercise (as is often the case in such matters), identified three factors which tipped the scales in favour of a conclusion that the respondent was an independent contractor. The fact that he singled out one as being “quite inconsistent with his being an employee” was a point of emphasis in his Honour’s consideration of all the factors.

66 In my view the primary judge was entitled to accord the respondent’s right to substitute other workers significant weight.

Significance of the Owner/Driver Agreement

67 In this case, unlike Stevens or Hollis, the terms of the parties’ relationship were, as the primary judge held, to be found in the Owner/Driver Agreement. Although, as I have earlier pointed out, the parties’ description of the respondent as “the Contractor” in that document is not determinative, it cannot be discounted.

68 In Massey v Crown Life Insurance Co [1978] 1 WLR 676 at 679 Lord Denning said:

“…[I]f the parties’ relationship is ambiguous and is capable of being one or the other [that is, either service or agency], then the parties can remove that ambiguity, by the very agreement itself which they make with one another. The agreement itself then becomes the best material from which to gather the true legal relationship between them.”

69 The Privy Council referred to this passage in Australian Mutual Provident Society v Chaplin and Another (at 409) saying of a clause in an agreement which described the relationship between the parties as “that of Principal and Agent and not that of Master and Servant”:

“Where there is no reason to think that the clause is a sham, or that it is not a genuine statement of the parties’ intentions, it must be given its proper weight in relation to other clauses in the agreement.”

70 In Stevens (at 37) Wilson and Dawson JJ observed that “the actual terms and terminology of the contract will always be of considerable importance”; see also Mason J at 26. In TNT both Cooke P (at 686) and Casey J (at 695) emphasised where the agreement which embodied the parties’ relationship was not a sham, the characterisation of the relationship was to be determined by analysing the rights and obligations it defined as well as the conduct of the parties in its performance.

71 There is no suggestion that the Owner/Driver Agreement is a sham. It was a serious document entered into by a Commonwealth authority. It appears to have been the product of considerable consultation between reputable bodies. As the preceding discussion will have made plain, although I recognise that the Court should have regard to the totality of the relationship, the parties’ description of the respondent as “the Contractor” should, in my view, be accorded significance as part of that exercise.

Other matters

72 I have considered the additional matters upon which the appellant relied but, in my view, they do not outweigh the factors indicating the respondent was an independent contractor.

73 The fact that the owner/drivers had union representation and were represented on a committee relating to conditions under which they worked was an appropriate recognition of the interest they held in ensuring that the appellant was alert to any concerns they had concerning their work conditions. Indeed the fact they were represented as a class constituted some recognition that their interests differed from the appellant’s employees. It was certainly not inconsistent with them being independent contractors.

74 The fact that the respondent received a minimum weekly sum is also not inconsistent with independent contracting: Ready Mixed, TNT. It is equally consistent with the notion of a retainer paid to ensure the continued availability of the respondent’s truck and services even in periods where the appellant’s business was not as busy as usual.

75 The fact that, if it be the case, the owner/drivers were entitled to workers’ compensation coverage through the Comcare system appears to me to be neutral. This aspect of the matter was not dealt with in any detail although it appears to have been the product of negotiations conducted by the TWU on behalf of the owner/drivers. The fact that the appellant agreed to pay insurance premiums to Comcare to procure workers compensation coverage for owner/drivers cannot transform what is, in substance, an independent contractor relationship into one of common law employment.

Conclusion

76 In my view, looking at the totality of the relationship, this was a case where “each party was genuinely trading off benefits under one relationship for perceived advantages under the other” (TNT at 695). The respondent owned the assets essential to perform his work (cf Humberstone at 404 – 405) and, in so doing, took the “chance of profit and the risk of loss” (Ready Mixed at 526). The appellant was relieved of the costs of supplying, operating and maintaining a major item of equipment, the truck. It was also free, to a large extent, from responsibility for paying the respondent sick leave and holiday pay. Structuring one’s business to be free of such obligations is a recognised rationale for the use of independent contractors: Hollis v Vabu Pty Ltd t/as Crisis Couriers at [37] per Davies AJA.

77 While the appellant exercised a degree of control, that control was essential in order that its business be efficiently operated. It was not, however, inconsistent with the respondent being an independent contractor: Ready Mixed Concrete at 526; TNT at 697.

78 Mason P observed in National Transport Insurance Limited v Chalker and Others at [61] that “[t]he Court is not blind to the general trend towards ‘outsourcing’ that is occurring in an increasingly deregulated marked”.

79 Text writers have commented upon the “growing tendency for those who hire labour to exploit the way in which work relationships are categorised by the law, through carefully constructed arrangements … so that the workers concerned will be categorised as something other than employees, despite to all practical intents and purposes performing the same role as employees” – a process they describe as “vertical disintegration”: see Creighton & Stewart, Labour Law an Introduction, 3rd Ed, The Federation Press, 2000 at [7.07].

80 Critics of the common law notion of employment suggest that a more apt description of the status of workers transformed from employees into independent contractors “by the magic of contractual language”, and whose working environment remained unchanged, would be that of a “dependent contractor” because of the presence of factors in such relationship strongly indicative of the relationship of employment: see Konrad v Victoria Police [1999] FCA 988; (1999) 91 FCR 95 at 126 [101]) per Finkelstein J; Creighton & Stewart, at [7.08].

81 In the course of argument Mr Watson observed that “most of the cases which come before courts are from persons clamouring to get all of the wonderful protection which one gets as an employee rather than being left out in the cold climate of an independent contractor”. That proposition serves to underline the consequences which may flow when parties structure their relationship so that the Court is required to determine on which side of the line it falls by applying the “increasingly amorphous” distinction between “employee” and “independent contractor”: see Deane J in Stevens at 49.

82 In this case, “viewed as a practical matter” the respondent was running his own business, one in which he had independence subject to the reservation to the appellant of that degree of control necessary to ensure its business operated efficiently: cf Hollis at 41 [47].

83 In my view the primary judge’s decision that the respondent was an independent contractor was correct.

Orders

84 I propose the following orders:

(1) Leave to appeal granted, but appeal dismissed.

(2) Appellant to pay the respondent’s costs.

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