United Petroleum Pty Ltd v Victorian WorkCover Authority
[2012] VSC 51
•23 February 2012
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
BETWEEN
S CI 2011 01687
| UNITED PETROLEUM PTY LTD (ACN 085 779 255) and UNITED CARD SERVICES PTY LTD (ACN 120 422 442) | Appellants |
| and | |
| VICTORIAN WORKCOVER AUTHORITY | Respondent |
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JUDGE: | OSBORN JA | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 16-17 November 2011 | |
DATE OF JUDGMENT: | 23 February 2012 | |
CASE MAY BE CITED AS: | United Petroleum Pty Ltd v Victorian WorkCover Authority | |
MEDIUM NEUTRAL CITATION: | [2012] VSC 51 | |
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INSURANCE – WorkCover insurance – Appeal pursuant to s 36J Accident Compensation (WorkCover Insurance) Act 1993 – Premiums calculated by reference to WorkCover industry classification – Predominant activity of the employer at the workplace – Classification of predominant activity – Schedules 1 and 4 of WorkCover Insurance Premiums Order (No 18) 2010/2011 – Corporate Head Office Administration, Private Sector – Service Station – Petroleum Products Agency the classification to which predominant activity most closely corresponds.
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APPEARANCES: | Counsel | Solicitors |
| For United Petroleum Pty Ltd and United Card Services Pty Ltd | Mr R P Gorton QC with Mr I McDonald | Clayton Utz |
| For the Respondent | Mr D Collins SC with Ms R L Enbom | Corrs Chambers Westgarth |
TABLE OF CONTENTS
Introduction........................................................................................................................................ 2
The history of classification of the workplace............................................................................. 3
The statutory scheme......................................................................................................................... 5
Predominant activity......................................................................................................................... 7
Activities at the workplace............................................................................................................... 9
The WIC............................................................................................................................................. 15
The structure of schedule 4............................................................................................................ 16
The index........................................................................................................................................... 18
Division F: Trade.............................................................................................................................. 19
Division I: Finance, Property and Business Services................................................................ 24
Conclusion......................................................................................................................................... 30
HIS HONOUR:
Introduction
The appellants are members of a group of companies known as the United Group. The United Group carries on a national business which derives its revenue from the purchase, importation, distribution and sale of fuels, the construction and oversight of service stations, the management of a property portfolio and the provision of financial services to members of the public and independent service stations operating under the banner of ‘United’.
Each of the companies within the United Group has common directors and shareholders. They also operate substantially inter-connected businesses and it is in this sense that they comprise a group.[1]
[1]Section 66 of the Accident Compensation (WorkCover Insurance) Act 1993 provides for the definition of groups for the purposes of the Act.
The appellants have appealed the classification of their national head office by the respondent, the Victorian WorkCover Authority (the ‘Authority’), for the purpose of WorkCover premiums for the year 2010/11.
The head office is located in premises situated in Hoddle Street, Melbourne, and constitutes a workplace in respect of which WorkCover insurance is required. It is contained in a physically separate building from premises accommodating the appellants’ other activities.
On 10 November 2011, I handed down judgment in respect of a preliminary question in this matter as to the nature of the appeal to this Court.[2] It is not necessary to revisit the reasons for that decision, except to say that I held that the appeal is one by way of hearing de novo.
[2]United Petroleum Pty Ltd v VWA; Emu (Aus) Pty Ltd v VWA [2011] VSC 570.
The appellants submit that, on a proper consideration of the activities undertaken at the workplace, the proper classification of the workplace is I6185T: Corporate Head Office Administration, Private Sector. Conversely, the Authority submits that the correct classification is F4864J: Service Stations.
The resolution of the appropriate classification turns, first, upon the characterisation of the predominant activity at the workplace and, secondly, upon the classification of that activity by reference to the categories provided for in the relevant WorkCover Insurance Premiums Order.[3]
[3]The relevant premiums order is the WorkCover Insurance Premiums Order (No. 18) 2010/2011, which came into operation on 30 June 2010 (‘the Order’).
For the reasons set out below, I have concluded that:
(a) the predominant activity at the workplace is to be characterised as the head office management and administration of the sale of petroleum products from retail outlets located throughout Australia (including the procurement of petroleum products for this purpose); and
(b) the proper classification of the workplace falls within F4641X: Petroleum Products Agencies, as that term is defined by the Order.
The history of classification of the workplace
From 1 October 2001 until 3 December 2008, the appellants’ WorkCover Industry Classification (‘WIC’) was I6369K: Business Services n.e.c (not elsewhere classified). On 24 July 2008, the Authority wrote to the first appellant (‘United Petroleum’) advising that it had been selected for a ‘Premium Audit’ under the Authority’s Injury Insurance Premium Compliance Program.
As part of that audit, the Authority asked United Petroleum to complete an audit questionnaire and conducted a site visit. The Authority subsequently requested additional documents, which were provided after numerous follow-up requests. The Authority offered to present the preliminary findings of the audit on 19 November 2008, but received no response to that offer. On 3 December 2008, the Authority wrote to United Petroleum advising that as a result of the audit, and as no written comments had been received about the preliminary audit letter, United Petroleum’s WIC would be amended to F4864J: Service Stations, effective 1 July 2008.
United Petroleum was dissatisfied with the reclassification of its workplace and, on 14 December 2009, wrote to the Authority requesting a review. The Authority conducted an internal review of the decision to amend the WIC and, on 3 March 2010, affirmed the reclassification.
On 23 November 2010, OAMPS Insurance Brokers Ltd, on behalf of United Petroleum, asked the Authority to again review the reclassification, pursuant to s 33 of the Accident Compensation (WorkCover Insurance) Act 1993 (‘WC Act’), as the head office had moved to new premises since the date of the first review. As part of that further review, the Authority conducted another site visit; requested further documents, including an organisational chart, position descriptions and a floor plan; and accessed the appellants’ website. On 8 February 2011, the Authority issued a Notice of Premium Review Decision, in which it confirmed its view that the correct classification for United Petroleum was F4864J: Service Stations. The Authority also advised that it had determined that the second appellant (‘United Card’) was for the purposes of the Order a member of a group with United Petroleum, with the operations at the head office ‘constituting a single workplace for the purposes of determining the predominant activity and associated industry classification’. As a result, the industry classification for United Card was amended to accord with that of United Petroleum, with effect from 1 July 2010.
The appellants have now appealed these decisions on the grounds that the Authority erred in its ‘review decision making process and decisions’, by misdirecting itself as to the test it should apply and failing to properly classify those workplaces in accordance with the relevant test.[4] However, the critical issue for the Court on an appeal de novo is simply: what is the correct classification?
[4]The grounds of appeal are:
The statutory scheme
Pursuant to s 7 of the WC Act, an employer must obtain and keep in force a compulsory WorkCover insurance policy. Section 15 of the WC Act permits the Governor in Council to make a premiums order specifying the methods to be used in calculating premiums payable by an employer for a WorkCover insurance policy.
Section 17 provides that the premium payable by an employer for a WorkCover insurance policy must be calculated in accordance with the Premiums Order.
A key element of the premium calculation method contained in the Order is the assignment of a WIC to a workplace, based on the predominant activity carried on in that workplace.[5]
[5]The industry classification is used to derive the industry rate pursuant to a rates notice notified under item 8 of Schedule 1. This figure is a component (along with the Employer Performance Rating) in calculating the applicable WorkCover premium rate under order 6 of the Order.
Item 7 of schedule 1 to the Order provides:
Industry Classification
(1) The industry classification of a workplace is the WorkCover industry classification in schedule 4 to which the predominant activity at that workplace corresponds or most closely corresponds.
(2) For the purposes of determining the industry classification in accordance with sub-item (1):
(a) regard must be had to the introduction to, and all relevant elements of, schedule 4;
(b) consideration must be given to the industrial characteristics of the predominant activity without regard to the risk of injury associated with the predominant activity or with any of the occupations of or functions performed by workers engaged in operations at the workplace; and
(c) the predominant activity at a workplace does not correspond or most closely correspond to a WorkCover industry classification if workplaces predominantly engaged in that activity are expressly excluded from that classification in any of the elements of schedule 4.
Workplace and predominant activity are defined in items 2 and 3:
Workplace
(1) Workplace, in relation to an employer, means:
(a) an area, or two or more contiguous areas, of land in Victoria occupied by the employer where workers employed by the employer work, or through which such workers pass in the course of their employment, whether or not workers employed by another employer also work or pass through that area or those areas in the course of their employment (actual workplace);
…
Predominant Activity
(1)(a) Predominant activity, in relation to a period of coverage at an actual workplace of an employer, means the activity of the employer which during that period contributes, or is likely to contribute, more than any other activity of the employer to the value of goods and/or services produced or provided by operations carried on in that workplace.
…
(2) In determining the predominant activity in relation to a workplace, regard may be had to, but must not be limited by, measures of activity during the preceding period of 12 months or less consisting of data relating to sales, cost of goods produced or cost of labour, taken from:
(a) a statement prepared and signed by a registered company auditor, accountant or tax agent; or
(b) where an employer did not engage a registered company auditor, accountant or tax agent during the period to which the information refers, a return by the employer.
Once the predominant activity of the employer at the workplace has been characterised in accordance with item 3 of schedule 1, it is necessary to consult schedule 4 to identify the WIC with which that predominant activity corresponds or most closely corresponds.
The terms of item 7 of schedule 1 envisage the ascertainment of the relevant predominant activity at a workplace before the application of the classification in schedule 4. Clause 7(1) implicitly recognises that the activity so identified may not correspond directly to any classification, because it requires the application of the classification to which the predominant activity ‘most closely corresponds’.
Clause 7(2)(a) of schedule 1 requires that regard be had to the introduction to (and all relevant elements of) schedule 4 in determining the WIC.
In turn, both the terms of the introduction to schedule 4, and the preliminary reference to schedule 1 in the flowchart in the introduction to schedule 4 setting out the process for identifying the WIC,[6] expressly confirm that the predominant activity should not be determined by reference to the workplace categories described in schedule 4.
[6]Set out below see [50]
It is thus appropriate to deal with the characterisation of predominant activity before returning to those provisions of the schedule dealing with the process of classification.
Predominant activity
As set out above, the predominant activity at a workplace is the activity of the employer which contributes, or is likely to contribute, more than any other activity of the employer to the value of goods and/or services produced or provided by operations carried on in that workplace.
An employer may conduct a variety of activities at a workplace. It is necessary to identify which of those activities is the predominant activity by reference to its contribution to the value of goods and/or services produced or provided by operations carried on in that workplace.
In ACC v John Valves,[7] Ashley J (with whom Crockett and Smith JJ agreed) identified the necessary enquiry in relation to s 182 of the Accident Compensation Act 1985,[8] the precursor to the current provisions, as follows:
… what activity contributes most to the value of goods produced by the employer from operations there carried on? The answer would appear to be the machining of rough castings into finished products. In determining the answer it is necessary to examine what work the employees undertake in the area.
It is not the described occupations of the workers in an establishment which resolves the question framed above. It is the performance by the workers of their duties in an integrated way which evidences the relevant activity. The fact that determination of the predominant activity requires consideration of what it is that most contributes to the value of goods produced or services provided, which looks at the matter from the employer's standpoint, does not mean that the activity enquired of is that of the employer. It is not, although determination of the predominant activity in the manner indicated will disclose what might be described as the employer's predominant activity.[9]
[7][1993] 2 VR 10 (‘John Valves’).
[8]Section 182:
(1)In this Part, 'predominant activity' in relation to an establishment of an employer means the activity that, during such period as the Commission determines, is the activity that the Commission determines contributes or is likely to contribute more than any other activity to the value of goods or services or goods and services produced or provided by the employer from operations carried on in the establishment.
(1A)In determining the predominant activity in relation to an establishment, regard must be had to, but must not be limited by, measures of activity during the preceding period of 12 months or less consisting of prescribed classes of data relating to sales, cost of goods produced, cost of labour or gross profit.
(2)If the Commission is satisfied that, at an establishment of an employer that comprises two or more contiguous areas, the predominant activity carried on at each of those areas is different, the Commission may determine that each of those areas is an establishment of that employer for the purposes of this Part
[9]John Valves, 18.
The definition of predominant activity contained in the Order has since been amended. The definition now emphasises the ‘activity of the employer’.
Nevertheless, in determining which activity of the employer at the workplace is the predominant activity, the proper approach remains to examine, in an ‘integrated way’, the activities undertaken at the workplace. It is in this sense an analogous process to that identified by Kitto J in Shire of Perth v O’Keefe[10] in respect of a land use by-law:
The application of the by-law in a particular case has therefore not to be approached through a meticulous examination of the details of processes or activities, or through a precise cataloguing of individual items of goods dealt in, but by asking what, according to ordinary terminology, is the appropriate designation of the purpose being served by the use of the premises at the material date.[11]
[10]Shire of Perth v O’Keefe (1997) 187 CLR 384.
[11]Ibid, 408.
It seems clear that it cannot be said that petroleum products are produced at the head office. Nevertheless, it is contended by the Authority that they may be said to be ‘provided’ by operations carried on at the workplace. As Mr Collins put it: ‘… they are the functions and operations of a petroleum retailer, by which it provides fuel it owns, having purchased it at a wholesale price and by which it sells it at a remote location, being service stations throughout Australia, at a retail price.’[12]
[12]81.
Conversely, the appellants contend that United Petroleum’s head office provides services by way of its predominant activity.
These competing approaches underlie the issues of characterisation and classification of the predominant activity which confront the Court.
Activities at the workplace
The United Group is administered by employees who work at the group’s national head office. The national head office is physically separate from all other United Group workplaces.
The United Group has regional offices in Adelaide, Hobart, Brisbane, Sydney, Darwin, Townsville, Loxton, Ulverstone and Perth, which report to, and are overseen by, the national head office.
Evidence was called from Mr David Szymczak, a former general manager of United Petroleum, who is presently the general manager of several other companies in the group. Mr Szymczak’s affidavit evidence was that there are 242 service stations operating across Australia under the banner ‘United’. There are 54 in New South Wales, 97 in Victoria, 16 in Western Australia, 17 in Tasmania (including unmanned service stations), 15 in South Australia, 32 in Queensland, 9 in the Northern Territory, and 2 in the Australian Capital Territory. Save for some service stations operated by a company within the United Group in South Australia, United service stations across Australia are either operated by commission agents, franchisees, or independent owners, or are unmanned. Mr Szymczak’s oral evidence indicated that at the date of trial there were some 220 service stations operated by commission agents, 20 by franchisees and 17 unmanned service stations.
Although the United Group comprises a number of companies, the overwhelming majority of the employees at the national head office are employed by United Petroleum. In turn, apart from limited exceptions,[13] no United Group employee is stationed at any United service station, although ‘Area Managers’ or auditors employed by United Petroleum occasionally visit service stations.
[13]Some service stations in South Australia are operated by Key Comp Pty Ltd, a member of the United Group.
The services provided to the United Group at the national head office include the provision of general management and support services, such as IT, accounting and auditing, legal, secretarial, human resources and insurance. More specifically, the appellants’ evidence is that the roles and responsibilities of employees of United Petroleum at the national head office include the following:
(a) Management of the supply of fuel to United service stations. Staff receive and collate reports from service station operators and maintain the computer system which receives those reports. These reports contain fuel sales data and are sent to fuel schedulers (currently located at Townsville and Adelaide) to determine the quantity of fuel to be delivered to the service stations. The reports are also used to reconcile revenue figures. Employees of United Petroleum also negotiate and arrange with oil companies for the purchase and supply of fuels, and with trucking companies for the delivery of fuels to the service stations. They monitor and determine ongoing pricing for all United service stations.
(b) Administration of franchise arrangements between United Franchise, another member of the group, and franchisees operating service stations under the banner ‘United’. This includes making franchise agreements, ensuring franchisees comply with the terms of those agreements, and recruitment and training of franchisees.
(c) United Petroleum is also responsible for certain maintenance works (particularly relating to equipment used for the storage and sale of fuel) at United service stations operated under commission agency agreements. Its employees approve requests for maintenance works and engage the services of third party contractors to perform the works.
(d) Administration of car wash facilities at United service stations, including marketing, monitoring revenue and profit, and approving maintenance requests.
(e) Collating reports in relation to safety incidents and determining what steps should be taken to ensure compliance with relevant safety regulations.
(f) In relation to United depots at Traralgon, Bairnsdale and Romsey in Victoria, Loxton in South Australia and Ulverstone in Tasmania, staff are ultimately responsible for checking and approving gas orders, facilities maintenance and invoicing.
(g) Administration of operations at a number of properties owned by United Group companies used as truck parks for trucks delivering fuel to United service stations.
(h) Management of the group’s property portfolio, which includes both commercial and residential real estate. This involves buying and selling properties, collecting rental, paying charges, rates and taxes, and arranging maintenance.
(i) Staff are also involved in projects undertaken by other companies within the group which construct service stations and convenience stores. United Petroleum employees negotiate construction contracts, design the layout for buildings, ensure the projects are completed on time and within budget, and obtain the relevant permits and approvals.
(j) Management of the retail operations for those United service stations which maintain a convenience store. Whilst service station operators purchase directly from suppliers, United Petroleum employees negotiate the terms of purchase and the placement of promotional materials, communicate with service station operators as to those terms and the merchandise to be purchased, and design and prepare promotional materials.
(k) In relation to United Terminals, another group member which imports fuel from overseas to sell to United Petroleum and another United Group member, staff negotiate contracts with overseas wholesalers to purchase petroleum products, engage third parties to unload petroleum from the ships and to transport the fuel, purchase foreign currency to pay for the supply, oversee United Terminals’ employees and negotiate with third parties for the rental of fuel tanks at depots.
United Card employees are also based at the United Group’s national head office. United Card’s employees are responsible for administering credit cards and other card facilities provided by United Card to members of the public. This involves monitoring the provision of credit, dealing with customer queries, marketing and promotion of the financial services, and operating the relevant computer systems.
Mr Szymczak agreed in cross-examination that the main activity of United Petroleum was the distribution and sale of petroleum products. He said that United Petroleum also organises arrangements on behalf of retailers for shop goods at service stations and arranges supplies of LPG.
Mr Szymczak produced United Petroleum’s profit and loss statement for the 12 months to 30 June 2011. This records its trading activities as follows:
| 12 MONTHS TO 30-Jun-11 | 12 MONTHS TO 30-Jun-10 | |
| SALES | ||
| Sales – petroleum products | 1,560,848,383 | 1,364,134,286 |
| Sales – car wash | 2,638,265 | 3,041,627 |
| Sales – other goods | 120,341 | 168,181 |
| 1,563,606,990 | 1,367,344,093 | |
| LESS: COST OF GOODS SOLD | ||
| Cost of goods sold – petroleum products | 1,453,950,597 | 1,269,066,703 |
| Cost of goods sold – car wash | 776,149 | 852,548 |
| Cost of goods sold – other goods | 112,338 | 191,750 |
| 1,454,839,084 | 1,270,111,002 | |
| GROSS PROFIT FROM TRADING | 108,767,906 | 97,233,091 |
Mr Szymczak’s evidence was that the greatest percentage of sales was effected through commission agents. In turn, the business of United Franchise (another member of the group) was in fact conducted by United Petroleum employees. In the case of both commission agents and franchisees, the fuel remained the property of United Petroleum until its retail sale was effected. United Petroleum arranges for the supply of fuel to the service stations and for the pricing of the fuel.
Approximately 20 per cent of the sales are constituted by wholesale sales.
The Authority submitted that the activities undertaken at the head office which contribute most to the value of goods or services provided by operations carried on in the workplace are those relating to the sale of petroleum products. In my view, the relevant activities involve integrated operations relating to both the purchasing and onsale of petroleum products. Those activities are of greater value than associated activities relating to the import of fuel, management of franchise agreements, administration of maintenance works, administration of promotional activities, management of the car wash business, response to safety obligations, management of depot and truck park facilities, other property management activities, and the provision of financial services. Cross-examination of Mr Szymczak by reference to the floor plan of the head office and recorded observations of activities made on a view by officers of the Authority established that the predominant activity of the employees as such (not assessed by reference to value) was the management and administration of petroleum sales throughout Australia. This evidence tends to support the clear inference as to the predominant activity which is to be drawn from the financial statements, coupled with the evidence as to the overall structure and conduct of United Petroleum’s business.
I do not, however, accept that the activities related to the sale of petroleum products are characterisable as the ‘retailing of petroleum products’, as counsel for the Authority submitted. The retail sales are made at diverse service stations located throughout Australia. It is at the service stations that the fuel sold is ascertained in quantity, delivered to the customer, and payment is made. In turn, the fact of payment is recorded and reported back to the head office. It is at the service stations that ongoing fuel storage levels are physically monitored and replenished as necessary by way of deliveries made from locations other than the head office. Further, as Mr Gorton emphasised, the actual sales of petroleum products are made by independent commission agents and franchisees and not by United Petroleum.
In my view, it cannot be said, as the Authority further submitted, that petroleum goods are ‘provided by’ the operations at head office. Rather, their provision is planned, promoted, managed and arranged.
In my opinion, the characterisation of the predominant activity at the head office is best expressed in ordinary language as the head office management and administration of the sale of petroleum products from retail outlets located throughout Australia (including the procurement of petroleum products for this purpose).
The practical elements of that predominant activity are summarised in para 36(a) of my decision above.
The sense in which the administration in issue has head office character, as distinct from simply a national character, can be seen by comparing the operations with those of the fuel schedulers carried out at Townsville and Adelaide. Although the scheduling may be ‘national’, it is a more subsidiary function and split between two regional locations.
Within the elements of the operations carried out, the fixing of retail prices might be regarded as the particular component of activity of the employer most significant to the value produced by the operations at head office. The characterisation of the relevant predominant activity thus involves a judgment as to the level of generality at which that activity is described. In my opinion, the ‘integrated activity’ is best characterised in the terms I have expressed.
The WIC
As I have said, item 7 of schedule 1 of the Order introduces the concept of industry classification. It makes clear, in part:
(a) that there may be no precise equivalent of the predominant activity contained in the schedule of classifications and that the task is to identify the classification to which the predominant activity corresponds, or most closely corresponds (item 7(1));[14]
[14]Quoted above.
(b) schedule 4 must be read as a whole and regard must be had to all relevant elements of it (item 7(2)(a)); and
(c) consideration must be given to the ‘industrial characteristics of the predominant activity without regard to the risk of injury associated with the predominant activity or any of the occupations engaged in at the workplace’ (item 7(2)(b)). It follows that the relevant characteristics are of an economic kind, and that this is so is confirmed by the categories adopted in schedule 4. Likewise, the provisions of schedule 1 relating to predominant activities include provisions relating to workplaces comprising two or more contiguous areas. These make specific provision with respect to cases in which the predominant activity carried on in such an area comes within one or more of the following categories of services: clerical services, management services, administrative services, sales and marketing services, warehousing services associated with manufacturing, wholesaling or retailing. This exemplifies characterisation by reference to a class of economic activity.
(d) The predominant activity does not correspond or most closely correspond to a classification if workplaces engaged in that activity are expressly excluded from that classification in any of the elements of the schedule.
The structure of schedule 4
Schedule 4 of the Order makes provision for classification. The introduction to schedule 4 states:
In accordance with item 7 of schedule 1, the industry classification to which a workplace is classified for an employer is the WorkCover industry classification in this schedule to which the predominant activity at that workplace corresponds or most closely corresponds.
Industry classifications, which are denoted by two letter, four digit alpha/numeric codes, are organised within broad divisions (each identified by a single letter), subdivisions (each identified by a two digit code) and Groups (each identified by a three digit code).
The preambles to the various divisions summarise and explain the scope of the relevant division and clarify the correct classification for specific predominant activities.
The predominant activity at the workplace is determined in accordance with item 3 of schedule 1 without regard to this schedule. It is then necessary to identify the WorkCover industry classification in this schedule to which that predominant activity corresponds or most closely corresponds.
For this purpose, regard must be had to all relevant elements of this schedule, i.e. headings, preambles to divisions, industry descriptions, exclusions/references and the listed activities.
It must be noted that the predominant activity at a workplace does not correspond or most closely correspond to a WorkCover industry classification if workplaces predominantly engaged in that activity are expressly excluded from that classification in any of the elements of this schedule referred to above.
The process for identifying the appropriate WorkCover industry classification is set out in the flow chart below.
This introduction again emphasises that for the purposes of classification, attention is directed to all relevant elements of the schedule, ie headings, preambles to divisions, industry descriptions, exclusions/references and the listed predominant activities.
In turn, the flowchart set out as part of the introduction envisages a process which works through the elements of the schedule from the more general to the more particular.
The index
The index to schedule 4 sets out divisions, subdivisions, group titles and codes. The divisions relate to:
· agriculture, forestry, fishing and hunting;
· mining;
· manufacturing;
· electricity, gas and water;
· construction;
· trade;
· transport and storage;
· communication;
· finance, property and business services;
· public administration;
· community services;
· recreation, personal and other services.
The predominant activity in the present case would appear to fit most readily under the heading of either Division F: Trade, or Division I: Finance, Property and Business Services.
Division F: Trade
The preamble to Division F commences as follows:
1.This Division includes all workplaces predominantly engaged in the trading of goods either as a retailer, wholesaler (physically handling the goods and, usually, taking title to the goods) or as an agent or purchasing, marketing or buying office. The term ‘agency’ is used here to include those operations which trade in goods but do not usually take title to the goods traded and do not physically handle the goods. Typically an agency receives commission or fees which are directly related to the value of goods traded. A purchasing, marketing or buying office is a separate workplace, of a multi workplace employer, which is predominantly engaged in buying or marketing goods for use by other workplaces of the employer. Such a workplace which buys or markets for other workplaces of the employer does not physically handle the goods.
2.The term ‘wholesale trade’ is used here in the broad sense to include the sale (as principals) of new or used goods to retailers or other wholesalers. The more important types of businesses engaged in wholesale trade are wholesale merchants who take title to the goods they sell and separately located sales branches or sales offices (not being retail stores), operated by manufacturing enterprises, which do not merely take orders but supply goods to customers from stocks physically held at their own premises. Workplaces engaged in storing and distributing goods to other workplaces of the employer are included in Division G.
3.The term ‘retail trade’ is used here, generally speaking, to include the activity of selling new or used goods to final consumers. The more important types of business engaged in retail trade are department stores or other shops, stalls, mail order houses, hawkers, door to door sellers, milk or bread vendors, vending machine operators or consumer cooperatives. However, cafes, restaurants, licensed hotels, motels, wine saloons and clubs are included in Division L, Recreation, Personal and Other Services.
4.In addition to the foregoing it may be useful to note that while most types of goods can enter wholesale trade, not all goods may be considered to enter the retail sector even though they may be sold to the final consumer. Goods not normally entering retail trade include cereal grains, metal ores, crude petroleum, industrial chemicals, iron and steel and industrial machinery and equipment.
It may be observed that:
(a) the preamble commences by stating that the division includes all workplaces predominantly engaged in the trading of goods, including wholesale sales, retail sales, or the conduct of an agency in the sense defined, or as a purchasing, marketing or buying office;[15] and
(b) a purchasing, marketing or buying office is a separate workplace of a multi-workplace employer, which is predominantly engaged in buying or marketing goods for use by other workplaces of the employer. Such a workplace which buys or markets for other workplaces of an employer does not physically handle the goods.
[15]A somewhat repetitive phrase.
There are some difficulties in literally applying this concept of a purchasing, marketing or buying office to the workplace in the present case. First, workplace is expressly defined in item 2 of schedule 1 to mean land in Victoria. The majority of service stations for which the head office engages in buying or marketing petroleum products are not located in Victoria. Secondly, the majority of such workplaces are not ‘workplaces of the employer’, but rather of commission agents or franchisees. Nevertheless, the predominant activity at the head office is engagement in the buying and marketing of petroleum products for use at other workplaces. It is, on its face, an engagement in trading activities.
Further, these activities are fundamentally of the kind engaged in by a marketing and buying office, as distinct from a wholesaler, retailer or agent. The critical distinction between the predominant activity and the concept of a purchasing, marketing or buying office defined in the preamble are, thus, that the buying and marketing is undertaken for workplaces associated with, but not ‘of’, the employer, and those workplaces are located nationwide.
Division F: Trade includes Subdivision 46: Agencies and Buying or Purchasing Offices (Including Commission, Import, Export, Purchasing, Indent Agencies and Brokers) Not Physically Handling Stock.
In turn, Subdivision 46 includes Group 464: Minerals, Metal and Chemicals Agencies. Within this group, classification F4641X: Petroleum Products Agencies is as follows:
F4641X Petroleum Products Agencies
This class consists of workplaces predominantly engaged in arranging the trade of petroleum or petroleum products, liquified petroleum gas (in bulk or containers), heating oils or other fuel oils for a commission or a fee or for other workplaces of the employer.
Predominant Activities
Bitumen agency
Crude oil agency
Crude petroleum agency
Diesel oil agency
Distillate agency
Fuel oil agency
Heating oil agency
Kerosene agencyLiquified petroleum gas (L.P.G.) agency (in bulk or in containers)
Lubricating oils agency
Oils or greases, industrial or lubricating, agency
Paraffin agency
Petrol agency
Petroleum products agency
Solvents, petroleum, agency
This classification reflects, in part, a subdivision of the purchasing, marketing or buying office category identified in the preamble to the division. The predominant activity at United Petroleum’s head office can fairly be described as ‘arranging the trade of petroleum products’, but again it is not strictly speaking done for other workplaces of the employer, because the service stations involved are nationwide and because, although associated with United Petroleum, they are not workplaces ‘of’ that company.
In the course of argument, senior counsel for the Authority at one point accepted:
… it might closely correspond because although they’re not workplaces they’re very similar to workplaces.
Senior counsel for United Petroleum submitted that his client did not fall explicitly within the category, but given that the predominant activity of United Petroleum’s head office is ‘arranging for the trade of petroleum products’ it is a category which is a ‘lot closer’ than the service station category.
I turn then to the other classifications within Division F: Trade which were referred to in argument.
Group 4674 relates to Minerals, Metals and Chemical Wholesalers. It includes classification F4741J: Petroleum Products Wholesalers (including blending industrial and lubricating oils from refinery base.)
F4741JPetroleum Products Wholesalers (Including Blending Industrial and Lubricating Oils from Refinery Base Stock)
This class consists of workplaces predominantly engaged in wholesaling petroleum or petroleum products or in retailing liquefied petroleum gas (in bulk or containers), heating oil or other fuel oils. This class also includes workplaces predominantly engaged in blending industrial or lubricating oils from refinery base stock.
Exclusions/References: Workplaces predominantly engaged in distributing liquefied petroleum gas through a mains system are included in Class D3620V.
Predominant Activities
Bitumen wholesaling
Crude oil wholesaling
Crude petroleum wholesaling
Diesel oil wholesaling
Distillate wholesaling
Fuel oil wholesaling or retailing
Heating oil wholesaling
Kerosene wholesaling
Liquefied petroleum gas (L.P.G.) dealing (in bulk or in containers)
Lubricating oils blending
Oils or greases, industrial or lubricating, blending
Oils or greases, industrial or lubricating, wholesaling
Paraffin wholesaling
Petrol wholesaling
Petroleum products wholesaling
The predominant activity at United Petroleum’s head office is not the making of wholesale sales. Most of the service station sales are made by commission agents and the evidence is that the franchise agreements also maintain United Petroleum’s property in the petroleum until the retail sale to the consumer. Neither party submitted that the head office was engaged in wholesale sales.
In turn, Group 486 relates to Vehicle Dealers: Petrol and Tyre Retailers and includes classification F4864J: Service Stations (Excluding Repairs).
F4864J Service Stations (Excluding Repairs)
This class consists of workplaces predominantly engaged in selling petrol or lubricating oils to the final consumer or in motor vehicle servicing.
Predominant Activities
Diesel oil retailing
Distillate retailing
Engine oils retailing
Kerosene retailing
Lubricating oils or greases retailing
Lubricating service, motor vehicle
Motor vehicle washing or cleaning service
Petrol retailing
Service station, motor vehicle, operation
The classifications contained in the Trade division thus envisage that a workplace may be used to engage in trade concerned with petroleum products in three potentially relevant ways:
· by arranging the trade of petroleum products for sale at other workplaces;
· by wholesale of petroleum products; or
· by retail of petroleum products.
It is the Authority’s submission that the classification most closely corresponding to the predominant activity at United Petroleum’s head office is that of service station as defined.
I do not accept that this classification is appropriate. I do not accept that retail trade occurs at the workplace in the ordinary sense of that concept. The predominant activity does not fit comfortably within the subdivision of retail trade and the workplace does not fit the specific description of a workplace ‘predominantly engaged in selling petrol or lubricating oils to the final consumer’. In addition, although the classification list of predominant activities includes ‘petrol retailing’, I do not accept that this occurs at the workplace, or that the phrase substantially corresponds with the predominant activity as I have characterised it. The ascertainment of the quantities of fuel to be supplied to the final consumer, the supply of that fuel to the consumer and the payment by the consumer for the fuel all occur elsewhere. The retail sale occurs elsewhere. The retail sale of fuel occurs at service stations, both in the ordinary sense of the term and in the sense in which retail is used in contradistinction to other concepts within the Order.
Further, the arrangements made at head office relating to retail sales are preceded by arrangements relating to wholesale purchases. Like the subsequent retail transactions, the wholesale purchases are concluded with parties who are not present in the head office and who may be interstate, and the products purchased are not delivered to, or otherwise dealt with physically by, the employees at the head office. The wholesale purchases are administered by, but not provided by, the operations conducted at head office. The head office administers both buying and marketing.
If a classification were to be adopted within the Trade division, the better classification is, in my opinion, that of F4641X: Petroleum Products Agencies. This is because the head office arranges the trade of petroleum and petroleum products at other workplaces with which the employer is associated. The Trade division generally embraces purchasing, marketing or buying offices, which are separate workplaces of a multi-workplace employer predominantly engaged in buying or marketing goods for use at other workplaces of the employer.
In turn, the concept of agency embraced by the classification Petroleum Products Agencies specifically extends to arranging the trade of petroleum or petroleum products for other workplaces of the employer.
Because the service stations operated by commission agents and franchisees are not workplaces of United Petroleum (for the reasons I have explained), the predominant activity does not precisely correspond with this classification, but the non-correspondence is limited to the precise nature of the relationship between the employer and the other workplaces at which petroleum products are retailed.
Division I: Finance, Property and Business Services
Division I relates to Finance, Property and Business Services. The preamble states:
DIVISION I : FINANCE, PROPERTY AND BUSINESS SERVICES
This Division includes all workplaces predominantly engaged in the provision of finance, in investing money in predominantly financial securities (including mortgages, patents and copyrights), in providing services to lenders, borrowers and investors, in providing insurance cover of all types and services to insurance underwriters and people or organisations seeking insurance cover, in dealing in, valuing or managing real estate (except agricultural or pastoral properties) for others, in renting or leasing (as owners or lease holders) dwellings, residential buildings, non-residential buildings (including space in such buildings) or land, or in developing or subdividing land. This Division also includes workplaces of holding companies, if they are predominantly engaged in holding shares in their subsidiary company (or companies), as well as workplaces predominantly engaged in the provision of a wide range of business services on a commission or fee basis such as architectural, surveying and other technical services, legal and accountancy services, data processing and other office services as well as advertising, management consultancy, market research, credit assessing and reporting, pest control, cleaning, caretaking, protection and a variety of other services including contract packing of goods (other than agricultural produce, food, beverages and tobacco, or crating or packing goods for transport). Workplaces predominantly engaged in leasing, renting or hiring industrial machinery, plant or equipment (except transport equipment) without operators for periods less than one year, from stocks physically held for this purpose, are also included in this Division as are workplaces predominantly engaged in leasing machinery, plant or equipment on a financial service basis.
This class is postulated to include all workplaces predominantly engaged in a series of activities, none of which appear to be applicable to the present case.
Nevertheless, the categories postulated in the preamble do not include head office,[16] whereas the division specifically makes provision with respect to such offices.
[16]Save in the limited sense of including workplaces of holding companies predominantly engaged in holding shares in subsidiary companies.
Subdivision 61 relates to Finance and Investment. Once again, the predominant activity does not fall comfortably within these general concepts of activity.
Group 618 relates to Corporate Head Office Administration. It provides separately for the private and public sectors. The general concept of corporate head office administration would embrace the predominant activity here in issue, unless it were read down by reference to the scope of the Division or Subdivision.
Classification I6185T: Corporate Head Office Administration, Private Sector is described as follows:
I6185T Corporate Head Office Administration, Private Sector
This class consists of workplaces of private sector employers with more than one workplace in Australia. The corporate head office must be located in a physically separate building, i.e. it cannot have a common wall with another workplace of the employer nor can it be located in the same building as, but on a different level from, another workplace of the employer. This workplace can only be engaged in corporate administration for the whole of the employer’s operation in Australia.
Exclusions/References: Workplaces which administer divisional or regional activities are included in the predominant industry of the workplaces which they administer. Workplaces predominantly engaged in administering other workplaces which are all in the same predominant industry are included in the industry to which the workplaces, other than the administration workplace, are included.
Predominant Activities
Corporate head office administration, private sector
Corporate promotional work, private sector
Head office planning operation, private sector
Investment management (own account), private sector
Property management (own account), private sector
Share registry operation (own account)
Superannuation fund administration (own account), private sector
Division I also includes Subdivision 63: Property and Business Services. Group 636 is Other Business Services on a fee for service basis. It includes classification I6369K: Business Services n.e.c. (not elsewhere classified).
I6369K Business Services n.e.c.
This class consists of workplaces predominantly engaged in providing business services n.e.c., such as auctioning or valuing services (except in the case of real estate, wool or livestock).
Exclusions/References: Workplaces predominantly engaged: (a) in auctioning or valuing wool, livestock or agricultural or pastoral properties are included in Class F4651C; and (b) in auctioning or valuing real estate (except agricultural or pastoral properties) are included in Class I6310T.
Predominant Activities
Auction rooms operation
Auctioning service (except real estate, wool or livestock)
Business services n.e.c.
Interior decorating service n.e.c.
Interpreting service
Meter reading service
Process serving agency
Telephone answering service
Translation service
Valuation service (except for real estate, wool or livestock)
Although, historically, the workplace was classified as I6369K: Business Services n.e.c., there is little favouring the adoption of this classification. The better view is that the business services in issue substantially correspond with other classifications and the examples of such services contained in the classification do not support the view that this category is appropriate.
United Petroleum submits that the predominant activity at the workplace conforms most closely with the classification of I6185T: Corporate Head Office Administration, Private Sector.
As I have said, the preamble to the division relating to Finance, Property and Business Services does not in terms deal with the category of head office at all. It may be that the reference to the workplaces of holding companies would embrace some corporate head offices, but the classification itself uses different terminology.
The introduction to schedule 4 states that the preambles to the divisions ‘summarise and explain the scope of the relevant divisions’. In this case, the summary and explanation of the scope of Division I do not directly assist in resolving the ultimate issue of construction.
Step 3 in the flow chart is ‘[h]aving regard to the relevant Division preambles, identify the relevant Division within schedule 4’. The relevant Division preambles support the view that the predominant activity falls to be classified under Division F, not Division I.
Nevertheless, in my view, the title of the classification itself does embrace the predominant activity of United Petroleum’s head office if the words are given their ordinary meaning. The workplace is a corporate head office and the predominant activity, as I have characterised it, is one of business administration. It is one of arranging or administering the trade of petroleum products.
Despite this, the question arises as to whether the division as a whole, and the classification in particular, are directed to workplaces which undertake predominant activities which are managerial, rather than operational, in character. Counsel for the Authority submitted that management is to be contrasted with engaging directly in operations; if those operational activities involve trade, they are more properly classified under Division I. Before returning to this issue, it is necessary to further consider the terms of the classification and, in particular, the conditions and exclusions set out within it.
United Petroleum’s workplace meets the two initial conditions stipulated in the classification:
· the employer has more than one workplace in Australia; and
· the head office is located in a physically separate building. This requirement meshes with specific provisions relating to contiguous areas contained in items 3(3)-(7) of schedule 1 of the Order.
The third stipulation is that the workplace ‘can only be engaged in corporate administration for the whole of the employer’s operation in Australia.’
This proviso is not free from difficulty of application. In my opinion, the engagement in issue must be that of the predominant activity. That predominant activity is for the whole of the employer’s operation in Australia. Further, the predominant activities listed under the classification commence with the category of ‘Corporate head office administration, private sector’, but go on to include ‘Corporate promotional work’, ‘Head office planning operation’, ‘Investment management (own account)’, ‘Property management (own account)’, Share registry operation (own account)’ and ‘Superannuation fund administration (own account)’. The proviso which requires that the workplace only be engaged in corporate administration must be understood to embrace these and similar categories and not merely the first category mentioned in some narrow sense. Nevertheless, the list may also be thought to reinforce the view that the classification is directed to head offices engaged in predominant activities which are managerial, rather than operational, in terms of their administrative function.
When the classification is read as a whole, the better view is that the proviso leads into the first exclusion which relates to workplaces which administer divisional or regional activities. The proviso is intended to make clear that the classification is directed to national head offices. It follows that the predominant activity in the present case can be regarded as falling within the proviso because it is a corporate head office involved in the administration of the national business. The real question is whether United Petroleum’s head office is engaged in administration of the relevant type.
In turn, the ‘exclusions/references’ do not apply to the present case. The workplace is not one in which the predominant activity is the administration of divisional or regional activities. Nor is the head office predominantly engaged in administering other workplaces which are all in the same predominant industry. The trading activities which are administered extend materially beyond administering other workplaces and the service stations at which the petroleum products are sold are predominantly occupied and managed by third parties. In this context, the term ‘workplaces’ is to be given its ordinary meaning of workplaces potentially elsewhere in Australia, as in the opening sentence of the classification (rather than the defined meaning under item 2 which is restricted to workplaces in Victoria). Further, the workplaces at which such activities are administered are not all engaged in the same predominant activity. They are variously involved in petroleum products importation, handling, transport and retail sales.
I return then to the underlying question of whether United Petroleum’s head office is of the type contemplated by the classification. In my view it is not. The predominant activity is one of trade, not business services. It does not fit within the scope of the activities described in the preamble of Division I. It is not embraced by the concepts of finance and investment to which the relevant subdivision relates. It does not comprise corporate management in the narrow sense of that phrase (although the phrase is broad enough to embrace the predominant activity). It differs in character from the other activities listed under the classification. It is, as the Authority submits, operational, rather than managerial.
Conclusion
For the reasons I have explained, it is possible to characterise the workplace either by reference to the trade or business categories I have identified. In the ultimate analysis, I favour a trade classification. The predominant activity has as its critical element the administration of fuel purchases and sales. This activity goes beyond head office management. It goes beyond the supply of business services and the provision of management functions. It is operational, rather than managerial, in its character. The digital age increasingly facilitates such operations.
In turn, although I accept that the predominant activity at United Petroleum’s head office does not correspond entirely to the classification of Petroleum Products Agencies, it is in my view this classification to which it most closely corresponds. The predominant activity involves arranging the trade of petroleum products.
Further whilst I accept that the predominant activity might be regarded as falling within the literal terms of the classification of corporate head office administration, when the Order is read as a whole I do not accept that it should be so regarded. In my view, the predominant activity involves engagement in a direct way in the administration of the trade of petroleum products and that activity falls to be classified under Division F.
Such a classification places the predominant activity within the appropriate Division F: Trade, and fits it within the notion of a purchasing, marketing or buying office identified in the preamble to that division, provided for in a separate subdivision, and specifically applied to petroleum products by the relevant classification.
I would allow United Petroleum’s appeal.
I accept that United Card’s appeal is technically incompetent,[17] but in a practical sense it has a direct interest in the outcome of United Petroleum’s appeal. Counsel for the Authority have stated that the Authority accepts that if United Petroleum’s appeal succeeds, the Authority will have to make a corresponding correction to the WIC of, and in turn the premium payable by, United Card.
[17]It was not preceded by an application for internal review in accordance with Part 2A of the WC Act.
I will hear counsel further as to the appropriate orders.
The Respondent erred in its review decision making process and decisions in at least the following respects:
a) it misinterpreted the meaning of ‘divisional or regional activities’;
b)it placed inappropriate weight on organisational charts and insufficient weight on the fundamental activities of the corporation;
c)it failed to properly consider the meaning of ‘activities’;
d)it assumed that an exclusion/reference in I6185T of the Premiums Order (No. 18) 2010/2011 has application to the business;
e)it did not have proper regard to the high level administration of the Appellants’ business throughout Australia when assessing the ‘predominant activity’ at the workplace;
f)it impermissibly determined that United Card Services Pty Ltd was a member of a group with the First Appellant when such a determination was not properly the subject of a review;
g)it impermissibly reclassified United Card Services Pty Ltd’s industry classification to F4864J-Service Stations (Excluding Repairs) when such a decision was not properly the subject of a review.
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