ZG Operations Australia Pty Ltd & Anor v Jamsek & Ors

[2021] HCATrans 27

[2021] HCATrans 027

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S139 of 2020

B e t w e e n -

ZG OPERATIONS AUSTRALIA PTY LTD ACN 060 142 501

First Applicant

ZG LIGHTING AUSTRALIA PTY LTD ACN 002 281 601

Second Applicant

and

MARTIN JAMSEK

First Respondent

DANIEL CIVTANOVIC AS TRUSTEE FOR THE BANKRUPT ESTATE OF ROBERT WILLIAM WHITBY

Second Respondent

STEPHEN HUNDY AS TRUSTEE FOR THE BANKRUPT ESTATE OF ROBERT WILLIAM WHITBY

Third Respondent

Application for special leave to appeal

KEANE J
STEWARD J

TRANSCRIPT OF PROCEEDINGS

AT CANBERRA ON FRIDAY, 12 FEBRUARY 2021, AT 11.47 AM

Copyright in the High Court of Australia

____________________

MR S.J. WOOD, QC appears with MR D. TERNOVSKI for the applicant.  (instructed by Agnew Legal)

MS R.S. FRANCOIS appears with MR A.D. CROSSLAND for the respondents.  (instructed by Watson Law)

KEANE J:   Yes, Mr. Wood.

MR WOOD:   Thank you, your Honour.  Dealing with a preliminary matter, the second proposed ground of appeal attacked the cost order below.  That cost order has been vacated and we do not seek special leave to appeal.

KEANE J:   Thank you.

MR WOOD:   Dealing then with the substance of the matter, the question of the appropriate test to apply in determining the difference between an employee and independent contractor, both parties accept that the multifactorial test, the modern day successor to the old tests of control and right to control, is the right test to apply to answer the question:  is the particular person an employee or a contractor? 

In applying that test one can answer that question as to whether or not someone is an employee or a contractor by asking whether or not they work in the business or serve in the business of the employer or they carry on a business of themselves.  As the Federal Court in Quest said, that is the focal point.  As Justice Windeyer said in the Marshall Case, the distinction between a servant and independent contractor is rooted fundamentally in the difference between a person who serves his employer in his, the employer’s business, and a person who carries on a trade or business of his own.  Two Judges, Justices Wilson and Dawson in Stevens v Brodribb say that what Justice Windeyer said was really posing the ultimate question, that is, whether someone is an employee or a contractor in a different way. 

Now, that dichotomy between whether someone is an employee or someone carries on their own business is an important dichotomy.  It should be a strict dichotomy even though applying the multifactorial test to answer that question whether or not someone is carrying on their own business or whether they are an employee will, as a question of application of the test, be difficult at the margins.

STEWARD J:   Your point, I think, Mr Wood, is simply this, that if you are an independent contractor you must be running your own business.  Certainly, the Commissioner of Taxation would take that view.

MR WOOD:   Exactly, your Honour.

STEWARD J:   Is your second point that there has been confusion perhaps amongst the judges below about that issue?  For example, in the Personnel Contracting Case, Justice O’Callaghan held that the person there was an independent contractor but not running his own business.  Here, in Justice Perram’s judgment, his Honour said that, in ACE Insurance, insurance sales agents were working in their own business but were nonetheless employees.

MR WOOD:   Yes, your Honour.

STEWARD J:   So the concepts seem to be blurring.

MR WOOD:   They do, your Honour, and there is a conflict also at the Full Federal Court level in the cases we have referred to, Quest and Tattsbet, where this very issue has been considered.

STEWARD J:   Was the fact that there were partnerships here, was that ever attacked by your opponents?

MR WOOD:   No, your Honour. 

STEWARD J:   I say that because, as you will recall, under the New South Wales law, a partnership is one where persons carry on business in common with a view to profit. 

MR WOOD:   That was an important factor in the assessment by the primary judge.

STEWARD J:   That was never challenged?

MR WOOD:   No, your Honour.

STEWARD J:   All right, thank you.

KEANE J:   Mr Wood, we think the Court would be assisted by hearing from Ms Francois at this point.  Yes, Ms Francois.

MS FRANCOIS:   Your Honour, we say the so‑called “no dichotomy” principle identified in the special leave application has three responses that we would make.  The first is, with great respect, there is no question of principle – and I will take the Court to that in detail.  The second is, this case is not a suitable vehicle if the Court was otherwise against me on the first point – given its unique facts.  Then we would say the third point is that there are not sufficient prospects of success.

The reason why we say there is no question of principle is that we say the applicants’ submissions elide what we accept is a recognised dichotomy in the ultimate conclusion between an independent contractor and an employee.  That is the ultimate conclusion the court has to reach.  But it is confusing that with the process of weighing the evidence where a person may have some of the indicia of business activity but still be an employee. 

There is no dispute that the test is to examine the totality of the relationship.  That is clear in Hollis v Vabu and Stevens v Brodribb.  As set out in our written submissions, Hollis v Vabu is a case where, in the taxation decision that is not followed in the High Court, there is no doubt that the bicycle couriers and the vehicle couriers employed by Vabu could contract as companies and as partnerships.  So the fact that people set themselves ‑ ‑ ‑

STEWARD J:   Can I ask you this?  Do you accept that if, after applying the multifactorial test you reach the conclusion that somebody is an independent contractor, that they must therefore be carrying on their own business? 

MS FRANCOIS:Yes. 

STEWARD J:   So what do you say about the statement at paragraph 7 of Justice Perram’s reasons for judgement where he said that ACE Insurance was a case where insurance sales agents were working in their own businesses and the business of ACE Insurance, and were employees?

MS FRANCOIS:May I take that and put that in context?  I would like to put that in the context of the primary judgment by Justice Anderson and the judgment of Justice Wigney and also the primary judge’s decision because in the end we say in context that is nothing more than accepting that there was some indicia of running one’s own business because, of course, they were for part of the time, set up as partnerships.  Mr Whitby, of course, from 2012, was no longer in partnership with anyone and invoiced on his own account. 

STEWARD J:   But if you accept that an independent contractor is someone who runs their own business, how can what Justice Perram says in paragraph 7 be correct, when his Honour says:

Secondly, as has been pointed out, working in the business of another is not necessarily inconsistent with working in a business of one’s own ‑ ‑ ‑

MS FRANCOIS:Because of the limited features that are given to that.  May I make that proposition good by reference to Justice Anderson?  If one can come to the main judgment, and that is at page 141, and your Honours will have read the detailed factual analysis, but his Honour’s conclusions, after having weighed all the individual factors - and this is the conclusions in which each other judge agrees - his Honour says at 243:

The heart of this conclusion is a preference for the substance of the relationship between the applicants and the company over certain aspects of the contractual obligations governing the relationship, and the legal structures through which the applicants contracted.  As recognise by the primary judge, the essence of the legal framework between the parties involved the applicants, for large part through their Partnerships, contracting with the company, with the Partnerships supplying the vehicles for the applicants’ work.  These are, on their face, indications that the applicants were operating an independent business.  But, in my view, they are outweighed by the particular, and perhaps peculiar, attributes of the long relationship between the parties. 

So, we could never get past the fact these people had, by reason of what we say is economic duress, put themselves into a business format by reason of the dictates of the company, but looking at the substance of the relationship, that gave rise, once the totality was examined, to a conclusion of employment. 

The small indicia of the fact that they had a partnership structure, and that they did have some features of a business, such as they had an accountant, they had to do some administrative work and they owned the vehicles because the company had required them to, that was not sufficient to, ultimately having regard to the totality of the relationship, say that they were independent contractors. 

STEWARD J:   Did you accept that the partnerships were validly formed? 

MS FRANCOIS:Yes.

STEWARD J:   Well, then, is that not an acceptance that they were running their own business?

MS FRANCOIS:   No.

STEWARD J: Well, section 1 of the Partnership Act 1892:

Partnership is the relation which exists between persons carrying on a business in common with a view of profit ‑ ‑ ‑

MS FRANCOIS:   Well, they were not serving any business.  May I take you to paragraph 244, and his Honour there describes the background of the applicants, but concludes at the end of that paragraph:

The applicants thus cannot be characterised as engaging in entrepreneurial or profit motivated activity, which is a hallmark of an independent business –

There was nothing that they did that was entrepreneurial.  They made no choice to set up those partnerships in any real sense.  They had no desire to be a business.  They were employees who were told to change their structure to suit their employer ‑ ‑ ‑ 

STEWARD J:   The partnerships enabled them to split their income, which might be seen as entrepreneurial.

MS FRANCOIS:   Or brought about by the fait accompli of buy these trucks or be fired.

STEWARD J:   That may be so.  It may be that they were under extreme economic pressure to form their own businesses in order to continue to operate their trucks, but does that deny ‑ ‑ ‑ 

MS FRANCOIS:   But these were not their trucks.

STEWARD J:   But does that deny the existence of a business?

MS FRANCOIS:   No, it is one of the factors to be considered.  So what your Honour’s analysis does, with great respect, is it gives primacy to the fact that there is a business structure in place.  The same was true in Hollis v Vabu.  There, those bicycle couriers, vehicle couriers, could contract with the company through other companies, and in the tax decision of the Court of Appeal, that was determinative, for the reasons your Honour is identifying.  But the High Court rejected that.

STEWARD J:   But in those cases, applying the multifactorial tests, the necessary conclusion is that they could not have been carrying on their own independent businesses because they were employees.

MS FRANCOIS:   Yes, but that is putting the cart before the horse.  So they had those structures - those bike couriers could have been partnerships, they could have been companies, but overall, looking at the totality of the relationship, that was but one factor to take into account, just as in this case, it is but one factor to take into account.  The fact of the partnerships is not determinative of the totality of the relationship.

STEWARD J:   I do not think Mr Wood is suggesting it is.  I think what his case is, is that, having applied a multifactorial test here, the conclusion was that they were carrying on their own businesses, therefore they cannot have been employees.

MS FRANCOIS:   No, that is not how the court reasons, with great respect.  So I was taking your Honours to page ‑ ‑ ‑ 

STEWARD J:   No, no, sorry, that was Mr Wood’s case, as I understood it.  I accept that that is not how the court below approached it.

MS FRANCOIS:   I think that is right.  In the primary judge’s decision, the greater emphasis was given to the contractual relationships and the form of the business and on appeal we were successful in demonstrating that many of those factors were given too much weight, particularly the suggestion that these people were operating any real known business in that they did not chase work, they worked solely for this company, they had no entrepreneurial aspirations whatsoever, this was not a decision that they had made to enter into a business.

So what the court did and how we see Justice Perram’s comments, particularly having regard to the primary judge, is he is rejecting the concept that merely having some form of business is determinative.  So, some indicia of the business is not determinative of whether or not you are an independent contractor and, with great respect, that does follow Hollis v Vabu because the dichotomy that Hollis v Vabu identify, and they describe it thus at page 38 of 207 CLR - they say:

Terms such as “employee” and “independent contractor”, and the dichotomy which is seen as existing between them, do not necessarily display their legal content purely by virtue of their semantic meaning.

So ultimately we say the test is one of substance.  The fact that there are some indicia of business is just by virtue of the fact that there was a point in time where these men were told to form these partnerships but thereafter the relationship was as employees.  Their hours were essentially dictated by the company.  Their working days were dictated by the company.  They did nothing else but work for the company for over 30 years.  They never had any other clients.  They never sought any other business.  They never did anything else.

We say that having regard to the totality test that is not in issue that is a perfectly correctly approach.  So the acceptance of any business, one can see from the judgment of Justice Wigney, if one goes back to paragraphs 16, 17 and 18 of the judgment, and that is at page 85 – sorry ‑ ‑ ‑

KEANE J:   Page 83.

MS FRANCOIS:   Thank you, Justice Keane.  Your Honours will see that at paragraph 16, his Honour starts setting out the background that I have not been as elegantly putting, which is that the men chose to take the latter course as dictated by the business.  That involved them buying the trucks at values determined by the business, and signing a contract which described them as contractors.  Having been presented with that fait accompli, they do set up partnership structures.  But his Honour then says:

Yet the reality was that, aside from the fact that the men took over the risk and expense of owning and operating the delivery trucks, little else changed.  The men certainly had no real independence.  While they continued to have some flexibility . . . they had no real or effective control in respect of the key aspects of the work relationship.  The business effectively continued to dictate the hours . . . the remuneration –

and the like.  His Honour then says at 17:

It may have been strictly correct to say, as the primary judge did, that after 1986 the men “in principle” could have used their trucks to “serve others”.  Yet that was no more than a chimera.

STEWARD J:   All of that may fairly have supported a finding below that they were in fact employees and not operating their own businesses – maybe.  The problem is paragraph 7 and the blurring of the concepts in paragraph 7 and whether that can be allowed to stand on the books.

MS FRANCOIS:   But his Honour’s observations there are in the context of accepting the reasons of Justice Anderson.  So he has accepted what his Honour has said about there being these minor ‑ ‑ ‑

STEWARD J:   Paragraph 7 is being put as a sort of a legal proposition – do not worry about the facts of this case, it is a legal proposition – that you can be in your own business but, nonetheless, be an employee.  That strikes me as problematic.

MS FRANCOIS:   I think what his Honour is doing is actually directed to page 53 of the application book and paragraph 213 of the decision of the primary judge.  So, the decision of the primary judge is putting, ultimately, some of the propositions that have fallen from your Honour.  The present case is, in my view, an example of partnerships running businesses of their own.  Whilst it is true that the partnerships were working the business of another entity, that is not inconsistent with working in a business of one’s own.  I think what his Honour Justice Perram was doing in his judgment ‑ ‑ ‑

STEWARD J:   All he is saying there is that a partnership can sell services to another person’s business.

MS FRANCOIS:   Perhaps.  But I think what he is – I am really only doing that to deal with context because I think what his Honour Justice Perram is doing in paragraph 7 – sorry, I think it really starts at 6 – is to direct the question about what the relationship is by focus on the employment relationship – that focusing on whether or not the person has some indicia of a business is the wrong question to ask. 

The test is whether or not the person is an employee.  To focus too much on do they have some business of their own is to miscast the test.  That is what I think his Honour is saying at 6.  His Honour there identifies the problem as:

The logic of this would suggest that one could substitute the question of whether a person was an employee with the question of whether the person was conducting their own business. 

That is the vice his Honour is attempting to address – that the focus of the question has miscarried because it is looking at ‑ ‑ ‑

STEWARD J:   But that is not Mr Wood’s case.  He is not saying that that should be the question asked, without regard to the multifactorial tests.

MS FRANCOIS:   That is correct, but I am putting in context what the error is said to be in Justice Perram’s judgment.

STEWARD J:   I see.

MS FRANCOIS:   Justice Perram is directing himself to that question.  So Justice Perram, when he makes that observation in paragraph 7, is there trying to deal with the problem he has identified at the end of paragraph 6.  He is saying you do not ask the question is the person working in their own business.  You ask the question, are they an employee. 

So that question of the dichotomy, which the High Court accepts exists in the ultimate conclusion between whether or not there is an independent contractor and employee, we accept there is a dichotomy in the ultimate conclusion.

What his Honour Justice Perram is doing is looking at the antecedent process.  In order to get to that conclusion where there is an accepted dichotomy you do not focus on the question of the person’s business, you look at all of the circumstances in their totality.  I think, with great respect, what his Honour is saying there is that to focus on the business is the wrong approach.  It is to focus on whether or not the person is an employee and that is how we would read his Honour’s reference to “business”. 

It is an indisputable fact that for most of this time but not all, because Mr Whitby did not run a partnership after 2012, these men had a business structure.  But that structure is but one factor to take into account and that is what his Honour is saying, that you cannot overemphasise the partnership agreements and the fact that they set themselves up to deal with this ultimatum in this way as being determinative because that will lead to a wrong focus in the test. 

So when his Honour says that in other cases people have had their own businesses it is this same process.  They have been told to set up as an independent contractor.  They set up and have – some have offices and some support staff but, ultimately, the conclusion the court has reached is that they were working in someone else’s business as a servant of that person not as an independent contractor. 

So, with great respect, his Honour is not getting the question of principle wrong, he is really directing his comments to the focus upon the inquiry that we all accept applies which is that you examine the totality of the relationships.

We say this is exactly like Hollis v Vabu in that you could contract with the company as partnerships or in a company but when one looks at the totality of the relationship, as the Full Court did, understanding that that was the process they had to go to, there is no question of principle. 

I then wanted to develop the question of the unique facts so that this case, although there is – if you are against me on that point may be a question of principle, there is no dispute in this case that the employer took advantage of uneducated truck drivers and used their economic power to require the drivers to buy the trucks and to work the drivers nine hours a day five days a week for the next 30‑odd years. 

There should be no dispute that now that conduct is unlawful under section 358 of the Fair Work Act.  So these facts do not, with great respect, give rise to a suitable vehicle.  Then we say, for the reasons given by the Full Court, and particularly the primary judgment of Justice Anderson, there are not sufficient prospects of success.

Your Honours, I have not yet addressed the question of estoppel which is one that I do not understand and wanted to deal with, but I am not sure if that is why I was asked to speak first.  Is that something I need to address?

KEANE J:   Yes, you should.

MS FRANCOIS:   Thank you.  We do not understand the claim of estoppel.  If one goes to the special leave application one can see that the question is framed at page 153 of the application book in paragraph 4b as whether or not the Full Court erred in:

failing to hold that [the drivers] were estopped from claiming to be employees –

Now, we do not understand this claim.  With respect, it does not identify a special leave question.  It also gives rise to two further questions, why did not Mr Kenzie QC raise it in the Full Court or his junior before the primary judge, but, secondly, and most importantly, what type of estoppel is being claimed.

Now, the second of those questions might be thought to be answered in the submissions.  But, with respect, the submissions make this even more opaque.  Is it an estoppel arising by conduct, contract, detrimental reliance or something else?  In paragraph 25 of the application, the applicants say:

For over 30 years, both parties arranged their affairs on the basis that the Partnerships were contractors.

At 27 they then say:

both parties assumed the Partnerships were contractors and acted in reliance upon that assumption.

But then in the reply they say:

once the Contract was executed, all parties assumed that it created a contractor relationship.

Now, if this is estoppel by contract ‑ ‑ ‑

STEWARD J:   Ms Francois, I take it that these issues were never raised before the trial judge or the Full Court.

MS FRANCOIS:   No.

STEWARD J:   They may have reflected the ingenuity of new counsel and you would have probably wanted to cross‑examine people about these sorts of things?

MS FRANCOIS:   Yes, yes.  But it is also what is currently put because if this had been raised below, it is a matter requiring specific pleading.  So if it had been raised below, we would have had a chance to see what facts were being put before us, how the claim is put.  It is also this partnership and contract thing cannot work, because the second applicant never had a contract with our clients.  There are periods when the first applicant had no contracts.  There is no partnership for a period of time with one of the applicants.

If this had been raised below, I am sure the Court is aware of the usual forensic manoeuvres to look at the Australian Consumer Law, consider section 21 unconscionability, and also it seems unusual that potentially an equitable estoppel would arise if the Court accepted there was economic duress and because there is no pleading, we have not been able to point to any specific fact but we would have wished to cross‑examine to try and make good points about whether or not this estoppel could arise, if there were unclean hands and the like, whether or not there was a mutual mistake.

KEANE J:   I think we get the drift, Ms Francois.

MS FRANCOIS:   I will cease and desist.  Thank you, your Honour. 

KEANE J:   Thanks, Ms Francois.  Mr Wood, do you persist with pressing special leave question 4b?

MR WOOD:   No, your Honour. 

KEANE J:   Very well.  There will be a grant of special leave in this matter, confined to questions 3 and 4a.  Mr Wood, how long will the hearing take?

MR WOOD:   No more than a day, your Honour. 

KEANE J:   Ms Francois?

MS FRANCOIS:   Your Honour, I agree.  In paragraph 243 of Justice Anderson’s decision, he raises Moffet v Dental Services.  There will be a notice of contention to plead…..to argue in the alternative that even if these men are independent contractors they were caught by the Superannuation Guarantee (Administration) Act.

KEANE J:   But nevertheless, even with that, you would think the hearing would be completed in a day?

MS FRANCOIS:   I think so.  Yes.

KEANE J:   Thanks, Ms Francois.  Very well.  Special leave is granted, and the parties should follow the directions of the Registrar in relation to further steps to bring the matter to a hearing. 

The Court will now adjourn briefly to reconstitute.

AT 12.15 PM THE MATTER WAS CONCLUDED