FEDERAL COURT OF AUSTRALIA

Jamsek v ZG Operations Australia Pty Ltd [2020] FCAFC 119

ORDERS

THE COURT ORDERS THAT:

1.    The orders made by the primary judge on 4 November 2018 in relation to the first applicant and Robert William Whitby are set aside.

2.    The first applicant and Robert William Whitby were between about 25 August 1993 and about 1 October 2015 employees of the first respondent:

(a)    within the meaning of s 335 and item 1 in the table at s 342(1) of the Fair Work Act 2009 (Cth); and

(b)    for the purposes of s 12(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth).

3.    The first applicant and Robert William Whitby were between about 25 August 1993 and about 1 October 2015 employees of second respondent:

(a)    within the meaning of s 335 and item 1 in the table at s 342(1) of the Fair Work Act 2009 (Cth); and

(b)    for the purposes of s 12(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth).

4.    The first applicant and Robert William Whitby were between about 1 January 1977 and 20 January 2017 workers in the service of the second respondent for the purpose of s 3 of the Long Service Leave Act 1955 (NSW).

5.    The matter be remitted to the primary judge to:

(a)    determine what, if any, contraventions of the Fair Work Act 2009 (Cth) and Long Service Leave Act 1955 (NSW) have been effected by the respondents;

(b)    determine what quantum of compensation of entitlements the respondents are liable to pay the applicants under the Fair Work Act 2009 (Cth);

(c)    determine what long service leave entitlements the respondents are liable to pay the applicants under the Long Service Leave Act 1955 (NSW); and

(d)    conduct a hearing on penalties.

6.    The respondents pay the first applicant’s costs of and incidental to the application for an extension of time to appeal (and subsequent appeal) to the Full Court.

7.    The parties otherwise bear their own costs of the proceeding.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

PERRAM J:

1    I have had the advantage of reading in draft the reasons of Anderson J. I agree with his Honour that both Mr Jamsek and the Trustees should be granted leave to appeal out of time. The explanations proffered for the delay were reasonable in the circumstances and the proposed appeal is of substance. It would be unjust in the circumstances if the appeal was not to be heard by reason of a concatenation of events for which the Appellants are largely blameless.

2    As to the appeal itself, I agree with Anderson J that if this Court were to come to a different view on the question of employment to that of the trial judge, that would be sufficient to conclude that the trial judge had erred and to engage this Court’s jurisdiction to review. The question of whether one person is an employee of another involves the application of a legal standard to a given set of facts. In this case, the legal standard is s 13 of the Fair Work Act 2009 (Cth) which defines a ‘national system employee’ (which the Appellants alleged themselves to be). An individual will be a national system employee ‘so far as he or she is employed, or usually employed’ by a national system employer. By s 11 ‘employee’ in that provision is taken to have its ordinary meaning, from which I would take that ‘employ’ also has its ordinary meaning.

3    The ordinary meaning of employment has been the subject of exposition by the High Court on a number of occasions including in Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16 (‘Stevens’) and Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21 (‘Hollis’). It is the principles stated in those cases which are to be applied to the facts in this appeal. No different principles are to be applied to the Appellants’ claims about either their superannuation under the Superannuation Guarantee (Administration) Act 1992 (Cth) (which uses the word ‘employee’ in its ordinary sense in s 12(1)) or their claims about long service leave under the Long Service Leave Act 1955 (NSW) (which in s 3(1) uses the word ‘worker’). The standard in each case is the same.

4    The question of whether a given set of facts could satisfy a particular legal standard is a question of law (Vetter v Lake Macquarie City Council [2001] HCA 12; 202 CLR 439 at 450 [24]). On the other hand, the question of whether the same facts do satisfy that legal standard is generally a question of fact. For their appeal to succeed the Appellants need to establish that on the facts as found below the Court should have found that they were employees. Consequently, their appeal is an appeal on a question of fact.

5    But the fact in question (whether the Appellants were employed) is an inference drawn from other facts found. This Court stands in the same position as the trial judge in the drawing of that inference and whilst it will give respect and weight to his Honour’s conclusion it will not shrink from giving effect to its own conclusion: Warren v Coombes [1979] HCA 9; 142 CLR 531 at 551. Furthermore, the particular standard to be applied – employment – has a correct answer. One either is employed or one is not. There is no indeterminate middle state. Consequently, if this Court draws a different inference to that drawn by the trial judge this will entail that the trial judge erred and this Court will be bound to substitute its own conclusion.

6    The question then is what inference this Court should draw about the issue. The Court is required to consider the totality of the relationship between the parties: Stevens at 29 per Mason J; applied in Hollis at 24 at [44] per Gleeson CJ, Gaurdron, Gummow, Kirby and Hayne JJ. As Mummery J observed in Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944 the object of this exercise is to paint a picture from the accumulation of detail and thereby to obtain an informed consideration of the qualitative nature of the whole. Having done so, it is often said that the difference between an employee and an independent contractor is ‘rooted fundamentally in the difference between a person who serves his employer in his, the employer’s, business, and a person who carries on a trade or business of his own’: Marshall v Whittaker’s Building Supply Co [1963] HCA 26; 109 CLR 210 (‘Marshall’) at 217 per Windeyer J. This might be thought to suggest that there is a natural dichotomy between, on the one hand, being employed and, on the other, conducting one’s own business. On this view, an affirmative answer to the latter inquiry would imply a negative answer to the former. 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.

7    There are, it turns out, two difficulties with this thinking. First, it pays insufficient attention to the word ‘serves’ in Marshall. The dichotomy Windeyer J identified was not between those who work in someone else’s business and those who conduct their own business; it was between those who serve in the employ of another and those who conduct their own business. 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: ACE Insurance Limited v Trifunovski [2013] FCAFC 3; 209 FCR 146 (‘ACE Insurance’) at 182 [128] per Buchanan J. The facts of Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (‘Dental Corporation’), delivered contemporaneously with the decision in this appeal, illustrate that. Thus an affirmative answer to the question of whether one is working in one’s own business does not necessarily entail that one is not working in another’s business or that one cannot be an employee. It all depends on the facts. ACE Insurance was a case where insurance sales agents were working in their own businesses and in the business of ACE Insurance and were employees. Dental Corporation is a case where Dr Moffet was working in his own business and in Dental Corporation’s business and was not an employee.

8    For that reason, alighting upon the question of whether someone is working in their own business may have a tendency to cause confusion in an area which is already replete with traps for the unwary. This Court has, therefore, affirmed that the question which is to be asked and answered is whether the person is an employee and not whether the person is conducting their own business: Tattsbet Limited v Morrow [2015] FCAFC 62; 233 FCR 46 at 61 [61] per Jessup J (Allsop CJ and White J agreeing). No doubt understanding whose business is being conducted is a valuable aid to comprehension but it is not the central inquiry and an answer to it, one way or the other, is not necessarily decisive.

9    Anderson J has explained the facts of this case and the application of those principles to the appeal in terms from which I respectfully would not dissent. But I would add this: to my mind the most important element in the present appeal is the question of goodwill. The trial judge thought that the Appellants could have sold their businesses and any such sale could have included a sale of goodwill. I would accept this is technically a correct statement in that there was no legal prohibition on the Appellants preventing them from including in an agreement for the sale of their businesses a component for goodwill.

10    But I do not think that conclusion was the correct question for the purposes of an industrial analysis. No doubt, the expression ‘goodwill’ is sometimes used in the context of a contract for sale of a business to denote the difference between the assigned value of the assets of a business and the sale price. But for legal purposes goodwill is a species of property and consists of the right or privilege to conduct a business in substantially the same manner and by substantially the same means that have attracted custom to it: Commissioner of Taxation v Murry [1998] HCA 42; 193 CLR 605 at 615 [23]. Viewed from that perspective, I do not think it can be correct to say that the Appellants had any capacity to generate goodwill in their own businesses. Although they had an entitlement to work for third parties the fact is that after 1986 they did not. The practical exigencies of the relationship explain why this was so: for most of the relevant period they were required to work from 6 am to 3 pm Monday to Friday and had no time to work for anyone else. There was therefore no realistic possibility of the liberty being taken up. This reality was part of the totality of the relationship.

11    The trial judge focussed on the submission of the Appellants that their work had not involved or resulted in the development of any goodwill. But his Honour was unimpressed by this fact concluding that ‘there are many businesses which do not generate goodwill and which cannot be effectively sold’. That may well be so but in this area the absence of goodwill in an employee’s business is a potential indicator that the goodwill is possessed by the employer and hence that the business being conducted is the employer’s business. This is not to deny that the Appellants were conducting their own businesses but it is a matter which can throw real light on whether they were being employed. It does not determine the matter but it is a helpful and important aspect of it. In my view, these men were much closer to the situation of the insurance sales agents in ACE Insurance who had their own cars, issued invoices for GST and ran their own businesses.

12    Consequently, in my view, the trial judge erred in three related ways. First, he erred in concluding that the Appellants had goodwill in their businesses which could be disposed of by sale for this involved the incorrect notion of goodwill. In practical terms, they had no goodwill and no possibility of acquiring it. Secondly, he erred in thinking that the absence of goodwill was, in any event, a factor of ‘little weight’. It was in fact an important matter. Thirdly, his Honour erred in drawing the inference that there was no relationship of employment. The correct inference was that there was.

13    The appeal must therefore be allowed. I agree with the orders proposed by Anderson J.

Associate:    

Dated:    16 July 2020

REASONS FOR JUDGMENT

WIGNEY J:

14    I agree with the orders proposed by Anderson J. Subject to what follows, largely by way of elaboration, I also agree with the reasons to be published by both Anderson J and Perram J. Like their Honours, I have concluded that the primary judge erred in inferring from the whole of the evidence that the relationship between Mr Jamsek and Mr Whitby and the business conducted by the respondent companies was not a relationship of employer and employee.

15    The relevant facts are comprehensively described in the reasons of Anderson J. The facts show that the reality of the relationship was that, for over 30 years, Mr Jamsek and Mr Whitby were continuously employed driving delivery trucks exclusively for the respondents’ business for effectively nine hours a day, five days a week, on conditions and at pay rates set by the business.

16    It is true that, in 1986, faced with the choice between redundancy and accepting a change to the nature of the relationship dictated by the business, the two men chose the latter course. That involved them buying the trucks previously owned by the business at values determined by the business and signing a contract which described them as “contractors”. 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 in the way they carried out their work, 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 during which the men were to be available for work, what they were to do, the remuneration that they were to receive, the annual leave that they could take, the paperwork they had to complete and other key rights and obligations.

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. There was no real scope for them to do so given that they were required to be at the disposal of the business for nine hours a day, five days a week, and their trucks were, for the most part, adorned with the business’s livery. When and for whom and in what circumstances could they realistically have done deliveries for others? Of course, the evidence showed that they never could and they never did.

18    The notion that the men could have sold their “businesses” if they wanted to and that such sales “may have included goodwill” was equally illusory and fanciful. There was in reality no scope for them to generate their own goodwill. They had no customers of their own and had always driven their trucks in circumstances which required them, for all intents and purposes, to appear to be representatives of the business. Their trucks and shirts bore the names and logo of the business, not some other business name or logo.

19    To my mind, the primary judge concluded as he did by giving primacy and excessive weight to contractual labels and theoretical possibilities and insufficient weight to the reality and totality of the working relationship between the parties, as demonstrated by the way they actually conducted themselves over many years. The evidence of the totality of the relationship compelled the conclusion that Mr Jamsek and Mr Whitby were employees of the business at all relevant times. The primary judge erred in concluding otherwise.

20    The appeals accordingly must be allowed. As indicated earlier, I agree with the orders proposed by Anderson J.

Associate:

Dated:    16 July 2020

REASONS FOR JUDGMENT

ANDERSON J:

21    For nearly 40 years, Martin Jamsek and Robert Whitby were delivery truck drivers for essentially the same business. After leaving high school at an early age, they commenced with the company that owned the business in 1977 and, from 1980 until 2017, worked full-time as truck drivers. That work was their sole source of income during that period. They did not drive, or deliver goods, for any other business or entity.

22    Since 1986, however, Mr Jamsek and Mr Whitby (applicants) were not formally considered employees of the respective companies that owned the business from time to time (for simplicity, referred to below in the singular as the company). The relationship between the applicants and the company was, for the large part, subject to contracts, entered into at various intervals, between, on one hand, partnerships in which the applicants were members with their spouses and, on the other hand, the company. These contracts were each entitled a “Contract Carriers Arrangement”. The partnerships were described therein as “Contractors”.

23    After termination of their working relationship with the company in 2017, the applicants commenced proceedings in this Court seeking declarations and orders in respect of certain statutory entitlements. The central issue concerns the nature of the relationship between the applicants and the company. The key questions include whether the applicants were, at the relevant times, “employees” within the meaning of the Fair Work Act 2009 (Cth) (FW Act) or the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act), or “workers” within the meaning of the Long Service Leave Act 1955 (NSW) (LSL Act). The primary judge held that the applicants did not meet these statutory definitions.

24    For the reasons explained below, my view, contrary to the primary judge, is that, upon an assessment of the totality of the relationship between the applicants and the company, the applicants were employees of the company during the relevant period. Notwithstanding the form of the contractual framework agreed between the parties, the relationship of the applicants and the company was, in substance, that of employee and employer.

25    Accordingly, the application for an extension of time, and the substantive appeal, by Mr Jamsek and the trustees for the bankrupt estate of Mr Whitby are allowed. On this basis, the matter will be remitted to the primary judge to determine the statutory entitlements of the applicants.

Terminology

26    It is necessary to outline some defined terms before setting out the relevant background. Firstly, as Mr Whitby had been declared bankrupt by the time of the appeal, it was the trustees of his bankrupt estate that were the applicants for an extension of time to appeal, not Mr Whitby himself. Regardless, for consistency with the reasons of the primary judge, these reasons refer collectively to Mr Jamsek and Mr Whitby personally as the applicants.

27    Secondly, as detailed below, the business for which the applicants carried out their delivery activities (business), was transferred to a new corporate entity on three occasions during the relevant period. To summarise, adopting broad dates, the sequence of owners of the business were as follows:

(a)    from 1977 (upon commencement by the applicants) until 1986, Associated Lighting Industries Pty Limited (ALI);

(b)    from 1986 to 1993, Thorn EMI Pty Limited (which changed its name to Thorn Australia Pty Limited on 19 August 1996) (Thorn EMI);

(c)    from 1993 to 2015, Thorn Lighting Pty Ltd (which changed its name to ZG Operations Australia Pty Ltd on 28 September 2015) (Thorn Lighting or ZG Operations, as relevant). This entity is the first respondent; and

(d)    from 2015 until 2016 (upon termination of the applicants), ZG Lighting Australia Pty Ltd (ZG Lighting) (which had previously been named Zumtobel Lighting Pty Limited (Zumtobel Lighting)). This entity is the second respondent.

28    Finally, as noted above at [22], the owner of the business from time to time is referred to in these reasons as the “company”.

Background

29    The relevant background, which was largely not in dispute on appeal, was set out in the primary judge’s reasons: Whitby v ZG Operations Australia Pty Ltd [2018] FCA 1934 (Primary Judgment) at [13]–[120]. Borrowing from those reasons, a summary of the background facts is set out below.

Chronology of key events

30    Mr Jamsek and Mr Whitby left high school when they were 14 years old and 15 years old respectively. Neither has any formal education or qualifications. Both have only ever worked in jobs requiring manual labour.

Commencement of working relationship

31    Mr Jamsek started working as an employee of ALI on 7 September 1977. He was then about 22 years old. He was a driver for the company at the latest by 1980.

32    Mr Whitby began working for ALI in October 1977, initially in the company’s paint shop. He was then about 17 years old. He became a delivery driver in 1980.

33    For most of the relevant period during which the applicants were drivers, warehouse staff “picked and packed” the orders for delivery and moved them to a despatch area of the relevant warehouse. They were sorted in that area before being loaded into the trucks. While the products were being “picked and packed”, the drivers would wait in a canteen and have a cup of tea or something to eat. The applicants would then move the products around on the back of their trucks using a pallet jack to ensure their safe transit.

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

Establishment of partnerships

35    Mr Jamsek, on the advice of his accountant, set up a partnership, MJ & PT Jamsek (Jamsek Partnership), with his wife in late 1985 or early 1986. His income was received and declared as partnership income until his working arrangement with the company ceased in 2017.

36    Around the same time, Mr Whitby, on the advice of his accountant, also set up a partnership, R&D Whitby (Whitby Partnership), in which he and his wife were partners. (It was an agreed fact at trial that the partnership existed from 1 January 1986, and that Mr Whitby was a member.) Mr Whitby was advised that one of the advantages of setting up a partnership was the tax advantages of splitting the income of the partnership between himself and his wife. The income generated from Mr Whitby’s activities was received and declared as business income of the partnership up until 30 June 2012. From 1 July 2012, his income was declared as business income personally derived from a transport operation or courier service business.

37    The Jamsek Partnership and the Whitby Partnership are collectively referred to below as the “Partnerships”.

The 1986 Contract

38    In late 1985, the company was looking to move the NSW branch of its business to Silverwater, a suburb in Western Sydney. Mr Jamsek and another driver, Mr Robinson, asked the company’s manager, Mr Vittens, for a pay rise to compensate them for the extra travel time. The request was rejected. Mr Jamsek and Mr Robinson (who were members of the Transport Workers’ Union) reported this rejection to the remaining drivers, including Mr Whitby. At the time there were five drivers working for the business.

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

40    Each of the five drivers took up the offer to become contractors. Mr Whitby and Mr Jamsek, on behalf of their respective Partnerships, executed a written contract with ALI to give effect to the new arrangements. The primary judge inferred that this probably occurred around 1 January 1986 (1986 Contract). A copy of the 1986 Contract could not be located and was not in evidence. However, the applicants recalled that it was in similar terms to contracts subsequently entered into (as described below), with the exception that the pay was on a “per carton” rate.

41    Before entering into the 1986 Contract, Mr Whitby was earning approximately $410 a week. The 1986 Contract provided a minimum of $600 per week ($120 per working day). The amount in fact earned each week built up over time. Mr Whitby gave oral evidence that he understood that a significant portion of the increase in earnings over $410 turned on the fact that he was, after entering in to the 1986 Contract, providing to the company a truck in addition to his labour.

42    At the time of entering into the 1986 Contract, Mr Whitby was paid out his accrued annual leave balance. He understood that this was paid out because his employment with the company had come to an end.

Purchase of new trucks

43    Consistent with the prelude to, and execution of, the 1986 Contract, Mr Whitby and Mr Jamsek purchased delivery trucks from the company. The primary judge inferred that these trucks, like the trucks acquired subsequently, were purchased on behalf of their respective Partnerships.

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

45    Mr Jamsek purchased an Isuzu Pantech 4 tonne truck from the company for $15,000. He and his wife approached a bank to obtain finance before agreeing to purchase the truck. He only agreed to the purchase once he had secured sufficient funding.

46    The applicants were responsible for the registration, maintenance and other costs associated with the upkeep of the trucks which they had purchased. The Partnerships paid all expenses associated with the trucks that they purchased, including interest on the funds borrowed to finance the purchase of the trucks.

Change in ownership from ALI to Thorn EMI

47    The primary judge inferred that, at some point in early 1986, after the 1986 Contract was executed and before 31 May 1986 when ALI was deregistered, ALI transferred the business to Thorn EMI.

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

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

Purchase of new trucks in 1989 and 1990

50    The Whitby Partnership acquired a 6 tonne truck in 1989 for $70,000. The partnership obtained finance in order to do so. The truck was registered in the name of the partnership. The partnership did not negotiate with the company as to the type or model of truck purchased.

51    In 1990, Mr Jamsek acquired an Isuzu Flat Top 10 tonne truck for an amount between $70,000 and $80,000. It was financed, and paid back over 10 years. At this time, he was asked to, and did, install a tarpaulin on it bearing a “Thorn” logo. He also arranged to have the truck painted.

52    At some time between 1990 and 1993, the Partnerships began invoicing the company on an hourly rate, rather than on a “per carton” basis.

53    Thorn Lighting was incorporated on 17 May 1993.

The 1993 Contract

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

55    Around 1 July 1993, four “contractors”, including the applicants through their respective Partnerships, executed a written agreement entitled “Contract Carriers Arrangement” with “Thorn Lighting”, described as a division of Thorn EMI (1993 Contract).

56    The agreed rate under the 1993 Contract included an allowance for annual leave, public holidays and sick days. It guaranteed 9 hours of pay each day, even though it was anticipated that the drivers might not necessarily have to work 9 hours per day.

57    The 1993 Contract included the following terms:

1.    The Contractors so named are:

a)    Separate legal entities both from each other and THORN LIGHTING.

b)    Able to work for other parties, providing that such work is not detrimental to either THORN LIGHTING or THORN LIGHTING customers.

c)    To present an invoice for work carried out in the preceding week.

2.    THORN LIGHTING and the Contractors have agreed:

1.    The Contractors will:

a)    Undertake carriage of goods as reasonably directed

b)     Comply with all Acts, Ordinances, Regulations and By-laws relating to the registration, third party insurance and general operation of the vehicle within New South Wales.

c)    Pay all legal costs, such as tax and duty, payable in respect of the vehicle and keep the vehicle in a mechanically sound, road worthy and clean condition.

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

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

f)    Hold at all times and on request produce for inspection, a current driver's licence issued in respect of a vehicle of the class of the vehicle in use and immediately notify THORN LIGHTING if the licence is suspended or cancelled.

g)    Not engage or use the services of a driver for the vehicle without prior and continuing approval by THORN LIGHTING. Such driver is to be correctly licensed, suitably dressed, and in all other respects entirely to the satisfaction of THORN LIGHTING.

h)    Obtain and maintain a public liability insurance policy for an amount of $2,000,000 or greater in respect of any liability incurred by the Contractor in performance of work for THORN LIGHTING.

i)    Obtain and maintain a comprehensive motor insurance policy over the vehicle including cover for amount of $5,000,000 or greater for third party property damage in respect of one accident.

j)    Immediately report any accident to the person in charge of the N.S.W. Branch Warehouse and to attend to any legal requirements at the scene or subsequent to the accident.

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

…

3.    ANNUAL LEAVE:

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

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

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

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

i)    Notice of the change given before October 31st, no payment will be made.

ii)    Notice given between November 1st and December 18th: the Contractors affected will be paid an amount of $18.92 per hour for a 9 hour day. During that period, the Contractors will be available on call.

iii)    No notice given before December 19th, then the Contractors will be paid at their usual weekly rate and must attend either THORN LIGHTING Wetherill Park or Smithfield sites and work as directed.

…

7.    PAY RATES:

a)    The pay package has been based on trucks over one year old with a carrying capacity of not less than 5 tonnes but less than 8 tonnes. As at 5th July, 1993, the current running rate is $34.33 per hour and standing rate is $18.92 per hour.

Contractors will not be paid for any annual leave, public holidays, and sick days as an allowance has been made within the above rates.

However, if industrial action by THORN LIGHTING employees creates a situation where the Contractors have no work, then the standing rate of $18,92 per hour will be paid,

b)    The Contractors and THORN LIGHTING have agreed to a standard nine hour working day with a usual starting time of 6 a.m., both parties accepting that the actual hours may vary due to work load fluctuations.

c)    On the basis of (a) and (b), the full weekly pay rate for Contractors doing metropolitan work is $1544.85 per week.

d)    The full weekly pay rate for country work, including two trips to Canberra, two trips to Central Coast/Newcastle, and one trip to South Coast is $2250.

As the country work is done on a set day in each area basis, it is possible that the timing of a public holiday may cause no consignments being available for country delivery on the next working day. In this situation, the country run Contractor will be available for metropolitan work and for that day be paid at the metropolitan rate.

e)    If the metropolitan work load requires an earlier start than 6 a.m., an hourly rate of $34.33 will apply.

f)    THORN LIGHTING agree to review these rates with the Contractors annually, in June of each year, any changes to apply from the 1st of July. If during the period prior to the review an unexpected increase in vehicle costs should arise, then THORN LIGHTING agree to an earlier review date.

g)    The Contractors will present invoices for work carried out during the preceding week on the following Monday. THORN LIGHTING will pay by direct bank method on the following Thursday.

…

9.    OPERATIONAL POINTS:

a)    THORN LIGHTING will where ever possible, offer any extra work to the Contractors at a mutually agreed rate for each job.

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

c)    The Contractors will arrange amongst themselves, whereby one truck will automatically come to Smithfield each morning to pick up transfer to Wetherill Park. If on arrival at Smithfield, there is more volume than one truck can handle, the Contractor will contact Wetherill Park to arrange assistance. However, if a truck cannot be spared for the transfer, Smithfield Warehouse should be advised to arranged alternative transport.

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

58    At or around the time of the 1993 Contract, Mr Jamsek was supplied with “Thorn” uniforms, to replace the “ALI” uniforms that he had previously worn. The primary judge accepted that the drivers were provided with various items of clothing which bore a “Thorn” logo.

59    In about 1993, a company manager stated to Mr Jamsek that “you can’t include any additional hours worked unless it is a special delivery which we have agreed”.

1993 transfer of business to Thorn Lighting

60    On 25 August 1993, the business name “Thorn Lighting” was registered by Thorn Lighting. The primary judge inferred that, around this time, the business was transferred from Thorn EMI to Thorn Lighting. No new written contract was entered into between the Partnerships and the new owner of Thorn Lighting until 1998.

Purchase of new truck in 1993

61    In 1993, the Whitby Partnership traded in the truck acquired in 1989 (see above at [50]) and leased a 6 tonne tabletop Mitsubishi. The leased Mitsubishi was treated as an asset of the partnership and deductions were claimed on the costs of the lease, running costs and for depreciation. Mr Whitby did not negotiate with the company as to the type or model of truck acquired. A company manager told Mr Whitby “we want you to fix a new tarp on the truck”. Mr Whitby purchased a tarpaulin that the company installed and to which it affixed company logos.

The 1998 Contract

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

63    Mr Jamsek and Mr Whitby, on behalf of their respective Partnerships, executed a further “Contract Carriers Arrangement”, dated 1 October 1998, with Thorn Lighting (1998 Contract). The “contractors” were named as the Jamsek Partnership, the Whitby Partnership and Mr Robinson. The 1998 Contract provided for an increased rate, which had been approved by Mr Higgins’ manager. For the purposes of this appeal, there were, other than the rate increases, no material changes between the 1993 Contract and 1998 Contract.

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

The 2001 Contract

65    In 2001, Mr Jamsek and Mr Whitby, on behalf of the respective Partnerships, executed a further “Contract Carriers Arrangement”, dated 1 January 2001, with Thorn Lighting (2001 Contract). Mr Whitby had again approached Mr Higgins and proposed on behalf of the drivers that they be given an increase in their rate of pay. Mr Whitby gave evidence at trial, as recounted at [52] of the Primary Judgment, that the purpose of increasing the rates was to secure or improve the profitability of the business of the Partnerships. Mr Jamsek gave oral evidence at trial that he had discussed what rate of pay he would require with Mr Whitby. The increase was approved by Mr Higgins’ managing director.

66    For the purposes of this appeal, there were, other than the rate increases, no material changes between the 1993 Contract, 1998 Contract and the 2001 Contract.

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

Events between 2001 and 2015

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

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

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

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

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

73    Around 2002, the company supplied and installed a new tarpaulin on the truck used by Mr Whitby. The Whitby Partnership paid for half of the cost of the new tarpaulin. The company paid for the other half of the cost of the tarpaulin and for the cost of “Thorn” logos which were added after the tarpaulin had been installed.

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

75    Mr Whitby gave the following evidence about the manner in which deliveries were readied at the warehouse around this time:

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

MR WHITBY: Yes. That’s correct.

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

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

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

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

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

MR WHITBY: That’s correct. Yes.

COUNSEL: … the goods around?

MR WHITBY: Yes.

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

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

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

MR WHITBY: That’s correct. Yes.

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

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

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

77    In 2008, Mr Whitby made another request for an increase to the drivers’ rate of pay. This request was made to Mr Graham Hayward. The request was supported by a letter Mr Whitby wrote on behalf of the Whitby Partnership, the Jamsek Partnership and Mr Robinson. It expressed the following (emphasis in original):

CONTRACT CARRIERS AGREEMENT RATE REVIEW

23rd May 2008

RE.

MJ & PT Jamsek of [address];    (31 years service)

R & D Whitby of [address];        (31 years service)

R Robinson of [address];             (32 years service)

Mr. Graham Hayward

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

Please note …

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

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

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

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

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

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

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

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

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

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

11.    Advertising on trucks.

12.    General cost of living up over this period.

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

78    An increase was agreed. Mr Jamsek gave evidence that this document was one example of the three or four occasions during the period from 1985 that he approached a representative of the company for a rates increase.

79    Around 2008 or 2009, the company supplied and installed a black tarpaulin bearing both “Thorn” and “Zumtobel” logos on Mr Whitby’s truck.

80    In 2009, the drivers approached Mr Chris Dixon (who was employed by the company as a Supply Chain Manager since 31 March 2018) and submitted a proposal to quote for non-metropolitan deliveries. Mr Dixon agreed to “give it a go” if it was cheaper or the same amount as what the company was paying others to make those deliveries. The primary judge inferred that, from time to time after 2009, Mr Dixon would approach the drivers to see if they were interested in a non-metropolitan delivery and, if the driver was interested, they would quote for that job and complete it, if approved.

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

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

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

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

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

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

85    The manifest run sheets, at least from around 2012, included the time of arrival at the customer’s place of delivery and the time of departure. Mr Whitby gave evidence that, around 2011 or 2012, the warehouse coordinator at the time, Ms Shelly Newton, told him the following:

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

86    Mr Whitby stated that this task took approximately 15 minutes a day. He performed this task daily until the termination of his relationship with the company.

87    Mr Jamsek likewise gave evidence that he was told in August 2012 by the warehouse foreman that he had to start scanning the delivery dockets”. Mr Jamsek stated that he told the warehouse foreman that it was not part of his job, but Mr Jamsek was told that he had to do the clerical work. Mr Jamsek duly complied.

88    The Whitby Partnership was dissolved with effect from 30 June 2012.

2015 Restructure

89    On 28 September 2015:

(a)    Thorn Lighting changed its name to ZG Operations; and

(b)    Zumtobel Lighting changed its name to ZG Lighting.

90    On the same date, ZG Operations and ZG Lighting executed a “Restructure Deed”. The deed restructured these companies by separating the sales and operations functions such that ZG Lighting (which had previously been called Zumtobel Lighting Pty Limited) would be solely responsible for sales and ZG Operations (which had previously been called “Thorn Lighting Pty Ltd”) would be responsible for the balance of the business functions.

91    As a result of the restructure, the staff of certain divisions of ZG Operations were transferred to ZG Lighting on 1 October 2015.

92    Around this time, the applicants received a document entitled “Organisational Announcement – Business Name Changes” and dated 22 September 2015. The document explained the imminent changes to the names of the entities (as referred to above at [89]). The memo also stated that there would be no impact on employment entitlements.

93    At the same time, letters were sent by ZG Lighting and ZG Operations to suppliers advising them of the restructure. The primary judge expressed that it was not clear whether or not copies of these letters were provided to the drivers, although it was submitted on the applicants’ behalf that they were: Primary Judgment at [88].

94    In October 2015, the drivers were instructed that their invoices would need to be made out to ZG Lighting. The Jamsek Partnership and Mr Whitby did so on and from 10 October 2015.

Termination of working relationship

95    Both Mr Whitby and Mr Jamsek’s services were terminated by ZG Lighting on 20 January 2017. They each received a letter on 14 November 2016 which stated that the impending termination of the 2001 Contract was the product of financial conditions and the need for the company to reduce costs. By this time, the applicants were earning $1995.95 a week for nine hours a day, for five days.

Particular aspects of the relationship

96    The primary judge also summarised various evidence in relation to particular aspects of the working relationship between the applicants and the company. Borrowing from the Primary Judgment, those matters are summarised below.

Leave

97    In 2000, Mr Jamsek took six or seven weeks of leave. During this period, a friend of Mr Jamsek drove his truck and the Jamsek Partnership paid him for his work. The Jamsek Partnership received payment for the provision of the partnership’s truck and the services of Mr Jamsek’s friend in accordance with the 1998 Contract.

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

99    Mr Jamsek took two weeks leave in 2012, 10 days of leave in 2014, and he took leave from October 2016 to 7 November 2016.

Working hours

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

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

102    Up until around 2009, Mr Whitby regularly arrived at the warehouse at 6 am. From about 2014, Mr Whitby would typically arrive no earlier than 7 am and leave to perform his deliveries after 9 am. Until that time, he would sit in the canteen.

103    The finishing time for Mr Whitby varied. There were occasions, but not many, on which there was no delivery work. Frequently, deliveries would be finished before 3 pm. However, Mr Whitby’s evidence was that, except towards the end of his relationship with the company, he was regularly working nine hour days.

Stocktakes and cleaning

104    Mr Jamsek said that twice a year, when the company completed a stocktake, he would be told to clean outside the back of the warehouse. Occasionally he would not do this if there was an urgent delivery. However, Mr Dixon gave evidence that a stocktake did not occur each year over his tenure. Furthermore, Mr Dixon denied that Mr Jamsek had cleaned up outside the warehouse while the stocktake was occurring.

105    Mr Whitby also said that on a few occasions from 1993 to 2001, he was told to complete the stocktake. However, on each of these occasions, a warehouse employee would tell Mr Whitby that “the union does not want you to do the stocktake”. He stated that a manager told him to “just go and clean up the yard” on these occasions. He stated that he would clean up the yard after he finished his deliveries (if he had any) until 4pm. Mr Whitby also gave evidence that “[a]t one stage in about 2013 Chris Dixon said to me “There are no deliveries due because of stocktake. Clean up the rear of the warehouse”.” However, Mr Dixon denied making that statement.

106    As a result of this evidence, the primary judge concluded at [94] of the Primary Judgment that there were at least some occasions on which Mr Jamsek and Mr Whitby, at the request of employees of the company, assisted in cleaning up whilst a stocktake was being undertaken. However, neither assisted in the actual stocktake. The primary judge did not draw any conclusion about the credibility of any witness arising from the differing recollections of these events: Primary Judgment at [95].

107    Both Mr Jamsek and Mr Whitby used their trucks on occasions to help move the location of the factory or warehouse. They were paid their usual rate for helping with the relocations. Also, from time to time until 2016, the applicants picked up and returned empty pallets to the warehouse. They charged the company and were paid for this assistance.

Branded clothing

108    While working for ALI until 1986, Mr Jamsek and Mr Whitby wore a uniform with an “ALI” logo that was supplied by the company. From time to time thereafter, the company provided, or made available, items of clothing bearing branding of the business or company. Mr Jamsek usually wore a high visibility shirt bearing the relevant company branding and shorts (without branding). In 2014 or 2015, he was provided with a high visibility vest which he was told to wear in the warehouse. Ms Newton’s recollection, in contrast, was that Mr Jamsek and Mr Whitby wore company clothing from time to time, but primarily wore their own clothes without a company logo.

109    The primary judge concluded at [99] of the Primary Judgment that the drivers wore a mix of clothing provided by the company (bearing branding or logos) and their own clothing. Again, according to the primary judge’s finding, the applicants were, at least from 2014, required to, and did, wear high visibility vests in the warehouse.

Accounting arrangements – Mr Jamsek

110    There were no tax returns or financial statements of the Jamsek Partnership in evidence for the 1987 to 1996 and 2000 to 2006 financial years. However, the available tax returns and financial statements of the Jamsek Partnership establish that, from 1997, the income derived by the partnership was split, generally evenly, between Mr Jamsek and his wife. The primary judge inferred that this occurred on and from 1 January 1986.

111    The 1997 financial statements recorded expenses of almost $34,000 and income of almost $75,000. Motor vehicle expenses were over $25,000. There was an expense of $1,200 for “casual labour”. Depreciation was claimed on a commercial motor vehicle (being the truck). Depreciation was also claimed on a typewriter, a truckport, a truck canopy and a desk.

112    The 1998 financial statements and partnership and individual income tax returns contained the same kind and levels of deductions and claims for depreciation. The expense for “casual labour” was $1,000.

113    The 1999 financial statements and partnership and individual income tax returns also recorded similar levels of deductions and claims for depreciation as in the 1997 year. The expense for “casual labour” was $200. Depreciation was also claimed in respect of a “capital improvement – driveway” which appears to have occurred on 9 March 1999 at a cost of $2,180.

114    The 2007 financial statements recorded income and expenses as follows:

115    At this time, depreciation was being claimed on the typewriter, truckport, truck canopy, desk, truck, truck radio and the “improvement to driveway”.

116    The 2008 to 2017 financial statements and partnership and individual income tax returns recorded similar kinds and levels of expenses and depreciation as indicated above in relation to the 2007 year.

117    The Jamsek Partnership insured Mr Jamsek’s vehicles, met all the running costs and maintained public liability insurance and comprehensive motor vehicle insurance after entry into the 2001 Contract. The primary judge inferred (at [119] of the Primary Judgment) such insurances were maintained at all relevant times.

118    According to this evidence, the Jamsek Partnership charged GST in relation to the services it supplied, which it invoiced as “Labour and Equipment”, and claimed input tax credits on partnership purchases.

Accounting Arrangements – Mr Whitby

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

120    The Whitby Partnership also claimed deductions, in certain years, in respect of a rental property in Smithfield, which was used to save the partnership running costs due to Mr Whitby travelling between the warehouse and his home.

121    Tax returns of the Whitby Partnership for the 1987 to 2010 years were not in evidence. The 2011 partnership tax return claimed deductions for rent ($6,930), depreciation ($2,409), motor vehicle expenses ($14,758) and other expenses ($14,758). The 2012 partnership tax return claimed deductions for rent ($6,900), depreciation ($1,688), motor vehicle expenses ($23,267) and other expenses ($10,772).

122    After the introduction of GST, the Whitby Partnership provided the company with tax invoices and charged GST for the supplies made.

123    As noted above, the Whitby Partnership was dissolved from 30 June 2012 and the partnership ceased to be registered for GST. Mr Whitby, continuing his work as previously, commenced invoicing for his services using his own Australian Business Number.

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

(a)    in the year ended 30 June 2013, Mr Whitby claimed deductions of $10,800 for rent expenses. In that year, motor vehicle expenses were $18,040. He also claimed depreciation (in relation to a ute) of $1,181 and other expenses totalling $4,826;

(b)    in the year ended 30 June 2015, Mr Whitby claimed deductions of $7,698 for rent, motor vehicle expenses of $17,647, depreciation of $1,659 and other expenses totalling $4,325;

(c)    in the year ended 30 June 2016, Mr Whitby claimed deductions of $5,188 for rent, motor vehicle expenses of $14,361, depreciation (in relation to a ute) of $2,730 and other expenses totalling $4,209; and

(d)    in the year ended 30 June 2017, Mr Whitby claimed motor vehicle expenses of $8,046, depreciation of $945, repairs and maintenance of $2,416 and other expenses totalling $7,665 (which included home office expenses of $4,259). He claimed a loss on sale of a ute of $1,370.

Application to this Court

125    The applicants, alongside Mr Robinson, initiated proceedings in this Court on 15 November 2017. An amended originating application, which removed Mr Robinson as an applicant, was filed on 7 August 2018. By the time of the primary judge’s decision, the three respondents were ZG Operations, ZG Lighting and Mr Dixon.

126    According to the Primary Judgment at [7], the parties accepted that the following contentions comprised the applicants’ claims:

(1)    pursuant to s 87(1) of the FW Act and cl 29.1 of the Road Transport and Distribution Award 2010 (Award), the applicants were each entitled to four weeks of paid annual leave for each year of their (alleged) employment, and they were not given any such paid leave by ZG Operations and/or ZG Lighting;

(2)    pursuant to cl 29.2 of the Award, ZG Operations and/or ZG Lighting were required to pay the applicants a loading of 17.5% of the minimum rate specified in cl 15 of the Award;

(3)    ZG Operations and/or ZG Lighting breached s 90(2) of the FW Act by failing to pay the applicants upon termination of their (alleged) employment amounts owing for leave accrued and not taken in the period 1 January 1986 (or alternatively 25 August 1993) to 20 January 2017;

(4)    pursuant to s 96 of the FW Act and cl 30 of the Award, the applicants were each entitled to 10 days of personal leave per year for each year of service. ZG Operations and/or ZG Lighting failed to pay them in respect of their outstanding personal leave entitlements in breach of s 99 of the FW Act and cl 30 of the Award;

(5)    in breach of s 116 of the FW Act and cl 32 of the Award, ZG Operations and/or ZG Lighting failed to pay the applicants for certain designated public holidays each year on which they absented themselves from work, specifically two days in 2011, nine days in each of the years 2012 to 2014, eight days in 2015, nine days in 2016 and one day in 2017;

(6)    pursuant to cl 27.1 of the Award, the applicants were entitled to be paid overtime for all hours worked outside of ordinary working hours, being 7 hours 36 minutes each day over five days, Monday to Friday. ZG Operations and/or ZG Lighting contravened s 45 of the FW Act and cl 27.1 of the Award by failing to pay the applicants overtime, calculated at a rate of $66.88 per hour for the first two hours of time worked outside of ordinary hours, and $88.88 per hour for overtime in excess of two hours;

(7)    ZG Operations and/or ZG Lighting contravened cl 13.3 of the Award by failing to give the applicants a total of 10 days of paid time off work to search for another job during their 10-week notice period;

(8)    ZG Operations and/or ZG Lighting failed to pay the applicants 12 weeks of redundancy compensation, calculated at their weekly contract rate, in breach of s 118 of the FW Act and cl 14.1 of the Award;

(9)    pursuant to cl 21.2 of the Award, ZG Operations and/or ZG Lighting were obliged to make such superannuation contributions for the applicants’ benefit to avoid being required to pay the superannuation guarantee charge. ZG Operations and/or ZG Lighting failed to make such superannuation contributions in breach of cl 21.2 of the Award;

(10)    in contravention of s 357 of the FW Act, ZG Operations and/or ZG Lighting put a contract to the applicants in or about December 2000 (which was subsequently entered into by the applicants’ respective Partnerships in 2001), which identified the applicants as independent contractors, not employees;

(11)    ZG Operations and/or ZG Lighting did not permit the applicants to take long service leave in accordance with the LSL Act during the period they were “workers”, and on termination of their (alleged) employment, ZG Operations and/or ZG Lighting were obliged to pay to the applicants an amount equal to the value of their long service leave accrued over 33.8 weeks and calculated at the weekly contract rate prevailing upon termination; and

(12)    to the extent they were not principal contraveners of the FW Act or the Award, ZG Operations and ZG Lighting, as well as Mr Dixon (for the period 21 November 2011 to 30 April 2015), were each knowingly concerned in or party to the contraventions of the FW Act or the Award for the purposes of s 550(2)(c) of the FW Act. Accordingly, they were taken to have personally contravened the FW Act.

127    The applicants also alleged that Mr Dixon was personally liable because he was, for the purposes of s 550(2)(c) of the FW Act, “knowingly concerned” in contraventions by the respondents of ss 44, 45 and 357 of the FW Act.

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

Primary judge’s substantive judgment

129    On 30 November 2018, the primary judge dismissed the applicants’ proceedings: Whitby v ZG Operations Australia Pty Ltd [2018] FCA 1934 (i.e. the Primary Judgment). The primary judge, assessing the totality of the relationship between the applicants and the company, held that the applicants were not employees for the purposes of the FW Act: ibid at [212].

130    The primary judge recognised that whether or not a person is an employee requires an objective assessment of the nature of the relationship between that person and the other party: ibid Reasons at [122]. The key factors that led to the primary judge’s conclusion were as follows.

131    The first key factor was the motivations of the contracting parties in entering into the 1986 Contract. The primary judge held at [133] that the circumstances prior to the entry into that contract, and the terms of the contract, indicated “a mutual intention that significant aspects of the existing relationship would come to an end, and that arrangements would change”.

132    Second, the primary judge found that the choice of the applicants to enter into the Partnerships in or around 1985 to 1986, and to contract with the company through the Partnerships, pointed against an employment relationship: ibid at [134]–[152]. Having regard to, amongst other things, the taxation implications of operating throughout the partnership, the primary judge concluded at [147] that “[t]he profitability of the partnerships turned in large measure on the costs associated with operating the vehicles purchased by the partnerships, including the costs associated with the substantial purchase price of the vehicles”.

133    Third, the primary judge held that the provision of vehicles by the applicants (or their respective Partnerships) was a significant matter in considering the “totality” of their relationships with the company: ibid at [153]–[168]. In particular, the primary judge expressed at [167] that “the manner in which [the trucks] were operated and maintained indicate that the company did not have the control over the activities of the drivers which might be expected if the drivers were employees”.

134    Fourth, after considering the relevant written contracts, the primary judge observed that the terms of the contracts were clear in identifying each Partnership as a party, and that the parties in fact conducted their activities on the basis that the Partnerships were supplying equipment and services: ibid at [173]. The primary judge rejected the applicants’ submission that the contracts should be construed as contracts with the individuals rather than the Partnerships.

135    The primary judge also observed at [179]–[180] that no written contract governed the work of the applicants during certain periods during the relationship. However, his Honour inferred from the parties’ conduct that there was an agreement between them during these periods in the same terms as the written contracts. The primary judge did not regard the absence of written contracts as tending to suggest that the applicants were employees: ibid at [182].

136    Fifth, and finally, the primary judge considered various factors such as working hours, length of service, control and activities at the warehouse: ibid at [183]–[211]. The primary judge recognised at [183] that the applicants earned their income from a single source for nearly 40 years. However, his Honour expressed at [185] that “[w]hilst the applicants did not serve other customers … there was no reason why the applicants could not have served others in the hours available to them outside of the hours in which they had contracted to provide services to the companies”.

137    In relation to the applicants’ contention that the company exercised control of their activities, the primary judge noted in opposition that:

(a)    the number of hours in fact worked by the applicants, and the flexibility around returning home once all deliveries were completed indicated a relationship of less control than might be expected of a typical employment relationship ([187]);

(b)    the applicants were not instructed by the company to wear a uniform ([188]);

(c)    the company had no real control over the way in which Mr Jamsek and Mr Whitby managed and operated their trucks, and the company did not purport to exercise control over the applicants’ purchase or maintenance of the trucks ([189]);

(d)    with limited exceptions, the applicants were not directed how to conduct their deliveries ([192] and [195]). The primary judge accepted that it was overwhelmingly a matter for Mr Whitby and Mr Jamsek as to how they secured their deliveries and then carried them out ([195]);

(e)    the applicants notified the company when they wanted to take leave ([210]); and

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

138    The collective consideration of these factors led the primary judge to conclude at [212] that the applicants were not employees for the purposes of the FW Act. Neither were they employees within the meaning of the SGA Act ([218]) or workers within the meaning of the LSL Act ([224]). As a result, the applicants failed to obtain the relief sought.

Primary judge’s costs judgment

139    On 22 February 2019, the primary judge ordered that the applicants pay the costs of Mr Dixon, but that the respondents’ application for costs be otherwise dismissed: Whitby v ZG Operations Australia Pty Ltd (No 2) [2019] FCA 201.

140    The basis for the award of costs against the applicants in respect of Mr Dixon was summarised by the primary judge as follows at [36] of the costs judgment:

I am satisfied that the respondents have established that the proceedings were instituted against Mr Dixon “without reasonable cause”. There was no real prospect of establishing that Mr Dixon knew the applicants were, in truth, employees on any of the bases identified by the appellants after the proceedings were instituted.

Appeal to the Full Court

141    The time period specified by r 36.03 of the Federal Court Rules 2011 (Cth) for the applicants to file a notice of appeal against a decision of the primary judge is 28 days. No notice of appeal was filed within 28 days of the substantive judgment by the primary judge.

142    On 2 April 2019, Mr Jamsek filed an application for an extension of time to file a notice of appeal. Mr Jamsek initially sought to appeal against both the primary judge’s substantive judgment and costs judgment. He also appealed against each of ZG Operations, ZG Lighting and Mr Dixon. However, a subsequent amended application for an extension of time, and a revised draft notice of appeal, discontinued his appeal against the costs judgment, and also removed Mr Dixon as a respondent. Mr Jamsek’s application for an extension of time in respect of the substantive judgment was 103 days out of time.

143    On 15 July 2019, a Registrar of the Court ordered that the hearing of the application for the extension of time and the proposed appeal be heard concurrently.

Joinder of the Trustees

144    Mr Whitby was declared bankrupt on 5 February 2019, being a date after the delivery of the substantive judgment but before the delivery of the costs judgment. The Official Trustee in Bankruptcy was the initial trustee of Mr Whitby’s bankrupt estate, however a creditor in the estate subsequently nominated registered trustees to take over the administration.

145    On 2 August 2019, Daniel Civtanovic and Stephen Hundy (Trustees) were appointed as the new trustees of the bankrupt estate of Mr Whitby. The Trustees shortly thereafter sought advice in relation to the application initiated by Mr Jamsek in the Full Court.

146    On 8 August 2019, the Trustees applied to be joined as applicants to this appeal proceeding. Perram J granted the joinder on 14 August 2019: Jamsek v ZG Operations Australia Pty Ltd (Joinder Application) [2019] FCA 1332.

Hearing of the appeal

147    The appeal was heard on 26 August 2019. The applicants were represented by Ms Francois, Mr Crossland and Ms Hooper of counsel. The respondents were represented by Mr Kenzie QC and Mr Meehan of counsel.

148    The three grounds of appeal advanced by the applicants in their further amended draft notice of appeal, subject to being granted the requisite extension of time, were as follows:

1.    The primary judge erred in failing to find:

(a)    that in the period 25 August 1993 to about 1 October 2015 the First Appellant (Mr Jamsek) and Mr Whitby were “employees” of the First Respondent (ZG Operations) within the meaning of the [FW Act] and/or the [SGA Act]; and/or that they were “workers” in the service of ZG Operations under the [LSL Act];

(b)    that in the period from about 1 October 2015 to about 20 January 2017 Mr Jamsek and Mr Whitby were “employees” of the fourth [sic: second] respondent (ZG Lighting) within the meaning of that word in the FW Act and/or the SGA Act; and/or they were “workers” in the service of ZG Lighting within the meaning of the LSL Act;

…

2.    The primary judge erred in finding that ‘in principle there was no reason why Mr Jamsek and Mr Whitby could not have served others in the hours available to them outside of the hours in which they had contracted to provide services’ to ZG Operations and ZG Lighting … in that:

   (a)    this proposition was not put to Mr Jamsek or Mr Whitby;

(b)    it was contrary the substance of the conduct of all parties since 1993 and Mr Jamsek’s and Mr Whitby’s role in the Business since 1977 (being that they worked regular weekly hours of 40-45 hours per week in the Business only and not in other businesses) …;

(c)     it would be unreasonable to expert Mr Jamsek or Mr Whitby to drive trucks or be involved in truck-driving on a more than full-time basis or more than 40-45 hours per week;

(d)    the finding appears to have assumed that Mr Jamsek or Mr Whitby should have subleased their trucks or engaged an employee to drive it at night or on the weekends, but without any evidence of the cost-benefits or of the viability of doing so;

(e)    in the circumstances of (b) to (d) above it was a finding without evidence or was an irrelevant speculation.

3.    The learned primary judge erred in finding that Mr Jamsek and Mr Whitby could have sold businesses and they included goodwill … because there was no evidence to support the finding of “goodwill” and selling would involve no more than selling the vehicles and other such assets.

149    It was determined early in the hearing that the Full Court would hear the parties as if the extension of time and the appeal were being run together. This was appropriate because, amongst other reasons, the merits of the applicants’ appeal was relevant to whether an extension of time ought be granted. For the purposes of these reasons, however, it is necessary to start with the logically anterior question—whether the applicants ought to be granted an extension of time to bring their appeal.

Extension of time

Applicants’ submissions

150    As explained, Mr Jamsek filed his application for an extension of time on 2 April 2019, being 103 days out of time. Mr Jamsek submitted that the extension of time should be granted as the delay is not extensive (i.e. it was commenced promptly after the costs judgment), the delay did not cause any real prejudice, there was a reasonable explanation for the delay, and the proposed grounds of appeal had merit.

151    The explanation for the delay was essentially that the delivery of the costs judgment by the primary judge led to different advice being provided to Mr Jamsek about the prospects of an appeal against the primary judge’s substantive judgment. After the substantive judgment on 30 November 2018, Mr Jamsek had determined not to appeal that decision on the basis of advice from counsel. However, after the costs judgment on 22 February 2019, counsel’s advice was that there may be prospects to appeal the costs judgment. This led to further, albeit belated, analysis of the merits of an appeal from the primary judge’s substantive judgment.

152    Having received leave for the Trustees to be joined as parties, Mr Jamsek and the Trustees filed a further amended application for an extension of time, adding the Trustees as applicants, on 15 August 2019. This was 230 days out of time. Mr Whitby, like Mr Jamsek, had not appealed the substantive judgment based on advice from counsel. Mr Whitby was subsequently declared bankrupt on 5 February 2019, prior to the costs judgment. About a month after the costs judgment, Mr Whitby, having received revised advice from counsel, expressed to his solicitors that he wished to proceed with an appeal, but was unable to do so as he had been declared bankrupt.

153    In a Further Report to Creditors dated 6 June 2019, the Official Trustee noted that Mr Whitby’s solicitors had requested that the Official Trustee consider appealing the substantive judgment and costs judgment. The Official Trustee then provided notice to creditors in that report “requesting indemnities and/or funding to allow the trustee to consider the right to appeal or assign this chose in action to a third party”. The report further provided that, should no indemnities or offers of funding be forthcoming, “the Trustee will not be in a position to take further action in relation to the chose of action”.

154    The Official Trustee was evidently not willing to lodge an application for an extension of time in the absence of funding or indemnities. However, the Trustees, shortly after their appointment on 2 August 2019, promptly obtained legal advice and provided instructions for them to be joined to Mr Jamsek’s application.

155    Additionally, Mr Jamsek and the Trustees also provided evidence that another reason why the applicants did not seek to appeal the substantive judgment was their mistaken understanding that they would have to be cross-examined again on appeal. They found cross-examination at trial stressful and did not wish to experience that again. As such, the applicants submitted that, to the extent that the applicants may be characterised as having elected not to bring an appeal against the substantive judgment, the applicants’ did not truly comprehended the nature of what they were electing between.

Respondents’ submissions

156    The respondents’ submitted that the lengthy delay of Mr Jamsek and the Trustees’ application and the explanation for it, together with the absence of merit in the grounds of the proposed appeal, warranted the conclusion that it was not in the interests of justice that an extension of time be granted.

157    The respondents particularly submitted that they had experienced ongoing prejudice in having to deal with the Trustees’ late application in a compressed timeframe at the same time as having to prepare arguments in respect of the merits of the applicants’ appeal. However, in the respondents’ submission, the fact that the application for an extension of time was being considered concurrently with the appeal provided the Court with the advantage of being able to evaluate the weaknesses of the Trustees’ proposed grounds of appeal.

Consideration

158    The Court possesses a wide discretion in determining whether or not to grant an extension of time for the filing of an appeal. However, the prima facie rule is that an appeal brought out of time will not be entertained, as explained by Tracey J in Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 426 at [12]:

An application for an extension of time within which to file a notice of appeal may be made pursuant to Rule 36.04 of the Rules. The Court has an unfettered discretion to grant or refuse such an application. That discretion must, of course, be exercised judicially. This requires a balancing of potentially conflicting interests and regard to the peculiar circumstances of each case. The starting point in any given case is that the relevant legislation or rules have prescribed a period within which an appeal must be lodged. Such prescription serves the public purpose of bringing disputes to finality. There is, therefore, what has been described as a prima facie rule that applications or appeals brought out of time will not be entertained: cf Lucic v Nolan (1982) 45 ALR 411 at 416. It is, therefore, necessary for an applicant who seeks an extension of time to advance some plausible reasons which explain the delay in commencing the appeal and provide a foundation for the conclusion that it is in the interests of justice that an extension be granted: cf Duff v Freijah (1982) 62 FLR 280 at 285.

159    In BVG17 v BVH17 [2019] FCAFC 17; 268 FCR 448, Collier and Rangiah JJ, citing AZAEY v Minister for Immigration and Border Protection [2015] FCAFC 193; 238 FCR 341 at [10]–[12] per North, Besanko and Flick JJ, summarised (at [34]) the relevant considerations as follows:

In considering whether to order an extension of time in which to file a notice of appeal, the Court is required to determine whether an order in such terms is in the interests of justice. This ordinarily requires consideration of issues including the length and explanation for the delay, the nature of the litigation, the prejudice to other parties of a grant or refusal of an extension of time, and the prospects of success of the appeal if it proceeded …

160    In the present case, the length of Mr Jamsek’s delay—103 days out of time—was not minor. The same can be said for the application by the Trustees—being 230 days out of time—to an even greater extent, although the delay should not be laid at the feet of the Trustees, who acted swiftly to initiate an appeal. As a starting point, the desire for finality in litigation should prima facie permit the respondents to rely on the substantive judgment of the primary judge. In my view, however, the interests of justice require that the application for an extension of time to file a notice of appeal should be allowed, both in respect of Mr Jamsek and the Trustees of Mr Whitby’s bankrupt estate.

161    First, the delay of Mr Jamsek and Mr Whitby (and then the Official Trustee) should be considered in light of the split nature of the proceeding before the primary judge, with his Honour having separately delivered the costs judgment about three months after the substantive judgment. It was the costs judgment which ultimately triggered the desire of Mr Jamsek and Mr Whitby (albeit by that time as a bankrupt) to appeal the substantive judgment. It appears that the cold reality of an adverse costs order heightened the significance of their lack of success at trial. Once the costs judgment was delivered, the applicants’ representatives moved relatively swiftly to file a notice of appeal against the costs judgment and also, as a result of further consideration, the substantive judgment. This is not to deny that the substantive judgment and costs judgment involved distinct orders by the primary judge in respect of which the applicants could appeal. However, the time period between the substantive judgment and costs judgments serves to mitigate the prejudice that the respondents would suffer from the delay since the substantive judgment.

162    Second, the prejudice to the respondents of the delay was limited given the circumstances. Because the representatives for Mr Jamsek proceeded to lodge an appeal shortly after the costs judgment, there had not been a prolonged period of time between consideration of the proceeding by the Court and the filing of the application for an extension of time. In respect of the joinder of the Trustees, it must be accepted that the respondents faced prejudice in having to respond to the Trustees’ late addition to the proceeding in the month leading up to the hearing of the appeal. And the new focus on Mr Whitby would have created additional burden on the legal representatives for the respondents. However, that burden was minimal given the commonality in the background circumstances of Mr Jamsek and Mr Whitby. Indeed, judging from the Primary Judgment, the primary judge largely considered the applicants as a collective and seldom referred to circumstances that were individually unique. As such, after the Trustees were joined, the respondents were largely able to rely on the same submissions made, and to be made, in respect of Mr Jamsek.

163    Third, and perhaps most importantly, the prospects of the appeal by Mr Jamsek and the Trustees were strong. This follows, of course, because I, with Perram and Wigney JJ, have found that their appeals should be allowed. However, my view is that, even without the benefit of those submissions and that evidence, Mr Jamsek and the Trustees still possessed at least reasonable prospects of success on appeal.

164    Accordingly, Mr Jamsek and the Trustees ought be granted an extension of time in which to file their appeals. Before turning to their grounds of appeal (consideration of which commences below at [185]), I summarise below the relevant legal principles in relation to the nature of appellate review and the characterisation of an employment relationship.

Relevant legal principles

Appellate review

165    The exercise of this Court’s appellate jurisdiction, as governed in the present case by Div 2 of Pt III of the Federal Court of Australia Act 1976 (Cth), involves an appeal by way of rehearing: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 (Branir) at [20] per Allsop J, with Drummond and Mansfield JJ agreeing; Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 (Aldi) at [45] per Perram J. The appellate court must conduct a “real review” of the trial and the primary judge’s reasons: Lee v Lee [2019] HCA 28; 93 ALJR 993; 372 ALR 383; 89 MVR 388 (Lee) at [55] per Bell, Gageler, Nettle and Edelman JJ, citing Fox v Percy [2003] HCA 22; 214 CLR 118 (Fox v Percy) at [25] per Gleeson CJ, Gummow and Kirby JJ and Robinson Helicopter Co Inc v McDermott [2016] HCA 22; 90 ALJR 679; 331 ALR 550 at [43] per French, Bell, Keane, Nettle and Gordon JJ. The task of the appellate court is the correction of error: Branir at [22]. As such, for the appellate court to vary or reverse the decision of the primary judge, it is necessary for an appellate court to demonstrate error in the primary judge’s findings or conclusion: Branir at [21].

166    Error is not demonstrated merely because the appellate court disagrees with the primary judge: Aldi at [45]. And, conversely, it is unnecessary for the primary judge’s decision to be characterised as “plainly” or “obviously” wrong: Aldi at [6]–[7]. To require this would set the standard of appellate review too high: ibid at [9]. Instead, what constitutes an error for these purposes depends on the nature of the impugned findings or conclusions by the primary judge: Branir at [24]. As Perram J observes above at [4], the determination (by reference to the facts found) as to whether the applicants in the present case were employees and workers for the relevant statutory purposes during the relevant periods is a question of fact: see Comptroller-General of Customs v Pharm-A-Care Laboratories Pty Ltd [2020] HCA 2; 94 ALJR 182; 375 ALR 98 at [41] per Kiefel CJ, Bell, Gageler, Keane and Gordon JJ, and the cases cited therein.

167    A slight difference emerged between the parties in respect of the application of these principles. The applicants relied on the judgment of Gageler J in Minister for Immigration and Border Protection v SZVFW [2018] HCA 30; 264 CLR 541 (SZVFW) in support of the proposition that, if the Full Court in the present case reached a different conclusion to the primary judge, the Full Court was compelled to give effect to that conclusion. The applicants submitted that, to the extent that pre-SZVFW authorities (in particular Branir and Aldi) suggested that the Full Court was required to identify particular error in the constituent findings or reasoning by primary judge, then SZVFW should be followed instead.

168    The analysis by Gageler J in SZVFW at [35]–[50] was primarily directed to explaining the circumstances in which an appellate court should apply two alternative standards of appellate review, which may be broadly described as the “discretion standard” and the “correctness standard”. As explained by Gageler J (at [44]) by reference to decisions such as House v The King [1936] HCA 40; 55 CLR 499 and Norbis v Norbis [1986] HCA 17; 161 CLR 513, the “discretion standard” is to be applied where the appellate court reviews “evaluative conclusions in respect of which the applicable legal criteria permitted of some latitude of choice of margin of appreciation such as to admit of a range of legally permissible outcomes”. The exercise of broad statutory discretions—such as making an order that is “just and equitable” or in “the best interests” of a party—are examples.

169    The “correctness standard”, in contrast, requires the appellate court, where applicable, to substitute its own conclusion where it disagrees with that of the primary judge. This standard was approved by the majority in Warren v Coombes [1979] HCA 9; 142 CLR 531 as the general standard of appellate review, as Gageler J observed in SZVFW at [41]. The correctness standard will apply where the “legal criterion applied or purportedly applied by the primary judge to reach the conclusion demands a unique outcome”: ibid at [49].

170    From my reading, no aspect of the Gageler J’s judgment in SZVFW undermines the principles drawn from decisions of the Full Court in Branir and Aldi. Indeed, having explained the circumstances in which the “discretion standard” and the “correctness standard” were applicable, Gageler J at [50] cited Branir at [25] to exemplify that the distinction between these standards had “been acknowledged and applied to guide appellate review in the Full Court of the Federal Court”. In short, my view is that SZVFW did not alter the relevant principles.

171    The ultimate determination in the present case—whether the applicants are “employees” and “workers” for particular statutory purposes—is an example of where it is unnecessary for the applicants to demonstrate a particular form of error in the constituent findings or reasoning of the primary judge. Of course, any such error, if established, would strengthen the likelihood that the primary judge erred in reaching his ultimate determination. But that path of analysis is not necessary.

172    A passage from the decision of the High Court in Australian Securities and Investments Commission v Kobelt [2018] HCA 19; 93 ALJR 743; 368 ALR 1 is illustrative. In the decision under appeal to the High Court, the Full Court of the Federal Court held, contrary to the conclusion of the primary judge, that Mr Kobelt’s conduct was unconscionable in contravention of the Australian Securities and Investments Commission Act 2001 (Cth). On appeal to the High Court, Kiefel CJ and Bell J observed the following (at [47]) about the appellate function of the Full Court:

The conclusion that a supplier of a financial service has engaged in conduct that contravenes the statutory norm of conscience fixed by s 12CB(1) of the ASIC Act is an evaluative judgment. Nonetheless, it is a judgment that is either right or wrong. It was the duty of the Full Court to conduct a “real review” of the evidence and the primary judge’s reasons for judgment. Their Honours were unanimous in concluding that the primary judge erred in finding that Mr Kobelt’s conduct in the supply of credit under his book-up system was unconscionable.

(Emphasis added and citations omitted.)

173    The same is true about whether the applicants in the present case are “employees” or “workers” within the meaning of the relevant statutes. Although the process to answering those questions is an evaluative one (as discussed below), the primary judge’s decision in the present case was not of a nature that “tolerates a range of outcomes”, to adopt the language of Gageler J in SZVFW at [49]. The “discretion standard” is therefore irrelevant to the present case. Instead, the questions posed to the primary judge demanded a single answer; the applicants were either “employees” for the purposes of the FW Act and the SGA Act, or they were not. Likewise, they were either “workers” for the purposes of the LSL Act, or they were not. The “correctness standard” is therefore applicable in the present case.

174    Accordingly, even if the applicants in the present case cannot point to particular errors committed by the primary judge in his Honour’s constituent findings or reasoning, the Full Court in the present case must substitute its view for that of the primary judge if the Full Court is of the view that the applicants are “employees” or “workers” for the relevant statutory purposes.

Employment relationship

Statutory definitions

175    The statutory definitions relevant to the applicants’ case adopt the ordinary meaning of an employment relationship as developed by the common law.

176    The meaning of an “employee” for the purposes of the FW Act depends on the relevant Part of that Act in which it is adopted. In certain contexts, “employee” and “employer” are directly conferred their ordinary meaning. In other contexts, those terms are defined by reference to the definitions of a “national system employee” and “national system employer”, which are in turn founded on an ordinary understanding of an employment relationship.

177    Under the SGA Act, the definitions of “employee” and “employer” are likewise given their ordinary meaning: s 12(1). The SGA Act then modifies the definition of an “employee” by specific provisions: s 12(2)–(11).

178    Finally, under the LSL Act, s 3(1) defines a “worker” as follows:

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

The multi-factor test

179    There is no single standard for whether an employment relationship exists: ACE Insurance Ltd v Trifunovski [2013] FCAFC 3; 209 FCR 146 (ACE Insurance (FC)) at [102] per Buchanan J, with Lander and Robertson JJ agreeing. It is instead necessary to undertake what is commonly referred to as a “multi-factor test” or a “multi-factorial assessment”, which requires the consideration and synthesis of all relevant indicia: Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; 228 FCR 346 (Quest) at [176] per North and Bromberg JJ; Eastern Van Services Pty Ltd v Victorian WorkCover Authority [2020] VSCA 154 (Eastern Van Services) at [36] per Tate, Kyrou and Niall JJA; Dental Corporation Pty Ltd v Moffet [2020] FCAFC 118 (Dental Corporation) at [29] per Perram and Anderson JJ. This does not entail a “mechanical exercise of running through items on a check list”: Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944 per Mummery J, quoted in Roy Morgan Research Pty Ltd v Federal Commissioner of Taxation [2010] FCAFC 52; 184 FCR 448 (Roy Morgan) at [31] per Keane CJ, Sundberg and Kenny JJ. Rather, “the totality of the relationship between the parties” is relevant: Stevens v Brodribb Sawmilling Co Pty Ltd [1986] HCA 1; 160 CLR 16 (Stevens) at 29 per Mason J, quoted in Hollis v Vabu Pty Ltd [2001] HCA 44; 207 CLR 21 (Vabu) at [24] per Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ.

180    It is not possible to exhaustively list all relevant factors for consideration: Stevens at 37 per Wilson and Dawson JJ. However, for illustration, the following series of central considerations were identified by Perram J in ACE Insurance Ltd v Trifunovski [2011] FCA 1204; 200 FCR 532 at [29]:

[T]he terms of the contract; the intention of the parties; whether tax is deducted; whether sub-contracting is permitted; whether uniforms are worn; whether tools are supplied; whether holidays permitted; the extent of control of, or the right to control, the putative employee whether actual or de jure; whether wages are paid or instead whether there exists a commission structure; what is disclosed in the tax returns; whether one party “represents” the other; for the benefit of whom does the goodwill in the business inure; how “business-like” is the alleged business of the putative employee — are there systems, manuals and invoices; and so on …

(See also On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) [2011] FCA 366; 214 FCR 82 (On Call) at [217]–[218] per Bromberg J, Hallmark Construction Pty Ltd v Harford [2020] NSWCA 41 at [85]–[86] per Basten JA (with Meagher JA and Emmett AJA agreeing) and Eastern Van Services at [36].)

181    After examining all relevant considerations, the broad fundamental distinction, as traditionally framed, is between a person employed under a contract of service, who serves the employer’s business, and a contractor engaged under a contract for services, who conducts a trade or business of his or her own: Marshall v Whittaker’s Building Supply Co [1963] HCA 26; 109 CLR 210 at 217 per Windeyer J, quoted in Vabu at [40]; see also ACE Insurance (FC) at [24], Quest at [177]–[178] and Eastern Van Services at [29]. However, as Perram J explains above at [6]–[8], this distinction, depending on the circumstances, may not represent a perfect dichotomy. As such, the appropriate question is not whether the person is conducting their own business; the question is whether the person is an employee: Tattsbet at [61] per Jessup J, with Allsop CJ and White J agreeing.

Substance and reality

182    Where a court is required to characterise a relationship as that of employment or not, the court should focus on the substance and reality of the relationship, rather than its mere legal form: Quest at [142] per North and Bromberg JJ; WorkPac Pty Ltd v Skene [2018] FCAFC 131; 264 FCR 536 at [180] per Tracey, Bromberg and Rangiah JJ; Eastern Van Services at [36]. An express statement by the contracting parties as to the nature of the relationship will be relevant, but not determinative: ACE Insurance (FC) at [102]. For instance, by labelling their relationship an independent contract, the parties cannot alter what is in reality an employment contract: Australian Mutual Provident Society v Allan (1978) 52 ALJR 407 (AMP) at 409 per Lord Fraser for the Privy Council (otherwise reported as Australian Mutual Provident Society v Chaplin (1978) 18 ALR 385 at 389); Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 (Re Porter) at 184 per Gray J; WorkPac Pty Ltd v Rossato [2020] FCAFC 84 at [590] per White J.

183    In their plurality judgment in Quest, North and Bromberg JJ described various avenues in which a court might reconcile a disparity between the face of a contract and the reality of the relationship the subject of that contract. The first is that the contract may be a sham—a product not intended by the parties to have substantive effect but rather to deliberately deceive third parties: Quest at [144], citing, amongst other authorities, Raftland Pty Ltd v Federal Commissioner of Taxation [2008] HCA 21; 238 CLR 516 at [33]–[35] per Gleeson CJ, Gummow and Crennan JJ. The second is that the contracting parties, by their conduct subsequent to the execution of the contract, impliedly varied their contract: Quest at [149]. Neither of these explanations were advanced by the applicants to explain the circumstances of the present case.

184    A third explanation, however, is pertinent to the facts of the present case. North and Bromberg JJ observed as follows in Quest:

[147]    In Autoclenz at [35], Lord Clarke SCJ, speaking for the Court, observed that:

… the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem.

A number of the terms of the agreement considered in Autoclenz were regarded as ineffectual because they did not “reflect the true agreement between the parties” (at [38]). The terms disregarded provided for rights or imposed obligations of a kind which served to indirectly disclaim the existence of an employment relationship.

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

(Emphasis added.)

Were the applicants “employees” and “workers”?

Method of consideration

185    As extracted above at [148], the applicants advanced three grounds of appeal in their further amended draft notice of appeal. The second and third grounds concern subsidiary findings of the primary judge that supported his ultimate finding—the subject of the first ground of appeal—that the applicants were not “employees” and “workers” within the meaning of the relevant statutes. Given the evaluative nature of the multi-factor test, it is possible that the applicants could succeed on the second and third grounds of appeal, but ultimately be unsuccessful in establishing that the applicants were in an employment relationship. In these circumstances, it is convenient to address the grounds of appeal collectively, although specific references will be made to the subsidiary findings the subject of the second and third grounds of appeal.

186    As explained above, the determination as to whether the applicants and the company were in an employment relationship requires a consideration of the totality of their relationship by reference to all relevant indicia. There is no precise template to undertake this task. In the present case, it is convenient to state my conclusion upfront and then expound why that is so.

187    My view, with respect to the primary judge, is that a proper consideration of the long relationship between the applicants and the company reveals that the applicants were in fact employees, not independent contractors, during the relevant period. Although there are various factors supporting the characterisation that the applicants were operating an independent business, these factors are outweighed by an appreciation of how the relationship operated in substance.

Key factors

Formation and operation of the Partnerships

188    The Partnerships were established in late 1985 or early 1986. At all material times, Mr Jamsek contracted with the company through the Jamsek Partnership. Mr Whitby similarly contracted through the Whitby Partnership until 30 June 2012, but thereafter contracted as a sole trader. Throughout the periods in which the Partnerships contracted with the company, the Partnerships invoiced for services provided and charged GST.

189    The primary judge noted in the Primary Judgment (at [146]) the “adoption by the parties of a structure which required the partnerships to invoice for work as independent contractors”. His Honour further expressed at [144] that “[t]he fact that the parties conducted their affairs for many years on the basis that the partnerships were making supplies in respect of which GST was payable, without any suggestion that the partnerships were not engaged in business or should not be charging GST” was a relevant factor. And, at [145], the primary judge described the Partnerships’ taxation affairs as being conducted in a “business-like manner”, and that “[t]he partnerships purchased assets, claimed deductions, made decisions about expenditure which affected profitability and conducted their affairs as one would expect of a business”.

190    I agree with the primary judge that these observations support the conclusion that the applicants were independent contractors in the present case. The utilisation of the Partnerships as contracting vehicles, and the manner in which the taxation and compliance affairs of the Partnerships were undertaken, are indicative of the applicants operating their own business: see, for example, Barro Group Pty Ltd v Fraser [1985] VR 577 at 580 per Kaye, McGarvie and Marks JJ; Climaze Holdings Pty Ltd v Dyson (1995) 13 WAR 487 at 495 per Steytler J, with Malcolm CJ and Rowland J agreeing; Wesfarmers Federation Insurance Ltd v Stephen Wells trading as Wells Plumbing [2008] NSWCA 186 at [39]–[42] per Basten JA, with Hodgson and Handley JJA agreeing. In the ultimate analysis, however, the weight that I would attribute to these matters is ostensibly less than that of the primary judge.

191    As a starting point, the fact that the applicants contracted with the company through their respective Partnerships does not preclude the existence of an employment relationship as between each applicant and the company. In AMP, the Privy Council observed at ALJR 410; ALR 391 that “[i]t may not be absolutely inconsistent with a relationship of master and servant that the alleged servant should be a partnership, but it would certainly be unusual”. Unusual it may be, but, importantly for the present case, the evidence of the other members of the Partnerships—i.e. the applicants’ spouses—directly contributing to work that generated income from the company was limited. The purpose behind the establishment of the Partnerships was to enable the splitting of income between each respective applicant and their spouse to gain tax advantages. Although the applicants’ spouses may have contributed incidental administrative assistance from time to time, the reality is that the members of the Partnerships were partners in name only, and not joint contributors to the income earning activities of the Partnerships.

Intentions behind the 1986 Contract

192    The circumstances surrounding the applicants entering into the 1986 Contract were outlined above at [38]–[42]. I agree generally with the primary judge’s observation that these events changed the relationship between the parties. However, I take a different view as to the significance of these events to the discharge of the multi-factor test. In particular, I disagree with the primary judge’s characterisation of the applicants’ intentions in entering into the 1986 Contract.

193    To explain, I start with the observation of Lord Clarke (writing on behalf of the Supreme Court of the United Kingdom) in Autoclenz Ltd v Belcher [2011] UKSC 41; [2011] 4 All ER 745; [2011] ICR 1157 (Autoclenz) that

the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part.

This passage was quoted by North and Bromberg JJ in Quest at [147], as extracted above at [184].

194    Autoclenz involved an appeal from a decision of the Employment Tribunal, upheld by the Court of Appeal of England and Wales, that the respondents—individual valeters who provided car-cleaning services—were “workers” within the meaning of relevant statute. The Supreme Court held (at [38]) that it was open for the Employment Tribunal to conclude that the documents alleged to form the contract between the appellant and the respondents “did not reflect the true agreement between the parties”, and that the Employment Tribunal was entitled to disregard the terms of the documents insofar as they were inconsistent with the true terms of the contract as evidenced by the parties’ conduct.

195    The judgment in Autoclenz provides detailed analysis of how a court may address the contention that the terms of an employment contract do not accurately reflect the true terms of the relationship between the contracting parties. Not all of the analysis is relevant to the present case. What is useful for immediate purposes is to extract a few paragraphs (which finish with the passage set out above) concerning the nature of the negotiation of employment contracts:

[33]     At para [103] [of the decision under appeal in [2009] EWCA Civ 1046; [2010] IRLR 70)] Sedley LJ said that he was entirely content to adopt the reasoning of Aikens LJ [writing separately in that same decision]—

‘recognising as it does that while employment is a matter of contract, the factual matrix in which the contract is cast is not ordinarily the same as that of an arm’s-length commercial contract.’

I agree.

[34]     The critical difference between this type of case and the ordinary commercial dispute is identified by Aikens LJ in para [92] as follows:

‘I respectfully agree with the view, emphasised by both Smith and Sedley LJJ, that the circumstances in which contracts relating to work or services are concluded are often very different from those in which commercial contracts between parties of equal bargaining power are agreed. I accept that, frequently, organisations which are offering work or requiring services to be provided by individuals are in a position to dictate the written terms which the other party has to accept. In practice, in this area of the law, it may be more common for a court or tribunal to have to investigate allegations that the written contract does not represent the actual terms agreed and the court or tribunal must be realistic and worldly wise when it does so … ’

[35]     So the relative bargaining power of the parties must be taken into account in deciding whether the terms of any written agreement in truth represent what was agreed and the true agreement will often have to be gleaned from all the circumstances of the case, of which the written agreement is only a part. This may be described as a purposive approach to the problem. If so, I am content with that description.

(Emphasis added.)

196    The pertinent point for present purposes is that, where the court must determine whether a relationship subject to a contract is one of employment, the relevance and weight of the parties’ intentions in entering into that contract must be characterised in light of the reality of the respective bargaining positions of each party. While the execution of the contract may evince the requisite meeting of the minds to establish a binding contractual relationship, accepting this is only the starting point in analysing the nature of the parties’ relationship in the present context.

197    Returning to the facts of the present case, the primary judge held that the circumstances prior to the entry into the 1986 Contract, and the terms of that contract, indicated a mutual intention to change the nature of the relationship between the parties:

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

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

(Emphasis added.)

198    Subsequently, having considered the sequence of the relevant contracts, the primary judge expressed the following:

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

(Emphasis added.)

199    I disagree with the primary judge as to the weight that should be attributed to the applicants’ intentions upon entering into the 1986 Contract. Although the entry into that contract indicates that the parties’ possessed a common intention to enter into those terms, the reality is that there was little, or no, room for negotiation in respect of the formation of the terms of the contract. This is evident from the following passages of Mr Jamsek’s affidavit evidence:

In 1985 to the best of my memory, one of the staff managers came to me and said 'we are looking to move the NSW branch for Associated Lighting to Silverwater, all the drivers will be working from Silverwater'. At the time we were in the Transport Union. Myself and Robert Robinson were union representatives and we approached the company for a pay rise of $10-$15 per week to compensate for the extra travel time. We said to the manager of the company, Frank Vitens (2nd in charge) at the time and said 'We heard that we were moving to Silverwater and we want an extra $15 a week for the extra travelling.' The manager said 'no'.

Robert Robinson and I went back to the drivers (at the time there were 5 drivers) and said to them that 'Associated said no to the pay rise'.

Within a couple of weeks of those discussions a manager Frank Vitens from ALI called a meeting and said to the drivers 'We are not willing to give you a pay rise but we are offering you the opportunity to become contractors. If you don't take up that opportunity we can't guarantee you a job going forward. The arrangement will be that you buy the trucks you are using now and you will be paid carton rates with a minimum of $120 per day, you will also be required to pay for your own expenses.'

200    Likewise, Mr Whitby deposed to the following:

I recall in late 1985 or early 1986, Frank Vittons, second in charge, said to me and the other drivers employed at the time that "The company wants to take a different direction, we are making you contractors and you will no longer be employees. If you don't like that we will get another company to take it over. We might be able to fit you in somewhere else but no promises." I recall that there may have been three (3) different meetings, which Frank said the following: "You will have to be buy our trucks from us and you will be responsible for all your own expenses. Part of the deal is that you will buy the truck off us for $21,000." I did not have any money to buy the truck and had to get a loan to enable me to buy the truck.

At this time, I was paid out my annual leave owing for the period of 9 years. I cannot recall the amount.

I was asked to sign a contract with ALI at that time, in about 1986. There were no negotiations over its terms. It was put to me and I was told "This is your contract. Can you please sign it." I did not seek legal advice. The document was entitled 'Contract Carriers' Arrangement'. I do not have a copy of the contract. As far as I recall, the terms were similar to the later contracts. I was not paid holiday pay or sick pay. A difference between the contract I signed at this time and the ones I signed later (i.e., in 1993, 1998 and 2001) is that in the 1986 agreement were paid per-carton delivered, as opposed to an hourly rate as in the later agreements.

201    This evidence demonstrates that the applicants were faced with the likely, if not certain, prospect of redundancy should they not enter into the 1986 Contract. There was no opportunity for negotiation and the applicants, unless they wished to seek alternative work, were compelled to accept the terms of the 1986 Contract. This was not a case where, for instance, the applicants sought professional advice and subsequently initiated discussions with the company about restructuring the terms of the working relationship. In truth, the company wanted the change, and the applicants had to accept the change or leave. These circumstances diminish any suggestion that there was a clear mutual intention to alter the nature and structure of the relationship between the parties.

Contribution of the vehicles

202    Prior to around 1985 or 1986, the company provided trucks for the applicants’ use. That changed with the entry into the 1986 Contract. At or around that time, the Jamsek Partnership and the Whitby Partnership each purchased trucks for the applicants’ use in working for the company. The Partnerships were required to purchase the vehicles on the basis of the ultimatum given by the company, as discussed above.

203    Subsequently, new trucks were purchased by the Partnerships in or around 1989 to 1990, and again by the Whitby Partnership in 1993. Mr Whitby purchased utes for usage for the business in 2010 and another four years later. After the 1986 Contract, the applicants, or their Partnerships, were responsible for the costs of registering and maintaining the vehicles.

204    The primary judge held that the provision of vehicles by the applicants (or their respective Partnerships) was a significant matter in considering the “totality” of their relationship with the company: Primary Judgment at [153]–[168]. In particular, the primary judge expressed the following:

[166]    … in assessing the ‘totality’ of the relationship, the fact that the partnerships owned the trucks, which were substantial assets under the control of the partnerships and which were central to the profitability of the partnerships’ (and from 1 July 2012 Mr Whitby’s) activities, is a factor which weighs in favour of the conclusion that the applicants were not employees. It is significant that each partnership made its own decisions about acquiring new vehicles. It was a matter for each what sort of expenditure to incur in the acquisition of a truck (or ute) and how to finance the acquisition. These decisions, which were wholly within the province of the partnerships, affected to a significant extent the profitability of the activities. Increases in rates from time to time were sought in substantial part because of the costs associated with operating the trucks.

[167]    The ownership of the trucks, the manner in which the goods were secured in them by Mr Whitby and Mr Jamsek, and the manner in which they were operated and maintained indicate that the companies did not have the control over the activities of the drivers which might be expected if the drivers were employees. …

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

205    The provision of vehicles by the applicants (through the Partnerships) for the purposes of the business was a relevant, and important, consideration supporting the conclusion that the applicants were operating independent businesses. A substantial outlay in capital for the purposes of the working relationship will be indicative of an independent contractor: Stevens at 24 per Mason J; Vabu at [47] and [56]. Indeed, the conventional view is that the owners of expensive equipment, such as trucks, are independent contractors: Vabu at [71] per McHugh J; Australian Air Express Pty Ltd v Langford [2005] NSWCA 96; 147 IR 240 (Langford) at [44] per McColl JA, with Ipp and Tobias JJA agreeing. This is because, amongst other reasons, ownership of such equipment is inconsistent with the right to control the worker: Langford at [36], citing Humberstone v Northern Timber Mills [1949] HCA 49; 79 CLR 389 at 404–405 per Dixon J. My view, however, is that the weight attributable to the provision of the vehicles by the Partnerships ought be tempered in light of the following observations.

206    The first observation relates to the degree of control possessed by the company in respect of the applicants’ vehicles. Although the vehicles were owned by the Partnerships, my view is that the applicants did not have the degree of control in respect of the acquisition of those vehicles that the primary judge appears to accept. To start, the applicants were first compelled to purchase vehicles as part of entering into the 1986 Contract, as explained above. And, for the majority of their subsequent relationship with the company, the applicants’ trucks were adorned with the logo of the company from time to time. This is discussed further below (starting at [219]) in respect of the “day-to-day control of the applicants”.

207    The second observation is that, according to the relevant authorities, the weight attributable to the investment of a person in capital equipment is often coupled with consideration of the degree to which that person has a special skill or training to use or operate that equipment: Vabu at [47]. Although the competent and safe driving of trucks requires special expertise, the level of additional skill required was not exceptionally significant.

208    The third observation is that, although the independent provision of substantial capital equipment understandably weighs against an employment relationship, it is but one factor, and must be considered in light of all the circumstances of the case. So much follows from the nature of the multi-factor test. Thus, there will be circumstances where the provision of a truck by a person will not be determinative of the relationship’s characterisation. Gray J provided a hint in Re Porter at 185 as to the circumstances in which this may occur:

A person who owns a truck might trade as a common carrier, carting goods for anyone who wishes to hire his or her services. There seems to be no reason in principle why an owner-driver should not also be engaged on a longer term contract for one person, carting only the goods of that person, and as an employee.

(Emphasis added.)

Broad contractual mechanics

209    Three contracts between the parties were in evidence: the 1993 Contract, the 1998 Contract and the 2001 Contract. For the purposes of this appeal, there are no material differences between the terms of those contracts, which, in relation to the 1993 Contract, were set out above at [57]. However, there remained significant periods of time in which no written contract in evidence governed the relationship between the parties (as discussed further below at [238]–[241]). The primary judge nonetheless held that it is to be inferred from the parties’ conduct that, during these periods, there was an agreement between them in the same terms as the written contracts: Primary Judgment at [180].

210    Having reviewed key aspects of the contracts, the primary judge appeared to view the contractual terms as favouring the conclusion that the applicants were not employees. In particular, the primary judge concluded (at [181]) that “[t]he effect of the contractual arrangements, whether governed by written contract or not, was that the partnerships agreed in return for a fee to supply delivery services and equipment, namely vehicles”.

211    In principle, I agree that the broad form of the contracts between the applicants and the company favoured the conclusion that there was no employment relationship. I also do not take issue with the primary judge rejecting the applicants’ submission at trial that the contracts should be construed as agreements with the drivers personally rather than the Partnerships. But, as was explained above at [191], this does not preclude the existence of an employment relationship.

Day-to-day control of the applicants

212    Despite the modern reliance on the multi-factor test, the “right to control” remains a central consideration in many cases: Narich Pty Ltd v Commissioner of Pay-roll Tax [1983] 2 NSWLR 597 at 601 and 606 per Lords Keith, Elwyn-Jones, Roskill, Brandon and Templeman; Stevens at 24 per Mason J and 36 per Wilson and Dawson JJ; ACE Insurance (FC) at [103]; Quest at [186]; Eastern Van Services at [93]. Two brief examples are illustrative.

213    In Vabu, the High Court held by majority that the relationship between a company conducting a business of delivering parcels and documents, Vabu Pty Ltd, and a bicycle courier working for that business, was that of employer and employee. The company’s control over aspects of the courier’s performance was important, as demonstrated by the following passages of the plurality judgment of Gleeson CJ, Gaudron, Gummow, Kirby and Hayne JJ:

[49]    … the evidence shows that the couriers had little control over the manner of performing their work. They were required to be at work by 9 am and were assigned in a work roster according to the order in which they signed on. If they signed on after this time, they would not necessarily work on their normal “channel”. Couriers were not able to refuse work. It was stated in document 590 that “any driver who does so will no longer work for this firm”. The evidence does not disclose whether the couriers were able to delegate any of their tasks or whether they could have worked for another courier operator in addition to Vabu during the day. It may be thought unlikely that the couriers would have been permitted by Vabu to engage in either activity.

…

[57]    Finally, … this is not a case where there was only the right to exercise control in incidental or collateral matters. Rather, there was considerable scope for the actual exercise of control. Vabu’s whole business consisted of the delivery of documents and parcels by means of couriers. Vabu retained control of the allocation and direction of the various deliveries. The couriers had little latitude. Their work was allocated by Vabu’s fleet controller. They were to deliver goods in the manner in which Vabu directed. In this way, 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. It was not the case that the couriers supplemented or performed part of the work undertaken by Vabu or aided from time to time; rather, as the two documents relating to work practices suggest, to its customers they were Vabu and effectively performed all of Vabu’s operations in the outside world. It would be unrealistic to describe the couriers other than as employees.

(Citations omitted and emphasis added.)

214    Another brief example is the Full Court’s decision in Ace Insurance (FC), which involved an inquiry into whether five insurance sales agents were employees of a general insurer named “Combined”. Having reviewed the relevant principles and evidence, Buchanan J, with the agreement of Lander and Robertson JJ, concluded as follows at [148]:

The overwhelming impression from the evidence is that the agents at each of the three levels were specifically trained by Combined in particular techniques of selling which Combined had adopted as its own, and the training was constantly reinforced. They then worked under close direction, supervision and organisation with a view to selling insurance products in a way determined by Combined. They had no real independence of action or true independence of organisation.

(Emphasis added.)

215    In the present case, the applicants provided a “Table of Indicia” to the primary judge that outlined various factors which were contended to indicate an employment relationship. In relation to the applicants’ submission that the company exercised control over them, the primary judge relevantly noted the following in opposition, or by way of qualification:

(a)    the number of hours in fact worked by the applicants and the flexibility around returning home once all deliveries were completed indicated a relationship of less control than might be expected of a typical employer-employee relationship (Primary Judgment at [187]);

(b)    the applicants were not instructed by the company to wear a uniform (ibid at [188]);

(c)    the company had no real control over the way in which Mr Jamsek and Mr Whitby managed and operated their trucks and the company did not purport to exercise control in any way in respect of the decisions to purchase trucks or maintain them (ibid at [189]). The company did not have the authority to direct the management and control of the trucks, being assets of the Partnerships (ibid at [191]);

(d)    the fact that the applicants were told what to deliver was not an indicia that necessarily characterises the relationship as one of employment because any external courier would be told the same thing (ibid at [190]);

(e)    the applicants secured their own loads in the trucks; they were not supervised in doing so or delivering the products (ibid at [194]);

(f)    with limited exceptions, the applicants were not in fact directed in how to conduct their deliveries (ibid at [192], [195] and [197]);

(g)    certain aspects of the contracts—including the disputes procedure and the ability of the company to determine the priority of deliveries—were not indicative of control over the applicants (ibid at [200]–[205]);

(h)    the fact that the applicants performed cleaning work at the warehouse on isolated occasions was “consistent with the give-and-take one might expect to see in the context of the long standing relationship each had with the company” (ibid at [209]);

(i)    the applicants notified the company when they wanted to take leave (ibid at [210]); and

(j)    the fact that Mr Jamsek paid for someone to carry out his delivery activities when he took leave in 2000 weighs against the conclusion he was an employee (ibid at [211]).

216    I do not take issue with all of these points and acknowledge that the applicants did possess a degree of freedom over the operation of their day-to-day activities. However, there are aspects of the control of the applicants by the company which, in my view, deserve prominence in the circumstances of the present case.

217    The first aspect of control is the duration of the hours worked by the applicants each day. They were required to work from 6 am to at least 3 pm on each work day Monday to Friday. The primary judge accepted (at [187]) that “there was undoubtedly an expectation (expressly referred to in the 1993, 1998 and 2001 Contracts) that the applicants would, or would be available for, work for 9 hours per day”, and (at [183]) that, during the entirety of their long working relationship the applicants “worked more or less regular hours with a relatively constant set of working arrangements”. However, the primary judge expressed (at [187]) that “[t]he number of hours in fact worked and the flexibility around returning home once all deliveries were completed, rather than being required to return to the warehouse, perhaps to perform other work, indicates a relationship of less control than might be expected of a typical employer-employee relationship”.

218    There were indeed aspects of flexibility possessed by the applicants that “traditional” employees may not have been afforded. For one, if the applicants made all the deliveries for that day, they were commonly entitled to head home. That said, in light of the long relationship between the applicants and the company, and given the applicants were expected to work nine hours a day for the company for nearly 40 years, this flexibility should not be viewed as materially indicative of the applicants undertaking an independent business.

219    Second, for the majority of their working relationship, the applicants’ trucks were adorned with the logo of the company. In 1990, Mr Jamsek was asked to, and did, install a tarpaulin on the truck bearing a “Thorn” logo and arranged to have the truck painted. In 1993, upon request by the company, Mr Whitby purchased a new tarpaulin, which the company installed and affixed the company logo. Around 2002, the company supplied and installed a new tarpaulin on Mr Whitby’s truck. The company paid half the cost of the tarpaulin and the company logos that were added after installation of the tarpaulin. Around 2008 or 2009, the company supplied and installed on Mr Whitby’s truck a black tarpaulin bearing both “Thorn” and “Zumbotel” logos. However, from 2010, Mr Whitby disassembled the gates and tarpaulin on his truck so it would become a “flatbed”, and from that point forward did not bear a company logo.

220    The following photos are three examples provided by Mr Whitby of the versions of tarpaulins supplied by the company during the working relationship:

221    There is likewise evidence as to the clothing worn by the applicants during their work. While working for ALI, the applicants wore a uniform with an “ALI” logo that was supplied by the company. Mr Jamsek stated that, around the time of the 1993 Contract, he was supplied with “Thorn” uniforms to replace the “ALI” uniforms. From time to time thereafter, the company provided or made available to the drivers items of clothing bearing branding of the business or company. The primary judge concluded (at [99]) that the applicants wore a mix of clothing provided by the company (bearing branding or logos) and their own clothing.

222    The following photo is an example provided by Mr Whitby of a uniform that was supplied to him by the company:

223    The primary judge’s consideration of the company branding on the trucks and worn by the applicants was confined to the following passages:

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

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

(Emphasis added.)

224    With respect to the primary judge, the fact that the company ostensibly required, or at least expected, the applicants for a substantial part of their relationship to adorn their trucks with the company logo and wear (and least in part) clothing adorned with the company logo, deserved greater emphasis in assessing the nature of the relationship between the applicants and the company. Although there may not have been a prescriptive policy regarding the applicants’ clothing during work, and there was no evidence of the company expressly requiring the applicants to wear particular clothing, there was an underlying pattern of conduct that supports the inference of an expectation that the applicants would, at least ordinarily, wear clothing bearing the company logo.

225    The effect of this conduct was to encourage stakeholders to identify the applicants as part of the company’s staff: Vabu at [52]. In the circumstances, it would not have been misleading to describe the applicants as representatives of the company, which is a matter indicating an employment relationship: Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia [1931] HCA 53; 46 CLR 41 at 48 per Dixon J, cited in Northern Sandblasting Pty Ltd v Harris [1997] HCA 39; 188 CLR 313 at 366 per McHugh J. Additionally, the adornment of the trucks with company logos is also relevant to the separate consideration, as discussed below, as to the extent to which the applicants could reasonably be expected to work for others beyond the hours prescribed for company work. In this regard, the specific branding would likely have limited the opportunity for the applicants to obtain alternative work.

Exclusivity of work and right to subcontract

226    Where a person conducts work exclusively for another party, this exclusivity (and the economic dependency it demonstrates) may favour the conclusion that the parties are in an employment relationship: Molfetas v Dwiar (1991) 33 AILR ¶266. Conversely, evidence that the person works for a number of other entities suggests that he or she is operating an independent business: On Call at [285]–[286] per Bromberg J.

227    The existence (or not) of a contractual right enabling a person to work for third parties will be relevant (see Pratt v Australian Broadcasting Commission (1985) 10 FCR 297 at 303), but not determinative. Consistent with the principles discussed above, the reality of the relationship between the parties may reveal that this right is, in practice, of little utility. This was explained by Gray J in Re Porter at 184–185:

a party may be described as an independent contractor, and the contract may even provide expressly that he or she is at liberty to provide services to other persons, outside of the contract. The reality may be that economic considerations dictate that work will only be accepted from the other party to the contract. There was evidence in the present case to the effect that, for practical purposes, an owner-driver who is heavily indebted to a finance company for the hire purchase of a truck is less independent than a person who is employed to drive a truck owned by the employer. The employee driver may leave and seek a job driving any sort of vehicle with any other employer. The owner-driver must be assured of a steady supply of work in order to keep up payments in respect of the truck, and can only take work for which the particular truck is suitable. There is also evidence that, in some cases, owner-drivers are reluctant to exercise the notional freedom which they may have to refrain from presenting themselves for work on particular days at their own choice. Evidence was given of a practice of withholding work from owner-drivers for some periods, by way of reprisal for their failure to attend and perform services as desired. In such circumstances, there is no particular reason why a court should ignore the practical circumstances, and cling to the theoretical niceties. The level of economic dependence of one party upon another, and the manner in which that economic dependence may be exploited, will always be relevant factors in the determination whether a particular contract is one of employment.

228    The ability of the person to subcontract or delegate work is also relevant. The right to delegate work will point against an employee relationship (Stevens at 26 per Mason J and 38 per Wilson and Dawson JJ, each citing AMP at ALJR 410; ALR 391 per the Privy Council), although the terms of a contract in this regard are not conclusive. And, if the person in fact engages others to perform the contracted work, this indicates that the person is not him or herself an employee: Tattsbet at [67]–[68] per Jessup J.

229    In the present case, a friend of Mr Jamsek drove his truck on his behalf for six or seven weeks in 2000 (for which the Jamsek Partnership received payment). But, apart from this exception, the applicants essentially devoted to the company their working life and the vehicles they, or their Partnerships, owned. The primary judge recognised that the duration of the applicants’ service to the company weighed in favour of an employment relationship:

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

230    However, the primary judge downplayed the exclusive nature of the applicants’ services by pointing to the intentions of the parties in entering into the 1986 Contract, and the fact that the applicants were entitled to conduct work for third parties:

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

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

(Emphasis added.)

231    My view is that the primary judge did not err in expressing the finding emphasised in the passage above and, accordingly, I would dismiss the second ground of appeal advanced by the applicants (the terms of which were extracted above at [148]). It is strictly correct that the applicants were entitled to conduct work for third parties. The contracts expressly provided so, subject to that work not being detrimental to the company or its customers. There was accordingly no error on the part of the primary judge in stating that the applicants could have served others outside of the hours they had contracted to work for the company.

232    Ultimately, however, I accept the applicants’ criticism in respect of this statement for the purposes of assessing the totality of the relationship between the applicants and the company. The applicants’ entitlement to work for third parties outside of the contracted hours must be characterised in light of the core obligations imposed on the applicants. The applicants were expected to work nine hours a day from 6 am from Monday to Friday. Although there was flexibility for the applicants to return home once all deliveries were completed (rather than being required to return to the warehouse), this, in practice, left minimal time for them to serve others in alternative hours.

233    An evaluation of the totality of the relationship between the parties in the present case requires the court to assess what the parties in fact did over the nearly 40 years of their relationship. During that period, the business operated by the company was the applicants’ sole source of income. Throughout that period, the applicants worked more or less regular hours with a constant set of duties and working arrangements. In these circumstances, the fact that the contracts did not prevent the applicants driving their trucks after working hours and on the weekends for additional customers is, in my view, of limited significance.

Capacity to generate goodwill

234    The ability for a person to generate goodwill or saleable assets by undertaking work is indicative of that person operating an independent business: Stevens at 37 per Wilson and Dawson JJ; Re Porter at 186 per Gray J; see also Dental Corporation at [64]–[71] per Perram and Anderson JJ. Although that is so, there are various forms of work in which it is naturally difficult or impossible for goodwill to be generated: AMP at ALJR 411; ALR 393–394; Vabu at [48]; Roy Morgan at [46]; On Call at [274]–[275].

235    The primary judge briefly considered the ability of the applicants to develop goodwill and sell their business as follows:

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

The Contractors will:

…

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

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

236    The applicants’ third ground of appeal (the terms of which are extracted above at [148]) relevantly contended that “[t]he learned primary judge erred in finding that Mr Jamsek and Mr Whitby could have sold businesses and they included goodwill”. To be precise, the primary judge did not say that a sale of the businesses would include goodwill; he said such a sale “may have included goodwill”. Regardless, I agree that the substance of this ground of appeal should be upheld.

237    It is true that the respective Partnerships owned the vehicles and could have sold those vehicles. However, no actual goodwill was generated by the Partnerships in working for the company as the effect of clause 2(1)(k) of the contracts was that, if one of the applicants’ vehicles was sold, there was no guarantee of continuity of work from the company. Moreover, it should be recalled that, on no occasion after the change in contractual arrangements in 1986, did the applicants undertake any delivery work for any person other than the company. The applicants were required to work from 6 am to at least 3 pm on each work day Monday to Friday. There was accordingly no realistic opportunity for the applicants to generate goodwill. There was nothing for the applicants to sell over and above their vehicles. Thus, a sale of the vehicles would not have included an amount of goodwill.

Absence of written contracts

238    The only written contracts in evidence were the 1993 Contract, 1998 Contract and 2001 Contract. However, during the course of the relationship between the parties, the business changed hands on various occasions, which, in respect of the following periods, led to the entity owning the business not having a written contract with the applicants:

(a)    between about May 1986 (the transfer of the business from ALI to Thorn EMI) and 1 July 1993 (the date of the 1993 Contract);

(b)    between 25 August 1993 (the date of the transfer of the business from Thorn EMI to Thorn Lighting) and September 1998 (the date of the 1998 Contract); and

(c)    between about 1 October 2015 (the date of the transfer of the business to ZG Lighting) and 20 January 2017 (termination of the applicants’ working relationship).

239    On this basis, the applicants submitted at trial that the absence of a written contract during these periods was more consistent with the applicants being employees. The primary judge rejected this submission:

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

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

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

240    In my view, even if the finding at [180] of the Primary Judgment—that the parties always conducted themselves on the basis that the written contracts governed the relationship—were accepted, that does not negate the possibility that the absence of a written contract may point towards the existence of an employment relationship. Subject to the circumstances of the particular case, it may generally be expected that an independent contractor would be more anxious than an employee to ensure that the person maintained a legally binding written contract with the entity for whom work was conducted. This is particularly so where the contractor was dependent on that work as the contractor’s dominant or sole source of income.

241    In the present case, my view, contrary to that of the primary judge, is that the absence of a written contract during the periods specified above weighs, albeit only slightly, in favour of an employment relationship. If anything, the lengthy periods during which there was an absence of written contracts, in light of the other circumstances of the present case, underlines the immutability of the working relationship and the centrality of the applicants to the company’s organisation.

Conclusion

242    The determination of whether parties are in an employment relationship will often be, to quote Gray J in Re Porter at 184, a “matter of impression”. In close cases, reasonable minds may differ. In the present case, my view, with respect to the primary judge, is that a proper consideration of the totality of the relationship between the applicants and the company establishes that the applicants were party to an employment relationship. They were “employees” within the meaning of the FW Act and the SGA Act and “workers” within the meaning of the LSL Act.

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 recognised 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 suppling 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.

244    The applicants both left high school at an early age. Neither gained any formal education or qualification. Both commenced work for the company in 1977 and became drivers at the latest by 1980. For nearly 40 years, they worked full-time as truck drivers in the business. That work was their sole source of income during that long period. The applicants did not drive, or deliver goods, for any other entity or business. The applicants thus cannot be characterised as engaging in entrepreneurial or profit motivated activity, which is a hallmark of an independent business: On Call at [291]; Quest at [181].

245    In 1986, the applicants were faced with an effective ultimatum: redundancy or agreement to a restructured contract. They decided to sign on. As a result, the applicants were required to buy the trucks they had previously been using at a price specified by the company without negotiation. This restructure was, as submitted by the applicants, “at the employer’s initiative and design”. However, despite the contractual restructure, there was no change to the day-to-day activities of the applicants. Indeed, when the business was transferred in 1993 and 2015 to a new entity, the applicants did not execute a new contract with the transferee of the business. The activities of the applicants remained largely constant.

246    In performing their day-to-day activities, the applicants were required to work at least nine hours per day unless otherwise directed by the warehouse manager. On occasions, the applicants were directed by the company to undertake clerical, warehouse and non-delivery moving work in addition to their core responsibilities. Any overtime work was unpaid. They were not permitted to take more than four weeks’ annual leave. For large part, the applicants were required to use tarpaulins on the trucks supplied by the company with the logo of the business. The applicants also wore clothing exhibiting the business logo. The applicants were, in substance, representatives of the company.

247    In addition to the manner in which the working relationship operated in practice, a striking feature of the present case is undoubtedly the long and uninterrupted period during which the applicants conducted work for the company. In circumstances where the applicants did not conduct work for any other business during this period, the facts of the present case, in my view, paint a picture of two truck drivers who were, and who were seen to be, an integral part of the company’s business. And, in this regard, as Lord Denning observed in Stevenson, Jordan & Harrison Ltd v MacDonald & Evans [1952] 1 TLR 101 at 111, “under a contract of service, a man is employed as part of the business and his work is done as an integral part of the business; whereas under a contract for services his work, although done for the business, is not integrated into it but is only accessory to it”. To observe as such is not to revive an “organisation test” or “integration test” for the purposes of identifying an employment relationship. Such an approach has been discarded: Stevens at 27-28 per Mason J. The point is that the nature of the lengthy and devoted working relationship between the applicants and the company colours the manner in which all the relevant circumstances of that relationship are synthesised for the purposes of the multi-factor test.

248    I acknowledge that parties to a working relationship should broadly be entitled to define the nature of their relationship as they desire. As a starting premise, freedom of contract demands as much. The form of a written contract will be the starting point to characterise the relationship between the contracting parties. In the present case, it is apparent that the company intended in 1986 to transition their drivers away from an employment relationship. The company required the drivers, including the applicants, to enter into a “Contract Carriers’ Arrangement” which described the drivers as “Contractors”. But the classical notions of freedom of contract may not be seamlessly applicable in employment contexts. And, most fundamentally for present purposes, the characterisation of a relationship as that of employment or otherwise is not performed exclusively by reference to the terms of a written contract. As explained in Quest at [148], “the parties’ characterisation of their relationship, whether direct (by the application of a label) or indirect … may not be given effect according to its terms, because that characterisation contradicts the nature of the relationship the parties have actually created”. In the present case, my view is that the applicants were, in reality, employees within the ordinary meaning of that term.

Discharge of appellate review

249    It is useful, then, to return to, and briefly apply, the principles on appellate review that were outlined above at [165]–[174]. I turn to the more specific grounds of appeal first.

250    The second ground of appeal is that “[t]he primary judge erred in finding that ‘in principle there was no reason why Mr Jamsek and Mr Whitby could not have served others in the hours available to them outside of the hours in which they had contracted to provide services’ to [the company]”. This was a finding of fact by the primary judge. This appellate court must decide the correctness of this fact for itself, with due regard for advantages of the position of the primary judge. However, in respect of this particular ground, there is no need to consider these advantages further. For the reasons explained above at [231], this statement was not erroneous. It is strictly correct that the applicants were contractually entitled to conduct work for third parties. What the applicants truly complained of in respect of this statement is the inference drawn, and significance attributed to, this factual finding by the primary judge for the purposes of assessing the totality of the working relationship.

251    The third ground of appeal is that “[t]he learned primary judge erred in finding that Mr Jamsek and Mr Whitby could have sold businesses and they included goodwill … because there was no evidence to support the finding of “goodwill” and selling would involve no more than selling the vehicles and other such assets”. As particularised by the applicants’ submissions, the focus of this ground was the primary judge’s finding that a sale of the applicants’ “businesses” (or, more precisely, their respective Partnerships’ “businesses”) may have included goodwill. This too was a finding of fact by the primary judge. However, it is one which was, in my view, attended by error. As explained above at [237], the nature of the applicants’ work for the company was such that there was nothing for the applicants to sell over and above their vehicles, and that the sale of the vehicles would not have included an amount of goodwill.

252    The first ground of appeal impugned the primary judge’s ultimate conclusion that the applicants were not “employees” and “workers” within the meaning of the relevant statutes. As explained above at [166], this conclusion concerned a question of fact. In reviewing the correctness of this finding, this Court is not required on appeal to identify any particular erroneous step in the primary judge’s fact-finding or reasoning (although it eventuates that the third ground of appeal is made out). As explained above at [171]–[173], the question determined by the primary judge in this regard only has one legally possible answer. Either the applicants were in an employment relationship, or they were not. Thus, as explained by Allsop J (as his Honour then was) in Branir at [25]:

In circumstances where, by the nature of the fact or conclusion, only one view is (at least legally) possible (for example, the proper construction of a statute or a clause in a document, where, although, as often said, minds might differ about such matters of construction, there can be but one correct meaning …) the preference of the appeal court for one view would carry with it the conclusion of error.

253    My view, as explained above, is that the applicants were in an employment relationship with the company. In the context of the present case, this, with respect to the primary judge, carries with it the conclusion of error.

Extended definition of “employee” under the SGA Act

254    As noted above at [177], s 12(1) of the SGA Act provides that, as a starting point, “employee” and “employer” are conferred their ordinary meaning under that Act. However, the definition of an “employee” is then modified for the purposes of the SGA Act on the bases described in s 12(2)–(11). In particular, s 12(3) provides the following:

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

255    As I have held above that the applicants were employees within the ordinary meaning of that term, there is no need to consider the applicants’ alternative argument that s 12(3) of the SGA Act was applicable to them in the present case. (In respect of the interpretation and application of s 12(3) of the SGA Act, see Dental Corporation at [76]–[106] per Perram and Anderson JJ and [111]–[113] per Wigney J.)

Conclusion and orders

256    For the reasons expressed above, Mr Jamsek and Mr Whitby were “employees” within the meaning of the FW Act and the SGA Act and “workers” within the meaning of the LSL Act during the relevant periods.

257    Mr Jamsek and the Trustees only sought declaratory relief in respect of these matters in the Full Court and did not seek any determination as to the contravention by the respondents of the relevant legislation. In these circumstances, the orders sought by Mr Jamsek and the Trustees in their Draft Notice of Appeal dated 8 August 2016 are broadly appropriate. However, for the reasons explained above at [254]–[255], the Court ought not declare that Mr Jamsek and Mr Whitby are “employees” within the meaning of s 12(3) of the SGA Act.

258    As for the costs of the trial of this matter, Mr Jamsek and the Trustees ultimately did not seek to disturb the costs judgment of the primary judge in respect of the trial of this matter. The Court should accordingly not make any order in that respect.

259    As for the costs of this appeal, my view is that the respondents should pay Mr Jamsek’s costs of and in respect of his application for an extension of time (and subsequent appeal) to the Full Court. However, given the late application to join the appeal by the Trustees (albeit at no personal fault of their own), my view is that the Trustees should bear their own costs of their joinder application and their application for an extension of time (and subsequent appeal).

260    Accordingly, with the agreement of Perram and Wigney JJ, the Full Court orders and declares that:

(1)    the orders made by the primary judge on 4 November 2018 in relation to the first applicant and Robert William Whitby are set aside;

(2)    the first applicant and Robert William Whitby were between about 25 August 1993 and about 1 October 2015 employees of the first respondent:

(a)    within the meaning of s 335 and item 1 in the table at s 342(1) of the Fair Work Act 2009 (Cth); and

(b)    for the purposes of s 12(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth);

(3)    the first applicant and Robert William Whitby were between about 25 August 1993 and about 1 October 2015 employees of second respondent:

(a)    within the meaning of s 335 and item 1 in the table at s 342(1) of the Fair Work Act 2009 (Cth); and

(b)    for the purposes of s 12(1) of the Superannuation Guarantee (Administration) Act 1992 (Cth);

(4)    the first applicant and Robert William Whitby were between about 1 January 1977 and 20 January 2017 workers in the service of the second respondent for the purpose of s 3 of the Long Service Leave Act 1955 (NSW);

(5)    the matter be remitted to the primary judge to:

(a)    determine what, if any, contraventions of the Fair Work Act 2009 (Cth) and Long Service Leave Act 1955 (NSW) have been effected by the respondents;

(b)    determine what quantum of compensation of entitlements the respondents are liable to pay the applicants under the Fair Work Act 2009 (Cth);

(c)    determine what long service leave entitlements the respondents are liable to pay the applicants under the Long Service Leave Act 1955 (NSW); and

(d)    conduct a hearing on penalties;

(6)    the respondents pay the first applicant’s costs of and incidental to the application for an extension of time to appeal (and subsequent appeal) to the Full Court; and

(7)    the parties otherwise bear their own costs of the proceeding.

Associate:

Dated:        16 July 2020