Recent cases on vicarious liability
84 In Stevens v Brodribb Sawmilling Company Pty Limited (1986) 160 CLR 16 the High Court dealt with another claim for vicarious liability for negligence. The plaintiff was engaged to perform work in the defendant's logging operations, along with others also engaged as contractors. Some were "fellers", some were "sniggers". The plaintiff was a truck driver. He was injured by the negligence of a snigger and claimed that the defendant was liable as the employer of the snigger. The High Court examined the relationship of both the snigger and the plaintiff. Mason J said at 23 - 24:
The first question to determine is whether the relationship between Brodribb and Gray was one of employer and employee or one of principal and independent contractor. It will also be convenient at this point to consider whether Stevens was an employee of Brodribb or an independent contractor, for, although not directly relevant to the matter presently under consideration, both issues arise from a common factual foundation. A prominent factor in determining the nature of the relationship between a person who engages another to perform work and the person so engaged is the degree of control which the former can exercise over the latter. It has been held, however, that the importance of control lies not so much in its actual exercise, although clearly that is relevant, as in the right of the employer to exercise it: Zuijs v. Wirth Bros. Pty. Ltd.; Federal Commissioner of Taxation v. Barrett; Humberstone v. Northern Timber Mills. In the last-mentioned case Dixon J. said:
"The question is not whether in practice the work was in fact done subject to a direction and control exercised by an actual supervision or whether an actual supervision was possible but whether ultimate authority over the man in the performance of his work resided in the employer so that he was subject to the latter's order and directions."
But the existence of control, whilst significant, is not the sole criterion by which to gauge whether a relationship is one of employment. The approach of this Court has been to regard it merely as one of a number of indicia which must be considered in the determination of that question: Queensland Stations Pty. Ltd. v. Federal Commissioner of Taxation; Zuijs' Case; Federal Commissioner of Taxation v. Barrett; Marshall v. Whittaker's Building Supply Co. Other relevant matters include, but are not limited to, the mode of remuneration, the provision and maintenance of equipment, the obligation to work, the hours of work and provision for holidays, the deduction of income tax and the delegation of work by the putative employee.
(Footnotes omitted.)
and (at 25-26):
I agree with the majority in the Full Court of the Supreme Court that neither Stevens nor Gray was an employee of Brodribb. The facts, as I have related them, do not support an inference that Brodribb retained lawful authority to command either Stevens or Gray in the performance of the work which they undertook to do. As I have said, they provided and maintained their own equipment, set their own hours of work and received payments, not in the form of fixed salary or wages, but in amounts determined by reference to the volume of timber which they had been involved in delivering, through the use of their equipment, to the sawmill. The authority of Brodribb's bush boss seems to have been confined to the organization of activities in the forest, determining the location of roads and ramps, selecting the logs to be snigged, monitoring the volume and quality of production and deciding whether work would take place in bad weather. There is, in my opinion, no basis for inferring an intention that the bush boss should have authority to direct Stevens and Gray in the management and control of their equipment which they were using for the purpose of delivering timber to the mill.
and (at 26):
What is more, Brodribb and the men, including Stevens and Gray, regarded their relationship as one of independent contract, not one of employment, an attitude evidenced in the case of Gray by his employment of his son as a driver. The power to delegate is an important factor in deciding whether a worker is a servant or an independent contractor: Australian Mutual Provident Society v. Chaplin.
85 Mason J then referred to the "so-called 'organisation test'" saying (at 26):
The test seems to have had its genesis in a passage of Lord Wright in Montreal v. Montreal Locomotive Works in which his Lordship said:
" … it is in some cases possible to decide the issue by raising as the crucial question whose business is it, or in other words by asking whether the party is carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior."
but said (at 27):
For my part I am unable to accept that the organization test could result in an affirmative finding that the contract is one of service when the control test either on its own or with other indicia yields the conclusion that it is a contract for services. Of the two concepts, legal authority to control is the more relevant and the more cogent in determining the nature of the relationship.
(Footnotes omitted.)
86 Wilson and Dawson JJ said (at 35):
The classic test for determining whether the relationship of master and servant exists has been one of control, the answer depending upon whether the engagement subjects the person engaged to the command of the person engaging him, not only as to what he shall do in the course of his employment but as to how he shall do it: Performing Right Society Ltd. v. Mitchell and Booker (Palais de Danse) Ltd. The modern approach is, however, to have regard to a variety of criteria. This approach is not without its difficulties because not all of the accepted criteria provide a relevant test in all circumstances and none is conclusive. Moreover, the relationship itself remains largely undefined as a legal concept except in terms of the various criteria, the relevance of which may vary according to the circumstances. Thus when Windeyer J. in Marshall v. Whittaker's Building Supply Co. said that the distinction between a servant 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", he was really posing the ultimate question in a different way rather than offering a definition which could be applied for the purpose of providing an answer.
(Footnotes omitted.)
87 The importance of the concluding observation should be noted. Their Honours, like Mason J, did not regard the identification of a "business" as supplying an alternative, or a preferable, test. Their Honours said (at 36):
In many, if not most, cases it is still appropriate to apply the control test in the first instance because it remains the surest guide to whether a person is contracting independently or serving as an employee. That is not now a sufficient or even an appropriate test in its traditional form in all cases because in modern conditions a person may exercise personal skills so as to prevent control over the manner of doing his work and yet nevertheless be a servant: Montreal v. Montreal Locomotive Works. This has led to the observation that it is the right to control rather than its actual exercise which is the important thing (Zuijs v. Wirth Bros. Pty. Ltd.) but in some circumstances it may even be a mistake to treat as decisive a reservation of control over the manner in which work is performed for another. That was made clear in Queensland Stations Pty. Ltd. v. Federal Commissioner of Taxation, a case involving a droving contract in which Dixon J. observed that the reservation of a right to direct or superintend the performance of the task cannot transform into a contract of service what in essence is an independent contract.
(Footnotes omitted.)
but continued (at 37):
Having said that, we should point out that any attempt to list the relevant matters, however incompletely, may mislead because they can be no more than a guide to the existence of the relationship of master and servant. The ultimate question will always be whether a person is acting as the servant of another or on his own behalf and the answer to that question may be indicated in ways which are not always the same and which do not always have the same significance.
88 Brennan J and Deane J agreed with Mason J's conclusion that neither the plaintiff nor the snigger were employees.
89 In Connelly v Wells (1994) 55 IR 73 Gleeson CJ (of the Supreme Court of New South Wales) referred to Stevens v Brodribb and to the way in which the "control test has given way to the application of competing criteria and indicia". His Honour said:
When one person agrees to perform work for another, it may become necessary, for any one of a number of purposes, to determine whether the relationship between them is that of employer and employee. Such a determination might affect their respective obligations to the revenue authorities, or the extent to which one is legally responsible for the acts or omissions of the other, or their insurance arrangements. In the present case the respondent suffered an injury whilst at work, and the question arose, in the course of proceedings under the Workers Compensation Act 1987, whether the respondent had entered into or was working under a contract of service with the appellant as his employer.
When such an issue arises it is often the case that the competing possibility advanced for consideration is that the relationship between the two persons involved is that of principal and independent contractor. Consequently, many of the decided cases state the relevant principles in a manner which directs attention to the differences between these two kinds of legal relationship. The most recent authoritative statements on the subject in this country are to be found in the judgments of the High Court in Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16, (Mason J at 23-29, Wilson and Dawson JJ at 36-39 and Deane J at 49). As Deane J observed, the distinction between an employee and an independent contractor has become increasingly amorphous as what used to be called the control test has given way to the application of competing criteria and indicia. The degree of control to which the person performing the work is subject is still described as a prominent factor, but is not now regarded as determinative. Other relevant matters are said to include the way in which the work is remunerated, the provision and maintenance of equipment, the arrangements that are made about hours of work and provision for holidays, the obligation to work, the arrangements that are made about taxation, and the capacity to delegate the work.
90 Importantly his Honour said (at 74):
Where the relationship between two persons is founded in contract, the character of the relationship depends upon the meaning and effect of the contract …
91 His Honour thought post-contract conduct to be irrelevant. That was also the view of the Privy Council in Chaplin and Narich. It has been, however, assumed in the present case that the nature of the relationship may be legitimately examined by reference to the actual way in which work was carried out. No dispute has been raised in the present case about that approach, which for reasons to be explained shortly appears to be correct, and I will not dwell upon the contrary view. At 81 - 82 Kirby P said:
Originally disputes such as the present were resolved by reference to the "control test", ie whether the suggested "employer" had control over the work to be done by the asserted "worker". Traditionally the test was expressed: can the person said to be the employer direct the person claimed to be a worker not only as to what the worker does but also as to how he or she does it.
In due course the unsatisfactory features of this test became obvious. This led to a line of authority in which the higher courts made it clear that the search was not for actual control but for the ultimate authority to control the work involved, employment lying in the latter. See Humberstone v Northern Timber Mills Pty Limited (1949) 79 CLR 389 at 404. Nevertheless, despite this clarification, in the understandable desire to have simple rules which could determine the threshold question of the alleged employment of a worker (upon the determination of which entitlements of the Act would either follow or be denied), there was a natural tendency to look for rules which could readily be applied. One by one, these "rules" came, on analysis, to be seen as unreliable.
Burke CCJ referred to the suggested principle that one indicium of employment was the control of hours. But then it was held that the absence of such control did not necessarily take the relationship outside that of employment or the worker outside the protection of the Act. Similarly, the suggested rule that only a contractor supplied his or her own tools and equipment and that a worker looked to the employer to do so except in the most minor respects, became discredited. Whilst the supply of its own equipment was often an indication of the fact that the relationship was not one of employment, it was not necessarily determinative as Ready Mixed Concrete (South East) Limited v Minister of Pensions and National Insurance [1968] 2 QB 497 at 516 illustrates.
The real incapacity of the "control" test to provide sound guidance, as to the nature of the relationship of worker and employer was demonstrated in a series of cases where the asserted "worker" performed duties in isolated places or was involved in activities so peculiar and individualistic that no effective control could either be exerted or expected in that worker's work. See eg Zuijs v Wirth Bros Pty Limited (1955) 93 CLR 561 at 572.
It is in this way that Australian courts, after their hankering for clear and simple rules, came to the present test. It is stated in such decisions as Stevens v Brodribb Sawmilling Company Pty Limited (1986) 160 CLR 16.
(Emphasis in original.)
and (at 83):
The other indicia of the nature of the relationship have been variously stated and have been added to from time to time. Those suggesting a contract of service rather than a contract for services include the right to have a particular person do the work, the right to suspend or dismiss the person engaged, the right to the exclusive services of the person engaged and the right to dictate the place of work, hours of work and the like. Those which indicate a contract for services include work involving a profession, trade or a distinct calling on the part of the person engaged, the provision by him of his own place of work or his own equipment, the creation by him of goodwill or saleable assets in the course of his work, the payment by him from his remuneration of business expenses of any significant proportion and the payment to him of remuneration without deduction for income tax. None of these leads to any necessary inference, however, and the actual terms and terminology of the contract will always be of considerable importance.
92 It was in the context set by the various decisions to which I have referred that the High Court gave judgment in Hollis v Vabu Pty Limited (2001) 207 CLR 21 ("Hollis"), the case which the trial judge in the present case found decisive. In Hollis, the High Court dealt with the circumstances of bicycle couriers of the kind dealt with by the New South Wales Court of Appeal five years earlier in Vabu (see above), but not with motorbike or motor vehicle couriers.
93 It appears to me to have been in Hollis that a real emphasis was authoritatively placed on the notion of working in the business of another, rather than in the business of the individual. The joint judgment said (at [39]-[40]):
39 In Colonial Mutual Life Assurance Society Ltd v Producers and Citizens Co-operative Assurance Co of Australia, Dixon J explained the dichotomy between the relationships of employer and employee, and principal and independent contractor, in a passage which has frequently been referred to in this Court. His Honour explained that, in the case of an independent contractor:
"[t]he work, although done at [the principal's] request and for his benefit, is considered as the independent function of the person who undertakes it, and not as something which the person obtaining the benefit does by his representative standing in his place and, therefore, identified with him for the purpose of liability arising in the course of its performance. The independent contractor carries out his work, not as a representative but as a principal."
40 This statement merits close attention. It indicates that employees and independent contractors perform work for the benefit of their employers and principals respectively. Thus, by itself, the circumstance that the business enterprise of a party said to be an employer is benefited by the activities of the person in question cannot be a sufficient indication that this person is an employee. However, Dixon J fixed upon the absence of representation and of identification with the alleged employer as indicative of a relationship of principal and independent contractor. These notions later were expressed positively by Windeyer J in Marshall v Whittaker's Building Supply Co. His Honour said that the distinction 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".
(Footnotes omitted.)
94 It seemed to be important to the reasoning that individual bicycle couriers made no great investment in, or commitment to, a "business" of their own. At [22] the joint judgment said:
22 It is significant to note that one of the considerations mentioned by Meagher JA in the taxation decision as indicating that the couriers were independent contractors was that they bore the "very considerable" expense of providing, maintaining and insuring their own vehicles. It is apparent that Meagher JA was there concerned with expense in relation to motor vehicles and motorcycles. The purchase and maintenance of a bicycle could hardly be termed a "very considerable" expense. It may be that, in the taxation decision, a case that was, as his Honour put it, "hardly without difficulty", a different result might properly have been reached respecting Vabu's bicycle couriers from that which obtained respecting its other couriers. However, it is unnecessary to express any conclusion on this matter. It is sufficient to say that this case concerns liability arising from the activity of a bicycle courier, not a motor vehicle or motorbike courier. For the reasons that follow, the relationship between Vabu and its bicycle couriers in the present case is properly to be characterised as one of employment.
95 The restriction of analysis and conclusions to the circumstances of bicycle couriers is, in my view, a potentially important one. It seems to suggest that questions of scale may be important, and even decisive. In similar vein, dealing with the facts of the case, the joint judgment said (at [47]-[48]):
47 In classifying the bicycle couriers as independent contractors, the Court of Appeal fell into error in making too much of the circumstances that the bicycle couriers owned their own bicycles, bore the expenses of running them and supplied many of their own accessories. Viewed as a practical matter, the bicycle couriers were not running their own business or enterprise, nor did they have independence in the conduct of their operations. A different conclusion might, for example, be appropriate where the investment in capital equipment was more significant, and greater skill and training were required to operate it. The case does not deal with situations of that character. The concern here is with the bicycle couriers engaged on Vabu's business. A consideration of the nature of their engagement, as evidenced by the documents to which reference has been made and by the work practices imposed by Vabu, indicates that they were employees.
48 First, these couriers were not providing skilled labour or labour which required special qualifications. A bicycle courier is unable to make an independent career as a free-lancer or to generate any "goodwill" as a bicycle courier. The notion that the couriers somehow were running their own enterprise is intuitively unsound, and denied by the facts disclosed in the record.
96 The last observation echoes a similar conclusion of the Full Court of the Supreme Court of Victoria in Roy Morgan in 1997.
97 Other important indicia of employment in Hollis were: bicycle couriers were required to be at work by 9 am; they were not able to refuse work, which was assigned to them by Vabu; they wore uniforms bearing Vabu's logo, in part as a form of mobile advertising; their finances were superintended by Vabu; their outlays were relatively small; and they had "little latitude" in what they did and when. Importantly for the present case, the following things were said:
57 Finally, and as a corollary to the second point mentioned above, 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.
(Emphasis in original.)
98 Hollis, of course, was a decision based squarely on its own facts, but it is obvious that the trial judge thought that similar considerations applied to the resolution of the issues before him.
99 The joint judgment in Hollis also emphasised that no new principle was created, saying (at [59]):
59 … This decision applies existing principle in a way that is informed by a recognition of the fundamental purposes of vicarious liability and the operation of that principle in the context of one of the many particular relationships that has developed in contemporary Australian society.
100 In Sweeney, also a case about vicarious liability, the High Court dealt further with the development of the concepts of employment and independent contracting, as they interact with the principle of vicarious liability, saying (at [11]-[13]):
11 Three recent decisions of this Court have examined questions of vicarious liability: Scott v Davis, Hollis v Vabu Pty Ltd and New South Wales v Lepore. It is unnecessary to rehearse all that is established by those decisions. It is important, however, to begin examination of the issues in this appeal from a frank recognition of some considerations that are reflected in those decisions. First, "[a] fully satisfactory rationale for the imposition of vicarious liability in the employment relationship has been slow to appear in the case law". Secondly, "the modern doctrine respecting the liability of an employer for the torts of an employee was adopted not by way of an exercise in analytical jurisprudence but as a matter of policy". That may suggest that the policy to which effect was given by "the modern doctrine" is clearly identified, but, as is implicit in the first proposition, the policy which is said to lie behind the development of the modern doctrine is not and has not been fully articulated. Thirdly, although important aspects of the law relating to vicarious liability are often traced to the judgment of Parke B in Quarman v Burnett, neither in that decision, nor in other early decisions to which the development of the doctrine of vicarious liability may be traced, does there emerge any clear or stable principle which may be understood as underpinning the development of this area of the law. Indeed, as is demonstrated in Scott, the development of the law in this area has not always proceeded on a correct understanding of the basis of earlier decisions.
12 Nonetheless, as the decisions in Scott, Hollis and Lepore show, there are some basic propositions that can be identified as central to this body of law. For present purposes, there are two to which it will be necessary to give principal attention. First, there is the distinction between employees (for whose conduct the employer will generally be vicariously liable) and independent contractors (for whose conduct the person engaging the contractor will generally not be vicariously liable). Secondly, there is the importance which is attached to the course of employment. Whether, as has recently been suggested, these, or other, considerations would yield a compelling and unifying justification for the doctrine of vicarious liability need not be decided in this matter. In particular, whether, as suggested, the justification for the doctrine of vicarious liability is found in an employer's promise in the contract of employment to indemnify the employee for legal liability suffered by the employee in the conduct of the employer's business is a large question which is better examined in the light of full argument.
13 Whatever may be the justification for the doctrine, it is necessary always to recall that much more often than not, questions of vicarious liability fall to be considered in a context where one person has engaged another (for whose conduct the first is said to be vicariously liable) to do something that is of advantage to, and for the purposes of, that first person. Yet it is clear that the bare fact that the second person's actions were intended to benefit the first or were undertaken to advance some purpose of the first person does not suffice to demonstrate that the first is vicariously liable for the conduct of the second. The whole of the law that has developed on the distinction between employees and independent contractors denies that benefit or advantage to the one will suffice to establish vicarious liability for the conduct of the second. But there is an important, albeit distracting, consequence that follows from the observation that the first person seeks to gain benefit or advantage from engaging the second to perform a task. It is that the relationship is one which invites the application of terms like "representative", "delegate" or "agent". The use of those or other similar expressions must not be permitted to obscure the need to examine what exactly are the relationships between the various actors.
(Footnotes omitted.)
101 Referring to Hollis, the High Court said (at [30]):
30 It is as well to add something further about Hollis. Hollis hinged about whether the person whose conduct was negligent was to be identified as an employee of the principal. Seven considerations were identified in the facts of that case as bearing upon the question. They included that the courier wore the principal's livery, that he was subject to close direction by the principal about not only the manner of performing the work (work which required only limited skills), but also both the financial dealings generated by the work and the times at which the work was done.