Chiodo v Silk Contract Logistics

employment 7 The High Court considered the distinction between an employee and an independent contractor in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 96 ALJR 89 (Personnel Contracting) and ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2; 96 ALJR 144 (Jamsek). The principles that emerge from those cases can be summarised as follows (drawing on the summary in JMC Pty Ltd v Commissioner of Taxation [2022] FCA 750 (JMC) at [16]-[26] (Wigney J)): (a) Where the rights and duties of the parties are contained in a written contract (and the contract is not a sham), the obligations established by that contract are decisive of the character of the relationship: Personnel Contracting at [43]-[44], [59] (Kiefel CJ, Keane and Edelman JJ), [172] (Gordon J, Steward J agreeing at [203]). (Whether all of the parties' rights and duties are embodied in the written contract may of course depend on whether the contract has been varied and whether the assertion of relevant rights is subject to any estoppel.) (b) In order to ascertain the relevant rights and obligations, the written contract is to be construed in accordance with established principles of contractual interpretation: Personnel Contracting at [60] (Kiefel CJ, Keane and Edelman JJ), [173] (Gordon J, Steward J agreeing). Those principles allow regard to be had to circumstances surrounding the making of the contract and events and matters, known to the parties at the time of contracting, which assist in identifying the purpose or object of the contract. The nature of the work contracted for and any tools or equipment that the putative employee had to supply may also be relevant to the task of construction. Generally, things said or done after a contract was made are not legitimate aids to its construction. (c) Flowing from the first two points, the characterisation of the relationship between the parties depends on their contractual rights and not on circumstances, facts or events that do not affect those rights. Thus, a "wide ranging review of the entire history of the parties' dealings" is neither necessary nor appropriate for the purpose of characterising the relationship: Personnel Contracting at [59] (Kiefel CJ, Keane and Edelman JJ (and see [185]-[189] (Gordon J, Steward J agreeing))). A course of dealings between the parties that does not reflect their strict contractual rights, or the fact that certain of those rights have never been exercised, is not relevant (except to the extent that it might indicate that the contract has been varied or is subject to an estoppel, or that the written contract was a sham): Personnel Contracting at [61] (Kiefel CJ, Keane and Edelman JJ); JMC at [20] (Wigney J). (d) Once the contours of the legal relationship are identified, its characterisation often hinges on two considerations: the extent to which the putative employer has the right to control how, when and where the putative employee performs the work; and the extent to which the putative employee can be seen to be working in their own business as distinct from the putative employer's business: Personnel Contracting at [36]-[39], [73] (Kiefel CJ, Keane and Edelman JJ), [113] (Gageler and Gleeson JJ), [180]-[183] (Gordon J, Steward J agreeing). Both of these involve questions of degree. (e) The contractual provisions likely to be relevant include those that deal with the mode of remuneration, provision and maintenance of equipment, the obligation to work and hours of work, provision for holidays, deduction of income tax, whether work can be delegated, and the right to exercise direction and control: Personnel Contracting at [113] (Gageler and Gleeson JJ), [174] (Gordon J, Steward J agreeing). (f) The label that the parties attach to their relationship is not determinative and rarely of assistance: Personnel Contracting at [63], [66] (Kiefel CJ, Keane and Edelman JJ), [184] (Gordon J, Steward J agreeing). 8 Where there is not a written contract, the identification of the parties' contractual rights must proceed somewhat differently but the fundamental task is the same: the parties' contractual rights and obligations are to be ascertained and characterised. The question remains what the parties' legal rights and obligations were, rather than how they behaved in the performance of their contract (Secretary, Attorney-General's Department v O'Dwyer [2022] FCA 1183; 318 IR 216 at [29]-[33] (Goodman J)). However, that distinction obviously becomes more complicated where the contract is not written and its terms are to be inferred in whole or in part from the parties' conduct. The terms of an oral contract may not be limited to express terms; terms may be inferred from the circumstances, including a course of dealing between the parties, or implied where necessary for business efficacy: Realestate.com.au Pty Ltd v Hardingham [2022] HCA 39; 406 ALR 678 at [21]-[22] (Kiefel CJ and Gageler J). 9 Where there is no written contract and no evidence of a particular conversation in which a contract was formed orally, evidence of the parties' conduct must necessarily be considered in order to draw inferences as to whether the meeting of minds necessary to create a contract has occurred and what obligations they have thereby undertaken (see Personnel Contracting at [177] (Gordon J, Steward J agreeing)).

the present case 10 CTC operated a business delivering timber to customer sites. Originally, it collected timber from the wharf in what was known as "break bulk" - that is, laid out pack by pack on the wharf - and transported it to customers. From about the early 2000s, CTC would collect timber in containers which were taken to its yard, where it would be broken down into individual shipments for delivery to customers. 11 Around February 1999 the applicant, who had been working for another company, offered to provide cartage services to CTC. There was a dispute in the evidence as to who first approached who, which does not need to be resolved. It is tolerably clear that a conversation occurred and an agreement was reached that the applicant would provide services to CTC. At that time, the applicant was the sole director and shareholder of Bayview Transport Services Pty Ltd (Bayview) and was providing services to another business through that entity. I reject Mr Chiodo's evidence that he (reluctantly) formed a company in order to be able to work for CTC. 12 From 1999 to around June 2008, Bayview rendered invoices to CTC for cartage performed by the applicant. It was initially paid based on the volume of cargo carted, and later on a fixed rate per load. The truck that the applicant used in performing these services was owned by Bayview, which also paid for things such as insurance. 13 The proper inference from these circumstances is that there was a contract between CTC and Bayview (the Bayview CTC contract). The contract was partly oral and partly implied. The applicant was not in any direct contractual relationship with CTC. 14 From around May 2008, the applicant continued to provide cartage services to CTC as before, but rendered invoices for those services in the name of "Bayview Enterprises Pty Ltd". A company of that name existed but the applicant had no connection with it. The invoices used ABNs which were registered to the applicant personally or to his wife. The truck which the applicant used was owned, maintained and insured by him. CTC continued to accept the services and pay the invoices. The proper inference is that there was now a contract between the applicant and CTC (the sole trader CTC contract), which (absent any evidence of a conversation forming it) is to be implied from the conduct of the parties. Bayview was deregistered in September 2010. 15 In November 2018 the shares in CTC were purchased by a company called Marrakech Road Pty Ltd, which was later renamed Silk Logistics Holdings Ltd. That company is the ultimate holding company of the present respondent. The change of ownership of CTC had no direct effect on the sole trader CTC contract. 16 Around July 2019, at a meeting with Mr Morgan and Mr Towers (managers employed by CTC), the applicant was told that CTC was not prepared to continue with two of the aspects of the sole trader CTC contract: provision of services by a sole trader; and payment of subcontractors based on a "load rate". If the applicant wished to continue to provide cartage services he would need to operate through a corporate entity, with up to date insurance, and accept payment at an hourly rate. The hourly rate was nearly three times that paid to CTC's employee drivers, but represented a significant reduction in earnings for the applicant, and Mr Morgan recalled him being upset after the meeting. Mr Towers also told the applicant that, later in the year, subcontractors would be engaged by the respondent rather than by CTC. In July 2019 Stilo Enterprises Pty Ltd (Stilo) was incorporated with the applicant as its sole director and shareholder. 17 From around late August 2019, the applicant provided cartage services to CTC, for which Stilo rendered invoices which CTC paid. The invoices were paid on an hourly rate. Stilo provided the truck and other equipment and obtained relevant insurance. The proper inference is that there was a contract between Stilo and CTC which was partly oral and partly implied from the parties' conduct (the Stilo CTC contract). 18 From the beginning of November 2019 Stilo addressed its invoices to the respondent (also based on an hourly rate) and services continued to be provided as before. The proper inference is that from that time there existed a contract between Stilo and the respondent (the Stilo Silk contract) which was on the same terms as the Stilo CTC contract. 19 The Stilo Silk contract came to an end in March 2021 when it was terminated with immediate effect by the respondent. This happened after the applicant told Mr Johnstone (the respondent's Transport Supervisor) that he was not going to do any more work for the respondent. Mr Johnstone then stopped offering work to the applicant. 20 Earlier, on 30 July 2020, Mr Matters (who assisted the applicant at the hearing of this proceeding) had sent an email on the applicant's behalf to Mr Morgan, asserting that the applicant was an employee and claiming what were said to be underpayments. The respondent denied this claim on 13 August 2020. It does not seem to have had any effect on the conduct of the parties to the Stilo Silk contract. Following the termination of that contract the applicant sent a letter to Mr Morgan purporting to resign his employment with the respondent.

The evidence 21 In identifying the various contracts above, and in what follows concerning the characterisation of the relationships brought into existence by those contracts, I have preferred the evidence of the respondents' witnesses to that of the applicant where there is a conflict between them. The applicant contradicted himself several times, and in the witness box was evasive and unforthcoming. Some of the contradictions arose from adjusting his evidence when taken to inconsistent documents or confronted with aspects that were unsupported and implausible. He sometimes put a gloss on facts that was misleading. For example, in his third affidavit the applicant deposed that his prime mover was serviced in the respondent's yard "by a mechanic employed by the respondent", without revealing that in fact he paid for that work and claimed it as a tax deduction. I formed the view that his evidence was designed to advance his claims rather than assist the Court, and that it should be treated with great caution.

Parties 22 The respondents in Jamsek were drivers formerly employed by a company who, at its insistence, had bought the trucks that they operated and entered into new contracts to provide cartage services. Each had formed a partnership with his wife; and the partnerships owned the trucks, contracted with the company and rendered invoices to it. The use of partnership structures, delivering the benefit of income splitting, was "not possible to square" with the contention that the drivers were not conducting a business of their own (at [63] (Kiefel CJ, Keane and Edelman JJ), [89]-[90] (Gageler and Gleeson JJ), [107] (Gordon and Steward JJ). 23 While the partnership arrangements in Jamsek were on foot, the drivers and their respective wives were in contractual relationships with the putative employer. In the present case, during the periods of the Bayview CTC contract, the Stilo CTC contract and the Stilo Silk contract, the applicant had no direct contractual relationship with the putative employer at all. This at the very least weighs heavily against a conclusion that he was an employee of CTC or the respondent during these periods. Employment, at least normally, involves an individual worker who assumes a contractual obligation to the putative employer to perform labour. 24 The sole trader CTC contract, so far as the evidence shows, was not embodied in any document or conversation, or otherwise brought into effect as a result of some conscious reconfiguring of the arrangement that preceded it. There was no negotiation of new contractual terms. Indeed, it appears that nobody at CTC paid any regard to the fact that the applicant was rendering invoices in the name of a company that had nothing to do with him (but with his own ABN or that of his wife), and in effect operating as a sole trader, until July 2019. In substance, therefore, the applicant substituted himself for Bayview and the terms of the Bayview CTC contract otherwise continued in effect. That has some significance because Bayview, in the earlier contract was clearly not (and not alleged to be) an employee of CTC. It was a corporate entity that provided CTC with cartage services using a truck that it owned and a driver (the applicant) whose services it procured. 25 Further, the evidence indicates that, at times during the term of what I have referred to as the sole trader CTC contract, the applicant issued invoices to CTC bearing an ABN that was registered in the name of his wife (Nidia Chiodo); Ms Chiodo was paid by CTC; and she paid the applicant a salary from the money thereby received. This arrangement is also difficult if not impossible to square with the proposition that the applicant was an employee of CTC. 26 It is also noteworthy that no relief is sought against CTC and it is not a party to the proceeding. The first prayer for relief in the originating application seeks a declaration that the applicant was employed from July 1997 "by the respondent", which cannot on any view be correct. The respondent is a distinct legal person from CTC and was not in the picture until the middle of 2020. Further, there is no evidence that suggests the applicant had any working relationship with CTC prior to 1999. The other prayers for relief seek payments by, or allege contraventions by, the respondent (and not CTC). Even if there were some basis on which to conclude that the applicant was an employee prior to November 2019 (when the Stilo Silk contract came into effect), no basis has been established on which entitlements due to him in that capacity would be payable by the respondent. (No application has been made to amend the application so as to seek relief against CTC or join it as a party.) 27 The area of dispute therefore narrows down to the period of the Stilo Silk contract, during which (as noted above) there was no direct contractual relationship between the applicant and the respondent. Consequently, the contracts involving CTC are relevant (and are mentioned further below) only for the light that they shed on the nature of the parties' relationship under the Stilo Silk contract. They have that relevance because it does not appear that there was any conscious reformulation of the contract terms, and Stilo and Silk continued to operate as the parties to the earlier contracts had done.

Control 28 Witnesses for the respondent deposed that the applicant, to a large extent, worked the hours that he chose to work. Analysis of billing records and running sheets showed that he did not work for CTC or the respondent every day and often finished early on Fridays. Witnesses also deposed that the applicant usually went home each day after finishing his last run (leaving his prime mover parked at CTC's or the respondent's premises), while drivers retained on ordinary employment contracts were required to stay until the close of business even if they had no more deliveries to do. There was also evidence that the applicant preferred to do certain kinds of deliveries and declined to take jobs that were not attractive to him, including those which involved going to the wharf. I prefer this evidence to that of the applicant. His witness Mr Valenta (who was employed by CTC as a yard manager and later allocator (roles which saw him supervise the loading of trucks and allocate drivers to jobs)) deposed that he never had a discussion with the applicant about his preference for particular jobs. However during cross-examination he retreated from this claim, and also conceded that a witness who had given evidence to the opposite effect was one of two people generally in charge of allocations (with him assisting). 29 Working short or irregular hours is, of course, not inconsistent with being an employee. What is significant is that there is no evidence that CTC or the respondent ever insisted on the applicant working particular hours or taking particular jobs, or asserted any right to do so. He did not seek permission to take a day off or finish early and was not expected to do so. The hours that the applicant worked were not (or at least were rarely) the result of his putative employer not wanting him to attend work, but of him deciding when he wanted to offer himself for work and when he did not. 30 The applicant regarded himself as a skilful and experienced driver who was hired for his expertise. He considered that he knew the best routes for driving a truck between various locations in Sydney and agreed that he always chose the route that he would drive. There was no evidence to suggest that CTC or the respondent ever sought to dictate to him in this respect. This is consistent with CTC and the respondent having contracted for a result (the successful delivery of goods) rather than the provision of labour, and the applicant rather than his putative employer exercising control over the detail of how each job would be performed (cf Stevens v Brodribb Sawmilling Co Pty Ltd (1986) 160 CLR 16 at 25 (Mason J), 35, 37-39 (Wilson and Dawson JJ); Jamsek at [105] (Gordon and Steward JJ)).

Own business or employer's business 31 Aside from the limited extent of his commitment to working for CTC and later the respondent, several features of the successive contracts suggest that the applicant was carrying on his own business and not working as part of CTC's or the employer's business. 32 For much of the period in question (and the whole of the period for which he actually worked for the respondent), the respondent made use of a corporate entity controlled by him that contracted with the putative employer. That entity paid him a salary and obtained workers' compensation insurance, which was tax deductible. When not working through a corporate entity, the applicant was still paid upon invoices which included an ABN and upon which GST was payable (allowing the applicant to claim input tax credits, which he did). For a period, and for reasons that he did not wish to elucidate, he directed the income from his work for CTC to Ms Chiodo. 33 While conducting himself as a sole trader, the applicant claimed significant tax deductions for business expenses and his accountant framed his tax returns on the basis that he was conducting a business. Deductions were also claimed by Bayview and later Stilo. To a large extent these related to ownership and maintenance of the prime mover that the applicant drove. In his oral evidence the applicant agreed that (thanks to his accountant) he "claimed everything" and as a result paid very little tax. He was not criticised for that, and his approach to his tax obligations is only of peripheral relevance to the characterisation of his relationships with CTC and the respondent. What is more relevant is that the contracts were structured in a way that allowed the applicant to obtain financial benefits from incorporation and from receiving income in the form of payments on invoices, and he took advantage of those opportunities. As noted in Jamsek (above at [22]), that is "not possible to square" with a contention that the applicant was not conducting his own business. 34 The prime mover was, of course, a significant capital asset on the books of (relevantly) Bayview, the applicant and finally Stilo. Use of the prime mover was clearly central to the provision of the services. The applicant and the companies that he controlled took on the burden of financing the acquisition of this asset, maintaining and insuring it, while obtaining the opportunity to use it to generate a profit. CTC and the respondent, meanwhile, avoided having to pay those costs itself, but paid rates that were significantly above the wages of a driver driving one of its own trucks. When the applicant was moved on to an hourly rate, very much against his wishes, that rate was nearly three times the hourly wage of an employed driver. These were calculations of the kind normally made by businesses operating in their own interests independently of each other; and the wide disparity in rates indicates that the value of the applicant's labour was only a relatively small part of the value of the contract. 35 Up to around July 2019, when the change to an hourly rate was insisted upon by CTC, the applicant was paid on a fixed rate per load (and had earlier been paid by volume). He explained in cross-examination that he preferred this, as the more deliveries he achieved the more he was paid. He was able to use the contacts and relationships he had developed to have jobs allocated to him that could be done quickly (generally short trips) and use his skill as a driver to get them done efficiently, so as to maximise his income. On several occasions, Mr Evans (the director and sole shareholder of CTC prior to its sale to the respondent, who was retained as a consultant by the respondent following the purchase) had offered the applicant a position driving for wages and he had refused. In cross-examination he accepted that this had happened and explained that moving to an hourly wage would have resulted in a pay cut for him. 36 The ad hoc nature of the applicant's work, discussed above, is relevant to whether he is to be seen as working in the respondent's business or his own. There was also evidence from Mr Evans (although the applicant denied it) that, when the Bayview CTC contract was being formed, there was discussion to the effect that the applicant was providing services to CTC's competitors and would drive for CTC in his "extra time"; and that the applicant had done work for some of CTC's competitors during the time he was driving for it. There is nothing to suggest that CTC treated this as a breach of contract, or that it sought to make its arrangement with the applicant exclusive. This too is consistent with the applicant having been retained as an independent contractor, to provide cartage services from time to time when mutually convenient, and not as an employee (cf Howard v Merdaval Pty Ltd [2020] FCA 43 at [30]).

Conclusion 37 It is clear, in the light of the features of the parties' relationship described above, that the applicant was not at any relevant time an "employee" of, or a "worker" employed by, the respondent. The same conclusion would be comfortably reached in relation to the applicant's relationship with CTC if that were necessary in order to determine the claims for relief. 38 There is no substance to the allegations that these contracts were a sham and that the respondent breached s 357 of the FW Act. (a) "Sham", used in connection with a contractual document, means something brought into existence as a "mere piece of machinery" to serve some purpose other than that of constituting the whole arrangement (Personnel Consulting at [177] (Gordon J), referring to Raftland Pty Ltd v Commissioner of Taxation [2008] HCA 21; 238 CLR 516 at [34]-[35] (Gleeson CJ, Gummow and Crennan JJ)). In the present case there was no document purporting to encapsulate (or even categorise) the parties' relationship. Reference is also sometimes made to "sham arrangements", connoting "an arrangement through which an employer seeks to cloak a work relationship to falsely appear as an independent contracting arrangement in order to avoid responsibility for legal entitlements due to employees" Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] HCA 45; 256 CLR 137 at [21]. There is no cogent evidence in the present case of any arrangement having that character. In his closing submissions the applicant drew attention to his evidence that he was told by Mr Evans to form a company (Bayview) and that despite that company existing he would still work for CTC "exactly like an employee". I have already rejected this evidence at [11] above, Bayview was an active company before these conversations could have taken place. There is nothing capable of being given the label of a sham. (b) As to s 357, that section according to its terms applies to a person who "employs, or proposes to employ" another person. The consequence of the conclusions I have reached above is that the respondent never met that description in respect of the applicant and s 357 was thus not engaged (see Fair Work Ombudsman v Quest South Perth Holdings Pty Ltd [2015] FCAFC 37; 228 FCR 346 at [71] (North and Bromberg JJ) (overturned on appeal but not on this point: [2015] HCA 45; 256 CLR 137)). 39 As I have not formed the view that the applicant was an employee of CTC or the respondent it is not necessary to consider entitlements under the AH Act or LSL Act prior to 2010.

The SGA Act claim 40 The core obligation under the SGA Act is imposed on an "employer". It is to pay "superannuation guarantee charge" on the employer's "superannuation guarantee shortfall", which is an amount calculated according to the "quarterly salary or wages base" for each "employee": see ss 16-19. Although "employer" and "employee" have their "ordinary meaning" (s 12(1)), the concepts are expanded by the succeeding provisions of s 12. Section 12(3) provides that a person who "works under a contract that is wholly or principally for the labour of the person" is an employee of the other party to that contract. The concept of a contract "for the labour of the person" is not defined, but is evidently intended to expand the coverage of the SGA Act beyond "employees" in the ordinary sense of that expression. 41 The construction of s 12(3) was raised by way of a cross-appeal in Jamsek, which was remitted for determination by the Full Court of this Court. The Full Court held that s 12(3) applied only where the putative employee was an identified natural person who was a party to the contract in their individual capacity (Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48; 323 IR 302 (Jamsek remitter) at [33] (Perram and Anderson JJ, Wigney J agreeing)), which has the consequence that the SGA Act can have no application in relation to the periods covered by the Bayview CTC contract, the Stilo CTC contract and the Stilo Silk contract. Further, the reasoning of the Full Court is against any of the contracts being one "for the labour of" the applicant. The contracts in Jamsek remitter were held not to meet that requirement on the basis of the following features which are also present in this case: (a) they required the use of a substantial capital asset, for which the putative employees took responsibility and paid relevant costs (at [57]); (b) the putative employer received a single integrated benefit of the carriage of goods by means of a truck, rather than having a distinct "labour" component (at [59]); and (c) there were provisions in the contracts allowing the work to be performed by a substitute driver with the agreement of the putative employer, meaning that the performance of the contract was not personal (at [58]). (This point is different in the present case including because there was no written contract. I accept the applicant's evidence that nobody else drove his truck, but it is relevant that he at times paid his wife a wage for administrative tasks connected with his work and that during the period of the sole trader CTC contract CTC issued invoices to an ABN registered in the applicant's wife's name.) 42 In any event, there is a more fundamental problem facing this aspect of the applicant's claim. The SGA Act does not confer any entitlement on an employee as against an employer. Rather, it defines the circumstances in which the employer is required to pay the "superannuation guarantee charge", defined in s 6 to mean the charge imposed by the Superannuation Guarantee Charge Act 1992 (Cth). That charge reflects the aggregate of the "superannuation guarantee shortfall" for all employees of the employer and is payable to the Commonwealth. It was held, in Roy Morgan Research Pty Ltd v Commissioner of Taxation [2011] HCA 35; 244 CLR 97, to be a tax for constitutional purposes. Thus, the SGA Act encourages employers to make superannuation contributions at or above a defined level by imposing a tax on those who fail to do so; it does not impose any duty to make such contributions for the benefit of any employee. This was pointed out in Bluescope Steel (AIS) Pty Ltd v Australian Workers' Union [2019] FCAFC 84; 270 FCR 359 at [25] (Allsop CJ). (For some reason this point does not appear to have been raised in the Jamsek proceedings, even though the Commissioner of Taxation was joined as a respondent in Jamsek remitter (with the plurality in the High Court having referred to the absence of the Commissioner as a reason not to decide the cross-appeal: Jamsek at [75]). The point is raised by the respondent's submissions in the present case.) 43 For this reason, even if the applicant could establish that he was an "employee" within the meaning of s 12 of the SGA Act, that would not entitle him to the relief he seeks. (If his claim were amended in this respect so as to seek a declaration concerning the respondent's liability to pay superannuation guarantee charge, it would be dismissed for want of any standing to seek such relief. The applicant has no greater interest than any member of the public in questions as to whether or not the respondent has paid correct amounts of superannuation guarantee charge.)

disposition 44 The application must be dismissed. The respondent did not seek costs, presumably in view of s 570 of the FW Act. I certify that the preceding forty-four (44) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Kennett.