Federal Commissioner of Taxation v J Walter Thompson

GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) NG 242 of 1996 NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION ) BETWEEN: DE LUXE RED AND YELLOW CABS CO-OPERATIVE (TRADING) SOCIETY LIMITED First Applicant ABC RADIO TAXIS CO- OPERATIVE LIMITED Second Applicant WESTERN SUBURBS TAXI DEPOT PTY LIMITED Third Applicant YELLOW CABS (QUEENSLAND) PTY LIMITED Fourth Applicant VERMONT AUTOGAS PTY LIMITED Fifth Applicant VANNEVAR PTY LIMITED Sixth Applicant RAYMOND JOHN MEREDITH Seventh Applicant RUSSELL ARMSTRONG AND DIANNE M ARMSTRONG Eighth Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE(S): HILL J PLACE: SYDNEY DATED: 28 AUGUST 1997

MINUTES OF ORDER THE COURT DECLARES THAT:

1. The arrangements described in paragraph 7 of the Statement of Claim filed herein (hereafter referred to as the "payment arrangements") do not give rise to the payment of "salary or wages" within the meaning of that term in subs 221A(1) of the Income Tax Assessment Act 1936.

2. There is no obligation under subs 221C(1A) of the Income Tax Assessment Act 1936 upon the applicants to deduct any amount under the payment arrangements with their drivers.

3. The applicants and those drivers who make payments under the payment arrangements are not in the relationship of "employer" and "employee" within the meaning of those terms in s 12 of the Superannuation Guarantee (Administration) Act 1992.

4. The payment arrangements between the applicants and their drivers do not give rise to a liability to pay a superannuation guarantee charge under s 16 of the Superannuation Guarantee (Administration) Act 1992.

THE COURT ORDERS THAT: There be no order as to costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

GENERAL DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) NG 242 of 1996 NEW SOUTH WALES DISTRICT REGISTRY ) ) GENERAL DIVISION ) BETWEEN: DE LUXE RED AND YELLOW CABS CO-OPERATIVE (TRADING) SOCIETY LIMITED First Applicant ABC RADIO TAXIS CO- OPERATIVE LIMITED Second Applicant WESTERN SUBURBS TAXI DEPOT PTY LIMITED Third Applicant YELLOW CABS (QUEENSLAND) PTY LIMITED Fourth Applicant VERMONT AUTOGAS PTY LIMITED Fifth Applicant VANNEVAR PTY LIMITED Sixth Applicant RAYMOND JOHN MEREDITH Seventh Applicant RUSSELL ARMSTRONG AND DIANNE M ARMSTRONG Eighth Applicant AND: COMMISSIONER OF TAXATION Respondent JUDGE(S): HILL J PLACE: SYDNEY DATED: 28 AUGUST 1997

REASONS FOR JUDGMENT INTRODUCTION The passing of the horse driven hackney cabriolet or carriage in favour of the motorised "cab", with its taximeter designed to record the tariff or "tax", may have assisted in popularising the taxi as an essential element of a modern transport system, but it did nothing to clarify the legal relationship subsisting between taxi owner and taxi driver. That relationship was the subject of argument as early as 1848 when in Morley v Dunscombe (Queens Bench, 11 Law Times, 199, cited in Powles v Hider (1855) 6 El & Bl 207, 119 ER 841) it was held to be one of master and servant rather than merely of bailee and bailor. It is an argument which, as will be seen, has continued to the present day. The present proceedings, brought as a test case, were commenced in the High Court of Australia and subsequently remitted to this court. Having regard to the significance of the matter to the parties an order was made for an expedited hearing. The applicants are taxi operators, taxi co-operatives, and taxi plate owners operating in Sydney, Perth, Melbourne and Brisbane under State legislation regulating taxis. The respondent, the Commissioner of Taxation, claims that each of the applicants pays amounts to taxi drivers which fall within the meaning of "salary or wages" as defined in the Income Tax Assessment Act 1936 ("the Tax Act") and is thus liable to deduct amounts from the salary of drivers under the PAYE provisions of the Tax Act and to pay a superannuation guarantee charge in the event of any shortfall under the Superannuation Guarantee (Administration) Act 1992 ("the Superannuation Guarantee Act"). The applicants claim that no relationship of employment exists with drivers and, in consequence, no liability arises to deduct PAYE tax or to pay a superannuation guarantee charge.

The circumstances under which each of the applicants contracts with drivers differ, although not to a great degree. Accordingly, it is convenient to set out in some detail the situation existing in New South Wales, in which State each of the first, second and seventh applicants carry on business, and then to indicate briefly such differences as there may be in the other States. THE BACKGROUND FACTS New South Wales Three applicants operate in New South Wales. The first applicant, De Luxe Red and Yellow Cabs Co-operative (Trading) Society Limited ("De Luxe"), is a Sydney based co-operative with approximately 1500 licensed members and shareholders, who operate approximately 2000 taxis. De Luxe manages a fleet of approximately 54 taxis which it operates from its base at Paddington. De Luxe offers at the base various services and facilities to members, including a service station, a tyre bay, a radio repair shop, a repair and maintenance operation area, a brake bay, a cafeteria for staff and drivers, an area for drivers to wait during shift changes, storage and parking facilities and a smash repair operation. None of the managed fleet drivers purchase fuel from the base. The managed taxi fleet comprises four metro taxis (specially suited to disabled passengers), nine special purpose taxis (vehicles used for conveying passengers in wheelchairs), eight taxis with "9200 plates" (with restricted operating hours) and the remaining taxis with unrestricted licences. De Luxe owns one of the unrestricted licences and the remainder are leased from licensees pursuant to a "Taxi Management Agreement". Under that agreement De Luxe has the right to use the plates and to operate a vehicle displaying such plates upon payment of a fee. The agreement may provide that De Luxe also leases a car. In addition, De Luxe has two cars with normal registration plates which are available for use as taxis if one of the managed fleet is unserviceable. The company also owns the ancillary equipment with which the stand-by taxis are equipped, such as roof rack and tail light, radio and computer dispatch unit, meter and emergency alarm equipment. Taxis Combined Services Pty Limited ("Taxis Combined"), a wholly-owned subsidiary of De Luxe, owns and operates a computerised radio communication and dispatch system to facilitate bookings for drivers of taxis owned and operated by members and licensees of De Luxe as well as taxis in the managed fleet. De Luxe provides separate communication facilities for other Sydney based operators including ABC Radio Taxis Co-operative Limited ("ABC"), St George Cabs Co-operative Limited and South Western Taxis by agreement with those companies. Before drivers are approved to drive the managed fleet a check is made that they hold current licences, that they have a satisfactory accident record, that they have no record of dishonesty and owe nothing to Cabcharge (Australia) Pty Ltd ("Cabcharge"). Drivers operating out of the Paddington dispatch facility, whether managed fleet drivers, owner drivers or drivers for other operators, are required to attend a course run by Taxis Combined where they are taught computer dispatch operating procedures. Following completion of that course, drivers are provided with a PIN (personal identification number) and a DID (driver identification number). These identification numbers are used by the drivers to access the computer dispatch system and to identify drivers in the system. At the Taxis Combined course drivers are provided with written material dealing with rules for the dispatch system, location of cab ranks, computer codes for suburbs, a computer dispatch manual and a colour-coded map of the area covered by the De Luxe network. The DID is used as a code for identifying the driver in the system. There is no written contract between drivers and De Luxe. However the Taxi Industry (Contract Drivers) Determination 1984 ("the Determination"), made pursuant to the Industrial Arbitration Act 1940 (NSW), requires that the bailment relationship with the driver be on the terms and conditions set out in a Schedule to that Determination . Relevant clauses of that Schedule include: "SCHEDULE MEMORANDUM OF AGREEMENT made this day of .............................................................. One thousand nine hundred and..........................BETWEEN .......................DELUXE RED CABS CO-OPERATIVE TRADING SOCIETY LTD................. of.................... in the State of New South Wales (hereinafter called the "bailor") of the one part AND .............. ..........................................................of...................................................................................... in the said State (hereinafter called the "bailee") of the other part WHEREBY IT IS AGREED as follows:-

1. That the bailor shall bail and the bailee shall hire such duly registered and licensed Taxi Cab and/or cabs as during the terms of this agreement the bailor in his sole and absolute discretion may make available from time to time to the bailee together with the equipment belonging thereto on the terms and conditions hereinafter appearing.
2. In consideration for such bailment the bailee shall pay daily to the bailor 60 per cent of the chargeable fares earned by the bailee of any such cab during each occasion when a cab is made available to him by the bailor after the commencement of this agreement and during the currency thereof. ....
3. The bailee shall permit the bailor by the bailor's officers, employees or agents at all times during the continuance of this agreement to have access to the said cab and inspect and/or test the condition thereof and IT IS HEREBY EXPRESSLY AGREED that the bailor shall at all times have the right to require the bailee personally to return the cab to his garage or depot for inspection or testing as aforesaid, or for the repair or maintenance thereof, or for any other reason whatsoever that the bailor may deem fit. ....
4. Subject always to the provision of this agreement, the bailee must use the cab for the transportation of fare paying passengers and luggage only in accordance with any acts, regulations or by-laws relating to taxi cabs.
5. The bailee may at any time determine this agreement by giving notice of his intention so to do and at or before such notice the bailee shall at his own cost return to the garage or depot then being used by the bailor in good repair and condition and free from transport and all other charges any cab then the subject of the bailment to him pursuant to the terms of this agreement.
6. The bailee shall at all times during the terms of this agreement strictly comply with all acts, regulations, by-laws, ordinances and other matters for the time being in force in New South Wales in regard to motor vehicle traffic and taxi cabs. ....
7. The bailor or bailee reserves the right to cancel this agreement at any time without notice or giving any reason.
8. The bailee may not take any taxi cab outside the area for which it is licensed to operate unless permission is obtained from the bailor. ....
9. Where the bailor requires the bailee to wear a distinctive dress or uniform it shall be provided and laundered free of cost by the bailor. ....
10. If the bailee should continuously carry out his obligations under this agreement for a period of not less than five years the bailor shall grant to him all benefits in the nature of long service leave to which he would have been entitled if he had been during the currency of such agreement an employee of the bailor, and such benefits shall not be less favourable than those benefits prescribed under the Long Service Leave Act, 1955, as amended.
11. IT IS EXPRESSLY AGREED between the parties hereto that nothing herein contained shall create or be deemed to create a partnership or the relationship of employer and employee between the bailor and bailee and that the intention of the parties hereto is that the bailee shall merely hire the cab and shall not have or acquire any proprietary interests therein, AND IT IS FURTHER EXPRESSED AGREED AND DECLARED between the parties hereto that this agreement as set forth contains the entire understanding of the respective parties with reference to the subject matter hereof and there is no other understanding or agreement whether expressed or implied in any way binding extending defining or otherwise relating to the aforesaid taxi cabs or any of the matters to which these presents relate." (Emphasis added.) As required by the Determination, De Luxe provides all new drivers to its managed fleet with various other documents including a Bailee Application Record, Bailee Election form, fleet cab operations and procedures manuals for both day and night shifts, a pay-in list showing gross pay-ins and a pay-in list pertaining to net pay-ins. Drivers are required to elect as between two methods of payments for a shift, being the "meter pay-in" (or "off-the-meter") method or the "fixed pay-in method". Under the first method, the bailee is entitled to receive and retain from the chargeable fares a percentage, being 45% for first year permanent and all casual taxi drivers and 50% for second or subsequent year permanent taxi drivers. Under the second method, the bailee is entitled to receive and retain from the chargeable fares the balance after deducting an amount which amount is paid by the driver to the operator. The Determination sets out the maximum amount which the driver is required to pay. This maximum amount varies with the type of shift (day or night) and the day of the week, and may take into account the mileage driven in the shift. De Luxe has its own rates which are less than the maximum provided in the Determination, with the result that drivers with De Luxe receive more than would be received by a driver operating under the Determination. Virtually all drivers with De Luxe elect for the second "fixed pay-in" method. Two methods of "fixed pay-in" apply. The first, referred to as the "nett pay-in" method, takes into account a pre-estimate of the cost of reimbursing the driver for the fuel which is paid for by the driver (and a car wash in the case of the night shift). Under the other method, called the "gross pay-in" method, De Luxe covers fuel and washing costs for drivers. Drivers are ordinarily given three months after commencing with De Luxe to decide whether they wish to work on a net or gross pay-in method. De Luxe reserves the right to charge drivers the additional mileage amount referred to in the Determination (31 cents per kilometre) with respect to each shift. Drivers operate on a shift basis. There are two shifts, a day shift commencing at approximately 4am and finishing no later than 3pm and the night shift commencing at approximately 3pm and finishing at about 3am. On Monday evenings, day shift drivers may, at their option, take taxis on an extended shift until 7pm for an increased pay-in of $121.00. On weekends, taxis are available for what are called "semi-double shifts" which means that drivers may take the taxi for the day shift and then retain it for the night shift. The most popular arrangement with drivers on Friday and Saturday nights is what is referred to as the "reverse-semi shift" which involves the driver taking the taxi at 3pm on either Friday or Saturday and completing the shift by 3pm the following day. The pay-in for a Friday reverse-semi is $165.00 and a Saturday reverse-semi is $157.00. Taxis are taken by some drivers on a regular basis. Permanent drivers are those who take a taxi for at least 5 shifts per week. Regular casual drivers are those who drive less than 5 shifts per week. Some casual drivers will drive only infrequently. De Luxe has about 70 permanent drivers and between 80 to 100 casual drivers. Approximately 75% of De Luxe's casual drivers are regular casuals. Almost all day drivers are permanent drivers and the majority of night drivers are regular casuals. Drivers are allocated a taxi prior to the commencement of a shift. Permanent drivers are generally allocated the same taxi unless it is unavailable. However, if a permanent driver does not arrive on time at the base the taxi which would otherwise have been allocated to that driver is considered for allocation to another driver. Drivers collect the taxis from the base at the commencement of their shift and return it to the base at the end of the shift. Drivers ordinarily provide their own street directories, change and carry an authority card, which is issued to them by the Department of Transport. Metro taxi and special purpose taxi drivers work six days per week, and often work very long shifts. In this event, they generally retain possession of the taxi and operate from their own homes. These drivers make their relevant pay-ins every second day at the base. At the end of a shift drivers are expected to refuel the taxis and return them, with the keys, to the changeover area at the base, following a day shift or the night wash department after night shift. The driver is expected to make the payment to De Luxe at the time of handing over the vehicle irrespective of the amount of custom the driver has generated on the shift. On completion of the shift, the driver is expected to fill in a daily work sheet showing the driver's name, details of the cab, odometer readings and the time of commencement and completion of the shift. All registration and maintenance costs for the taxis in the managed fleet are borne by De Luxe and almost all drivers take taxis on the basis that they are responsible for fuel and the cost of washing the car. All mechanical repairs for taxis are performed by De Luxe at the base and all panel beating repairs are done at Taxis Combined smash repairs at the base or at De Luxe's other smash repair premises at Alexandria. Electrical and automatic transmission repairs are sub-contracted to licensees who also operate from the base. De luxe pays hiring duty to the Office of State Revenue on hiring the cars to drivers by reference to moneys received from drivers of its managed fleet. De Luxe expects is drivers to accept from passengers Cabcharge and various other recognised credit cards, including Motorpass, JCB, Diners Club, Citycabs and American Express. Some cabs are presently trialing Eftpos. Drivers receive full credit for the face value of the amount charged to these credit cards. If charge Dockets exceed the pay in amount drivers are reimbursed in cash for the excess at the time of pay in. Credit card dockets and an imprinting machine to process them are left in the taxis. De Luxe advertises its credit card facilities on the side of its cabs. Drivers may accept charge cards other than those just mentioned but De Luxe does not give a credit to drivers in respect of dockets for such cards in relation to their pay-ins. Credit facilities for approved cards are arranged for by the cab owner and in the case of the managed fleet by De Luxe. De Luxe requires any taxi driver who uses the network to comply with the Computer Dispatch Operating Rules of Taxis Combined and breaches of these rules are dealt with by Taxis Combined's Customer Service Department. Complaints from the public about drivers are also handled by that Department. Shirts bearing the Taxis Combined logo are available for purchase by drivers from the base but are not provided to drivers by De Luxe. De Luxe expects the drivers to wear these shirts as well as to comply with dress standards contained in the New South Wales Taxi Industry Code of Conduct. De Luxe gives no directions to its managed fleet drivers regarding how they must operate their taxis and drivers are free to choose how they wish to operate, subject to applicable legislation. In particular, drivers are free to choose whether they obtain work via the De Luxe network, from ranks or off the street. Approximately 25% of drivers now use mobile phones, which they provide themselves, to obtain work. De Luxe does not limit the area where managed fleet drivers can operate. If, however, a driver wishes to take a fare outside the Sydney metropolitan area he is expected to notify the base by radio. De Luxe does not require drivers to perform any particular hiring apart from metro taxis which are designed specifically for disabled people. De Luxe is required by the Determination to provide its permanent drivers (but not its regular casual or casual drivers) with annual, sick and long service leave. So, for example, a permanent driver who has completed 55 shifts in a three month period is entitled to sick leave; the entitlement on a yearly basis being five days' sick leave. De Luxe is liable under New South Wales industrial law to pay workers compensation to drivers and thus pays insurance premiums to cover drivers in respect of any worker's compensation claims. Where a taxi is unavailable for a permanent driver because of an accident or a mechanical breakdown De Luxe pays the driver downtime. If a taxi breaks down or has an accident where the driver is not at fault De Luxe pays the driver downtime for the remainder of the shift, as required by the Determination. ABC, the second applicant, is a co-operative owned by shareholders with taxi licenses. It operates a taxi network under a service agreement with Taxis Combined from the Paddington premises. It has approximately 170 taxis in its network but operates itself thirteen taxis as its managed fleet. It is in respect of those taxis that the present dispute arises. The remainder of the ABC fleet is operated by shareholders, lessee operators and operators licensed by ABC. Like De Luxe, ABC has a base with service station facilities. Licensees perform mechanical repairs at that base. There is also a car wash at the base. ABC has approximately 300 drivers on its books and approximately 60 of these are active drivers. Drivers are obtained through word of mouth, by advertising or from lists from driver training schools. All current ABC fleet drivers have elected to operate on a "nett pay-in" method. They have foregone any entitlement to holiday pay, sick leave or long service leave. Where drivers purchase fuel they are reimbursed the cost. However, drivers are charged an amount per kilometre driven. ABC is flexible with drivers' starting times. When a shift is completed the taxi is refuelled and washed. The pay-in amount is paid at that time. Reimbursement for fuel purchased by drivers is made later. Amounts in excess of pay-ins arising, for example through credit card dockets, are paid at the beginning of the next shift, although some drivers let the credit build up. Except so far as is stated above, ABC drivers operate in the same way as do drivers with De Luxe. The seventh applicant, Mr Meredith, operates two taxis from his home in Sydney. He regularly drives one of the taxis himself and has three drivers who drive for him. One driver drives for him permanently, the other two are regular casual drivers, driving less than five shifts a week. He makes contact with prospective drivers either through the driving school conducted by Taxis Combined or through advertising. He is a member of De Luxe and uses the Taxis Combined computer dispatch network. Mr Meredith advises drivers that he expects them to maintain high standards, to look after the taxis and advise him of any mechanical problems. Drivers pick up cars from Mr Meredith's home. Sometimes they drive a "semi-shift", that is to say the driver will have the taxi for the day shift and part of a night shift. Sometimes there will be a swap of taxis so that the driver will finish the semi-shift with a different taxi. Mr Meredith's drivers all operate on a fixed "nett pay-in" basis. This means that they pay for any fuel they use. The rates he charges for pay-ins are the same as those charged by De Luxe. He does not charge for excess kilometres, although he reserves the right to do so. Mr Meredith maintains the taxis himself, pays the cost of any repairs and keeps the taxis clean, either washing them himself, or reimbursing the drivers the cost of a wash. Mr Meredith pays his permanent drivers annual leave, sick leave and long service leave in accordance with the Determination. Casual drivers do not receive these benefits. Save as stated above, there is no relevant difference in the arrangements between Mr Meredith and his drivers, on the one hand, and De Luxe and its drivers, on the other. In summary, Sydney drivers generally pay a fixed amount to operators for use of the taxi and, subject to compliance with statutory and network rules, are free to ply for customers from the computer network or radio, from a rank or off the street or by mobile phone, whichever generates the most work. Legislation regulates many aspects of the way drivers operate. Network operators set rules for the use of the computer and radio and the handling of public complaints. Contracts between the operators and drivers in Sydney are, whether or not in a specific case in writing, by force of the Determination, in accordance with the Schedule to that Determination in the form of an agreement for bailment of the taxi (as set out above) which expressly excludes the relationship of employer-employee operating between them. Finally, as a result of industrial legislation some drivers receive long service leave, holiday pay and sick leave from operators. All drivers are covered by workers' compensation. Western Australia One applicant operates in Western Australia. Vannevar Pty Limited ("Vannevar"), the sixth applicant, operates a taxi business under the name "M & L Taxi Management" in Perth. It manages 31 taxis. In most cases, Vannevar simply manages the taxi plate, radio, computer and meter for the taxi plate owner. The plate owner does not usually own the vehicle and in consequence the vehicles with which the present proceedings are concerned are owned by Vannevar. Vannevar is a member of Swan Taxi Co-operative Limited ("Swan Taxis"). There are more than 1,000 taxis operating in the Perth metropolitan area. Approximately 780 taxis operate through Swan Taxis and approximately 210 operate through a competing taxi dispatch service, Black & White Taxis. The arrangements in place in Perth between operators and drivers broadly mirror those in Sydney except that there is no regulated form of contract. Drivers apply to be registered with a network in the present case with Swan Taxis, and agree to abide by the rules and regulations governing that co-operative's network. A form is also signed by both driver and owner but contains non-contractual terms. Prior to the operation of the Taxi Act 1994 (WA) the Taxi Control Board issued three types of recommended agreement. Each was in the form of a bailment agreement. Vannevar used its own form of agreement. In addition to various commercial terms, Vannevar's agreement provided: " Subject to the provisions of this agreement the LESSEE:- (a) Shall have the control of the taxi-car including the running and management thereof during the periods referred to in Clause 1. (b) Shall not be subject to any instructions or directions by the LESSOR relating to the operation of the taxi-car except those made in accordance with the terms of this agreement. (c) Shall use the taxi-car for the carriage of passengers and luggage in accordance with the provisions under which the taxi-car is licensed."

There are no industrial awards governing taxis in Western Australia and drivers receive no annual or long service leave, sick leave or workers' compensation. Nor do they receive any payment for down time. The taxi industry is largely self regulated .in Western Australia. Vannevar obtains drivers through the Commonwealth Employment Service. They are required to complete a course conducted by the Road Transport Training Council Western Australia Inc and are approved by Vannevar's insurer as being acceptable insurance risks. Drivers with Swan Taxis are given an Operator Handbook. All drivers with Vannevar operate under a "fixed pay-in" system. There are maximum rates recommended by the Taxi Industry Board. Vannevar requires drivers to pay a bond. If a permanent driver does not take a taxi out for a shift an attempt is made to find a replacement driver. If no replacement driver is found the permanent driver is required to pay for the shift. If a taxi is unavailable for mechanical reasons the amount of pay-in is adjusted on an hourly basis. Cabcharge and other credit dockets are not accepted by Vannevar. If a driver accepts Cabcharge he is required to take the docket to Swan Taxis where he can exchange the docket for cash. Vannevar does not enforce the rules of Swan Taxis. Any breach of those rules is a matter for the Swan Taxi Disciplinary committee. Although the owner of a taxi licence has a real interest in ensuring that a driver does not infringe regulations, since the taxi license may be put into jeopardy, in practice the only way to insure against this is to pick the right drivers. If it came to notice that a driver was operating outside the licensed area or was overcharging an attempt would be made to stop that happening. Save as stated, there is no relevant difference between the method of operation in Western Australia and that pertaining in New South Wales. Victoria One applicant operates in Victoria. Black Cabs Combined Limited("Black Cabs") owns and operates in Melbourne a taxi communication centre under the authority of the Victorian Taxi Directorate for the receipt and dispatch of bookings to drivers of taxis operating within that network. The fifth applicant, Vermont Autogas Pty Limited ("Vermont"), manages a taxi fleet comprising 23 vehicles, operating them through the Black Cabs network. Vermont enters into a written agreement with its drivers. The agreement is in the form of a lease of a vehicle in consideration of a rental payment. In addition to various commercial terms, the agreement provides in clause 5: "Subject to the provisions of this Agreement the Lessee - (a) shall have the control of the vehicle including the running and management thereof during the periods referred to in Clause 1 above. (b) shall not be subject to any instructions or directions by the Lessor except those requiring observance of the conditions of this Agreement; (c) shall use the vehicle for the carriage of passengers and luggage in accordance with the provisions of any act, Regulations or By-Laws from time to time relating to Taxi Cabs or Private Hire Cars (as the case may be); and, (d) shall use the vehicle at such places as he in his absolute discretion shall deem fit." Vermont has approximately 130 drivers on its books of which approximately 120 would have driven in a three month period. Fifty of the drivers drive five or more shifts a week. The remainder of drivers are casuals. There is a high rate of turnover. Payment is made to Vermont by drivers of 50% of the meter takings. Of this amount, 20% is allocated to the vehicle, and the balance to the license. State rental tax is paid on the amount of monies paid by drivers in respect of the car, but not the license. Because payment by the driver to Vermont is made by reference to the meter takings the driver completes a work sheet showing, inter alia, the metered fares, eg flag fall, distance units, wait units, extras, end time, paid kilometres and total kilometres travelled. Refuelling costs and the cost of car washes are deducted. Where Cabcharge or credit dockets are received, the driver's share of the takings is the cash component and, if necessary, the Cabcharge or other credit amount would be reimbursed in cash. Taxi legislation requires that drivers wear uniforms. Black Cabs also has a code of conduct which it requires of network drivers. As between Vermont and drivers, it is left up to drivers to comply with their obligations under legislation and Black Cabs' code of conduct. There is no industrial legislation operating in Victoria regulating taxis so that no payments are made for sick leave, downtime, holiday pay or long service leave. Drivers who have driven with Vermont for more than two months are allowed a rebate of rental of $5.00 per week. This amount is accumulated and paid to the driver in a lump sum. In the event of an accident, the driver is required to pay a $100 excess. Except as stated, there is no relevant difference between the arrangements operating between Vermont and its drivers and those operating in New South Wales. Queensland Three applicants carry on operations in Queensland. The fourth applicant, Yellow Cabs (Queensland) Pty Limited ("Yellow Cabs"), manages a Brisbane based network of about 840 taxis, comprising about 60 taxis operated by itself and about 780 taxis operated by other individual operators. The eighth applicant, Mr Armstrong, is the licensee of two cabs which operate through Yellow Cabs and the third applicant, Western Suburbs Taxi Depot Pty Limited, is a company with six taxis in its managed fleet which also operates through the Yellow Cabs network in Brisbane. The arrangements between the operators and drivers in Brisbane are broadly the same as those in place in the other metropolitan areas already discussed. In Brisbane both the fixed pay-in and percentage of gross takings payment methods operate. Approximately 50% of the drivers operate under the fixed rental method, approximately 40% use the percentage of the meter method and about 10% operate under a seven day, fixed rental system. Drivers may choose the method they wish to adopt and may later opt to change. Drivers operating on a fixed rental method make a payment or pay-in which varies according to the time and day of the shift concerned . Ordinarily, the pay-in is higher on Friday and on week-ends. Yellow Cabs ordinarily receives 55% of the gross takings of drivers who operate on an off-the-meter method and occasionally this method is varied according to the perception of difficulty of a particular shift and can range from 45% to 55%. Drivers make their pay-ins at the end of the shift. There is no written contract between drivers and operators. As in New South Wales drivers are required to complete a training course. It used to be the case that drivers had to obtain an authorisation from the government to drive for a particular network, such as Yellow Cabs, and to change networks. That has changed and a driver can now change networks without government authority. There is a mix of drivers driving four or more shifts a week and casual drivers. Because drivers operate on either percentage or fixed pay in bases the work card, which drivers complete, contains meter details as well as information of kilometres driven. Drivers also pay $2.00 per shift in advance as a contribution to insurance premiums. Drivers in Brisbane do not receive any annual or sick leave or holiday pay from operators. They are subject to no industrial awards. SUMMARY OF THE SUBMISSIONS It was submitted by Senior Counsel for the applicants that the relationship which exists between the plaintiff operators and their taxi drivers is one of bailment rather than one of employment. It was further submitted that while taxi drivers may be said to form an essential part of their operator's business they nonetheless conduct their own business, namely that of plying for the hire of customers, which is separate and distinct from the business which is carried on by the operators. It follows, in the submission of Senior Counsel for the applicants, that the consideration (by way of cash or credit) which a driver ultimately retains falls outside the definition of "salary or wages" for the purposes of each of the relevant statutes. The respondent submitted that a common law relationship of master and servant or employer and employee exists between the plaintiffs and their drivers or, alternatively, that the drivers represent "employees" under the extended statutory definition relevant to each statute, in that payments are made by the plaintiffs to their drivers under contracts that are wholly or principally for the labour of the drivers. It is submitted that the taxi drivers are not carrying on a business separate to that of the operators but, rather, are an integral part of the plaintiffs' businesses with the result that the operators are obliged to deduct tax under s221C (1A ) of the Tax Act and to make contributions on their behalf to a complying superannuation fund or pay a superannuation guarantee charge in respect of any shortfall. THE STATUTORY PROVISIONS The question of whether the operators are required to deduct tax, or to pay superannuation guarantee charges in respect of any shortfalls depends upon whether the operators pay to the drivers "salary or wages" as defined in s221A(1)(a) of the Tax Act. That section defines "salary or wages" as meaning, inter alia: " ..salary, wages, commission, bonuses or allowances paid (whether at piece-work rates or otherwise) to an eligible person as such, and, without limiting the generality of the foregoing, includes any payments that are covered by Division 1AA of Part III, any payments of amounts to which paragraph 26(eb) or section 26AC applies, any payments of amounts that are assessable retirement amounts for the purposes of this definition, eligible termination payments and any payments made: (a) under a contract that is wholly or principally for the labour of the person to whom the payments are made, Section 221A(2)(b) extends the meaning of subs(1)(a) of the definition as follows: "(b) a payment made to a person under a contract that is wholly or principally for the labour of any person shall be taken to be a payment made under a contract that is wholly or principally for the labour of the person to whom the payment is made if: (i) in the case if a payment that is made in respect of labour that has been performed, in whole or in part, before the time when the payment is made- the whole or principal part of the labour that was performed before the time when the payment is made was performed by the person to whom the payment is made; and (ii) in the case of a payment that is made in respect of labour the whole of which is to be performed after the time when the payment is made- the person making the payment can reasonably be expected to believe that the person to whom the payment is made will perform the whole or principal part of the labour in respect of which the payment is made;" ARE THE DRIVERS EMPLOYEES AS SUCH? The critical issue in the present case is whether the drivers are within the ordinary meaning of the term "employees". A person will only be an employee where there is a contract between that person and another, who is the employer, for the performance of work. If the sole contractual arrangement between a driver and an operator were for the use of the taxi (ie a contract of bailment) there could be no employer-employee relationship. The usual question which arises in disputes of the present kind is whether the contractual relationship between two parties is one of employment or whether the person alleged to be an employee is in truth an independent contractor. The case law has thrown up a variety of judicial approaches and it may fairly be said that consistency in approach is often lacking. The classic formulation of the distinction between master and servant and independent contractor is that stated by Latham CJ in Queensland Stations Pty Ltd v Federal Commissioner of Taxation (1945) 70 CLR 539 at 545: "If the work to be done by one person for another is subject to the control and direction of the latter person in the manner of doing it, the person doing the work is a servant and not an independent contractor, and prima facie his reward would be wages. An independent contractor undertakes to produce a given result, but is not, in the actual execution of the work, under the order and control of the person for whom he does it." In Performing Right Society Ltd v Mitchell and Booker (Palais de Danse) Ltd (1924) 1 KB 762 McCardie J noted (at 767) several features which previous decisions had recognised as being relevant to the employment relationship: "...the nature of the task undertaken, the freedom of action given, the magnitude of the contract amount, the manner in which it is to be paid, the powers of dismissal and the circumstances under which payment for the reward may be withheld, all these bear on the solution in question". Although the control test is of great importance, it is not actual control which is significant. Rather it is the ability to exercise control which must be considered. Were it otherwise, only unskilled persons could properly be described as "employees": Federal Commissioner of Taxation v J Walter Thompson (Aust.) Pty Ltd (1944) 69 CLR 227 at 232 and Zuijs v Wirth Brothers Pty Ltd (1955) 93 CLR 561. The control test has for some time been the subject of criticism. Indeed, as early as 1944 it was said that it could result in decisions at odds with common sense and often fails to address itself to the economic reality of a particular relationship: J Walter Thompson supra at 232-233 per Lathan CJ and Humberstone v Northern Timber Mills (1949) 79 CLR 389 at 404 per Dixon J. In recent years the cases have examined the detail of the relationship between the parties to isolate factors which tend the one way or the other. This approach appears to stem from the American Restatement of the Law. Vol 1, Agency, p483, as referred to by Latham CJ in J Walter Thompson, or perhaps does no more than reflect the reality that the nature of the relationship will often depend on subtle variations apparent in the particular case. In Stevens v Brodribb Sawmilling Company Pty Ltd (1986) 160 CLR 16 the High Court, while reaffirming the control test, directed attention to particular features of the relationship there under consideration, which features pointed one way or the other. Mason J referred to the "indicia" of employment and at 24 said: " 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...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...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 the provision for holidays, the deduction of income tax and the delegation of work by the putative employee." Similarly, Wilson and Dawson JJ said (at 35) in a joint judgment noted that: " The classic test for determining whether the relationship of master and servant exists has been one of control...The modern approach is, however, to have regard to a variety of criteria." A more recent example of the application of a multi-factoral approach to the determination of the character of the relationship of master and servant is to be found in Federal Commissioner of Taxation v Barrett (1973) 129 CLR 395 where Stephen J weighed up factors which pointed ultimately to real estate salespersons being employees, not independent contractors. The difficulty which the control test gives rise to in practice has caused courts to attempt to formulate other tests. Thus, in Montreal v Montreal Locomotive Works (1947) 1 DLR 161 Lord Wright posed the issue for consideration to be : " whose business it is, or in other words by asking whether the parties carrying on the business, in the sense of carrying it on for himself or on his own behalf and not merely for a superior." Another, but related formulation is to be found in Fall v Hitchen (1973) 1 WLR 286 where the question was asked whether the work was done as an integral part of another's business or whether it was performed by the person for his own account. Stephen J in Barrett (supra at 402) criticised these so-called "new formulations" as doing little more than restating the question rather than providing an answer to it. Yet, it must fairly be said that to ask the question whether a person is carrying on business on his own account is to throw some light on the conceptual understanding of the nature of the relationship. So too does a consideration of factors such as whether the person is required to provide his own tools (Atlas Tiles v Briers (1978) 144 CLR 202), whether the person is at risk of loss (cf Montreal Locomotive Works), whether the person stands to make a profit, over and above a fixed remuneration, whether the employer is required to contribute towards workers compensation insurance, the method and intensity of training (Barrett supra), the ability to delegate to another (Australian Mutual Provident Society v Allan and Chaplin (1978) 18 ALR 385) or whether the contract between the parties describes the relationship as one of employer/employee or one of independent contractor (Narich Pty Ltd v Commissioner of Pay-Roll Tax (NSW) (1983) 2 NSWLR 517). Some factors will inevitably point one way and some factors will point in another way. What will be required, as Barrett's case demonstrates, is a process of weighing up the competing factors. The factor in the present case, which most tells against the relationship of drivers and operators being one of employment, is the fact that the operators agree with the drivers to grant use of the taxi by way of bailment. It would, in theory, be possible for there to be found to be a bailment of the vehicle to the drivers as well as a relationship of employment between the operators and the drivers, but just as the fact that an employee will not ordinarily be required to provide his or her tools so it would be most unusual for an employee to be required, not merely to provide his or her car to drive, but to obtain possession of that car under a contract which provides that the driver will pay a consideration for the bailment. There has been a long history of case law which has examined the relationship of taxi owners and taxi drivers. While that case law is not determinative in that there may be a need to consider special matters which may bear on the outcome of each case, that case law does provide a guide to the question whether the relationship in each of the present sets of circumstances is properly to be characterised as one of employment. BAILMENT AND THE TAXI CASES The starting point is the decision of the King's Bench Division (comprising Lord Campbell CJ, Earl and Crompton JJ) in Powles v Hider (1856) 119 ER 841 at 843. In that case it was decided that the owner of a cab was vicariously liable for the acts of the driver. The driver was the agent of the proprietor of the cabriolet rather than a principal contracting with passengers for his own account and in consequence was liable to a passenger for loss of the passenger's luggage. The case is less helpful than it might otherwise have been as it really turned on the provisions of the Metropolitan Hackney Carriage Act 1843, the effect of which was held to require the relationship between owner and driver to be one of employer, employee. Lord Campbell CJ said at 843: " But looking to the position of the proprietor , and the driver of a cab, under the circumstances provided, and to the Acts of Parliament which regulate their respective duties, we are of the opinion that the driver is to be considered the servant or agent of the driver with the authority to enter into contracts for the employment of the cab on which the proprietor is liable. There can be no doubt that this would be so, if the driver were engaged at fixed wages, accounting to the proprietor for the earnings of the cab. But must not the actual arrangement between them be equally considered a mode by which the proprietor receives what may be estimated as the average earnings of the cab, minus a reasonable compensation to the driver for his labour ? To stimulate the industry and zeal of the driver, he is allowed to pocket all the earnings of the cab that is this sum is paid; and it is evidently calculated in the season of the year. This is quite different from hiring a job carriage or a carriage and horses to be driven by the hirer or his servant, where the hirer becomes the bailee, and can in no sense be considered the servant of the proprietor. The Acts of Parliament referred to always regard the proprietor and driver of the hackney cab as employer and employed, or master and servant, and clearly contemplate that the party who engages the cab under the care of the driver of the hackney cab as employer and employed, or master and servant, and clearly contemplate that the party who engages the cab under the care of the driver shall have remedy against the proprietor." Subsequent cases have made the point strongly that Powles v Hider turned upon the specific provisions of the English legislation and did not provide a general conclusion on the owner/driver relationship. So, in Fowler v Lock (1872) LR 7 CP 272 the majority of the Court of Common Pleas, comprising Byles and Grove JJ, held that the relationship between the plaintiff cab driver and defendant cab-proprietor in that case was one of bailor and bailee and not employer and employee. Similarly, in Smith v General Motor Cab Company Ltd [1911] AC 189 at 191-193 the House of Lords upheld the decision of Woodfall J, at first instance, that the relationship between the respondent taxi-cab owner and a licensed driver was that of bailor and bailee and that there was no contract of service between them. In reaching this conclusion, Lord Atkinson stated (at 190-192): " The point in controversy, on which the decision of this case turns, was what was the true nature of the relation between the respondents and the appellant. Was it that of master and servant , or bailor and bailee of the taxi-cab of the respondents of which the appellant was the driver ?.....It may well be that though the relation between the taxi-cab owner and his driver inter se be that of bailor and bailee, the driver may still quoad third parties be treated as the agent of the proprietor authorized to ply for hire in the streets for reward to the latter; and the proprietor be thereby rendered liable for those acts of the driver which were within the scope of the latter's authority. The general result of the cases of Fowler v Lock (1872) LR 7 CP 272, Venables v Smith (1877) 2 QBD 279, King v London Improved Cab Co (1889) 23 QBD 281, Smith v Bailey [1891] 2 QBD 403, 405, and Gates v R Bill & Son [1902] 2 KB 38, cited in Doggett's Case [1910] 2 KB 336, is that in the case of horse-drawn cabs, where drivers were given them in charge under terms resembling those admitted to exist in the present case, the relation between the proprietor and driver was that of bailor and bailee, but that quoad third parties the drivers were, under the provisions of the Metropolitan Hackney Carriage Act, 1843 (admittedly applicable to taxi-cabs), deemed to be the servants of the proprietor. " In London General Cab Co Ltd v Commissioner of Inland Revenue (1950) 29 TC 407, in confirming the decision of the Commissioners of Inland Revenue, Vaisey J, of the High Court of Justice, held that the Commissioners had not erred in finding that the relationship between the appellant company which carried on business as a taxi-cab proprietor and its drivers was that of bailor and bailee of the cab. It must, however, be noted that there had, in any event, been an admission to that effect. His Lordship said (at 417): " ....I do not see my way to disturb the finding of the Commissioners. It seems to me that they have found in effect that the admitted bailment was a material matter for them to take into consideration, that there was not the relationship between the Company and its drivers of principal and agent, or master and servant, and that the people who were really carrying on the trade or business, whatever it may be, or however you may describe it; were no the Company, but the drivers who were the bailees under the arrangement which I think the Commissioners found was the true arrangement between the parties....I do not think that the Company was in fact "rendering a service"....If such a service was being carried on...I do not think it was being carried on by the Appellants....I think that if it was being carried on, and if such services were being rendered, they were being rendered by those to whom the cabs were bailed, and not by the Appellant Company...". In Australia the relationship between driver and owner arose for consideration in the High Court in Dillon v Gange (1941) 64 CLR 253. In that case the plaintiff, who had been injured, sued the owner for the negligence of the driver. There was a written agreement between the owner and driver whereby the owner let the cab on hire to the driver. There was, however, a by-law of the City of Melbourne which forbade owners entrusting licensed carriages to ply for hire other than to a servant. Although this by-law created a presumption that the driver was a servant, this presumption was found to be rebuttable. It was held that the agreement between the parties sufficed to rebut the presumption. Starke J spoke of the English cases dealing with the London Hackney Carriages Act as "anomalous". In his Honour's view, the later cases made it plain that the relationship between owner and driver should be treated as one of bailment, and not of employment. Similarly, in Checker Taxi-Cab Co Ltd v Stone [1930] NZLR 169 Herdman J, of the New Zealand Supreme Court, held that the contract between a taxi cab company which hired cabs to drivers under a contract which purported to create the relationship of bailor and bailee as between the letter and the hirer did in fact create a relationship of bailment and not partnership such that the company was entitled to recover damages from some of the drivers for injury done to its cab. Herdman J said (at 174-175): " From the statement of facts appearing in the case it is plain that the owner of the car and the driver for their mutual advantage entered into an arrangement to engage in the business of plying for hire, but in the present case it seems to me that the Checker Company (the owner) in hiring a car to Thompson (the driver) was doing no more than carrying on, independently of Thompson, a branch of its business which consists of hiring cars to men who wish to carry on the business of plying for hire." Sheppard J, a judge with a long experience in industrial matters, when sitting as a judge of the Supreme Court of New South Wales in Northern District Radio Taxicab Co-operative Ltd v Commissioner of Stamp Duties [1975] 1 NSWLR 346 accepted, without question, that the relationship in NSW between owners and drivers was one of bailment, not employment. His Honour said (at 347-348): " Before proceeding, I should say what is no doubt well known, namely, that in most cases drivers of taxicabs owned by other persons are not employees of such owners, but are bailees of the cabs they drive. I refer, inter alia, to Smith v General Motor Cab Co Ltd [1911] AC 188 at p 192 and to Dillon v Gange (1941) 64 CLR 253....the relationship of master and servant does not exist between the owner of a taxicab and a driver thereof..." In NSW the characterisation of the relationship had been the subject of industrial disputation as early as 1930, as appears from the decision of the State Industrial Commission in Yellow Cabs of Australia Limited v Colgan [1930] AR 137. The report of that case indicates that there was a written agreement of "lease" between the owner and driver providing for payment of rent of 50% of the gross takings. The lessee was required to pay for petrol, to wear a uniform and to comply with all acts and regulations then in force governing taxis. The majority of the Commission, Street and Cantor JJ, made reference to Doggett v Waterloo Taxi Cab Company Limited [1910] 2 KB 336 as emphasising that not too much weight should be given to the need for instructions to be given to a driver having regard to the necessity to secure compliance with the laws governing taxis, failure to comply with which could have consequences to the taxi owner. Their Honours said (at 163): "....in all arrangements where the parties occupy a relationship in the nature of that of joint adventurers, there is necessarily involved a certain degree of direction and control arising out of the nature of the relationship created by the agreement itself. But this does not necessarily create the relationship of employer and employee, that question, all the surrounding circumstances having been taken into consideration, being mainly determined by the degree and extent of the detailed control vested in one party over the acts of the other party in the actual execution of the work contemplated in the joint venture. This is the test which has been applied time after time by all the courts that have had to consider this question." Powles v Hider was distinguished as turning upon the provisions of the London Hackney Carriages Act of 1843. Those matters regarded by the majority as significant in pointing towards a bailment, rather than an employment relationship were; in addition to the terms of the agreement itself, that the drivers could keep the cab either at the company's garage or not (according to their own convenience), that drivers worked whatever days or hours they liked without control by the company, that drivers were not bound to start from or finish at the company's garage, nor were they required to record their time; they were not compelled to furnish any record of their hours, nor to work from any specified rank, nor were they under any orders as to the place or direction in which they should ply for work; that the drivers paid for their own petrol and they were liable to repay to the company the cost of repairing any damage to the cab or its equipment. Relevant also was that the agreement provided that the driver should pay to the company each day, by way of rent, 50 % of the gross amount recorded by the cab meter for the day; that drivers were not bound to obey telephone calls from the office of the company, but could choose to do so if they felt inclined. Although the company maintained superintendents on the road they did not control the drivers in their method of plying for hire and the drivers were not bound to obey their orders or go to such places as the superintendents directed. The superintendents were on the roads for the purpose of seeing to it that the agreement and relevant regulations were carried out. A telephone call from the head office to the driver was only made when there was a definite order for a cab from some intending hirer. The drivers were under no obligation to obey such a call. Their Honours concluded (at 169): " Such a system does not appear to establish that the drivers were subject to the commands of the company as to the manner in which they shall do their work, but were independent in that, though they embarked upon the carrying out of a joint enterprise, each driver was substantially in the position of an independent contractor 'who undertakes to produce a given result, but so that in the actual execution of the work he is not under the order or control of the person for whom he does it, and may use his own discretion in things not specified beforehand.'" As can be seen, although there are some differences, the mode of operating cabs in NSW has not greatly changed in the over sixty years since that case was decided. Two more recent cases remain to be mentioned. In Taxiway Pty Ltd v Commissioner of State Revenue (1995) 95 ATC 4667 the taxpayer who was the owner of a number of licensed taxis entered into standard form agreements with licensed taxi drivers under which they were entitled to use its taxis. The agreements provided, inter alia, that the lessor agree to permit the lessee to have exclusive use and possession of the vehicles during the specified times and that the lessee was to pay rental of 50% of the gross revenue received from hiring the vehicle and, further, that the driver's takings which were payable to the taxpayer were apportioned as to 80% for use of the licence and 20 % for the use of the taxi. The question for consideration was whether the taxpayer conducted a "rental business" such that stamp duty was payable on money "received...in respect of rental business for or in relation to the use of the goods" for the purposes of the Stamp Act 1958 (Vic). It was held that the business of the owner-licensee taxpayer was that of letting, bailing or otherwise giving rights to the taxi driver to use the relevant taxi for reward with the consequence that rental business duty was payable. . Reference is made in the course of the judgment in Taxiway to Emjay Motors Pty Limited v Armstrong (unreported, Supreme Court of Victoria, 24 August 1995). In that case, Hedigan J, of the Supreme Court of Victoria, refused to overturn the finding of a magistrate that the owner of a taxi was vicariously liable to a third party for damage caused by the negligence of a taxi driver, holding that that finding was reasonably open. The case is not without difficulty. It seems that the magistrate took the view that the agreement of lease between the owner and the driver if not a sham was "an artifice". Precisely what the difference would be between a sham and an artifice is not clear to me. If the agreement was not a sham then it operated in accordance with its tenor as a bailment. If the agreement was a sham, then it was a disguise for some other agreement, presumably a contract of employment. But there is no half way position.

CONCLUSION AS TO THE CHARACTER OF THE AGREEMENTS In my view, reinforced by the preponderance of authority to which reference has been made, the agreement between the operators and drivers in each of the present cases was one of bailment and not one of employment. Although no single factual matter is determinative, it is the cumulative weight of all the facts which leads me to this conclusion. First, the driver pays the owner and not the other way around. Of course, where the arrangement calls for a division of the gross fares, it can be said that a payment of 40% to the owner is no different than the owner paying 60% to the driver. Nevertheless, form is not wholly irrelevant. While the fixed payment method more clearly is marked as a bailment, than the gross percentage of meter method, I do not think that ultimately a distinction should be drawn between them. Second, where there is an agreement in writing (as in Perth and Melbourne), or implied by legislation (as in NSW), that agreement is one of bailment and not specifically of employment. Indeed, in NSW, the relationship of employment is expressly negated. It is not suggested that the negation of employment was a sham. Further, while the label which the parties use to describe their relationship is not necessarily determinative of the true character of the relationship, where it is not suggested that the label is a sham, it should be given effect to. Third, although some control is exercised by the operators over the drivers, that control is only such as is necessary to ensure compliance with legislation concerning taxis rather than such as to signify an employment relationship. There is an element of control exercised as well by the network operators, to their own drivers as well as to the drivers of other. But that control is only such as is necessary for the running of a network, it does not signify an employment relationship. Disciplinary steps, where taken, are taken by the networks as networks rather than the operators, and where the operators are members of the network, the disciplinary action stems from the network relationship rather than from an employment relationship. Drivers are free to obtain work as they wish, and in fact do so, often utilising mobile phones. As well, drivers will pick passengers up from the streets, or from ranks. There is no compulsion on the drivers to use the network, although clearly it will be in the interests of drivers to do so. Drivers provide their own change, and directories, pay for the petrol consumed and the cost of keeping the cars clean, (on night shift) except in the case of Mr Meredith who cleans the cars himself. In some places drivers pay additional insurance, premiums; in all States, subject to insurance, drivers are required to pay for damage to vehicles which the driver causes and are obliged to return the vehicles in the condition in which they receive them. Sometimes driver are required to pay an additional amount for kilometres travelled. In the event of a breakdown, the drivers are entitled to some reimbursement of amounts which they pay for the hire, again a matter inconsistent with employment. It is only in NSW that industrial legislation requires payment of long service leave, sick pay and workers compensation premiums. While these matters support in that State an argument in favour of employment, the industrial legislation must be viewed against the background of the Yellow Cab decision in 1930 and the many subsequent determinations thereafter in which it has been accepted that the relationship is one of bailment and not employment. In all States stamp duty is exigible on the basis that there is a bailment relationship between owner and driver, a matter not conclusive, but nevertheless supportive of the applicants' case. I would, accordingly conclude that the relationships existing between all applicant operators and their drivers are properly to be characterised as relationships of bailment, and not as relationships of employment. Thus, in no case is it correct to say that any of the applicants pay amounts to persons who are "employees" as such, when payments are made to drivers. On the contrary, each of the drivers with which the present applications are concerned carries on his or her own business rather than being a person engaged as an employee in the business of the applicants.. ARE THE PAYMENTS WHOLLY OR PRINCIPALLY FOR THE LABOUR OF THE DRIVERS? There remains the question whether there are made nevertheless between operators and drivers payments by the operators to the owners which are "wholly or principally for the labour" of the drivers for the purposes of the extended definition of "employee" and the Tax and Superannuation Guarantee Acts. There is an immediate problem. As has already been pointed out, there is no payment by the operator to the driver. The submission seeks to turn the facts on their head and argue that a payment from driver to operator is a payment from operator to driver. Perhaps where the percentage of meter method of payment is made the argument is possible. In those cases where there is but a fixed payment to be made by the driver to the operator the argument is not strong. That this was so, was conceded. Whether a contract is wholly or principally for the labour of a person will largely depend upon whether the contract is one for the production of a result, or whether it really is one for the performance of labour. If the former, then like the contracts in World Book (Australia) Pty Limited v Federal Commissioner of Taxation (1992) 27 NSWLR 377 the arrangement will not fall within the extended definition. So, too, the couriers in Vabu Pty Limited v Federal Commissioner of Taxation (1996) 33 ATR 537, were engaged to perform a result, the delivery of parcels, etc, rather than engaged to perform labour. They were thus employed in their own business, on their own account, and were not employees of a business conducted by the appellant in that case. Their contracts were not contracts wholly or principally for their labour. In the present case, even if there could be said to be a payment made by the operators to the drivers, contrary to the facts, that payment could not be said to be one for the labour of the drivers. The real relationship between operators and drivers is that the drivers make payment to the operators for the right to bail the cabs and ply them in their own business. They are neither employees in the ordinary sense, nor do they receive payments under contracts for their labour. The applicants are thus entitled to the declarations sought by them. In accordance with the agreement between the parties, there will be no order as to costs. I certify that this and the preceding thirty-one (31) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill Associate: Dated: 28 August 1997 Counsel for the Applicant: IV Gzell QC, PR Callaghan SC and PM Fraser Solicitor for the Applicant: SD Ratner & Co Counsel for the Respondent: P Keane QC and E Ford Solicitor for the Respondent: Australian Government Solicitor Date of Hearing: 4-5 August 1997 Date of Judgment: 28 August 1997