Statement of Claim but does not otherwise admit the allegations contained in that paragraph. 4. THE EMPLOYER SAYS THAT THE PERSON DESCRIBED AS THE WORKER IN THESE PROCEEDINGS IS NOT A "WORKER" WITHIN THE MEANING OF THE WORK HEALTH ACT." (emphasis mine) 3. On 10 January 1994 the appellant successfully applied to the Court for the following order:- "That the question of whether or not the worker in these proceedings is a "worker" within the meaning of the Work Health Act be heard and determined as a preliminary issue." 4. The relevant provisions of the Act: It is convenient at this point to set out the provisions of the Act relevant to the issue. It will be recalled the alleged injury occurred on 16 October 1993. Until the 1991 amendments to the Act, which came into force on 1 January 1992, "worker" had been defined in s3(1) as follows: ""worker" means a natural person who under a contract or agreement of any kind - - - performs work or a service of any kind for another person, OTHER THAN SUCH A PERSON WHO IS -

(h) AN INDEPENDENT CONTRACTOR;

• • -." (emphasis mine)

5. Until 1 January 1992, when the concept of "independent contractor" in the Act was swept away, that term was defined by s3(1) as follows: ""independent contractor" means a natural person who has a current certificate of exemption issued to him under section 58 by the Authority:"
6. Until 1 January 1992 when s58 of the Act was repealed, it provided:- "(1) A natural person who is in business on his own account may, in an approved form, apply to the Authority for an exemption under this section in respect of activities carried out for the purposes of that business. (2) The Authority may, in its discretion, and on being satisfied that an applicant under subsection (1) - (a) understands the effect under this Act of being granted the exemption applied for; (b) has not been subjected to undue pressure by any person to make the application; and (c) has considered other forms of insurance cover available to him, grant the exemption and issue to him a certificate of exemption in the prescribed form, or refuse to grant the exemption.

• (5) Neither a person to whom an exemption has been granted under this section nor a dependant of such a person shall be

entitled - (a) to compensation under this Act;

in respect of the death of or injury to the exempted person occurring or sustained in or as a result of an activity to which the exemption relates." 7. It can be seen from these provisions that pre-1992 only certain independent contractors, in the common law sense of that expression, were outside the definition of "worker" for the purposes of the Act; this was a radical change to the law on workers' compensation prior to the Act being passed in 1986. Until that time persons who were independent contractors at common law were outside the definition of a "worker" except in those specific cases when the Workers' Compensation Act deemed them to fall within it. Consequently, in determining who was a "worker", workers' compensation law before 1986 was bedevilled by the need to distinguish between a contract of service (the index of a "worker") and a contract for services; see, for example, the discussion in Zuijs v Wirth Bros Pty. Ltd [1955] HCA 73; (1955) 93 CLR 561 at 569-573, Huett v Clark [1956] TASStRp 7; (1956) Tas SR 39 at 42-27, Bailey v Victorian Soccer Federation [1976] VicRp 2; (1976) VR 13 at 27-29 and 33-35 per Gillard J, Dietrich v Dare (1980) 30 ALR 407 at 411, Christofis v Tomazos Bros. Pty. Ltd. [1986] NTSC 4; (1985-86) 38 NTR 8 at 14-19, Stevens v Brodribb Sawmilling Coy. Ltd [1986] HCA 1; (1986) 60 ALJR 194 at 196-198, and in countless other cases. As his Worship said in his closely-reasoned decision, the purpose and effect of the pre-1992 provisions in the Act - "- - - was to remove the need for the Court (in deciding if an applicant was a worker) to determine whether a contract was for the performance of service or for the provision of services (as an independent contractor) which had been the subject of much judicial determination. (His Worship cited various authorities by way of illustration, and continued:)

• • • In order to remove the need for evidence on the indicia of employment (such as control, provision of tools, rights of dismissal etc.) the legislature opted for a system whereby only persons with a current exemption certificate issued in accordance with section 58 of the Act were independent contractors (and thus were not workers for the purposes of the Act)."

8. It appears that by 1991 this approach to defining a "worker" for the purposes of the Act had been found to be unsatisfactory, for practical reasons; see the responsible Minister's speech on the 1991 amendments, at pp22-23. As a result of the 1991 amendments, s3(1) of the Act now defines "worker", as far as material, as follows:- ""Worker" means a natural person - (a) who, under a contract or agreement of any kind - - - performs work or a service of any kind for another person AND WHO IS A P.A.Y.E. TAXPAYER;

but does not include a person -

• • -." (emphasis mine)

9. It can be seen that the approach of defining "worker" in terms of an exclusionary concept of "independent contractor" has disappeared, and is replaced by a new approach which restricts a worker to a "P.A.Y.E. taxpayer". That term is now defined in s3(1) as follows:- "P.A.Y.E. taxpayer", in relation to a worker, means that his employer MAKES DEDUCTIONS from money paid to the worker for work performed or service provided to the employer IN ACCORDANCE WITH Division 2 of Part VI of the Income Tax Assessment Act 1936 of the Commonwealth, AND INCLUDES a worker in respect of whom such deductions are NOT MADE by his employer BUT ONLY BECAUSE

• (a) OF THE SHORTNESS OF TIME during which the worker has been in the employment of his employer; or (b) having regard to the amount of money paid to the worker, his employer IS NOT REQUIRED TO MAKE such deductions under that Division." (emphasis mine)

10. I note in passing that in these fundamental definitions of "worker" and its corollary term "P.A.Y.E taxpayer", the Legislative Assembly appears to have struck out on its own, in the sense that there is no similar approach to the definition of "worker" in legislation corresponding to the Act in any other State or Territory. Hence this preliminary issue. It will also be noted that as a vital element in defining "worker" the definition of "P.A.Y.E. taxpayer" contains some apparent circularity.
11. Section 53 of the Act provides for the crucial right to compensation of a "worker" as defined under the Act; as far as material, it states:- "Subject to this Part, where a worker suffers an injury - - - and that injury results in or materially contributes to his -

(b) impairment; or (c) incapacity, there is payable by his employer to the worker or the worker's dependants, in accordance with this Part, such compensation as is prescribed." 12. The reasoning and decision of the Court: The Court heard evidence and argument on the preliminary issue on 18 February 1994 and 23 June. In his reasons for decision the Magistrate summarized the relevant evidence, and expressed certain views thereon, as follows:- "The applicant (H) gave evidence on his own behalf. On the 13th day of October 1993 H said he was telephoned by Petros Koursaris (hereinafter referred to as "K") and asked if he was available to work as a Trades Assistant starting work the next day at Berrimah. H said that he accepted the position and on the 14th October 1993 he attended at the employer's factory at Berrimah and started work at about 7.30am. H said that he also worked for the Employer (the appellant) on the 15th day of October 1993 and on that day he spoke to K and K told him that he would pay H fourteen dollars an hour and that H accepted this amount. HE SAID THAT NOTHING ELSE WAS DISCUSSED AT THAT TIME IN RELATION TO THE TERMS OR CONDITIONS OF EMPLOYMENT OR HOW PAYMENTS WERE TO BE MADE. H said that when K first rang him on the 13th October K had indicated that he had about 5 and half weeks work with the possibility of more coming in. H said that whilst he was working on the 16th October 1993 his finger got caught in a machine and part of his finger was amputated. H advised K of the injury and after some discussion K initially agreed to drive H to the hospital but during the drive K took H to H's caravan so that H's wife could take him to the hospital. H said that at the caravan K gave H's wife his business card and told her to give that to the people at the hospital as H was covered by K's company (the appellant). H was admitted to the Darwin Private Hospital on the 16th October 1993 and discharged on the 19th day of October 1993. When H returned from hospital his wife at that stage had in her possession a claim form which H then filled out. After completing the claim form H said he rang K and asked what to do next and K informed him that they had to go and see his broker to complete the forms. H said that K and he went to see K's broker and K filled out part of that claim form at the broker's premises. H said that he was not paid for the work he did on the three days with K although he received a cheque yesterday in the mail. In cross examination H said that he came to Darwin in May of 1992 and he worked for a Mr Yiallourou from the 5th of November 1992 to the 8th October 1993. H denied that he was operating through a company, and said he didn't understand the question when asked whether he was trading under the name KLS Construction when he was working for Yiallourou (hereafter referred to as "Y"). H agreed that he was paid cheques by Y and some of these cheques were made out to H and some were made to KLS Constructions. He agreed that KLS Constructions was a company but denied that he was a shareholder. H admitted that he was a director of KLS Constructions. After being shown a recent search of KLS Constructions Pty Ltd H admitted that both he and his wife were both shareholders of the company. H agreed that he received money from Y in the name of that company, that he was paid a flat rate per hour by Y, that he

was paid $17.00 per hour by Y, and that he had an amount of tax deducted at the rate of 20% from the money he received from Y. Accordingly H agreed that during the whole time he was working with Y he was having tax deducted under the prescribed payments scheme (PPS) and (that) he was not employed as a PAYE taxpayer with Y. H agreed that about 6 months before he started working with K he did a day's work for K and he was paid cash for that day. I find that H's recollection of events is vague. For example, when initially asked how H got to work on the 14th October 1993 he said he drove to work but when it was put to him that in fact K drove him to work he then corrected himself and agreed with that proposition. H denied that on the 15th of October 1993 he had a conversation with K where K told him that he would pay H $14.00 per hour gross because it was casual work for a couple of weeks and H had to bring in his tax file number. H FURTHER DENIED THE SUGGESTION THAT HE SAID TO K THAT HE WOULD BE WORKING THE SAME AS HE DID WITH Y AND THEY DEDUCTED 20%. H further denied that K said he needed the forms as he had problems before with Mr Patakos. In cross examination it was put to H that if he was working for $14.00 per hour for 5 days from about 7.30 in the morning (until) 5.30 in the afternoon (he) would be receiving in excess of $700.00 per week and therefore he would be paying a lot more than 20% if paid as (a) PAYE taxpayer. To this proposition H said that his tax was worked out by his accountant; he didn't know. He agreed that in October (1993) he held a 24 hour policy for all accidents and if he sustained any accidents at work then he was covered under that policy. H agreed that he knew when working for Y that because of the arrangements with Y he wasn't covered by worker's compensation and further that he knew of the importance of the way tax was deducted to workers compensation before he started work with K. H agreed that he completed a statement with a loss assessor in his own handwriting, that he checked through that carefully to make sure it was correct and he signed it. (This statement was not tendered in evidence before me.) H agreed that he told the loss assessor the following matters in relation to his employment with the Respondent:

1. He was to be paid $14.00 per hour flat.
2. Tax was to be taken off but H didn't know if it was PPS or PAYE.
3. ALL WAGES TO H GO THROUGH HIS COMPANY.
4. H was a salaried employee with Y and with K. The next witness called by the applicant was Susanne Auld, (H's) de facto wife. Auld said that on the 16th October 1993 K and H came to their caravan, K gave her his card and said that H was his worker and I've got insurance just give the card to the hospital for my name. Auld also said that she had some subsequent telephone conversations with K in relation to the name of K's broker. Both Mr Southwood (initial counsel for the applicant) and Mr Waters sought to rely on these statements by K in the presence of H and Auld in relation to him being a worker, as being some form of admission. In my view, the question of whether a person is a "worker" or not under the Work Health Act is a question of law to be decided by the Court. In my view, it is not a fact which ordinarily is capable of being admitted outside of the Court process. For the alleged admission to have any weight at all, in my view, a starting point would need to be that the person seeking to rely on the admission would need to establish on the evidence that the person making the admission was aware of the matters which needed to be established in order for a person to be a "worker" under the Work Health Act. Whilst on the evidence it is clear that H was aware that whether he was paid as a PAYE or PPS taxpayer was relevant to whether he was a "worker" or not (for the purposes of the Act), on the evidence before me I am not satisfied that K was similarly aware. In my view, the statements by K that H was covered or that H was his worker do not assist me in the determination of this issue. However, the statements are relevant as showing the state of mind of K as to his belief. K gave evidence. K told the Court that he was a director and shareholder of the employer company. K said that he knew H and first met him when he came to K's workshop with K's brother-in-law Y. K said that H had spoken to him a few times about work and eventually on 13 October 1993 he rang H after he had obtained the phone number from Y. K said that he asked H to work the next day and that as H didn't have a car K agreed to pick him up which he did on the 14th October 1993. K said that on the morning of the 14th October 1993 he told H about the working hours and that if he worked there he would be casual and would not be working for wages. K further said that after 6pm on the 14th October 1993 (not on the 15th as put to H in cross examination) he was asked by H how much K was paying and K told him $14.00 per hour but he needed a certificate for his taxation. K SAID THAT H TOLD HIM HE HAD A CERTIFICATE NUMBER WITH Y FOR 20% AND HE WORKED FOR Y FOR 20% AND HE WAS GOING TO WORK FOR HIM FOR EXACTLY THE SAME. K said that he told H he wanted the certificate number as he wanted it clear for insurance as he had a problem with Patakos Welding previously. K said that he had no other conversation with H on the 15th October or 16th October in relation to wages or employment. K was asked what problems he had with Patakos Welding and K said that some people aren't honest and you get dragged through courts. K went on to explain that he gave Mr Kamarakis a key to work out of his factory. Kamarakis apparently injured himself working somewhere else and then tried to claim through K's insurance. In cross examination K said that the injury which brought him into conflict with Patakos Welding occurred on the 18th December 1988. In my view, both Mr Southwood and Mr Waters sought to make something of this problem with Patakos Welding to suggest that K was therefore aware of the importance of how somebody was paid to (the question) whether they were a "worker" and covered by (workers compensation) insurance or not. However, the definition of "worker" under the Work Health Act was different in 1988 than at the time of this accident. In 1988 whether a person was having PAYE deductions or not did not form part of the definition. K agreed that he gave his card after H was injured but he said he gave this card to H and not to H's wife. K also agreed that he told H to produce that card at the hospital. K said that he denied that he told Auld and H that H worked for the respondent and he was covered by Work Health. K was quite certain of this. However, shortly after this incident K agreed that he had discussed with Auld who his broker was and agreed with the proposition that he did that as H was a "worker". K also agreed that the reason for contacting his broker was for a claim for compensation to be made. I prefer the evidence of Auld and H to that of K on these aspects. K agreed that he completed the employer's portion of the claim form which became Exhibit D2. K agreed that when he was discussing the matter with his broker the question of whether tax was to be deducted at the rate of 20% or 33% was not discussed. I find that from the time of the accident up

until the time (at least) that Exhibit D2 was completed K believed that H was employed by the (appellant) and would be covered under the Work Health Court. K told the broker that H was working for wages". (emphasis mine) 13. On the basis of this resume of the evidence, and the findings expressed therein, the Court made the following observations and findings of fact: "A lot of K's evidence was unsatisfactory, and when he was later cross examined by Mr Waters a number of his answers were completely non-responsive to the questions and evasive. I REJECT THE EVIDENCE OF K WHEREVER IT CONFLICTS WITH ANY OTHER EVIDENCE. I make the following findings on the facts:

1. That as at the date of injury H and K had agreed as to H's general working hours.

2. As at the date of injury H and K had agreed that H would be paid $14.00 per hour. 3. AS AT THE DATE OF INJURY THERE HAD BEEN NO DISCUSSION OR AGREEMENT BETWEEN H AND K AS TO WHETHER INCOME TAX WAS TO BE DEDUCTED AT THE PAYE OR PPS RATE. IN THIS REGARD I PREFER THE EVIDENCE OF H TO THAT OF K (see passages emphasized at pp8 and 11). 4. As at the date of injury K did not know that whether H was paid and had tax instalments deducted at 20% or as a PAYE, affected whether H was a "worker".

5. As at the date (of) injury H was aware that if he had payments deducted under PPS then he was not covered by workers compensation. 6. As at the date of injury K believed that H would be covered by his workers compensation insurance. 7. THAT HAD THE INJURY NOT OCCURRED K AND H WOULD HAVE WORKED OUT SUBSEQUENTLY HOW TAXATION WAS TO BE DEDUCTED UPON H COMPLETING THE RELEVANT FORMS. 8. That at all relevant times H was a director and shareholder of KLS Constructions Pty Ltd. 9. That during the period from 5 November 1992 to 8 October 1993 when H was working for Y all monies received from Y (whether made out to H or H's company) were paid into KLS Constructions Pty Ltd. 10. That all monies paid to H by Y had tax deducted on the PPS system and not on the PAYE system. 11. THAT BECAUSE OF THE SHORTNESS OF TIME DURING WHICH H HAD BEEN IN THE EMPLOYMENT OF THE RESPONDENT NO MONEY WAS PAID TO H PRIOR TO THE DATE OF INJURY. (For the significance of this finding, and finding 12, see proviso (a) to the definition of "P.A.Y.E. taxpayer", at p6) 12. THAT BECAUSE NO MONEY WAS PAID TO H PRIOR TO THE INJURY NO DEDUCTIONS FROM ANY SUCH MONEY WERE MADE. I therefore find that for H's own financial reasons all monies that he was paid by Y he put through his own company and therefore had tax deducted at 20% on the PPS rate. ON THE EVIDENCE THERE IS NOTHING TO SUGGEST THAT H INTENDED TO CHANGE THAT SYSTEM WHILST HE WAS WORKING FOR K BUT NOR AM I SATISFIED THAT H INTENDED IT TO CONTINUE had matters progressed to that stage by the time the accident intervened. On the evidence I AM UNABLE TO FIND THAT H WOULD have completed the necessary forms to have all monies paid by the Employer paid to his company and also to HAVE TAX DEDUCTED AT THE RATE OF 20% (PPS SYSTEM) and not under the PAYE system. I FIND THAT NO AGREEMENT HAD BEEN REACHED BETWEEN H AND THE

RESPONDENT AS TO WHETHER TAX WAS TO BE DEDUCTED AT THE PPS OR PAYE BASIS." (emphasis mine) 14. His Worship had earlier discussed at length submissions as to the proper interpretation of the current definition of "worker" in s3(1) in light of the incorporated definition therein of "P.A.Y.E. taxpayer", and, acknowledging that "the matter is not free from doubt", expressed his conclusions thereon as follows:- "I find that the words "in accordance with" where they appear in the definition of "PAYE taxpayer" (see pp6,7) should be read as meaning "in a way authorised or provided for by, or which can reasonably be said to be in conformity with," Division 2 of Part VI of the ITAA. Whilst it could be argued that the definition of "worker" was dependent upon the objective fact of how deductions were made irrespective of how deductions should have been made, in my view such an interpretation is too simplistic and could lead to much injustice. If A and B agreed that B would work for "cash" and therefore A would deduct no money from anything paid to B then such an agreement may be unlawful and neither A or B should be able to prove or rely on that arrangement. An unlawful agreement should not be (and in my view could not be) determinative of whether B was a worker or not. Likewise, if A made deductions from money paid to B on the PPS system when at law A should have made deductions on the PAYE system then the deductions would have been unlawful (in breach of Section 221C(1A) of the ITAA (which provides for a maximum penalty of $1000 if an employer fails to deduct P.A.Y.E. tax from his employee's weekly salary or wages)) and therefore A could not rely upon the unlawful deductions as determinative of whether B was a worker or not. In my view, if an employer makes deductions on a PAYE basis then the Work Health Court should assume that such deductions are lawful until it is proved to the contrary. Pursuant to the definition of "PAYE taxpayer" (see pp6,7) in only two circumstances is a person a "PAYE taxpayer" where PAYE deductions are not made by the employer, namely where such payments are not made because: (a) of the shortness of time during which the worker has been in the employment of the employer; or (b) having regard to the amount of money paid to the worker, his employer is not required to make such deductions under that Division. It is not part of the exceptions that deductions under Division 2 of Part VI of the Income Tax Assessment Act 1936 should have been made. Mr Reeves (then counsel for the employer-appellant) submits that this should have been included (as an exception with exceptions (a) and (b)) if the meaning pressed by Mr Waters (then counsel for H) was correct. I do not agree. In my view the position is sufficiently clarified by the words "in accordance with" (see p6). IF DEDUCTIONS ARE NOT MADE UNDER DIVISION 2 PART VI BUT THEY SHOULD HAVE BEEN, THEN THE DEDUCTIONS CANNOT BE SAID TO BE "IN ACCORDANCE WITH" THE ITAA. LIKEWISE, IF (PAYE)

DEDUCTIONS ARE MADE UNDER DIVISION 2 PART VI BUT THEY SHOULD NOT HAVE BEEN, THEN SUCH DEDUCTIONS ARE NOT "IN ACCORDANCE WITH" THAT DIVISION (and, it would follow, the applicant would not be a "worker" under the Act)." (emphasis mine) 15. The Court then proceeded to apply the definition of "worker", as construed above, to its findings of fact (see pp12-14) and approached the question which it considered it had to answer to determine the preliminary issue, as follows:- "I find that where on the evidence: (1) Money HAS NOT been paid (to the applicant, as here); (2) Deductions (by the employer) from money paid (to the applicant) HAVE NOT BEEN MADE; AND (3) There is a dispute as to whether deductions WOULD OR SHOULD HAVE BEEN MADE under Division 2 of Part VI of the ITAA (comprising ss221A-221 YAA, instituting the collection of instalments of tax on natural persons by the P.A.Y.E. system); IT IS NECESSARY FOR THE WORK HEALTH COURT TO DECIDE AS A QUESTION OF LAW (ON THE FACTS OF THE CASE) WHETHER DEDUCTIONS SHOULD HAVE BEEN MADE UNDER DIVISION 2 OF PART VI OF THE ITAA OR NOT. It is therefore necessary for me to consider the ACTUAL RELATIONSHIP between H and the (appellant)." (emphasis mine) 16. The reason his Worship saw it as "necessary - - - to consider the actual relationship" between the employer and applicant, clearly was that PAYE tax is deductible under Division 2 of Part VI of the ITAA only from the salary or wages of an employee; that is, it is deductible only when a relationship of employer/employee exists, in accordance with those terms as defined in s221A(1) of the ITAA. "Employee" is there defined in terms of "a person who receives, or is entitled to receive, salary or wages"; and "employer" as "a person who pays or is liable to pay any salary or wages". It can be seen that PAYE tax is therefore deductible only when a master-servant relationship exists; that is, in traditional common law terms, when one person contracts to perform work for another, and is substantially subject to the control and direction of that other when doing it. It follows that PAYE tax is not deductible from money paid to an independent contractor, that is, a person who undertakes to perform work but is not, in its execution, subject to the control and direction of the person for whom he performs the work. Payments to independent contractors in certain industries, including the building and construction industry, are (separately and distinct from the PAYE system) subject to deductions of tax at source under the prescribed payments scheme (PPS), provided for by ss221YHA-221YHZ which constitute Division 3A of Part VI of the ITAA; the standard rate is 20%. 17. It can be seen that for the purpose of policing the P.A.Y.E. system the Australian Taxation Office must determine whether the necessary employer-and-employee relationship exists. The Office primarily uses the "control" test for this purpose. Taxation Ruling IT2129 of 1985 sets out guidelines to assist in identifying the payments - income described as "salary or wages" - to which the P.A.Y.E. system applies; it lists 23 relevant factors as non-exhaustive "practical working tests", to distinguish employees from independent contractors, without indicating their general relative importance inter se - each is to be weighted "according to its relative importance in the particular situation." It points out that the presence of a right in the employer to control how, where and when work is to be carried out and who is to carry it out, "points very strongly (and usually conclusively) to employee status". It uses the "integration" or "organization" test as an adjunct, where the "control" test is inconclusive. Compare the modern approach to distinguishing between employees and independent contractors, as stated in Stevens v Brodribb Sawmilling Coy. Ltd. (supra) at 196-198 (per Mason J), 201-2 (per Wilson and Dawson JJ) and 207; "control" is seen as significant, but merely one of a number of indicia. 18. The Court proceeded to embark upon the task which the Taxation Office faces. It stated the conclusions it had reached on 18 factors it considered relevant to determining the "actual relationship" between the parties; these were essentially the old common law indicia used pre-1986 for the purpose of distinguishing between a contract of service and a contract for services. The Court then expressed its conclusions on the task it had identified at p16 as necessary to be undertaken (that is, whether as a consequence of the "actual relationship" it determined, PAYE deductions should or should not be made under Division 2 of Part VI of the ITAA), viz:- "I therefore find that the (appellant) was obliged to deduct amounts from monies paid to H in accordance with Division 2 of Part VI of the ITAA and that if any agreement was made to the contrary (which I have found it was not) and if any deductions were not made in this way (which they were not as at the date of injury) then such deductions would have been unlawful and not in accordance with the ITAA. I find that in accordance with the ITAA and Taxation Ruling IT 2129 (EX P.5) any money to be paid by the employer to H would have been by way of "salary or wages". I digress to add that if there had been an agreement between H and the (appellant) to deduct amounts not in accordance with the ITAA, then such an agreement would have been illegal (as contrary to Section 221C (1A) of ITAA) and as a matter of public policy the Courts should refuse to enforce any agreement inconsistent with the statutory prohibition (Cotton v Central District Finance Corp Ltd (1965) NZLR 992 at 996). This in my view further supports the conclusion that the Court should not look at the objective facts only as this could have the possible effect of allowing an illegal agreement or payment to be given effect to by the Work Health Court. I further note that in the instant case there was no evidence that H or the (appellant) had completed any deduction form in accordance with the ITAA. I find that no "deduction form" as defined in Section 221 YHA (1) of the ITAA (an interpretation provision in Division 3A of Part VI of the ITAA instituting the PPS scheme) was completed in this matter. I therefore find that the (appellant) could not lawfully have deducted amounts (other than as PAYE deductions) from any monies to be paid to H at the date of the injury. I therefore find that at the time of the accident H was a "PAYE taxpayer" in accordance with the definition in the Work Health Act (see pp6,7) as: (1) No monies had been paid by the employer to H at the time of the accident. (2) No deductions from money had been made by the employer as no monies had in fact been paid at the time of the accident. (3) NO DEDUCTIONS FROM MONEY PAID WERE MADE IN ACCORDANCE WITH DIVISION 2 OF PART VI OF THE INCOME TAX ASSESSMENT ACT 1936 (that is, no PAYE deductions were made by the appellant). (4) NO (SUCH) DEDUCTIONS WERE MADE, DUE ONLY TO THE SHORTNESS

OF TIME DURING WHICH THE WORKER HAD BEEN IN THE EMPLOYMENT OF THE EMPLOYER. (This is a finding that proviso (a) in the definition of "P.A.Y.E. taxpayer" applied, in the circumstances of the case; see p6) (5) THAT HAD THE ACCIDENT NOT INTERVENED THE EMPLOYER SHOULD (AS A MATTER OF LAW) HAVE DEDUCTED TAX FROM MONIES PAID TO H IN ACCORDANCE WITH DIVISION 2 OF PART VI OF THE INCOME TAX ASSESSMENT ACT 1936 (that is, the appellant was legally required by the ITAA to make P.A.Y.E. deductions) (6) THAT HAD THE ACCIDENT NOT INTERVENED AND THE EMPLOYER MADE DEDUCTIONS FROM MONEY PAID TO THE WORKER AT THE PPS RATE AND NOT THE PAYE RATE, THEN SUCH DEDUCTIONS WOULD HAVE BEEN UNLAWFUL AND THEREFORE NOT IN ACCORDANCE WITH THE ITAA (because there was an employer/employee relationship, and therefore s221C(1A) of the ITAA required the appellant to make P.A.Y.E. deductions, under penalty). I THEREFORE FIND THAT AT THE TIME OF THE ACCIDENT H WAS A "WORKER" WITHIN THE MEANING OF THE WORK HEALTH ACT." (emphasis mine) 19. The arguments on appeal: Against the background of his Worship's conclusion on the issue and the reasoning which led to it, I turn to the arguments on appeal. 20. The appellant's submissions: Mr McDonald of counsel for the appellant submitted that the Court had erred in law by posing for itself the wrong test to determine who is a "worker" under the Act. The error was manifested in its "process of reasoning" and in its "reasons for decision", in 4 respects. (1) The Court had misconstrued the definition of "worker" in s3(1) of the Act: This misconstruction was an error which went to the Court's jurisdiction, since the provision misconstrued - the definition of a "worker" - was the foundation of the Court's (limited) power to hear and determine the substantive application made under s53 of the Act. 21. Mr McDonald submitted that The King v Hickman; ex p. Fox [1945] HCA 53; (1945) 70 CLR 598 at p606 per Latham CJ shows that a Court of limited jurisdiction - "- - - cannot give itself jurisdiction by a wrong determination as to the existence of a fact upon which its jurisdiction depends, or BY PLACING A WRONG CONSTRUCTION UPON A STATUTE UPON WHICH ITS JURISDICTION DEPENDS, unless by a valid provision the (Court) is given power to act upon its own opinion in relation to the existence of the fact or in relation to the construction of the statute." (emphasis mine) 22. The Court had no power "to act upon its own opinion" as to the meaning of "worker". Its jurisdiction under s94 is confined to determining a claim by a "worker", within the meaning of that term as defined in the Act. See generally ss3, 53, 93, and 94 of the Act, which show that the Court's power is only that which is conferred by the Act, though s97 gives a limited incidental power. This means that for the Court to entertain H's application for compensation pursuant to s53 of the Act, H must be a "worker" within the definition of that term in s3(1); in fact he was not, because he did not meet the requirements of the definition of a "P.A.Y.E. taxpayer", set out at pp6,7. The effect of defining "worker" in s3(1) in terms of what that term "means", is that "worker" is there conclusively and exhaustively defined for the purposes of the Act. (2) In particular, the Court had misconstrued "makes deductions" in the definition of "P.A.Y.E. taxpayer" which is incorporated into the definition of "worker" (see p6) 23. The definition of "worker" in s3(1) of the Act (p6) exhaustively defined that term in words which, in their plain and ordinary meaning, mean that the test whether an applicant is a "worker" is whether his employer has made deductions from money paid to him which purport to be P.A.Y.E. tax deductions made in accordance with the manner set out in Division 2 of Part VI of the ITAA; this is subject to the two provisos to the definition of "P.A.Y.E. taxpayer" at pp6,7. Correlatively, whether H is a "worker" for the purposes of the Act is not to be determined by first considering whether on applying the provisions of the ITAA to the legal relationship between H and the appellant, as determined, the employer is required to deduct P.A.Y.E. tax from his payments to H. The test of a "worker" for the purposes of the Act is purely "objective", in that it turns on whether the employer purportedly made P.A.Y.E. deductions from those payments. The test is not "normative", in the sense that it does not require the Court to determine whether the ITAA required P.A.Y.E. deductions to be made; his Worship had erred in adopting the "normative" approach in the passage emphasized at p16. (3) The Court erred in refusing to use the Minister's Second Reading speech introducing the 1991 amendments as an aid to construing the definition of "worker" thereby introduced. 24. I note that his Worship was referred to the speech and purported to set it out in his judgment. He considered that Second Reading speeches were "received by the Courts as evidence of the mischief at which a statute - - - is directed". Mr McDonald submitted that he had wrongly identified the 'mischief' at which the 1991 amendments were directed, as limited to removing "the need for the Work Health Authority to administer exemption certificates". He had wrongly considered that in the absence of a provision such as s15AB of the Acts Interpretation Act (C'th) in the Territory, the speech "should not be used to establish Parliament's intention - - - in order to resolve an ambiguity in the legislation." I interpose that it is clear that his Worship did not use the Second Reading speech for any purpose. 25. The relevant part of the Minister's Second Reading speech when introducing the 1991 amendments, was as follows:- "The next major initiative included in the Bill is the removal of the Exemption Certificate provisions. In the present Act, provision exists for a person to be exempted from the compulsory insurance requirements if he can demonstrate that he is an Independent Contractor. Such an exemption effectively removes the individual from the scope of the Act in terms of both compulsory insurance and compensation benefits. Its purpose was to avoid delays caused by litigation, where it was not clear whether or not a person was a worker and thus entitled to compensation. The system has been reasonably successful in achieving its fundamental aims, but has been something of a bureaucratic nightmare to administer. It is also open to abuse. The new Bill removes the exemption provision altogether and, instead, redefines "worker". The new definition will relate

to the taxation regime under which a person is paid. The basis for future determination of a person's "worker" status will be whether that person is employed and paid under the 'Pay As You Earn', or PAYE as it is commonly known, taxation provisions. This will be the sole basis for the purposes of worker compensation. It will alleviate the existing cumbersome administrative procedures and, in effect, will be monitored by the Australian Tax Office. Special provision is included in the Bill for those who have only just commenced work with an employer, and have not yet had PAYE tax deducted only because they have not yet been paid. There is also provision for low income earners who do not reach the tax threshold and therefore do not pay PAYE tax. This amendment will be easy for workers and employers to understand and it has the advantage of keeping bureaucratic red tape to a minimum." (Parliamentary Record, N.T. Legislative Assembly, 15 August 1991, p1587) 26. Mr McDonald submitted that as a matter of law this speech should have been utilized by the Court to ascertain the meaning of "worker" in s3(1) of the Act, and thereby to give effect to the legislative purpose behind the amending Act of 1991. He submitted that the purpose of that Act, as set out in the speech, was not, as his Worship considered (p22), limited to the need to remove the Work Health Authority's function of administering the system of exemption certificates, which had hitherto objectively defined those independent contractors who were not "workers" in terms of the Act. It had a further purpose: in place of that system, it instituted a new "objective" test which defined a "worker" for the purposes of the Act as a person who had tax deducted, purportedly on a PAYE basis, from money paid to him by his employer. It did not institute a "normative" test for a "worker", by defining him as a person whose employer was liable under the ITAA to deduct PAYE tax from payments to him. The "objective" test introduced in 1991 necessitated that "worker" in 3(1) be interpreted in the way suggested by the appellant at p21. His Worship, by ignoring the speech, had moved from the simple "sole basis" there set out (p23) for determining whether an applicant was a "worker", to determining it by a consideration of multifarious common law factors (p17), contrary to the legislature's intention. (4) There was no evidence to support crucial findings by the Court: There was no evidence to support the findings of fact (pp18,19) crucial to his Worship's ultimate conclusion (p19) that H fell within the definition of "worker" in s3(1) of the Act. Mr McDonald submitted that if the Court had applied the correct ("objective") test of "worker" in this case (see p21), in light of its findings at pp12-14 it could not have reached its ultimate conclusion (p19) that H was a "worker". He relied on the following submissions in particular to support that proposition:- (a) Finding (4) at p19 - that proviso (a) (p6) applied, in the circumstances - could not stand, because it was inconsistent with several other findings which showed that "shortness of time" was not the "only" reason P.A.Y.E. deductions had not been made by the appellant. See, for example, findings 3 and 7 on p13, and the lack of positive findings in those later set out at pp13 and 14, which showed that the failure by H and the appellant to discuss and agree on whether deductions were to be on a PPS basis or on a PAYE basis was another reason PAYE deductions had not been made. (b) In the combined light of findings 8 and 9 at p13, which showed that H had been a PPS taxpayer for a significant period of time, the finding at p13 that "there is nothing to suggest that H intended to change that system whilst he was working for the (appellant)", and finding 3 at p10 understood in the light that his Worship found H to be a truthful witness, it was not open to the Court to have found (p18) that H was a PAYE taxpayer, as required by the definition of "worker" in s3(1). 27. In support of his various submissions at pp20-25 under headings (1)-(4) above, Mr McDonald relied on the following authorities: Consolidated Press Holdings Ltd v Wheeler [1992] NTSC 102; (1992) 109 FLR 241 at 245, on the nature and powers of a court of limited jurisdiction such as the Court, including its lack of inherent powers; Grassby v The Queen [1989] HCA 45; (1984) 168 CLR 1 at 16-17 per Dawson J, on the same point; Sherritt Gordon Mines Ltd v Federal Commissioner of Taxation [1977] VicRp 42; (1974-76) 10 ALR 441 at 455, showing that 'means' in a definition indicates that the definition is intended to be conclusive and exhaustive; Dillingham Constructions Pty Ltd v Steel Mains Pty Ltd [1975] HCA 23; (1975) 6 ALR 171 at 178-9 per Murphy J, who considered that the use of a U.K. Law Revision Committee report on the basis of which certain NSW legislation was passed, was "desirable" when construing that legislation, and that "since ascertaining the mischief is part of the process of ascertaining the legislative intent - - - it is pointless to draw a distinction between the two"; Wacando v The Commonwealth [1981] HCA 60; (1981) 148 CLR 1 at 25 per Mason J, on using what the Minister in charge of the Bill said in Parliament, when the Bill was "introduced to remedy a mischief"; The Commissioner of Taxation v Whitfords Beach Pty Ltd [1982] HCA 8; (1981-1982) 150 CLR 355 at 373-375 per Mason J, on the same point; TCN Channel Nine Pty Ltd v The AMP Society [1982] FCA 169; (1982) 42 ALR 496 at 507-508, where the Full Court of the Federal Court received the Minister's Second Reading speech and the explanatory memorandum to the Bill "to identify the mischief" the provision in question was intended to remedy; Barker v The Queen [1983] HCA 18; (1983) 47 ALR 1 at 7-8 where Mason J was prepared to accept that a U.K. Law Revision Committee report investigating the subject matter of Australian legislation could be used "to ascertain the mischief with which the Act is concerned"; Rogers v Resi-Statewide Corporation Ltd [1991] FCA 186; (1991) 101 ALR 377 at 381-2, where von Doussa J held it "permissible to have regard to the second reading speech to identify the mischief which the amendment was to remedy"; Maynard v O'Brien (1991) 78 NTR 16 at 20-1, where Angel J cited parts of the Minister's Second Reading speech, it having been submitted that it could be referred to "to ascertain the mischief" the Act was "intended to remedy", because "the meaning of s37(2) is ambiguous" (though his Honour concluded that the speech did not assist "even if such a course is permissible"); the authorities cited in R v Racing, Gaming and Liquor Commission; ex p. Tangentyere Council Inc [1988] NTSC 36; (1988) 54 NTR 13 at 21-23, to the effect that a misconstruction of the Act which was the Court's only source of jurisdiction, could mean it had acted without jurisdiction; R v The War Pensions Entitlement Appeal Tribunal; ex p. Bott [1933] HCA 30; (1933) 50 CLR 228 at 242-3, to the effect that if the Court did not apply itself to the question which the Act prescribed, its ostensible determination was not a real performance of the duty imposed by law upon it, and mandamus lay, since the Court is charged with the duty of ascertaining the facts upon which rights depend; Sinclair v Mining Warden at Maryborough [1975] HCA 17; (1975) 132 CLR 473 and BHP Petroleum Pty Ltd v Balfour (1987) 61 ALJR 345, on the same point; Hope v The Council of the City of Bathurst [1980] HCA 16; (1979-1980) 144 CLR 1 at 7-9, where on the question whether certain agistment activities fell within the statutory description of "carrying on" the business of grazing, Mason J observed that many authorities supported the proposition that the question whether facts fully found fell within the provisions of a statutory enactment properly construed, is itself a question of law, (though special considerations applied where the statute used words according to their common understanding and the question was whether the facts as found fell within those words); John Holland Constructions Pty Ltd v Hall [1987] NTSC 3; (1987) 45 NTR 11 at 25-26, on what amounts to "a question of law"; Harrower v Craig (1992) 109 FLR 80 at 84, to the effect that a finding of fact not supported by the evidence is an error of law; Minister for Immigration and Ethnic Affairs v Pochi [1980] FCA 85; (1980) 31 ALR 666 at 689 per Deane J, to the effect that for a decision to be based on evidence means that it must be based on material which tends logically to show the existence or non-existence of facts relevant to the issue; and Mahon v Air New Zealand Ltd (1983) 50 ALR 193 (P.C.) at 206-207, to the effect that the rules of natural justice germane to that case required that the judge base his decision on evidence that had some probative value, in that it tended logically to show that facts existed consistent with the finding, and that the reasoning supporting the finding was not logically self-contradictory. Mr McDonald also referred to Pearce and Geddes 'Statutory Interpretation in Australia' (3rd ed., 1988), pars3.2-3.6, which discusses the use at common law of parliamentary materials as an extrinsic aid to ascertain the purpose of legislation, or the mischief with which it intended to deal, and whether they can also be used as aids to construing the statute. 28. The respondent's submissions: Mr Southwood of counsel for H conceded that if the Court had misconstrued the Act as alleged at p21 or had misapplied the Act to the facts it found, it would have committed an appealable error of law; see Tracy Village Sports and Social Club v Walker [1992] NTSC 91; (1992) 111 FLR 32 and Wilson v Lowery [1993] NTCA 127; (1993) 110 FLR 142 at 146. He submitted that this court therefore was not concerned with whether the alleged error of law was of a type which went to jurisdiction; rather, the appeal involved solely a question of statutory interpretation, and that should be the sole focus of appellate attention. 29. He submitted that this Court needed to answer only two questions, to decide the appeal:- (1) did his Worship misconstrue the definition of "worker" or the incorporated definition of "PAYE taxpayer", in s3(1) of the Act; (2) did his Worship otherwise misdirect himself in law. 30. He submitted that, having regard to his Worship's reasons for decision, these questions should both be answered "No", and the appeal dismissed. 31. Mr Southwood agreed that the new definition of "worker" as from 1 January 1992 created a new "objective" test, just as the pre-1992 "certificate of exemption" test (pp4,5) had been objective in nature. It was a test, however, which required the Court to go beyond the mere fact of whether the employer had purported to effect PAYE tax deductions from money paid to the applicant, and to decide whether the employer was legally required to do so by Division 2 of Part VI of the ITAA, (as his Worship had held). 32. He submitted that in most cases it would be easy to demonstrate that an employer had made P.A.Y.E. deductions "in accordance with" the ITAA, in this sense. Consequently, liability to make P.A.Y.E. deductions would in the majority of cases provide a simple and expeditious test by which to determine whether an applicant was a "worker". However, in other cases - where it was not so easy to demonstrate that the ITAA required that PAYE deductions be made

• the Court had to have regard to the old indicia developed by the common law to distinguish employees from independent contractors and applied before the Act was introduced in 1986, to decide whether the employer was required to make those deductions "in accordance with" the ITAA.

33. In support of this approach, and of his Worship's reasoning, Mr Southwood relied on the following 5 matters and submissions:- (1) his Worship's analysis (pp14,15) of the definition of "worker" in his reasons for decision; (2) that the only "mischief" the legislature intended to remedy by its 1991 amendments was that which was embodied in the then requirement for the Work Health Authority to administer the exemption certificate system regulating independent contractors for the purpose of the Act (pp4,5). Therefore, the Second Reading speech relating to that amendment was irrelevant to the resolution of the preliminary issue; even if the Court had had recourse to it, it could not have affected its resolution of that issue; (3) to adopt H's suggested interpretation would avoid creating "a considerable lacuna in the Act", and thereby avoid numerous injustices in the sense that otherwise there would be workers left without any cover whatsoever; (4) to adopt the appellant's suggested interpretation of "makes deductions" in effect would render superfluous the later words "in accordance with" and the words following, in the definition of "PAYE taxpayer" in s3(1); and (5) the word "makes" in the definition of "PAYE taxpayer" in s3(1) (p6) is apt to impose an obligation or liability on an employer to make the deductions; it is not merely a transitive verb, and to recognize the employer's obligation it should be read as meaning "is required to make".
34. Mr Southwood additionally submitted that in any event H fell within the ambit of the inclusive proviso (a) to the definition of "PAYE taxpayer" (see p6), as his Worship had found (finding (4) at p19), and was therefore within the definition of "worker". In support, he relied in particular on the Court's findings 11 and 12 at p13. In the context of "shortness of time" and a dispute as to whether deductions were to have been made on the PAYE system it made sense to resolve that dispute by reference to the legal liability arising out of the actual relationship; that is, to read "makes" in the definition of "P.A.Y.E. taxpayer" as "is required to make", where a question arose under proviso (a). This was the approach his Worship had correctly adopted.
35. The appellant's submissions, in reply; Mr McDonald in reply made 7 submissions. (1) The appellant had categorized (p20) the error alleged as an error which went to jurisdiction, only for the purpose of emphasizing the precise error committed. It was clear that an error going to jurisdiction was an error of law. (2) The new "objective" test of "worker" in the changed definition of that term in the 1991 amendments, did not

require recourse to the pre-1986 indicia developed by the common law to distinguish an employee from an independent contractor. Rather, the test remained wholly a statutory test; the same purpose underlay both the differing 1986 and 1991 approaches to the definition of "worker" - to remove any need to consider the old common law indicia. The statutory test now was: "Have deductions, purportedly effected on a P.A.Y.E. basis, in fact been made by the employer?" If such deductions were found not to have been made (as was admittedly the case here), the statutory test next required the Court to consider whether either proviso (a) or (b) to the definition of "PAYE taxpayer" applied (see pp6,7). As to this, Mr McDonald stressed that both provisos were prefaced and their scope controlled by the words "but only because", and submitted that in light of H's "relevant pre-employment history" with his previous employer in which he had been "PPS all along", the requirement of proviso (a) that the non-deduction of P.A.Y.E. tax be due only to shortness of time, could not be met. See generally submissions (a) and (b) at pp24-25. Proviso (b) was clearly not applicable in this case. (3) There was nothing illegal about any "agreement" as to tax between H and the appellant; there was no agreement, in that the manner in which tax would be deducted remained to be worked out. In any event any "agreement" between the appellant and H was not rendered illegal or void by the ITAA, if it was contrary to it; rather, in that event, its implementation would attract the statutory penalty under s221C(1A) of the ITAA, but the agreement would still bind the parties. In support, Mr McDonald relied on what Devlin J said in St John Shipping Corporation v Joseph Rank Ltd (1957) 1 QBD 267 at 290, that "each case must be determined by reference to the relevant statute". I note that the effect of that decision is that if a contract is legal when made but its performance is effected in breach of a statute, the contract is not rendered illegal unless the contract, as performed, was one which the statute meant to prohibit. That is a very different case to the one postulated here. I note also the discussion of the general topic of the effect on the enforceability of contracts of their performance in breach of statute, in F.J. Leonhardt Pty Ltd v Fitzgerald, (unreported, Kearney J, 23 September 1994, available on SCALE) at pp15-19 and 23-43. Mr McDonald sought to distinguish Cotton v Central District Finance Corp Ltd (1965) NZLR 992, where it was held that a hire purchase agreement which did not comply with certain hire purchase regulations was illegal and void, the regulations there specifically providing that "a hire purchase agreement entered into in contravention of the

regulations shall be void". (4) The appellant's interpretation of "worker" at p21 would not give rise to a "considerable lacuna" in the Act, because - (a) there would be remedies at common law available to an applicant, in any event; and (b) the number of cases that would fall outside the ambit of the interpretation of "worker" suggested by the appellant would be "infinitesimally small, if they exist at all." (5) Even if the appellant's interpretation gave rise to a lacuna in the Act, any potential for the Act thereby to create injustice was not necessarily curable by this Court. It was not appropriate for this court by "judicial intervention" to give a Court of limited jurisdiction, a jurisdiction it was not given by the Act. In support, Mr McDonald relied on Pelligrini v Trikilis [1989] NTSC 37; (1989) 63 NTR 5 at 9, a case under the Act pre-1992 involving an applicant holding an exemption certificate under s58 who claimed unsuccessfully to be a "worker". It had been submitted that to hold that the difference between a worker and an independent contractor lay simply in the holding of an exemption certificate "would result in dire social consequences". Angel J said that "whether or not these consequences follow is not a proper matter for judicial consideration", citing Vacher and Sons Ltd v London Society of Compositors [1912] UKHL 3; (1913) AC 107 at 118, per Lord Macnaghten. Mr McDonald also referred to Wulaign Association Inc v Minister for Racing and Gaming (1991) 78 NTR 1 at 11 per Kearney J, to the same general effect. I observe that nevertheless "the operation of the statute" is relevant to its construction; see p36. (6) The legislative purpose in making the 1991 amendment to the definition of "worker", would be "destroyed" by his Worship's reasoning, which, in effect, allowed "the tail of (the) legislative provision (to wag) the whole dog." (7) The expression "makes deductions - - - in accordance with", in the definition of "P.A.Y.E. taxpayer" (p6), referred to a deduction made purportedly under the P.A.Y.E. system in the ITAA, and not to a liability imposed by the ITAA to deduct P.A.Y.E. tax. It followed on this interpretation that his Worship's findings at pp12-14 showed that H could not fall within the definition of "worker", applying proviso (a) to the definition of "P.A.Y.E. taxpayer". 36. Conclusions: The sole question before His Worship was whether H, when he suffered his injury on 16 October 1993, was a "worker" for the purposes of the Act. 37. If H was such a "worker" his common law rights against his employer, arising from his injury, are abolished; see s52 of the Act. However, as an injured "worker", he would have a statutory right to apply to the Court for compensation, pursuant to s53 of the Act. If he was not a "worker" as defined, he is outside the ambit of the Act, which is concerned with workers incapacitated by industrial injuries; his rights and remedies would be restricted to those available at common law, and the Court would have no jurisdiction to hear and determine his application for compensation under s53 of the Act. 38. Whether the Court erred in law in ruling that H was a "worker" when he was injured, and thereby has wrongly given itself jurisdiction to hear and determine his application for compensation, depends upon the proper construction of the definition of "worker" and its incorporated definition of "P.A.Y.E. taxpayer" in s3(1). I have considered all of the appellant's submissions (at pp20-25 and 31-35) and the respondent's submissions (at pp28-31), but the construction of the definitions of those terms is all that is necessary to determine the appeal, bearing in mind Mr Southwood's concession at p28, Mr McDonald's reply to that concession at p31 and his Worship's findings at p19, particularly findings (4)-(6) inclusive. As to the limited scope of the appeal under s116(1) of the Act, see Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139 at 156-157 per Glass JA, and Tracy Village Sports and Social Club v Walker (supra) at 37-39. 39. In construing "worker" and "P.A.Y.E. taxpayer" in the Act I bear in mind that in Cooper Brookes (Wollongong) Pty Ltd v The Commissioner of Taxation [1981] HCA 26; (1980-81) 147 CLR 297, Mason and Wilson JJ said at pp320-321:- "In some cases in the past these rules of construction (that is, the literal construction rule and the so-called "golden rule" oF CONSTRUCTION) HAVE BEEN APPLIED TOO RIGIDLY. THE FUNDAMENTAL OBJECT OF STATUTORY CONSTRUCTION IN EVERY CASE IS TO ASCERTAIN THE LEGISLATIVE INTENTION BY REFERENCE TO THE LANGUAGE OF THE INSTRUMENT VIEWED AS A WHOLE. BUT IN PERFORMING THAT TASK THE COURTS LOOK TO THE OPERATION OF THE STATUTE ACCORDING TO ITS TERMS AND TO LEGITIMATE AIDS TO CONSTRUCTION. The rules, as D.C. Pearce says in Statutory Interpretation, p14, are no more than rules of common sense, designed to achieve this object. They are not rules of law. If the judge applies the literal rule it is because it gives emphasis to the factor which in the particular case he thinks is decisive. When he considers that the statute admits of no reasonable alternative construction it is because (a) the language is intractable or (b) although the language is not intractable, the operation of the statute, read literally, is not such as to indicate that it could not have been intended by the legislature. On the other hand, when the judge labels the operation of the statute as "absurd", "extraordinary", "capricious", "irrational" or "obscure" he assigns a ground for concluding that the legislature could not have intended such an operation and that an alternative interpretation must be preferred. But the propriety of departing from the literal interpretation is not confined to situations described by these labels. It extends to any situation in which for good reason the operation of the statute on a literal reading does not conform to the legislative intent as ascertained from the provisions of the statute, including the policy which may be discerned from those provisions. QUITE OBVIOUSLY QUESTIONS OF DEGREE ARISE. IF THE CHOICE IS BETWEEN TWO STRONGLY COMPETING INTERPRETATIONS, AS WE HAVE SAID, THE ADVANTAGE MAY LIE WITH THAT WHICH PRODUCES THE FAIRER AND MORE CONVENIENT OPERATION SO LONG AS IT CONFORMS TO THE LEGISLATIVE INTENTION. IF, HOWEVER, ONE INTERPRETATION HAS A POWERFUL ADVANTAGE IN ORDINARY MEANING AND GRAMMATICAL SENSE, IT WILL ONLY BE DISPLACED IF ITS OPERATION IS PERCEIVED TO BE UNINTENDED." (emphasis mine) 40. Their Honours rejected a literal interpretation in that case because it would result "in an operation for (a legislative provision) which in our opinion is capricious and irrational". I respectfully adopt this general approach to statutory construction. 41. As to the changes in the definition of "worker" by the 1991 amendments I respectfully agree with his Worship that:- "The major part of the definition (of "worker") - - - (remains) totally unchanged. The exceptions (are that) "an independent contractor" was removed (from the list of exclusions) and the additional requirement that a (worker) be a "P.A.Y.E. taxpayer" was added. The effect of this, in my view, is that any natural person who performs any work or service of any kind (whether as an employee or a contractor) under any contract of agreement is a "worker" provided that the person meets the new requirement added into the definition namely that the person "is a PAYE taxpayer" (assuming that the person did not fall within one of the exceptions cited in paragraphs (c) to (h) of the definition)." 42. I express my general opinion on the outcome of the appeal immediately. I consider that in the definition of "P.A.Y.E. taxpayer" (p6) the legislature has plainly adopted an "objective" test: whether the employer in fact makes tax deductions which purport to be made under the P.A.Y.E. system instituted by the ITAA. If he does - and that is a matter which usually will be very readily ascertainable and not in dispute - the person from whose payments he makes those deductions "is a P.A.Y.E. taxpayer" for the purposes of the definition of "worker" in s3(1). I arrive at that opinion from the ordinary meaning and grammatical sense of the language used in the definition of "P.A.Y.E. taxpayer"; understood in that sense the definition yields an operation which cannot be said to be unintended by the legislature, and in my view clearly was intended. I do not consider that the legislature intended that the test of whether a person was a "worker" under the Act required the Court to investigate the liability of his employer to make P.A.Y.E. deductions under the ITAA. Rather, the Act is concerned only with the fact that tax deductions are made, in apparent conformity with the P.A.Y.E. system. The Court is not required to "police" the ITAA, in this regard. In general, I accept Mr McDonald's submission (2) at p32 as an accurate summary of the proper approach to determining whether a person is a "worker". 43. Notwithstanding his Worship's meticulous analysis of the phrase "in accordance with" in the definition of "P.A.Y.E. taxpayer", and his view that the legislature could not have intended the "too simplistic" interpretation set out above because it "could lead to much injustice" (see p14), I respectfully consider that his construction of that definition in the passage emphasised at p15 is incorrect, and involves an error of law. There are broadly 4 reasons for this opinion. 44. First, it is trite that a legislative provision must be read in its context; see K and S Lake City Freighters Pty Ltd v Gordon and Gotch Ltd [1985] HCA 48; (1985) 60 ALR 509 at 514 per Mason J. The definition of "P.A.Y.E. taxpayer" (pp6,7) is exhaustive; the test in its general part is that "his employer makes deductions", while in inclusionary proviso (b) it provides for the special situation where "deductions are not made - - - but only because - - - his employer is not required to make such deductions". This indicates in my opinion that the legislature was alert to the distinction between an employer who is required to make deductions and one who in fact makes deductions, and deliberately used "makes" as opposed to "is required to make" in the general part of the definition. 45. Second, "as a general rule a Court will adopt that construction of a statute which will give some effect to all of the words which it contains"; see Beckwith v The Queen [1976] HCA 55; (1976) 12 ALR 333 at 337, per Gibbs J. Accordingly, the word "makes" should not be read as "is required to make" in the definition of "P.A.Y.E. taxpayer", since to do so would render nugatory the inclusory provisos (a) and (b), which provide for certain situations where "deductions are not made". To be consistent, the use of both "makes" and "made" in the general part of the definition, requires that both bear their ordinary, accepted meaning. 46. Third, the qualifying phrase "in accordance with" (p6) must be read in its context, in particular with the word "makes", and against the background that the concept of "P.A.Y.E. taxpayer", of which it forms part, serves to define a "worker" under the Act. In this context the plain meaning of "makes deductions - - - in accordance with" the P.A.Y.E. provisions of the ITAA, in my opinion, is that the Court is required to ascertain if P.A.Y.E. tax deductions have in fact purportedly been made, pursuant to the ITAA; that is, the Court's only concern is that the administrative system set up under the relevant provisions of the ITAA for the deduction of P.A.Y.E. tax has apparently been complied with. The Court is not required by "in accordance with" to go behind a purported compliance with the P.A.Y.E. system, to ascertain the nature of the actual relationship according to the common law and thus if the employer is legally required under the ITAA to make P.A.Y.E. deductions. It appears to me to be unthinkable in the light of the history of the Act, that the legislature ever contemplated that to determine whether a person is a "worker" under the Act the Court should be required to embark upon determining the liability of the employer to deduct P.A.Y.E. tax under the ITAA. It is true that "in accordance with" can create difficulties in discerning the legislative intent; see, for example, Robart v Matchplan Pty Ltd (in Liq.) (unreported, Supreme Court of Victoria (Appeal Division), 21 December 1993) at pp1-3 per Fullagar J. But its meaning is clear here. 47. I bear in mind the submissions as to the "lacuna" that the "too simplistic" interpretation at p38 might create, and in that connection the observation in Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (supra) cited at p37, as to when an interpretation "which produces the fairer and more convenient operation" may be chosen. However, to read "makes" as "is required to make", by reason of "in accordance with", would in my opinion place a non-natural construction both on the word "makes" and on the definition of "P.A.Y.E. taxpayer": see Liversidge v Anderson [1941] UKHL 1; (1942) AC 206 at p245, per Lord Atkins. A strained construction of words can only be made when other factors outweigh the desirability of applying their literal meaning, and that is not the case here. 48. Fourth, the "too simplistic" approach at p38 to the definition of "P.A.Y.E. taxpayer" provides an efficient and simple test for determining with certainty whether a person is a "worker" under the Act. The definition covers low-income earners who would otherwise be P.A.Y.E. taxpayers (proviso (b)), persons in respect of whom there is agreement tacit or express to have tax deducted on a P.A.Y.E. basis but who are injured before any such tax is in fact deducted (proviso (a)), as well as persons who have in fact had P.A.Y.E. tax deducted by their employer. I note Mr Southwood's submission (p29) that in most cases the "normative" interpretation of "makes" as "is required to make" would also provide an efficient and simple test, and that only in a minority of cases would the Court have to have recourse to the old common law indicia. However, as noted above, that interpretation involves a strained construction of "makes". If "makes" were construed as "is required to make", then even if an employer purported to deduct tax on a P.A.Y.E. basis, the Court would have to go behind that fact and apply the old common law indicia to establish whether the employer was required to have made P.A.Y.E. deductions; see his Worship's observation in the passage emphasized at p15. This could be a protracted and expensive process; in my opinion, Parliament never intended that any such enquiry be undertaken by the Court to determine whether an applicant is a "worker". 49. I turn to the matter of the use of the Second Reading speech. It is arguable from Cooper Brookes (Wollongong) Pty Ltd v The Commissioner of Taxation (supra) that recourse may be had to the speech (pp22-23) to search out the reasons the Act was passed, even though the meaning of the words is clear and unambiguous. In Maynard v O'Brien (supra) Angel J said at pp19-20, citing from Pearce and Geddes:- "According to this traditional approach (which rejected a purposive construction of legislation), it is only when a study of the language itself leaves the court in doubt as to the meaning of the Act that regard may be paid to the reasons why an Act was passed." (D.C. Pearce and R.S. Geddes, op.cit.p24) 50. The learned authors point out that the approach of the Court seems to be changing, and later (p29) they state: "The comments of Mason and Wilson JJ in Cooper Brookes appear to deal with the vexed question whether it is permissible to embark upon an inquiry as to the purpose of the Act in the absence of ambiguity or doubt as to meaning on the face of the Act itself. If a literal approach may be departed from in any case in which it fails to yield a result which is consistent with the purpose of the Act (or legislative intent), as Mason and Wilson JJ suggest, a priori, IT MUST BE PERMISSIBLE IN ANY CASE TO SEEK TO DISCOVER THAT PURPOSE - - - On the other hand, it has nearly always been assumed that an ambiguity must have arisen before it is permissible to call in aid the purpose approach - - -." There seems to be a growing practice to allow the use of the second reading speech where a bill was introduced to remedy a mischief: ( His Honour then cited several authorities in support and continued:) It seems that the weight of authority is in favour of allowing recourse to the minister's second reading speech to search for the reasons an Act was passed and to eke out the mischief sought to be remedied." (emphasis mine) 51. See also Salmon v Chute [1994] NTSC 21; (1994) 94 NTR 1 at pp20-21. In neither of these cases, however, was the speech looked at to ascertain the purpose of the Act, in the absence of ambiguity; in both cases it was referred to, to ascertain the mischief sought to be remedied. The Barons of the Exchequer stated as long ago as Heydon's Case itself [1584] EngR 9; (1584) 3 Co Rep 7a; 76 ER 637 at 638, that having ascertained the mischief, Parliament's remedy and the reason for it, "the office of all the Judges is always to make such construction as shall suppress the mischief, and advance the remedy - - - ." A construction which "advances the remedy" is these days called a purposive construction, the purpose of the Act being to remedy the mischief. It is arguable that in very recent times the common law in Australia has developed to the extent where the purposive construction of legislation is now dominant, and is to be adopted even where there seems to be no ambiguity or doubt as to the meaning of the Act, on its face. 52. Throughout most of Australia the purposive construction of statutes and the use of Second Reading speeches as an extrinsic aid to the interpretation of statutes is provided for by specific legislation. Not so in the Territory. The common law in the Territory has not yet accepted that Second Reading speeches may be used to assist generally in determining the purpose of Territory statutes; I consider that I should refrain from doing so, where the language is, as here, unambiguous in its meaning. That is to say, the courts should not use extrinsic materials to confirm the ordinary meaning of unambiguous language, in the absence of a statutory provision such as s15AB(1)(a) of the Acts Interpretation Act 1901 (C'th). See Arrowcrest Group Pty Ltd v Gill [1993] FCA 541; (1993) 46 FCR 90 at 103-4 per French J, on the similar position in South Australia. However, if I am wrong as to the clarity and unambiguity of the language in question, I consider that recourse to the Second Reading speech is open to aid in resolving that ambiguity. Examination of that speech at pp22-23 would support the construction of "makes deductions - - - in accordance with" set out at p38. 53. In my opinion, the "mischief" the legislature clearly had in mind when passing the 1991 amendments was, as his Worship said, "to remove the need for the Work Health Authority to administer exemption certificates." Its "remedy" was to redefine the term "worker" in terms of whether a person is employed and paid under the 'pay as you earn' (PAYE) taxation provisions. That is the sole link between the definition of "worker" in the Act and the ITAA. This change in the definition of "worker" was part of a single remedial package, together with the repeal of s58 of the Act, and the removal of the reference to "independent contractor" in the definition of "worker" and of the definition of "independent contractor"; the package was designed to overcome the mischief. 54. I turn to the separate question whether his Worship erred in law in making finding (4) on p19 that H fell within the ambit of proviso (a) to the definition of "P.A.Y.E. taxpayer" (p6). Proviso (b) is not relevant in this case. In my opinion, his Worship's finding involved an error of law in that his approach to the question did not accord with that set out in (2) on p32. The question to be addressed to determine whether proviso (a) applied, was: was the sole reason that P.A.Y.E. deductions had not been made the shortness of time H had been in the employment of the appellant? To answer that question necessitated in my view ascertaining the answer to a prior question: had the appellant and H expressly or tacitly agreed that P.A.Y.E. deductions would be made? 55. His Worship made his finding (4) on p19 as a result of his enquiry (see pp16-19) directed to answering the quite different question, whether P.A.Y.E. deductions were required to be made by the ITAA. This was a question which the Act did not contemplate he should seek to answer. His Worship in fact made findings which bore directly on the enquiry whether the parties were agreed that P.A.Y.E. deductions would be made. See findings 3 and 7 on p13 and the finding that there was "no agreement" at p14. Nevertheless, his approach at p17 was directed to the wrong question - whether the ITAA required that P.A.Y.E. deductions be made - and at p18 he set aside agreement as a relevant factor, since the answer to whether proviso (a) applied was to be determined by whether the ITAA required P.A.Y.E. deductions to be made, and not by what the parties had agreed. 56. In the process in which he engaged, his Worship's findings 3 and 7 at p13 and of "no agreement" at p14 were inconsistent with findings 11 and 12 at p13 which flowed directly from his conclusion that the ITAA required that P.A.Y.E. deductions be made and supported the ultimate conclusion that the respondent fell within proviso (a). For "shortness of time" to be the sole cause of a non-deduction of P.A.Y.E. tax, as required if proviso (a) is to apply, there must have been prior agreement tacit or express, that P.A.Y.E. deductions were to be made. His Worship's findings 3 and 7 on p13, and of "no agreement" on p14, constitute a finding on the evidence that there was no such prior agreement; that finding precludes a conclusion that it was "only because" of the "shortness of time" that P.A.Y.E. deductions were not made. The only conclusion open on that finding is that it was not just "shortness of time" which caused no P.A.Y.E. deductions to be made. His Worship's conclusion was erroneous, because it was not open on the findings of fact he made; hence, his ultimate conclusion that H was a "worker" in terms of s3(1) of the Act, because he fell within proviso (a) to the definition of "P.A.Y.E. taxpayer", is vitiated. 57. For the above reasons I would allow the appeal, quash the decision of 16 August 1994 that at the time of his accident on 16 October 1993 H was a "worker" within the meaning of the Act, and in lieu order that his application for compensation filed on 11 November 1993 be dismissed on the basis that he has failed to establish that at the time of his accident he was a "worker" within the meaning of the Act. Order accordingly. 58. Addendum: After arriving at this conclusion my attention was drawn to his Worship's decision of 16 December 1994 in Michalak v Murlise Pty Ltd. In that case it appears the applicant had tax deducted on the PPS system. He was injured and compensated. His compensation payments were later cancelled on the basis that he was not a P.A.Y.E. taxpayer and hence not a "worker" in terms of the Act. His Worship was asked to determine whether he was a "worker", as a preliminary issue. In his decision in Michalak his Worship referred to his decision in this case; he noted the quite different factual situation and now considered his decision of 16 August 1994 was based solely upon the finding that H fell within proviso (a) to the definition of "P.A.Y.E. taxpayer". He considered, accordingly, that a number of the remarks in his reasons of 16 August were obiter. In Michalak, where the meanings of "worker" and "P.A.Y.E. taxpayer" were "squarely raised", his Worship took the view a person is a "P.A.Y.E. taxpayer" for the purposes of the Act only where P.A.Y.E. deductions had been made; since that was not the case with the applicant in Michalak, he was not a "worker" under the Act and that was "the end of the matter". In other words, in Michalak his Worship appears to have resiled from his earlier views in this case, and taken the same general approach to the construction of "PAYE taxpayer" in s3(1) of the Act as that I indicated at p38. I have sufficiently indicated at pp44-46 why I consider his Worship's conclusion that H fell within proviso (a), is terminally infected by the wrong approach arising from a "normative" construction of "makes", which led to that conclusion.