But I apprehend it will be said that we are for the reason that our arrangement with the family company is a related or collateral one. I am happy to be wrong about that, frankly, but I have to proceed on the basis that is what is being asserted, particularly when I see the amended summons in the words in which it now appears. And, indeed, it follows that the applicant has to agree that the contract between the family company has to argue that the contract with my client was a related or collateral contract to the employment contract otherwise she hasn't got any ability to challenge anything before the court or what is before the court is not challenged. That is my attempt to answer your Honour's point, to deal with the proposition your Honour has raised with me.
10 It is clear from the provisions of s 108A which I have previously set out that the remuneration cap only applies where the proceedings "relate to" a contract of employment which makes provision for remuneration exceeding the cap.
11 As the applicant submitted, taken at its highest in favour of the applicant, the amended summons is directed to a contract or arrangement which was not itself a contract of employment but which anticipated that a contract of employment would exist between the applicant and RJ.
12 Having asserted on an alternative basis that the contract between RJ and the respondent was a related or collateral contract to the employment contract between the applicant and RJ, Mr Newall said there was no relationship between the applicant and the respondent as alleged in the summons. Again, this fails to address the assertion made in the amended summons and is not helpful in dealing with the applicant's case. As I have said, these interlocutory proceedings must be conducted on the basis that the assertion made by the applicant in the amended summons can be taken at its highest in favour of the applicant.
13 In the course of Mr Newall's submissions, I enquired of him how I could determine for the purpose of these interlocutory proceedings whether one contract was a related condition to a contract or arrangement or was a collateral arrangement without having heard some evidence about these matters. I understand Mr Newall to have submitted that the contract or arrangement sought to be impugned did fall within s 108A(3), but that he conceded that there was no evidentiary basis for such an assertion.
14 In my opinion, a determination as to whether something is a collateral arrangement or a related condition involves a determination of law arrived at by reference to a factual basis. Whilst I have not been able to find any authoritative judicial pronouncement on what may be a "related condition" (and perhaps it is a concept which is so simple that none is required), there is some discussion on what constitutes a "collateral arrangement". I refer in particular to the discussion by Hungerford J in Bartolacci v Permanent Custodian (1992) 44 IR 388. His Honour said at 398,
"The phrase 'collateral arrangement' requires consideration in terms of the meaning of the two words which comprise it. 'Collateral' in its commonly accepted meaning, according to The Concise Oxford Dictionary 6th ed, 1976, means a 'side by side, parallel; subordinate but from same source; contributory, connected but aside from main subject, course, etc'. The proposition that somehow a collateral arrangement could relevantly be within the section as sitting side-by-side with or parallel to, but not related to, a contract or arrangement under which work is performed in an industry does not sit comfortably with what the word 'collateral' ordinarily means. It seems to me that to be collateral to something there must be some necessary connection with or necessary relation to the primary thing, that is, subordinate to but from the same source, and even though that which is collateral may be separate or aside from the main subject. In other words, in the context of s 275, unless there be some necessary connection or relationship between the collateral arrangement and the primary contract or arrangement under which work is performed, then, in my view, there would be no relevant function for 'collateral arrangement' to perform in the context of s 275 which is essentially concerned with what might be called in a shorthand way 'work contracts or arrangements'." (Original emphasis).
15 The discussion by Hungerford J must throw some doubt upon whether there is a necessary correlation of collateral arrangements so that if something is collateral to something else, the latter is necessarily collateral to the former. Concepts of primacy and subordination would appear to indicate to the contrary. In order to be persuaded for the purpose of these interlocutory proceedings that s 108A(3) must apply in accordance with its terms, I would need to be satisfied that the contract or arrangement between the applicant and the respondent was an arrangement collateral to the contract of employment between the applicant and RJ. (I repeat, Mr Newall did not make any such submission). It may be arguable that the reverse applies namely that that contract of employment was collateral to the primary contract or arrangement between the applicant and the respondent. (This consideration does not deal with a related issue, namely whether or not a contract that is argued by the applicant to exist in the alternative, can constitute a collateral arrangement for the purpose of s 108A(3).) In the same way whether something is related or not may also involve a question of fact. (Arguably, concepts of relationships do not necessarily involve circumstances of primacy and subordination).
16 It is notorious that interlocutory strike out applications should not be dealt with until an appropriate time in the proceedings, namely when any factual material which is necessary for the determination of the preliminary point is available to the Court. (See, for example, Virtue v NSW Department of Education and Training (1999) 92 IR 428). It is obvious from what I have said that a determination as to whether the contract or arrangement which is sought to be impugned in these proceedings comes within s 108A(3) can only be made after a factual enquiry has been undertaken. Mr Newall did not seek to argue that the Court currently had before it sufficient evidentiary material upon which to make such a determination. Accordingly, this strike out application must fail.
17 For completeness, I refer also to a submission made by Mr Moses, counsel for the applicant, in resisting the strike out application. Mr Moses emphasised that s 108A is framed by reference to a remuneration package which is payable or receivable by an individual, being the person who performs the work. That is, arguably, the definition of remuneration package by reference to monetary remuneration and employment benefits payable or receivable must direct attention to what is payable to or receivable by the individual rather than what is paid to or receivable by a contracting corporate entity. In so submitting, Mr Moses relied upon my analysis of s 108A in Shankland v Beta Alistine Pty Ltd [2007] NSWIRComm 111. At [13] I said,
"There are a number of indicia that, in my opinion, lead in the aggregate to a construction of s 108A and in particular the definition of employment benefit which result in a conclusion contrary to that contended for by the respondents. They are as follows:
1) There is a reference in s 108A(1)(a) and (b) to a remuneration package which is paid or received, or payable or receivable. This must be a reference to that which is paid or payable to, or received or receivable, by or on behalf of the applicant.
2) The definition of "remuneration package" refers to the aggregation of the "value" of monetary remuneration and employment benefits. The reference to "value" is more indicative, in my opinion, of a value to the employee. It would be odd and almost nonsensical to refer to a value of something to the employer. In the same vein, "value" should be contrasted with "cost". The definition of "remuneration package" involves assessing in monetary terms the value to the employee of the benefits that are payable to or receivable by him or her pursuant to the contract of employment.
3) Indeed, there is a reference to "cost" within the definition of employment benefit itself. This is not intended, in my opinion, to refer to the quantification of the cost but is more indicative that the benefit is payable by the employer to the employee's account and as an expense of the employer.
4) In terms of the provision of a motor vehicle, the definition of employment benefit directs attention to the resultant benefit to the employee.
5) FBT is a tax on the value of certain benefits, referred to as "fringe benefits" that are provided, in general terms, by employers to employees or to associates of employees, associated with the employment relationship. The tax is payable by an employer who provides the fringe benefit. The manner in which the tax is calculated and the circumstances in which it applies to the provision of a motor vehicle is a matter of some complexity to be determined by the relevant statute and rulings issued from time to time by the Commissioner of Taxation. Hopefully, these brief observations, which are all that it is necessary to make to determine these proceedings, are non-controversial.
6) Although Clause 7. of the applicant's contract of employment compels the employer to pay FBT, this contractual compulsion is also reflective of the compulsion to pay FBT provided by the relevant taxation legislation. The mere fact that an employer is liable to pay FBT on the provision of a motor vehicle to an employee whether by statute or contractual obligation is not determinative, in my opinion, as to whether or not the liability to pay FBT is an employment benefit for the purpose of s 108A(3).
7) FBT is, as I have said, a tax payable by an employer for the provision of certain benefits to employees. Whilst there is a cost to the employer, by reason of the payment of FBT, that tax cannot constitute a benefit provided to an employee for the purpose of the definition of employment benefit in s 108A(3). The emphasis, as I have said, is directed to the assessment of the value of the benefit in the hands of the employee. Clearly, the acquisition or leasing costs of a vehicle, as well as the cost of registration, insurance, repairs, maintenance and running costs and the like, would all fall within the rubric of a value to the employee, because these are costs which he or she would have to bear personally if it were not for the provision of a motor vehicle for private use by the employer. It matters not that an employee providing his or her own vehicle might acquire one of a lesser value, because the applicant has clearly contracted to have included within his remuneration package a motor vehicle of a make, model and recommended retail price determined by, and selected by, him. FBT falls outside this concept.
8) The obligation of an employer to pay FBT on a fringe benefit made available to an employee may be contrasted with the tax payable on salary and other remuneration and which is deducted by an employer from monies received by an employee. This tax, deducted under the PAYG scheme, is tax which is payable by the employee as income tax and which is compulsorily collected for the Australian Taxation Office by employers. That tax clearly is to be taken into account when determining the amount of remuneration payable by an employer to an employee for the purpose of s 108A."
18 There is also a detailed consideration of the provisions of s 108A within the judgment of Haylen J in Lozevski v Goodman Fielder Consumer Foods Pty Ltd (2004) 144 IR 28 commencing at [50].
19 In light of these authorities, I agree with the submission of Mr Moses that s 108A cannot apply to the totality of the monies and any other benefits paid by the respondent to RJ on an annualised basis, assuming that that contract or arrangement falls within s 108A(3).
20 For these reasons the strike out application fails and the motion is dismissed.
21 The parties agreed that in all the circumstances of the proceedings, costs should be reserved, and I accede to this submission.
Orders