JMC Pty Ltd v Commissioner of Taxation

• Jurisdiction: Australia Federal only
• Judgment Date: 23 May 2023
• Neutral Citation: [2023] FCAFC 76
• Date: 23 May 2023
• Court: Full Federal Court (Australia)

Federal Court of Australia

JMC Pty Ltd v Commissioner of Taxation [2023] FCAFC 76

Appeal from:	JMC Pty Limited v Commissioner of Taxation [2022] FCA 750
File number:	NSD 562 of 2022
Judgment of:	BROMWICH, THAWLEY AND HESPE JJ
Date of judgment:	23 May 2023
Catchwords:	CONTRACTS - whether contract between lecturer and education provider was one of employment or independent contractor - whether lecturer fell within ordinary or extended meaning of employee pursuant to the Superannuation Guarantee (Administration) Act 1992 (Cth) - right to subcontract or assign - right to control - appeal allowed - lecturer held to be an independent contractor
Legislation:	Superannuation Guarantee (Administration) Act 1992 (Cth) ss 12(1), 12(3) Taxation Administration Act 1953 (Cth) Part IVC Tertiary Education Quality and Standards Agency Act 2011 (Cth)
Cases cited:	Australian Mutual Provident Society vChaplin [1978] UKPC 7; 18 ALR 385 Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 96 ALJR 89 JMC Pty Limited v Commissioner of Taxation[2022] FCA 750 Narich Pty Ltd v Commissioner of Pay-roll Tax [1983] 2 NSWLR 597; 50 ALR 417 Stevens v Brodribb[1986] HCA 1; 160 CLR 16 ZG Operations Australia Pty Ltd v Jamsek[2022] HCA 2; 96 ALJR 144
Division:	General Division
Registry:	New South Wales
National Practice Area:	Taxation
Number of paragraphs:	108
Date of hearing:	8 May 2023
Counsel for the Appellant:	Mr J Lockhart SC and Mr J S Byrne
Solicitor for the Appellant:	Holding Redlich
Counsel for the Respondent:	Mr L T Livingston SC and Ms C T Ensor
Solicitor for the Respondent:	ATO Litigation and Legal Services

ORDERS

		NSD 562 of 2022
BETWEEN:	JMC PTY LTD ACN 003 572 012 Appellant
AND:	COMMISSIONER OF TAXATION Respondent

order made by:	BROMWICH, THAWLEY AND HESPE JJ
DATE OF ORDER:	23 may 2023

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The notice of contention be dismissed.

3. The orders made on 29 June 2022 be set aside, and in lieu thereof the appeal from the objection decision be allowed.

4. The respondent pay the appellant’s costs before the primary judge and before this Court as assessed or agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

THE COURT:

INTRODUCTION

1. JMC Pty Limited is the provider of higher education programmes. JMC engaged a qualified sound engineer or technician, Mr Nicholas Harrison, to provide teaching services by way of delivering lectures and marking student exams and assignments in courses for a Bachelor of Creative Technologies (Audio Engineering and Sound Production). The engagement was by way of a series of short-term written contracts in the periods between 1 April 2013 and 30 June 2016, and between 1 July 2017 and 31 March 2018.

2. JMC paid Mr Harrison for the work he performed during the relevant periods without making superannuation contributions, upon the basis that he was an independent contractor. The Commissioner issued assessments of superannuation guarantee charges to JMC premised on Mr Harrison being an employee within the meaning of s 12 of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act), either within:

1. the ordinary common law meaning of “employee” as provided for by s 12(1); or

2. the extended meaning of “employee” provided for by s 12(3), namely that Mr Harrison had worked “under a contract that [was] wholly or principally for [his] labour”.

3. JMC objected to the assessments under Part IVC of the Taxation Administration Act 1953 (Cth) and then appealed to this Court from the Commissioner’s unfavourable objection decision. The primary judge dismissed the appeal, concluding that Mr Harrison was an employee within the ordinary meaning of that word. JMC now appeals from the orders dismissing its appeal.

4. The trial took place before the primary judge in December 2020, before the High Court’s decisions in Construction, Forestry, Maritime, Mining and Energy Union v Personnel Contracting Pty Ltd [2022] HCA 1; 96 ALJR 89 and ZG Operations Australia Pty Ltd v Jamsek[2022] HCA 2; 96 ALJR 144. The trial was conducted upon the basis that the question of whether or not a person was an employee was to be determined upon the basis of an assessment of the relationship as exposed both by the terms of the contractual relationship and the manner of performance of the contract.

5. The High Court delivered judgments in Personnel Contracting and Jamsek on 9 February 2022. These cases required that - where the parties’ relationship was comprehensively committed to a written contract, the validity of which was not challenged as a sham, and the terms of which were not varied, waived or the subject of an estoppel - the question of whether a person was an employee or an independent contractor was to be resolved solely by a consideration of the terms of the contract and not by reference to performance of the contract: Personnel Contracting at [59].

6. These decisions meant that significant parts of the evidence which had been admitted, including evidence as to the manner of performance of the contracts, were either of no, or diminished, relevance. The decisions required a renewed focus on the terms of the comprehensive written contracts between JMC and Mr Harrison. On 29 March 2022, the primary judge conducted a further hearing with oral and written submissions as to the effect of Personnel Contracting and Jamsek. His Honour dismissed JMC’s appeal on 29 June 2022: JMC Pty Limited v Commissioner of Taxation[2022] FCA 750.

7. For the reasons that follow, the primary judge erred in concluding that Mr Harrison was an employee. The appeal should be allowed and the notice of contention dismissed.

LEGAL PRINCIPLES The relevant common law principles

8. The primary judge summarised the principles in Personnel Contracting and Jamsek as follows:

[17] First, where the rights and duties of the parties are comprehensively committed to a written contract, the legal rights and obligations established by the contract are decisive of the character of the relationship provided that the validity of the contract has not been challenged as a sham, or that the terms of the contract have not been varied, waived or are subject to an estoppel: Personnel Contracting at [43], [44], [47], [59] (Kiefel CJ, Keane and Edelman JJ), [172] (Gordon J, Steward J relevantly agreeing at [203]). The task is to construe and characterise the contract made between the parties at the time it was entered into: Personnel Contracting at [174] (Gordon J).

[18] Second, in order to ascertain the relevant legal rights and obligations, the contract of employment must be construed in accordance with the established principles of contractual interpretation: Personnel Contracting at [60] (Kiefel CJ, Keane and Edelman JJ), [124] (Gageler and Gleeson JJ), [173] (Gordon J). In...