Home / News / High Court remittal clarifies scope of s 12(3) employee for superannuation purposes

High Court remittal clarifies scope of s 12(3) employee for superannuation purposes

Luke Livingston SC and Courtney Ensor appeared for the Commissioner of Taxation in the recently decided Jamsek v ZG Operations Australia Pty Ltd (No 3) [2023] FCAFC 48. The case was a remittal from the decision of the High Court of Australia in ZG Operations Australia Pty Ltd v Jamsek [2022] HCA 2.

The Commissioner was joined to the remitted appeal, at the direction of the High Court, to address matters of statutory construction concerning the operation of s 12(3) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (SGA Act). The Full Court of the Federal Court accepted each of the Commissioner’s submissions as to the construction of the SGA Act.

The case concerned Mr Jamsek and Mr Whitby (the Drivers), who had each established partnerships with their respective wives. Those partners executed contracts with the respondent companies for the carriage of goods by truck, with the partnerships responsible for the provision of both the trucks and drivers. The High Court unanimously held that the Drivers were not employees of the relevant company pursuant to the ordinary, or common law, meaning of “employee” as adopted in s 12(1) of the SGA Act.

On the remitted appeal, the Full Court held that the primary judge was correct to find that the Drivers had not discharged their onus of proving that they were employees within the extended definition in s 12(3). The Full Court held that neither the first element of s 12(3) (that there be a “contract”) nor the second element of that sub-section (that the contract be “wholly or principally for the labour of the person”) was satisfied.

In dismissing the Drivers’ appeal, Perram and Anderson JJ (with Wigney J agreeing) accepted the Commissioner’s submissions that:

  • s 12(3) only applies where the putative “employee” is an identified natural person who is a party to the contract in their individual capacity, as opposed to in the capacity of a partner in a partnership;
  • s 12(3) does not require a strictly bilateral contract, but rather a contract between two sides with a bilateral exchange of promises of labour and payment;
  • s 72 of the SGA Act deems a partnership to be a legal person for the purpose of treating it as being a party to a contract as a putative “employer”, but not as a putative employee, under s 12(3);
  • s 12(3) is not satisfied where a contract is properly characterised as being for the provision of a result and not for labour; and
  • the trucks were properly characterised as specialist, large scale capital equipment (unlike the bicycle in Hollis v Vabu (2001) 207 CLR 21) such that, in respect of one particular period for which Mr Whitby contracted in his personal capacity and (despite contractually being required to use a truck) occasionally used a utility vehicle, Mr Whitby had not discharged his onus of proving that the contract for that period was principally for Mr Whitby’s labour.

The Full Court held that, in order to discharge their onus, the Drivers needed to have adduced at trial evidence to establish a quantitative valuation of the various components of the delivery service. In the absence of such evidence, the Full Court was unable to quantify the relevant value of the labour component of the delivery service compared to the other benefits that the company obtained under the contracts.

A copy of the Court’s reasons can be found here.

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