WorkCover v Q-COMP and Allied Express Transport P/L

[2010] QMC 8

MAGISTRATES COURTS OF QUEENSLAND

CITATION:

WorkCover v Q-COMP & Allied Express Transport P/L [2010] QMC 8

PARTIES:

WORKCOVER QUEENSLAND

(appellant)

v

Q-COMP

(first respondent)

ALLIED EXPRESS TRANSPORT PTY LTD

(second respondent)

FILE NO/S:

MAG109981/09(5)

DIVISION:

Industrial Magistrates Court

PROCEEDING:

Appeal against decision of Q-COMP

ORIGINATING COURT:

Industrial Magistrates Court at Brisbane

DELIVERED ON:

7 July 2010

DELIVERED AT:

Brisbane

HEARING DATE:

5 July 2010

MAGISTRATE:

Lee G

ORDER:

The decision of Q-COMP is set aside and the matter is remitted to Q-COMP for consideration in accordance with these reasons. This means the appeal is successful.

CATCHWORDS:

INDUSTRIAL LAW – WORKERS COMPENSATION - employer’s premium – method of calculation – “wages” - payments to deemed workers – contract owner drivers - whether gross payments without deduction constitutes wages for assessment of premium – whether amounts can be deducted from those payments because they are allowances “payable”

Acts Interpretation Act 1954 (Qld), s 14A

Workers Compensation Act 1987 (NSW), s 174(9)

Workers Compensation Regulation 2003 (NSW)

Workers Compensation and Rehabilitation Act 2003 (Qld), s 54, s 550, Schedule 6

Midland Railway v Sharpe [1904] AC 349 cited

Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) CLR 389; [1944] HCA 34 applied

COUNSEL:

G Diehm SC for the appellant

S Gray for the first respondent

J Murphy (NSW) for the second respondent       

SOLICITORS:

Bruce Thomas Lawyers for the appellant

First respondent appeared on their own behalf

1. This is an appeal by WorkCover Queensland pursuant to section 550[1] of the Workers Compensation Act 2003 (Qld) (“the Act”) against a decision of Q-COMP dated 7 May 2009 which set aside a decision of WorkCover made in or about 26 February 2008[2]. At a subsequent request by Ms K. Robertson, Chief Executive Officer of the Courier and Taxi Truck Association situated in New South Wales, by letter dated 26 November 2008 a different officer of WorkCover provided a further explanation of its original decision[3]. 

   [1] In Part 3 (Appeals) of Chapter 13 (Reviews and Appeals) of the Workers Compensation and Rehabilitation Act 2003;  

   [2] There are 2 versions of WorkCover’s decision both of which are undated – see exhibit 1 and exhibit “RS4” to the affidavit of Reginald Sharma filed 3 March 2010;  see also the last paragraph of WorkCover’s letter dated 28 November 2008 in exhibit “RS5”;      

   [3] See exhibit “RS5” to the affidavit of Reginald Sharma filed 3 March 2010;

2. Q-COMP, the first respondent in this appeal, did not call evidence or cross examine any witnesses. It neither consents nor opposes the appeal. Allied Express Transport Pty Ltd (Allied) is the second respondent and is represented in this court by New South Wales solicitors instructed by the Courier and Taxi Truck Association (the Association) of which Allied is a member[4].

   [4] Paragraph 38 of affidavit of Margaret Jackson sworn 26 February 2010;

3. Allied engages contract owner drivers to provide carriage services pursuant to a written agreement[5]. Among other things, WorkCover determined that these owner drivers were workers as that term is defined in the Workers Compensation and Rehabilitation Act 2003 (Qld) (the Act) and determined Allied’s workers compensation premium based on all payments made to them without deduction. Upon review Q-COMP set aside that part of the decision relating to the calculation of premium on the basis that certain costs including vehicle costs should be deducted from the gross payments made by Allied for the purposes of calculating the rate of premium. WorkCover appeals that determination.

   [5] Paragraphs 5 to 10 & exhibit “B” of affidavit of Gloria Jeanette Bonaccorso sworn 2 March 2010;

4. The short question in this case is whether or not the total payments made by Allied to these contract owner drivers are wages as defined in the Act for the purposes of calculating workers compensation premium payable to WorkCover by Allied in the 2006/07 financial year or whether certain deductions can be made from those payments on the basis they are allowances that are payable in accordance with the definition of “wages” in Schedule 6 of the Act.

5. All evidence in chief was provided in affidavit form. WorkCover relied on the affidavit of Reginald Sharma, a Senior Compliance Auditor for WorkCover, filed 3 March 2010.  Allied relied on the affidavits of Kathleen Patricia Robertson sworn 9 March 2010, Gloria Jeanette Bonaccorso sworn 2 March 2010 and Margaret Jackson sworn 26 February 2010. By consent paragraphs 11 to 15, 25 to 28 and 32 to 37 (inclusive) of Ms Jackson’s affidavit were excluded for the purposes of this appeal. Mr Bonaccorso is the State Operations Manager of an associated company of Allied, namely, Allied Overnight Transport. Ms Jackson is an accountant currently employed as Allied’s Chief Financial Officer.               

6. The Act[6] provides for an employer’s obligation to insure against injury sustained by a worker (section 48), and that WorkCover must set the premium payable by the employer (section 54). Relevantly, subsection 54(6) provides:

   [6] In Division 1 (Premium setting generally) of Part 3 (Insurance under WorkCover Policies Generally) of Chapter 2 (Employer’s obligations) of the Act; 

   54 Setting of premium
   ….
   (6) An assessment of premium must be made on the following
   basis—

   (a) wages paid or estimated to be paid during the period of

   insurance—

   (i) are taken to have been paid in equal weekly

   instalments during the period; or

   (ii) if the employer establishes to WorkCover’s

   satisfaction the wages were paid by the employer

   in another way, are paid in the other way during the

   period;

   (b) the premium payable for the period of insurance is

   according to the method and at the rate in force from

   ……

7. For the purposes of this appeal the relevant definition of “wages” is defined in Schedule 6 of the Act:

   wages means the total amount paid, or provided by, an
   employer to, or on account of, a worker as wages, salary or
   other earnings by way of money or entitlements having
   monetary value, but does not include—

   (a) allowances payable in relation to any travelling, car,

   removal, meal, education, living in the country or away

   from home, entertainment, clothing, tools and vehicle

   expenses; and

   …..   

8. It is not disputed that the assessment of workers compensation premium for Allied in the 2006/07 financial year is to be calculated by reference to an amount of “wages” in accordance with that definition. The critical issue is what the correct amount is[7]. This boils down to a consideration of whether certain business expenses of the contract owner drivers can be characterised as allowances as that term is used in paragraph (a) of the above definition. If so, those amounts can be legitimately deducted which will have the effect of reducing the premium payable in the 2006/07 financial year.

   [7] Paragraph 2 written submissions for WorkCover;

9. Further written submissions were received by the parties as to whether the legislative history would shed any light on the question to be determined. The result was that there is no extrinsic material to assist in the interpretation of the meaning of wages. The definition of “wages” was originally in the Workers Compensation Regulation 1992 (Qld) made pursuant to now repealed Workers Compensation Act 1990 (Qld). Apart from drafting changes, the definition essentially remained unchanged in now repealed WorkCover Queensland Act 1996 (Qld) and current Workers Compensation and Rehabilitation Act 2003 (Qld).             

10. Allied advertises for contract owner drivers from time to time. After a recruitment process each driver enters into a written contract with Allied. That contract sets out the terms and conditions of engagement including Allied’s responsibility to remunerate each driver in the following terms in clause 4.1[8]:

    4.1         Allied Express will provide the following Rates of Remuneration to the Contract Carrier:

    i.A percentage of the client charge for courier and taxi truck services as agreed from time to time and currently set at 65% of the individual client job charge, excluding GST and additional client surcharges; or

    ii.any other method/ amount of payment as may be agreed upon between the client and Allied Express including for permanent runs, freight pick ups and deliveries, and any other type of rates; or

    iii.any combination of (i) and (ii) above or on formulas that may be agreed from time to time. 

    [8] Exhibit “B” to affidavit of Gloria Bonaccorso sworn 2 March 2010;

11. It is not contentious that there is nothing else in that contract that identifies how the 65% remuneration is made up and that clause 4.1 is the only contractual provision outlining Allied’s obligations to remunerate carriers engaged by it. Relevantly, there are no provisions about payment of allowances. In addition, there was no satisfactory evidence as to any other method of payment envisaged by subclause (ii) above.     

12. Ms Roberson explained the system of identifying the costs and gross income of each contract driver which she says is done on a yearly basis. Each driver is given a questionnaire entitled “Contract Carrier Costings” to complete inviting details of expenses such as vehicle depreciation, registration and compulsory third party insurance, fuel and tyres and the like[9]. Further information is provided by way of personal interview or over the phone with a staff member of the Association and drivers provide their Business Activity Statements (BAS). It is then checked by staff to see if the figures provided accord with generic costs experienced by the transport industry as determined by the Industrial Relations Commission of New South Wales in the Transport Industry – Courier And Taxi truck Contract Determination[10].

    [9] Exhibit “B” to affidavit of Kathleen Robertson sworn 9 March 2010;

    [10] Exhibit “A” to affidavit of Kathleen Robertson;

13. This information is collated and presented in a schedule to the insurer as representing gross income less actual costs of each driver. The schedule of the 2006/07 financial year is in exhibit “C” to Ms Robertson’s affidavit[11]. Ms Roberson describes this information as “incontrovertible data” in arriving at the correct deductible for each of the 229 drivers in the 2006/07 year[12].         

    [11] And also in Exhibit “F” to affidavit of Margaret Jackson sworn 26 February 2010;

    [12] Paragraphs 12 to 17 & Exhibit “C” to affidavit of Kathleen Robertson; 

14. In reliance on information provided by Ms Robertson[13], Ms Jackson who is an accountant and employed as the Chief Financial officer of Allied, states that Allied follows generally accepted accounting principles in allocating its own costs to its own profit and loss. She says further that no allocation is made in Allied’s profit and loss in relation to the breakdown of costs “built into the remuneration paid to owner driver/subcontractors”[14]. If anything, this supports the view that these are ordinary business expenses of contract drivers and not a separate expense in the form of an allowance expense in the hands of Allied. Ms Jackson then outlines the method adopted by Allied in identifying an owner driver’s level of gross remuneration by taking into account certain costs of operation so as to provide an adequate return for labour and investment[15]. In my view this evidence does not address the essential issue in this case i.e. whether those costs are “allowances” as that term is used in the definition of wages referred to above. Of course one expects to make a reasonable return on one’s investment but that is not the issue. Practices in New South Wales would undoubtedly be governed by New South Wales workers compensation legislation to which I will briefly refer later in these reasons. 

    [13] Paragraphs 38 to 44 of affidavit of Margaret Jackson; 

    [14] Paragraph 47 affidavit of Margaret Jackson;

    [15] Paragraphs 48 to 53 affidavit of Margaret Jackson; 

    Discussion

15. WorkCover submits that the arrangement between Allied and its contract drivers is that Allied pays a fee for each carriage of goods in accordance with the contract referred to earlier. Apart from minor exceptions, the contract driver is responsible for all expenses incurred. It was submitted that as a matter of law it is not correct to characterise those expenses as allowances as that word is used the definition of “wages” in the Act. They are not “allowances payable”. In order to be an “allowance payable”, any payment made would have to be one explicitly payable by reference to the particular item.           

16. All parties were unable to draw on any decision of the Queensland Industrial Court on this point[16]. However, in its submissions WorkCover referred to statements made by Latham C.J. as to the meaning of “allowances” in Mutual Acceptance Co Ltd v. Federal Commissioner of Taxation (1944) 69 CLR 389; [1944] HCA 34, a decision of the High Court. There, the court considered the meaning of wages as defined under the Pay-roll Tax Act 1941 (C’th) which, among other things, included “allowances paid or payable”[17]. Some employees provided their own vehicles to perform their travelling work. They were paid fixed sums of money for the use of their vehicles depending on the engine size and amount of territory to be covered. Those payments were described by the employer as “car allowances”. In seeking to minimize the amount of payroll tax with reference to wages paid by the employer, it was contended for the employer that these allowances were a partial reimbursement of actual expenditure and are therefore not included in the definition of wages, that allowances must be in the nature of remuneration for services, and that only so much of the profit element in the allowance is to be regarded as wages for the purposes of the statutory definition.

    [16] The Queensland Industrial Court is the last court of appeal for most workers compensation matters in Queensland; 

    [17] Unlike the Schedule 6 definition of “wages” in the Workers Compensation and Rehabilitation Act 2003 (Q’ld) excluding allowances, the Pay-roll Tax Act 1941 included “allowances” in the definition of “wages”;

17. In rejecting those submissions Latham C.J., who was in the majority (with Starke and Williams JJ.) said[18]:

    When the word [allowance] is used in connection with the relation of employer and employee it means in my opinion a grant of something additional to ordinary wages for the purpose of meeting some particular requirement connected with the service rendered by the employee or as compensation for unusual conditions of that service.  Expense allowances, travelling allowances, and entertainment allowances are payments additional to ordinary wages made for the purpose of meeting certain requirements of a service.  Tropical allowances, overtime allowances, and extra pay by way of “dirt money” are allowances as compensation for unusual conditions of service.   

    [18] At page 3 of 9 – paragraph 2;

18. And later[19]:

    The Pay –roll Tax Assessment Act, however, looks at wages from the point of view of an employer.  The tax is assessed upon what he pays or is bound to pay as wages (s. 12).  He is bound to make monthly returns of wages paid or payable (s. 18).  It would be quite impracticable for employers to comply with this provision if they had to ascertain how much, if any, of the allowance represented a personal benefit (or “profit”) to the employee.        

    [19] At page 3 of 9 – paragraph 4;

19. I note in that case that the workers are described as employees whereas, in the present case the owner drivers are not employees although they are workers as that term is defined in the Act. In my view that distinction in immaterial to the question as to the true meaning and character of “allowance”. 

20. Submissions for Allied sought to distinguish that case on the basis that it involved an interpretation of taxation legislation and that, unlike the definition of wages in the Workers Compensation and Rehabilitation Act 2003 (Qld) which excludes allowances payable from wages, the definition of wages in the Pay-roll Tax Act 1941 (Cth) included allowances. In my view that has no substance on the question to be determined here. In fact, in coming to the conclusion he did, Latham C.J. referred to Midland Railway v. Sharpe [1904] A.C. 349 which is itself a workers compensation case where a similar submission was made in ascertaining “earnings” where a “lodging allowance” was paid. Latham C.J. said[20]:

    It was held that the allowance was wages[21] and was earnings whether or not the workman made any profit out of it.  Lord Davey said: “If the appellants are right, you would in every case have to analyse the remuneration by way of wages or salary which has been paid to an …employee, and to ascertain the conditions of his labour, and what expenses he was put to, or might be put to, in order to earn that remuneration.  It would be impossible to analyse that in every case, and I think that cannot have been within the contemplation of the legislature in framing the Act[22]”.  In my opinion these observations are equally applicable to the Pay-roll Tax Assessment Act.           

    [20] At page 3 of 9 – paragraph 4;

    [21] [1904] A.C. at 353;

    [22] [1904] A.C. at 352, 353;

21. In my view the statements expressed by Latham C.J. apply in this case.

22. Allied submitted that owner drivers incur expenses and that those expenses should be characterised as allowances payable as in the definition of wages. It was submitted that WorkCover is agitating a narrow construction of the definition of wages whereas this court should adopt a broad construction of that definition. A purposive approach to the legislation should be adopted by construing the definition broadly and concluding that the expenses of each of the 229 owner drivers identified in exhibit “C” to Ms Robertson’s affidavit are allowances so that those amounts can be deducted from the total amounts paid by Allied.

23. The submission was supported by a broad meaning of the word “allowance” in the Australian Oxford Dictionary. The meanings include:

    An amount or sum allowed to a person, esp. regularly for a stated purpose; An amount allowed in reckoning; a deduction or discount;  

24. While not specifically referred to in submissions for Allied, a “purposive” construction of legislation in Queensland must mean a reference to section 14A of the Acts Interpretation Act 1954 (Qld) which provides:

    14A Interpretation best achieving Act’s purpose
    (1) In the interpretation of a provision of an Act, the
    interpretation that will best achieve the purpose of the Act is
    to be preferred to any other interpretation. 

25. The objects of the Act are set out in sections 4 & 5 which are an aid to the interpretation of the Act. However, in my view, the starting point is to look at the specific provision concerned. The meaning of a word is to be ascertained by the context in which it is used. In my view, reference to a general dictionary meaning is a last resort in the event a meaning cannot be gleaned from the legislative context with the assistance of authorities. Here it is the definition of wages in Schedule 6 of the Act. If a meaning is clear from a reading of the words in the provision, then that meaning ought to be adopted. If there is ambiguity, then resort can be made to other canons of construction.

26. The first point is that “wages” means “the total amount paid .. by an employer to …a worker …as ….other earnings by way of money or entitlements having a monetary value ….’. Even before considering the meaning of “allowance payable”, it is clear to me that the fortnightly payments made by Allied to contract drivers as per clause 4.1 of the contract cited earlier, fall within the definition just quoted. Even accepting that their level of remuneration may take into account certain expenses, they are the “total amounts paid” as “other earnings by way of money or entitlements with a money value”.     

1. I accept that the statements made by Latham C.J. apply to the meaning of “allowance” in this case. Consistent with those statements, I accept WorkCover’s submissions that an allowance must be something that is discretely and explicitly paid by the employer to the worker and is not to be bundled up in a gross payment made. An allowance must be in addition to ordinary remuneration[23]. I accept WorkCover’s submissions relating to the impracticality of adopting Allied’s submissions and the reliability of information provided by contract drivers as to their expenses. There are no primary records objectively establishing those expenses and it would be impossible for WorkCover to properly assess the records of all workers to verify the accuracy of information they have provided to Ms Roberson or her staff. In any event, I accept the proposition that workers compensation premiums are determined from the point of view of the employer, not the workers. Another factor that militates against these expenses being characterised as “allowances” is the fact that those amounts are only determined after Allied has paid its drivers on a fortnightly basis during the whole year. Again, I accept WorkCover’s submissions that those amounts cannot be said to be allowances that are payable[24].   

   [23] Paragraph 9 WorkCover’s submissions; 

   [24] Paragraphs 10 to 14 WorkCover’s submissions;

2. The other aspect of this is that, even assuming that the expenses in exhibit “C” to Ms Robertson’s affidavit are allowances, they cannot be said to be payable. First, Allied pays its contract drivers fortnightly according to Ms Robertson and the amounts of these expenses are not determined until after the end of the financial year in which they have already been paid. Secondly, “payable” connotes a legal liability to pay a specific amount. There is no reference in the written contract with the contract drivers about allowances. It may well be that their expenses are taken into account in working out their level of remuneration, but this is all wrapped up into a series of fortnightly payments during the year. These are undoubtedly expenses that may be tax deductible for the contract drivers.

3. I note that, unlike the definition of wages in Queensland workers compensation legislation cited earlier, the definition of wages in the Workers Compensation Act 1987 (NSW) appears to make express allowance for expenses of contractors who are deemed workers for the purposes of ascertaining premium[25]. Section 174(9) of the New South Wales Act[26] relevantly provides:

   [25] See Part 20 (Insurance Premiums) Workers Compensation Regulation 2003 (NSW) made pursuant to the 1987 Act adopts that definition of wages for premium purposes;

   [26] In Division 2 (Insurance Premiums) of Part 7 (Insurance) of that Act;  reference to “the 1998 Act “ is to the Workplace Injury Management and Workers Compensation Act 1998 (NSW);

   "wages", in relation to a worker:

   (a) ……

   (b) includes payment (whether by way of commission, fee, reward or otherwise) under a contract (whether referred to as a contract, agreement, arrangement or engagement) by reason of which the person paid is deemed by Schedule 1 to the 1998 Act to be a worker, after deducting such amount for costs necessarily incurred by that person in performing that contract as may be agreed on or, in default of agreement, as may be determined by the Authority, and (my emphasis)

4. Section 174(9)(c) then lists a range of payments that are not wages as defined including:

   (ii)       any allowance to reimburse costs arising out of an obligation incurred under a contract,         

5. While it is dangerous and even perhaps impermissible to use a provision in New South Wales legislation to interpret a provision in Queensland legislation, and I do not seek to do so here in arriving at my decision, I observe that the statutory scheme in New South Wales seems to lend some support for the views which I have already come to.    

6. In summary, I accept WorkCover’s primary submissions that the expenses in exhibit “C” to Ms Robertson’s affidavit are not allowances payable as that phrase is used in the definition of “wages” in Schedule 6 of the Workers Compensation and Rehabilitation Act 2003 (Qld). I allow the appeal. There is no need to consider WorkCover’s subsidiary ground of appeal relating to procedural error on the part of Q-COMP[27].

   [27] Paragraphs 16 to 19 submissions for WorkCover; Capuano v. Q-COMP [2005] 1 Qd.R. 232;

7. Further, I note that WorkCover abandons its third ground of appeal, namely the denial of natural justice[28].  

   [28] Paragraphs 20 to 27 submissions for WorkCover;  

8. Accordingly, pursuant to section 558(1)(d) of the Act, I set aside the decision of

   
   

   Q-COMP dated 7 May 2009 and “return the matter to the respondent[29]” Q-COMP with the direction that it reconsider the matter in accordance with these reasons, namely, that the total payments made by Allied to its contract drivers without deduction are wages as defined and are to be used in the assessment of the workers compensation premium to be paid to WorkCover in the 2006/07 financial year.

   [29] That is the term used in section 558(1)(d);

9. By consent, another issue concerning a related business Shamrock Consultancy Pty Ltd where Q-COMP found against Allied[30] was not pursued in this appeal. It is to be subject to further discussions.            

   [30] See exhibit 3 – Q-COMP’s decision at page 10 of 11;

10. I will grant the parties liberty to apply on three business days notice in the event that any ancillary matter cannot be resolved by agreement including the question of costs.