ESM0507 - Guide to determining status: importance of a written contract
Establishing the terms of a contract
Where there is a comprehensive written contract (that is, a
contract which contains all the terms of the agreement between the
parties) the Courts will decide employment status based on the
written contractual terms - viewed in the factual matrix that
existed when the contract was made. They will not normally refer to
evidence other than that of the written contract (for example, they
will not refer what the parties did in practice).
In the case of Narich Pty Ltd v The Commissioners of Payroll
Tax: Privy Council (see ESM7090), it was held that
‘…where there is a written contract…a Court is confined, in determining [status], to a consideration of the terms, express or implied, of that contract in the light of the circumstances surrounding the making of it; and it is not entitled to consider also the manner in which the parties subsequently acted in pursuance of such contract.’
Exceptions to this are where:
- the contract is not comprehensive (other terms and conditions then have to be established from other evidence)
- one or more of the written terms have been varied by agreement
- one or more of the written terms are a sham.
What the true terms of an agreement are is ultimately a question
of fact. If a written contract appears to be comprehensive it
should not normally be challenged except where it is apparent that
the parties might not have acted in accordance with it. Clear
evidence of that may show the contract is not complete, has been
varied or is a sham. The guidance at ESM1006 onwards will help you
decide whether a written contract is genuine.
Written contracts are therefore extremely important. If
Commissioners proceedings become necessary it is essential that you
ask the Commissioners to identify - and find as a fact - all
instances of where the true agreement between the parties differs
from the written contractual terms.
Fact/Law
Where there is a comprehensive written contract the Courts
regard the status issue as one of law because it depends on the
construction of a written document. They will therefore, in an
appeal, re-examine the whole question and decide status afresh. In
contrast, where there is no comprehensive written contract the
Courts regard employment status as a question of fact, or a mixed
question of fact and law, and will not disturb a Commissioners'
decision based on fact unless they think it is perverse.
This principle was considered in the case of Edwards v
Bairstow and Harrison (36TC207).
