Karshan (Midlands) Trading as Dominos Pizza v Revenue Commissioners

• Jurisdiction: Ireland
• Judge: Mr. Justice Tony O'Connor
• Judgment Date: 20 December 2019
• Neutral Citation: [2019] IEHC 894
• Court: High Court
• Docket Number: [2019 No. 31 R]
• Date: 20 December 2019

BETWEEN

KARSHAN (MIDLANDS) LIMITED TRADING AS DOMINOS PIZZA

PLAINTIFF

AND

REVENUE COMMISSIONERS

DEFENDANT

[2019] IEHC 894

Tony O'Connor

[2019 No. 31 R]

THE HIGH COURT

Revenue – Employment – Delivery drivers for pizza company – Whether drivers self-employed or working under contracts of services

Facts: The plaintiff operated as a well-known pizza firm, which made deliveries using drivers. The Tax Appeals Commissioner had held that the drivers worked under contracts of services and were taxable under schedule E of the Taxes Consolidation Act 1997. The plaintiff contended that the drivers were in fact self-employed and taxable under schedule D. The matter now came on appeal to the High Court by way of case stated.

Held by the Court, that the appeal would be dismissed. The Court was satisfied that the discussion, interpretation and application of a number of concepts by the Appeals Commissioner was correct in law, and the Court invited submissions on the resulting order.

JUDGMENT of Mr. Justice Tony O'Connor delivered on the 20th day of December, 2019

Introduction

1 This is an appeal by way of case stated for the opinion of the High Court pursuant to s. 949AQ of the Taxes Consolidation Act 1997 (“ TCA”). The appeal relates to a determination of Tax Appeals Commissioner Gallagher (“the Commissioner”) dated 8th October, 2018, which decided that pizza delivery drivers engaged by the appellant (“the drivers”) worked during the relevant tax years of assessment (2010 and 2011) under contracts of services and are taxable pursuant to schedule E of the TCA (“the determination”). The appellant contends that the drivers operate under contracts for services, are therefore self-employed, and taxable pursuant to schedule D of the TCA.

Contracts and performance

2 The determination noted facts admitted or proven which are included in the following summary:-

(i) The written agreement between the appellant and each driver inter alia:-

a. Identified each driver retained by the appellant as an “independent contractor”;

b. Stipulated that drivers were paid according to the number of deliveries successfully undertaken;

c. Provided for payments by the appellant to drivers for brand promotion through the wearing of branded clothing and or logos affixed temporarily to vehicles used by drivers. Clothing and logos were provided by the appellant to the drivers;

d. Required drivers to use their own cars and motor insurance. (The provision made for drivers to rent cars was not operated);

e. Offered drivers appropriate business use insurance on a third party basis at a pre-determined rate;

f. Did not warrant a minimum number of deliveries and drivers consequently assumed financial risks and rewards “in keeping with all self-employed individuals”;

g. Obliged drivers to provide invoices and maintain their own records;

h. Required drivers to maintain the confidentiality of trade information and secrets of the appellant;

i. Allowed drivers to engage a substitute driver provided that substitute could perform all contractual obligations of the driver to the appellant;

j. Did “not warrant or represent” that the appellant “will utilise” the services of each driver “at all” while drivers had the right to notify the appellant of days and times on which they were available;

k. Confirmed in the final clause of the contract that the driver undertook work for the appellant “strictly as an independent contractor”.

(ii) All drivers were required to sign a document to confirm that the appellant “has no responsibility or liability whatsoever for deducting and/or paying PRSI or tax” on monies which the appellant paid for their work.

(iii) Drivers were required to pay a deposit for clothing provided by the appellant.

(iv) Rosters were drawn by a store manager of the appellant after drivers had filled out “an availability sheet” approximately one week beforehand.

(v) The substitute, whether chosen by the drivers or the appellant, was paid by the appellant.

(vi) The branded uniform of cap, shirt, jacket and name tag together with the black trousers and black shoes were mandatory and subject to checks by managers of the appellant.

(vii) Drivers had to use their own phones to contact customers if necessary.

(viii) Drivers were obliged to provide the appellant with certificates of business use insurance.

(ix) The appellant ensured that drivers would only get two deliveries at a time and one delivery if another driver was waiting.

(x) Some drivers were required to fold boxes while waiting for deliveries to be ready.

(xi) The appellant furnished prepaid invoices for signature by many drivers.

(xii) Drivers clocked in and clocked out on the appellant's computerised system using driver numbers resulting in the collating and maintenance of that information by the appellant.

(xiii) Drivers were given a cash float which was returned at the end of each shift.

(xiv) A non-negotiable sum of €1.20 was paid to drivers per drop with an added 20c for insurance and drivers were also paid €5.65 per hour in respect of brand promotions.

Core issues

3 Counsel for the appellant ultimately contended that the Commissioner erred in law in her interpretation and/or application of the following concepts:-

(i) Mutuality of obligations;

(ii) Substitution;

(iii) Integration;

(iv) Terms of the contract, specifically that the Commissioner failed to give proper weight to the actual terms of the contract.

The Court therefore proceeds to analyse the submissions made under each of those headings.

Jurisdiction of the High Court on an appeal by way of case stated

General

4 Kenny J. in Mara (Inspector of Taxes) v. Hummingbird Ltd [1982] ILRM 421 at p. 426 explained:-

“A case stated consists in part of findings on questions of primary fact, e.g. with what intention did the taxpayers purchase the Baggot Street premises, These findings on primary facts should not be set aside by the courts unless there was no evidence whatever to support them. The commissioner then goes on in the case stated to give his conclusions or inferences on these primary facts. These are mixed questions of fact and law and the court should approach these in a different way. If they are based on interpretation of documents, the court should reverse them if they are incorrect for it is in as good a position to determine the meaning of documents as is the commissioner. If the conclusions from the primary facts are ones which no reasonable commissioner could draw, the court should set aside his findings on the ground that he must be assumed to have misdirected himself as to the law or made a mistake in reasoning. Finally, if his conclusions show that he has adopted a wrong view of the law, they should be set aside. If however they are not based on a mistaken view of the law or a wrong interpretation of documents, they should not be set aside unless the inferences which he made from the primary facts were ones that no reasonable commissioner could draw.”

5 Blayney J. in Ó Culachain v. McMullan Brothers Ltd [1995] 2 I.R. 217, cited by the Supreme Court in Mac Cárthaigh v. Cablelink Ltd [2003] 4 I.R. 510, further summarised as follows at pp. 222-223:-

“(1) Findings of primary fact by the judge should not be disturbed unless there is no evidence to support them.

(2) Inferences from primary facts are mixed questions of fact and law.

(3) If the judge's conclusions show that he has adopted a wrong view of the law, they should be set aside.

(4) If his conclusions are not based on a mistaken view of the law, they should not be set aside unless the inferences which he drew were ones which no reasonable judge could draw.

(5) Some evidence will point to one conclusion, other evidence to the opposite: these are essentially matters of degree and the judge's conclusions should not be disturbed (even if the court does not agree with them, for we are not retrying the case) unless they are such that a reasonable judge could not have arrived at them or they are based on a mistaken view of the law.”

6 Reference to “judge” in the above extract applies equally to the Tax Appeals Commissioner.

Burden of proof

7 Substantive issues of fact described in the case stated are not disputed although the interpretation of the umbrella contract provision for substitution looms. The appellant, as the relevant taxpayer, bears the burden of establishing that the drivers were engaged under a contract for services. An appeal by way of case stated is different from a consultative case stated where a more expansive approach can be taken. In this appeal the Court is restricted to identifying the law and applies a deference to the Commissioner who has experience in determining facts with an eye to the applicable law. There was indeed an intricate if not complex factual matrix with which the Commissioner grappled.

8 The determination explained the law which the Commissioner applied. Counsel for the appellant through this case stated process sought to identify errors of law made by the Commissioner. Under the heading “mutuality of obligations” and “integration”, the submissions concerned the explanation and application of the law by the Commissioner. On the other hand, the appellant confined its challenge under the “substitution” and “terms of the written contract” to the application of the law by the Commissioner. In other words, the appellant has the burden of specifying and establishing the errors of law made in the Commissioner's statement of the law for the concepts known as “mutuality of obligations” and “integration”. The appellant then has the onus to establish that the Commissioner misapplied the law specifically and in general, taking account of the four above mentioned concepts.

Function of this court

9 Between the extreme examples of “contract of service” and “contract for services” inevitably lies an intermediate range which may lead to different conclusions...