M. D. JAMIS APPUHAMY Appellant and T. P. SHANMUGAM, Respondent

024-NLR-NLR-V-80-M.-D.-JAMIS-APPUHAMY-Appellant-and-T.-P.-SHANMUGAM-Respondent.pdf


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1978 Present: Pathirana , J. and Sharvananda, J.
M.D. JAMIS APPUHAMY Appellant and T. P. SHANMUGAM, Respondent.5.C. 69/76 — L.T. 17/3681
Labour Tribunal – Termination of services – Taxi driver – Master and servant – Contract ofservice – Contract for services.
•The appellant who was running a laxi service employed the respondent as a taxi driver.Respondent was not paid any regular salary or wages, but was paid only a one-third share ofthe day’s profit out of the total earnings from the taxi driven by the respondent. Theappellant terminated the service of the respondent. Respondent made application to theLabour Tribunal for relief. Appellant took up the position that the respondent is anindependent contractor and denied that the respondent was his servant.
HELD:
That the respondent is an employee of the appellant and a workman within the meaning ofthe Industrial Disputes Act and not an independent contractor.
Appeal from an order of the Labour Tribunal.
A. J. I. Tilakawardena with Dudley Fernando for the Respondent-Appellant.Siva Rajaratnam for the Applicant — Respondent
Cur. adv. vult.
March 8, 1978. Sharvananda, J.
The applicant-respondent filed application before the Labour Tribunalalleging that he was employed by the respondent-appellant (hereinafterreferred to as the appellant) as a taxi-driver and that his services wereterminated by the appellant without reasonable or probable cause. Theappellant, while admitting that the applicant used to drive his taxi, deniedthat the applicant was his servant on a contract of service. He stated that theapplicant was not paid any regular salary or wages but was paid only a one-third share of the day’s profits out of the total earnings from the taxi drivenby the applicant.
The point in controversy on which a decision in this case turns is : Whatwas the nature of the relationship between the appellant and the applicant?Was it that of master and servant, or bailor and bailee of the appellant’s taxi-cab, of which the applicant was the driver, or of partners in a jointenterprise? A decision on this appeal does not in any way touch the questionof liability of the cab proprietor to third parties for the acts of the driver, for,though the relationship between the taxi-cab owner and his driver inter se
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may be that of a bailor and bailee, the driver may still, qua third party, betreated as the agent of the proprietor authorised to ply for hire and theproprietor be thereby rendered liable for the acts of the driver which werewithin the scope of the latter’s authority.
On the evidence, it would appear that the applicant was paid at the end ofthe day a one-third share of the day’s income earned on the taxi when drivenby the applicant, after deduction of the immediate expenses – for petrol andoil. The cost of repairs, replacements and general maintenance of the vehiclewas always borne by the appellant, but the applicant was liable to pay allfines in respect of traffic offences committed by the applicant. The Tribunalhas reached the conclusion that the applicant was in the employ of theappellant as one of his drivers in the taxi service carried on by him, that theapplicant’s period of service under the appellant was from 1966 to 1973 andthat the applicant’s services had been unjustifiably terminated by theappellant. It has ordered the appellant to pay the applicant compensation inrespect of the summary termination of his contract of employment. Theappellant has appealed to this Court from the said order.
In appeal, it was contended, on behalf of the appellant, that the contractbetween him (the proprietor) and the applicant (the driver) was only for theday on which the taxi-cab was taken out and that the applicant was not paidanything in the nature of wages or salary and that the driver was accountableto the proprietor for 75 percent of the day’s profits, his own remunerationbeing a sum equal to 25 percent of the profits out of the day’s takings.Appellant’s Counsel submitted that this mode of remuneration tends againstand not in favour of the view that the applicant is a servant; and that theproprietor exercises no control over the driver who was at liberty to go whenand where he pleases. On the other hand, applicant’s Counsel urged that themere fact that the driver was remunerated in this way would not by itselfprevent the employment being treated as an ordinary contract of service. It isunfortunately not clear from the evidence on record what were the preciseterms of the contract between the parties – whether the driver was or was notbound to report for work every day, and if he did come whether theproprietor was or was not bound to let him have the taxi-cab. The testimonyof the applicant, which has been accepted by the President, was however thathe was required to transport the appellant’s children to school and back daily.This would tend to show that it was obligatory on the applicant to report forwork daily at least during the school sessions.
The question of the applicant’s status, on the facts stated above, thuscomes up for decision. Was the applicant an employee under a contract ofservice or an independent contractor on a contract for services? A contract ofservice is simply another name for a contract of employment under which theparties are master and servant in the strict sense. A contract for services, on
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the other hand, is a contract under which an independent contractor agrees torender services to another in circumstances in which the relationship ofmaster and servant is not created. A servant is one who is bound to obey anylawful orders given by the master as to the manner in which his work shallbe done. The master retains the power of controlling him in his work andmay direct not only what he shall do but how he shall do it. An independentcontractor, as opposed to a servant, is one who carries on an independentemployment in the course of which he contracts to do certain work. He may,by the terms of his contract, be subject to the directions of his employer. But,apart from the contract, he is his own master as to the manner and time inwhich the work shall be done. In Collins v. County Council' Hilbery, J.summarised the distinction in this way:
“In one case the master can order or require what is to be done; whilein the other case he can, not only order or require what is to be done,but how it shall be done.”
In Times of Ceylon Ltd. v. Vurthiya Samithiya2 after referring to certaindecisions both in England and India, T. S. Fernando, J. concluded that “theultimate test to be applied is whether the hirer had authority to control themanner and execution of the act in question or … whether there exists in themaster a right to supervise and control the work done by the servant not onlyin the matter of directing what work the servant is to do, but also the mannerin which he shall do his work.” In Cassidy v. Ministry of Health.1 LordJustice Somerville however pointed out that the test of control is notuniversally correct. There are many contracts of service where the mastercannot control the manner in which the work is to be done. A chauffeur,though under a contract of service, has in certain instances, to exercise hisown judgment uncontrolled by anybody. However, the circumstances that thework to be done involves the exercise of a particular art or special skill andthe other party cannot in fact control or interfere in its performance is notdecisive against a contract of service. The duties to be performed maydepend so much on the special skill or knowledge of the employee that verylittle room for direction or command may exist. But that is not the point;what matters is the lawful authority to command or direct if only even inincidental or collateral matters. An artiste, though he may give a unique andindividualistic performance by which he expresses his personality may stillbe under such control by his employer as to make him a servant.Superintendance and control cannot be the decisive test when one is dealingwith a professional man, or a man of some particular skill and experience. Insuch cases, there can be no question of the employer telling the employeehow to do the work; therefore, the absence of control and direction cannot bean infallible test. The indicia which point to the essential attributes of a
'(1947) K.B.598 at 615.J(I962) 63 N.L.R. 126.
’(1951) 1 All E.R. 74 at 579.(1951)2 K.B. 343.
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contract of service were identified by Lord Thankerton in Short v. J. E. W.Henderson Ltd.1 to be as follows: –
“(a) The master’s power of selection of his servant; (b) the payment ofwages or other remuneration; (c) the master’s right to control the methodof doing the work; and (d) the master’s right of suspension.”
Lord Thankerton then went on to say:
“Modem industrial conditions have so much affected the freedom of themaster in cases in which no one could reasonably suggest that theemployee was thereby converted in to an independent contractor that, ifand when appropriate cases arose, it will be incumbent on this House toreconsider and restate the indicia . . . The statement . . . that selection,payment and control are inevitable in every contract of service is clearlyopen to reconsideration.”
Thus, it would appear, notwithstanding the absence of the indicia referredto above, circumstances may arise in which no one could reasonably suggestthat the relationship is other than that of the contract of service.
In the Privy Council judgment in Montreal Locomotive Works Ltd. v.Montreal and A.G. of Canada,5 Lord Wright suggested a more relevant andrealistic criterion:-
“In earlier cases, a single test, such as the presence or absence of control,was often relied on to determine whether the case was one of master andservant, mostly in order to decide the issue of tortious liability on the partof master or superior. In the more complex conditions of modern industry,more complicated tests have often to be applied. It has been suggestedthat a fourfold test would, in some cases, be more appropriate; a complexinvolving: (1) Control; (2) Ownership of the tools; (3) Chance or profit;(4) Risk of loss. Control in itself is not always conclusive. Thus, themaster of a chartered vessel is generally the employee of the ship’s owner,though the charterer can direct the employment of the vessel. Again, thelaw often limits the employer’s right to intefere with the employee’sconduct, as also do Trade Union regulations. In many cases, the questioncan only be settled by examining the whole of the various elements whichconstitute the relationship between the parties. In this way, it is in somecases possible to decide the issue by raising as the crucial question:Whose business is it? or, in other words, by asking whether the partyis carrying on the business, in the sense of carrying it on for himselfor on his own behalf and not merely for a superior.”
‘[(1947 174 Law Times, 417 at 42))]
’(1947) 1 D.L.R. 161.
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The last sentence in the above quotation provides in my view, the key tothe solution of the question whether the applicant in the present case is aservant or an independent contractor. The applicant’s position is that theappellant was carrying on a taxi service employing cab-drivers, of whom hewas one, to operate his taxi-cabs. The appellant admits that he had a fleet of .five taxi-cabs, of which two were owned by him and the other three by oneMrs. Jayawickrema, who appears to be a sleeping partner in the taxibusiness, and that in connexion with that business drivers were engaged onthe following basis of remuneration: one-third share of the day’s profitsearned on the respective cab less the cost of petrol and oil.
The ownership of the taxi and the incidence of the financial risk (thechance of profit or the risk of loss on the total investment) are all factorsrelevant to determine the true relationship between the appellant and theapplicant. The applicant neither owns the assets nor bears the risk of loss onthe investment. On the other hand, the appellant owns the equipment. Theimportance of the provision of the taxi-cab by the appellant lies in the simplefact that in most circumstances where a person hires out a piece of work toan independent contractor, he expects the contractor to provide all thenecessary tools and equipment; whereas if he employs a servant, he providesthem himself. “The essence of a contract of service is the supply of work orthe skill of a man.” – per Dixon, J. in Humberstone v. Northern TimberMills} In the instant case, the applicant does not supply the equipment; hesupplies his skill and service to operate the appellant’s taxi-cab.
Based on the decision in Smith v. General Motor Cab Co. Ltd.1 andDoggett v. Waterloo Taxi Cab Co. Ltd. it is claimed that under the EnglishCommon Law, a taxi driver who drives a taxi owned by another on the termsthat he is to account for a proportion of the takings is an independentcontractor and not a servant. An examination of these cases however showsthat they were not cases where the services of the driver were hired. On theother hand, they were cases where drivers, plying their own trade, hired outtaxis from cab proprietors on the terms of share of profits. “The contract wasan ordinary contract of locatio rei."- per Lord Shaw ((1911) A.C. 188 at192). The driver himself was providing a taxi service with a hired vehicle,the hire being represented by a share of the day’s profits. The driver wascarrying on the business on his own behalf and for his own benefit only. Thefacts in the instant case are the converse of the facts in the aforesaid Englishcases and differ fundamentally from them. The applicant in this case did nothire the appellant’s cab for the purpose of his own business. On the otherhand, the appellant hired the services of the applicant to operate his taxi-cabs; The applicant carried on no business of his. Section 220(2) of theAmerican Re-statement-Agency has the following relevant comment:-
“The ownership of instrumentalities and tools used in the work is of
importance. The fact that a worker supplies his own tools is some
‘(1949) 79 C.L.R. at 404.
’(1911)A.C. 188.
*(1910)2 K.B. 336.
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evidence that he is not servant. On the other hand, if the worker is usinghis employer’s tools or instrumentalities, especially if they are ofsubstantial value, it is normally understood that he will follow thedirections of the owner in their use, and this indicates that the owner is themaster. This act is however only of evidential value.”
As Cook, J. stated in Market Investigations Ltd. v. Minister of SocialSecurityg
“The fundamental test to be applied is this: Is the person who has engagedhimself to perform these services performing them as a person in businesson his own account? If the answer to the question is ‘Yes’, then thecontract is a contract for services; if the answer is ‘No’, then the contractis a contract of service.”
Denning L. J. , in Stevenson Jordon and Harrison Ltd. v. MacDonald andEvans10 emphasised this aspect when he stated:
“One feature which seems to run through the instances is that, on acontract of service, a man is employed as part of the business and hiswork is done as an integral part of the business. Whereas, under a contractfor services, his work, although done for the business, is not integral to it,but is only an accessory to it.”
On the facts in the present appeal, it would appear that the person whowas carrying on the taxi business was not the applicant but the appellant. Thetaxi service was provided by the appellant, and for the functioning of thatservice he engaged the applicant and the other drivers. The applicant’s workas a taxi-driver was done as an integral part of the appellant’s business. Forthe purpose of that business, the appellant engaged the services of theapplicant, who thus became part and parcel of the appellant’s organisation.
On this view of the facts, it cannot be said that the applicant was a baileeof the taxi-cab belonging to the appellant; nor could it be said that theappellant and the applicant were partners in the taxi-cab business. Mereparticipation in the profits does not make a person a partner. Section 2(3) ofthe English Partnership Act, 1890, which represents our law also, stipulatesthat, though the receipt by a person of a share of the profits of a business isprima facie evidence that he is a partner in the business, the receipt of such ashare does not of itself make him a partner in the business, and in particular,a contract for the remuneration of a servant by a share in the profits of thebusiness does not of itself make the servant a partner in the business. Thetaxi business in respect of which the question arises is not the business of theappellant and the applicant. There was no joint business between them; therewas only the business of the appellant in which the applicant was employed.The arrangements as to the division of the day’s earnings was merely a modeof paying the wages of the driver that was resorted to for the purpose of
*(1968) 3All E.R. 732 at 737.
’(1952) 1 T.L.R. 101.
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guarding against the idleness or fraud of the driver. This method ofremuneration was a device to provide an incentive to the applicant to earn asmuch money as possible for the mutual benefit of the master and the servant.
I agree with the Tribunal that the applicant is an employee of the appellantand a workman within the meaning of the Industrial Disputes Act and not anindependent contractor, nor a partner, nor bailee.
The appeal is dismissed with costs.
Pathirana, J. -1 agree.
Appeal dismissed.