Industrial Relations Commission of New South Wales CITATION : Taxi Industry (Contract Drivers) Contract Determination 1984 [2001] NSWIRComm 320 PARTIES : New South Wales Taxi Industry Association Transport Workers' Union of Australia, New South Wales Branch FILE NUMBER: 3119, 3282 of 2001 CORAM: Marks J CATCHWORDS : Contract of bailment - Application to vary contract determination - Whether custom and practice concerning pay-in rates for bailee taxi drivers - Pay-in rates varied consistent with basis for fare increases - Whether interim contract determination can be made. LEGISLATION CITED : Industrial Relations Act 1996 s3 s16 s163 s312 s320 CASES CITED : Taxi Industry (Contract Drivers) Contract Determination 1984 IRC 1969 of 1996 Taxi Industry (Contract Drivers) Contract Determination 1984 IRC 6439 of 1999 HEARING DATES: 11/22/2001 DATE OF JUDGMENT: 12/05/2001 Mr R Reitano of Counsel New South Wales Taxi Industry Association SOLICITORS LEGAL REPRESENTATIVES: Pigott Stinson Ratner Thom Mr A Metcalfe Transport Workers' Union of Australia, NSW Branch JUDGMENT: - 12 - INDUSTRIAL RELATIONS COMMISSION OF NEW SOUTH WALES CORAM: MARKS J Wednesday 5 December 2001 Matters No IRC 3119 and 3282 of 2001 TAXI INDUSTRY (CONTRACT DRIVERS) CONTRACT DETERMINATION 1984 Application by NSW Taxi Industry Association and TWU NSW Branch for variation re monetary rates DECISION 1 The Commission has before it two applications to vary the Taxi Industry (Contract Drivers) Contract Determination 1984. That contract determination applies to contracts of bailment between operators or owners of taxicabs and taxicab drivers. Contract determinations are made under Pt 2 of Ch 6 of the Industrial Relations act 1996. This Commission is given jurisdiction to deal with contracts of bailment under s 312 of the Act, which is in the following terms: (1) The Commission may inquire into any matter arising under contracts of bailment and may make a contract determination with respect to any of the following matters under those contracts: (a) the remuneration of bailees under those contracts (including by way of a minimum rate of commission expressed as a percentage of the chargeable fares earned), (b) the amounts (if any) to be paid by the bailor to the bailee as attendance money when the bailee is required to attend at a place where the public vehicle concerned is to be bailed to the bailee but no such bailment takes place and for special duties such as preparing and driving a public vehicle to a registering or licensing authority for inspection, (c) annual or other holidays, sick leave and long service leave for the bailee or payments to the bailee instead of any such leave, (d) the minimum number of hours per day, per week or for any longer period during which the bailor is to bail the vehicle, if drivable, to the bailee, (e) if satisfied that it is imperative to do so in the interest of bailors, bailees and the public—the maximum number of hours per day, per week or for any longer period that a bailee may drive a public vehicle, (f) other conditions. (2) Subsection (1) (a) does not authorise the Commission to fix penalty rates of commission in relation to excess hours of work or work on specified days but, in fixing a rate of commission under subsection (1) (a), the Commission may take into account all the circumstances in which a public vehicle is driven for reward. (3) The Commission may, after inquiry, make a contract determination with respect to the records to be kept by bailors in respect of contracts of bailment. Any such determination is subject to any regulations with respect to the matter. 2 A contract of bailment and "bailor" are defined respectively in ss 307 and 308 of the Act in terms which, for present purposes, are non contentious. 3 Section 320 of the Act gives the Commission jurisdiction and power among other things to vary a contract determination. 4 The variation to the contract determination in matter IRC 3119 of 2001 was sought by the NSW Taxi Industry Association. The application sought an increase in the amount of moneys paid by bailee taxicab drivers to bailors under the provisions of the contract determination. It was that matter which the parties agreed needed to be determined urgently and with respect to which this Decision is given. 5 For completeness I mention that the Transport Workers Union of Australia, NSW Branch ("TWU") sought to have clause 31 of the contract determination varied so as to include a formula by reference to which the remuneration of bailee drivers could be varied, including the deletion of moneys payable by bailee drivers known as excess rates. It is not necessary that I deal at this stage with the TWU application because the parties reached agreement that consideration of the TWU application should be deferred. 6 For completeness also I mention that two persons sought to intervene in the proceedings on behalf of two respective groups of bailee taxi drivers. However neither group was registered under the Act as an association of contract drivers and accordingly neither had a right to participate as a party principal in the proceedings. I gave each of the individuals liberty to intervene in their own personal capacities and make submissions concerning the issue for determination. 7 It is now necessary to refer briefly to some of the provisions of the relevant contract determination. Clause 1 which is entitled "Minimum Conditions to be Observed" provides that : "The bailor shall bail and the bailee shall take on bailment such duly registered and licensed taxicab and/or cabs as, during the term of this determination, the bailor in his sole and absolute discretion may make available from time to time to the bailee, together with the equipment belonging thereto, on the terms and conditions hereinafter appearing." 8 The combined operation of clause 3 and the schedule creates a dual method of payment for the bailment of taxicabs. A driver may elect whether to operate under method 1 or method 2. Under method 1 the driver as bailee is entitled to receive and retain one half of all chargeable fares. Under method 2 the driver/bailee is required to make a payment called the "pay-in" to the bailor. The amount of the pay-in is fixed by the schedule as being the maximum pay-in. There is provision for the driver and bailor to agree on a lesser figure. The amount of the pay-in will vary depending upon whether the driver operates a day shift or a night shift. The pay-in amounts for night shifts will vary depending upon the day of the week. The highest pay-in occurs on Friday and Saturday nights when, presumably, the driver's takings will be at their highest. The lowest pay-in occurs on a Monday night. 9 The application made by the NSW Taxi Industry Association ("TIA") is based on a determination of the NSW Department of Transport that taxi fares should increase 4.2% for city fares and 4.1% for country fares as and from 1 September 2001. That determination was based in turn on a recommendation handed down by the Independent Pricing and Regulatory Tribunal ("IPART"). The application made by the TIA was based on an argument that since 1984 it had been customary for pay-ins to increase at the same rate as fare increases so that "taxi operators receive the compensatory benefit of the fare increases …. And drivers receive increased benefits proportionately." 10 At the time that the contract determination was originally made in 1984 the bailor was required to pay for all fuel. By a variation made in 1996 a bailee operating under the pay-in method was required to pay in addition to the relevant pay-in for "fuel and car wash". This is a matter which assumed significance during the course of the proceedings, in a manner which I shall later describe. 11 On 6 April 2001 the TIA wrote to the Director General of the New South Wales Department of Transport seeking an increase in fares pursuant to s 34A of the Passenger Transport Act effective from1 July 2001 to reflect cost movements for the period July 1999 to end of March 2001. This covered the period with respect to which the last fare increase (of 5.1%) had been determined based on cost increases (other than a fare adjustment which was made solely to accommodate the GST which applied from1 July 2000). The TIA relied upon a cost analysis model developed by PriceWaterhouse Coopers whose report contained a detailed analysis of cost movements between July 1999 and March 2001 "using the taxi fare cost index model." The Department referred the application to IPART, which organisation reported to the Minister in July 2001. The Tribunal report disagreed with the PriceWaterhouse Coopers analysis in a number of significant areas. It is not necessary that I deal with the reasons why this divergence of opinion arose; the IPART report has been criticised by the TIA but was not the subject of any substantial criticism by the TWU. The Tribunal extended the period under consideration to include the June 2001 quarter. This had the effect of including within its consideration lower fuel prices from those which applied at the end of the March 2001 quarter. Having taken into account this lesser cost impact and a number of other matters of difference the Tribunal recommended that the increase of 15.3% sought by the TIA be reduced to 4.1% for urban areas and 4.2% for country areas. 12 The IPART recommendation contained a table of fixed and variable operation costs for urban taxis. Relevantly for present purposes LPG fuel costs were seen as increasing by 23% from the September 1999 quarter to the June 2001 quarter. However the weighting of those costs in terms of the overall operating costs of taxis was 8% giving a 2% weighted change. For the same period the total driver payments of each bailee driver of each taxi over a 12 months period increased from $57,771 to $60,092 representing a 4% increase. The total weighting of this cost was 36% giving an overall increase in costs of 1.4% for this factor. 13 The TWU submission put in opposition to the TIA claim was that bailee drivers should have the benefit of increases in bailee driver payments and the benefits of increases in fuel costs, particularly as those fuel costs were borne by the drivers. Accordingly any increase in pay-ins should be discounted to reflect the increased cost to drivers of fuel and by the extent to which increases in bailee driver payments have occurred and which properly belonged to drivers. 14 As I have previously stated, the TIA relied substantially on the fact that "since 1984 it has been customary for pay-ins to increase at the same rate as fare increases." In order to examine this ground, it is necessary to have regard to two decisions of Commissioner Connor of this Commission. The first was delivered on 23 December 1996 in Matter No IRC 1959 of 1996. In those proceedings Commissioner Connor was considering an application by the TIA to increase the maximum pay-in figure for method 2 taxi drivers by 5.1%, being the amount of an increase in taxi fares recently approved by the Department of Transport. The TIA argued that the formula contained within the contract determination since 1984 and the manner in which it had been applied to fare increases was indicative of a custom and practice that the industry should operate on that basis. Commissioner Connor noted that the fare increase approved by the Department was accompanied by additional responsibilities concerning vehicle standards, maintenance, inspection and driver safety which would result in increased costs of the operation of taxis. The Department granted an increase of $1 for each hiring charge and approved a proportion of that amount as to 80 cents to the taxi operators and 20 cents to bailee taxi drivers. That arrangement was adopted by the TIA and TWU by consent. 15 Commissioner Connor granted the application of the TIA and in doing so utilised the following reasoning: "As Mr Hatcher pointed out in the hearing, since 1980 the TWU has indicated its opposition to the existing formula in the contract determination and, up to now at least, there has been no consultation between the TIA and the TWU over it. But in the meantime, and until such times as something better is worked out between the parties or arbitrated, the existing formula is all I really have to go by. I do not accept Mr Hatcher's submission that the interim measures which were put in place in 1996 served to supplant that existing formula. Those measures were clearly identified as interim in nature: they were not intended to represent any long term change to the status quo. In my unreported decision of Wednesday, 4 October 1995 in the Contract Haulage Contract Determination Case (Matter No IRC 919 of 1995), I commented relevantly as follows (at p 3) '….The existing formula used to adjust the rates of pay in the contract determination does have the force of tradition behind it, even though those adjustments have in the past been made on all occasions by the consent of the parties. I would not wish to advance the formula to the level of Holy Writ. Nor do I believe that it should have the status of a presumption which could reverse the onus of proof which rests on the TWU in this hearing. But, in the absence of concrete evidence to challenge the formula, I believe that I should apply it ….' Those comments, I believe, apply equally to the situation described to me in this hearing." 16 The second decision of Commissioner Connor was delivered on 6 March 2000 in Matter No IRC 6439 of 1999. The TIA had sought to vary the contract determination by increasing the pay-in amounts by 13.63%, being the same percentage by which fare increases had recently been granted. The basis of the application was "conformity with custom and practice that pay-ins be increased as a proportion to fare increase rises." The application was opposed by the TWU. The TIA submitted that as an interim measure the increase in the pay-ins could be reduced to 8.1% with the balance, presumably, being determined at some later stage. The TWU argued that any interim increase should be limited to 5% because of increases which had occurred in the cost of automotive fuel borne by bailee taxi drivers. The Commissioner rejected the 5% figure as being "somewhat arbitrary. It does not have the force of any formula behind it….". Commissioner Connor then said that "the prima facie position in cases of this type is that custom and practice should prevail." The Commissioner concluded by saying: "Historically pay-ins in the taxi industry were adjusted by reference to an established formula with respect to which the TWU has consistently expressed opposition. Nevertheless, in the unreported judgment of Glynn J on Friday, 23 August, 1996 in Egan v Maroun (Matter No CT 1337 of 1995) the formula for increasing pay-ins was approved. In my unreported decision of Monday, 23 December, 1996 in the Taxi Industry (Contract Drivers) Contract Determination Case (Matter No IRC 1959 of 1996), whilst I spoke of the need to '…grasp the nettle for a major overhaul of the contract determination…' - a view I continue to hold - I commented further (at p 8) that: '….in the meantime, and until such time as something better is worked out between the parties or arbitrated, the existing formula is all I really have to go by ….'" 17 Some "information" about custom and practice was given by Mr Reitano of counsel who appeared for the TIA and by Mr Metcalfe, Chief Legal Advisor, of the TWU from the bar table. In written submissions Mr Reitano said: "Historically since 1995 the Industrial Commission has adopted the practice of increasing pay-ins by the same rate as taxi fares have risen. Initially the maximum pay-ins were increased by agreement between the applicant and the respondent, by the same rate that taxi fares increased. More recently the respondent has opposed the increase for the maximum pay-ins on this basis, however the Commission has adopted the custom and practice of continuing to increase maximum pay-ins by the same rate as the fare rise." The information provided by Mr Metcalfe was to the same effect. Namely, between 1984 and 1996 the TIA and TWU reached agreement about the matter in the way indicated by Mr Reitano. Since then the matter has been the subject of decisions of Commissioner Connor, to which I have referred. However, Mr Metcalfe submitted that the position changed dramatically once the cost of fuel was borne by bailee drivers, which gave rise to the opposition to the continuation of this practice. This accounted for the arbitration of this issue on the two occasions mentioned before Commissioner Connor. 18 Accordingly, to the extent that there has been custom and practice between the parties it appears to have been applied between 1984 and 1996. Thereafter, it cannot be said that any such custom and practice continued between the parties because the TWU has maintained a contrary position and the proceedings have gone to arbitration on two occasions. 19 Nevertheless, Commissioner Connor continued the then prevailing custom and practice in the two decisions which I have previously described. This raises the question as to whether, in all the circumstances the Commission should continue to adopt the approach of Commissioner Connor as contended for by the TIA or adopt a different approach as contended for by the TWU. 20 In my opinion an appropriate starting point involves an examination of the statutory context in which these proceedings are being dealt with. I have previously referred to the relevant provisions contained within Ch 6 of the Act. The jurisdiction and function of the Commission is, by s 312(1) to inquire into matters arising under contracts of bailment and to make a contract determination with respect to a number of matters including, relevantly, the remuneration of bailees under those contracts. 21 There is no necessity to examine the many decisions of this Commission and its predecessors to determine what is the appropriate approach to the exercise of jurisdiction and power. It is obvious, as referred to in s 163(1)(c) that the Commission is "to act according to equity, good conscience and the substantial merits of the case ….". In doing so it is necessary to be fair to both bailors and bailee drivers. Nevertheless, for the purpose of these proceedings, the inquiry must be directed to the remuneration of bailees. All of these matters need to be considered within the objects of the Act as contained in s 3. In particular s 3(g) states that one of the objects of the Act is to provide for the resolution of industrial disputes ."….by arbitration in a prompt and fair manner ….". 22 Having regard to the matters raised above it is next necessary to look at the particular provision of the contract determination and to examine its purpose and intent in the context of the overall provisions of the determination. 23 I have already referred briefly to the relevant provisions of the contract determination and the two alternative methods of payment. I was informed during the course of the proceedings that the bulk of the driver bailees operate under the second method namely the pay-in method. There were allegations that this was what was required by bailors, but I discount these allegations for the purpose of determining these proceedings. 24 The pay-in method, as I understand the provisions of the contract determination operates on the basis that the pay-in amount fixed by the contract determination is payable by the bailee driver to the bailor for each shift. Prior to 1996 the bailor paid for all fuel, oil, maintenance, registration and licence fees in respect of the operation of the taxicab. Since 1996 the bailee driver has paid for all fuel and car wash expenses that change being accompanied, as I have already said, by an adjustment to the pay-in amounts. The intention as clearly stated in the variation to the contract determination made in 1996 was that the bailee driver paid to the operator the fixed amount of the pay-in for each shift, paid the supplier for fuel and car wash and then kept the remainder of the takings of the taxicab. 25 Although it is not necessary to characterise the relationship between bailor and bailee driver by reference to any relationship recognised at law, it seems to me that that relationship is in the nature of a joint venture whereby the bailor contributes the use of the taxicab and the bailee driver undertakes the operation of the taxicab on the basis and in the manner described in the contract determination. 26 It is next necessary to revisit the IPART determination. I have already referred to some of the details. It is clear that the increase of 4.1% for urban taxi operating costs was achieved after taking into account a number of fixed and variable costs and variations in those costs between the quarters ending September 1999 and June 2001. It needs to be emphasised that the costs concerned were taxi operating costs. Of the 4.1% 2% on a weighted basis was attributable to increases in the cost of LPG fuel, this being the fuel source preponderantly used in the urban taxicab fleet. In circumstances where the resultant increase in fares is attributable as to approximately 50% to increase in fuel costs borne by bailee drivers, is it fair, equitable and just in all the circumstances that those drivers be compelled to pay that part of the fare increases attributable to increased fuel costs to bailors by way of an increase in the amount of pay-ins? If pay-ins were so increased, it would result in bailee drivers paying an additional amount to bailors each shift attributable to an increase in the cost of fuel borne by them. This would advantage bailors and disadvantage bailee drivers by not only failing to compensate bailee drivers for any increase in the cost of fuel arising out of the increased fares but would positively disadvantage them by paying that amount to bailors. Such a result would, in my opinion, not only be illogical but unfair, unjust and inequitable. Such a result would displace any inconsistent custom and practice if such could have been demonstrated. 27 The same reasoning should, in my opinion, also apply to such part of the fare increase as was allowed on the recommendation of IPART referable to increases in bailee driver payments. This was represented by 1.4% of the 4.1% additional increase in urban taxi operating costs on a weighted basis. To require that the amount of the pay-in each shift be increased by this amount would force bailee drivers to compensate operators with respect to that part of additional operating costs attributable to increases in their own earnings. In its report, IPART noted that the cost of bailee driver labour is "essentially the revenue that the bailee driver retains, which would otherwise have accrued to the operator had he/she been driving that shift." For the purpose of the review IPART assumed that bailee driver labour represented 40% of total operating costs. It then used changes in average weekly earnings between September 1999 and June 2001 quarters to estimate a growth of around 4%. There appears to have been no other quantification of this figure and it may or may not represent reality. In any event "reality" is, in fact, gross revenue from the operation of each taxicab, which may vary as a result of any number of factors ranging from the state of the economy to seasonal matters, the holding of the Olympic Games and the like. As I understand the IPART report the variations in bailee driver payments has not otherwise been quantified and is represented by a notional assessment only. These circumstances reinforce, in my opinion, the necessity to discount the amount of any increased pay-in attributable to this factor. Accordingly, in my opinion the amount of the pay-in should further be reduced by 1.4%. 28 In its submissions the TWU argued that pay-ins should not be increased at all notwithstanding the additional fare increase so as to enhance the remuneration of bailee drivers and counter the chronic shortage of drivers which had been reported by the TIA in its submission to the Department of Transport. I would be reluctant to accede to this submission based on the information and evidence which is currently before the Commission in these proceedings. 29 This leads to a consideration of a further matter in connection with the determination of these proceedings. The proceedings have been confined to a consideration as to whether or not pay-ins should be increased. That consideration in turn has been limited by reference to the increase in fares approved by the Department of Transport. However, the application filed by the TWU involves a wide-ranging examination of the relationship between bailee drivers and bailors of taxicabs by reference to the level and means of remuneration and the conditions under which the bailment/joint venture operates. The parties have deferred a consideration of these issues, as well as an argument about the excess payments also provided for in the determination. Because these matters are as yet unresolved, but will require arbitration by the Commission, it seemed to me that it would be inappropriate to resolve the discrete issue which is the subject of this decision by the making of a contract determination, other than an interim determination. During the course of submissions both parties agreed that this was possible, presumably by reference to the provisions of s 16 (4) of the Act which allows an award in special circumstances to be made on an interim basis. However, on further reflection, it may be that this is not possible. "Award" is defined in the dictionary to the Act as "an award made, or taken to be made, by the Commission under this Act and includes any order of the Commission under this Act that sets conditions of employment." This language may be seen in contra-distinction to the definition of contract determination in the dictionary which is defined to mean "a contract determination made, or taken to be made, by the Commission under Pt 2 of Ch 6." Pt 2 of Ch 6 clearly refers to the Commission making a contract determination and not an award. In addition, it could not be said, in my opinion, that a contract determination sets conditions of "employment" because quite clearly Ch 6 is intended to refer to contracts of bailment rather than contracts of employment. Accordingly, being in doubt as to whether there is power to make an interim contract determination and because the matter is said by TIA to be urgent it seems preferable to make a contract determination confined to the discrete issue the subject of these reasons for decision. I propose to apply a nominal term of 12 months, but I decline to specify that the determination ceases to apply at the end of its nominal term. 30 I propose to defer the operation of this contract determination for a few days to enable all bailee drivers to be made aware of the increased pay-in amounts. To adopt any other process including any process involving retrospectivity would, I assume, create serious administrative difficulties. ORDERS 31 I make the following orders: 1. I make a contract determination varying the Taxi Industry (Contract Drivers) Contract Determination 1984 by increasing the maximum pay-in amounts set out in Pt B thereof by 0.7%. 2. Such variation shall take effect on the 9th of December 2001 and shall have a nominal term of 1 year. 3. Liberty to apply. 4. Otherwise proceedings stood over generally. ______________________________ DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.