Joe Luigi was an experienced chef at the Metropolitan Hotel in the centre of Adelaide. However, after working at the hotel for more than 10 years, he decided to leave that job and set up his own catering business from his home and specialise in northern Italian food. He borrowed sufficient funds from the bank to purchase a van for the business and had his name "Joe Luigi" painted on the side of the van. He also bought some additional cooking utensils and equipment. He then set about designing an impressive menu featuring such well-known Italian meals such as pesto pasta, risotto, tiramisu as well as some of his own special dishes.Joe's business quickly prospered, and after 6 months he was struggling to keep up with the demand for his services. Also, operating the business from home was not ideal, since his kitchen was too small to handle the growing demand for his Italian food. One day while shopping in the market Joe met Alison, who Joe knew worked in the marketing department at the Metropolitan Hotel where Joe used to work. Alison told Joe that she wanted to leave the hotel and was looking for a new job. Since they had always had a good working relationship Joe suggested to Alison: "Why don't you come and work with me in my catering business? I can focus on the cooking side of things while you manage the catering arrangements?" Alison said she was interested but needed to think about it for a day or two. Soon after their conversation Alison contacted Joe and said she would like to accept his offer to work with him in the business. Within a month they were running the business together from an old shop which they were able to rent for $300 a week, the cost of which they shared, as well as the electricity and other bills for the business. They also set up a business web site in which they advertised themselves as "La Trattoria - Adelaide's Specialists in Northern Italian Cuisine". They created a new business logo featuring a traditional Italian chef holding a platter of food and a bottle of wine and had it painted on the side of the van in place of Joe's name . They also opened a bank account in which they contributed equally towards the business expenses. Alison took over the marketing role, negotiating with clients, arranging the bookings and hiring staff while Joe concentrated on the creative side of the business, inventing new dishes and looking for the best ingredients for his recipes. The business became very popular, particularly with catering for private functions, and Joe then found that he was then working more than 60 hours each week preparing the food. Since he was working longer hours than Alison each week he told Alison that he should be entitled to a greater share of the profit from the business. However Alison then became angry and refused to agree to this, and instead threatened to quit the business if Joe made any changes to the distribution of the profit. Joe was not happy with Alison's response, but did not argue about this any further. The business continued to expand, and eventually Joe and Alison decided they needed some additional assistance with the business. Eddy, a university student, had previously contacted them to look for some part-time work. Alison called Eddy and told him that the business did not need any more employees, but said they could give him some work as an independent contractor. Eddy accepted that arrangement and after that he worked on weekends as an assistant in the business, for which he was paid an hourly rate of $15. His duties include ordering and picking up supplies and doing deliveries, as well as helping out at any big functions. Eddy had to wear a shirt featuring the business's distinctive logo and was under Alison's close supervision. Shortly after Eddy started working for La Trattoria he was sent on a two-day "Barista andResponsible Service of Alcohol" course, paid for by the business. Between working for La Trattoria and attending university Eddy has very little spare time to undertake any other paid work. One day while he was picking up liquor supplies from Murphy's, a local wine merchant which La Trattoria often used, Eddy noticed a very good special for "Hermitage Champagne", a top of the range sparkling wine which La Trattoria sometimes supplied at their more exclusive functions. Normally priced around $150 per bottle, "Hermitage Champagne" was now on sale at a special price of $95 per bottle. The proprietor of Murphy's told Eddy that there were only 3 cartons left. Assuming that Alison and Joe would want to buy the wine at this special price Eddy purchased 3 cartons on La Trattoria's account for a total price of $1,710. Later, when Eddy told Alison what he had done she was angry and said: "You have no authority to order alcohol above $300 without our permission. Take it back and tell Murphy's to refund our money immediately". Eddy apologised and explained that he thought she and Joe would be pleased that he had taken some initiative to help the business. However Alison remained angry and demanded that Eddy return the wine. Several days after the "wine incident", while making a food delivery to the home of James, a regular client of La Trattoria, Eddy negligently reversed the work van into James' car parked in the driveway. As a result of the collision the rear of James' car was extensively damaged. The estimated cost of repairing the damage to the car was approximately $4,500, and James is now claiming compensation from Alison and Joe for this amount. Last month Alison took a booking from a new client, Mario, for his 60th birthday celebration for 20 people at $70 per person. Since her mind was otherwise focussed on the problems caused by Eddy and his car accident, Alison forgot to record the booking in the business diary or mention any details about it to Joe. As it appeared that there were no bookings on that particular weekend Joe took his family on a brief holiday to Melbourne. While in Melbourne Joe then received an abusive phone call from a very angry Mario. When Joe managed to calm Mario down and hear what he had to say, he was horrified to learn that Mario had been expecting La Trattoria to cater for his 60th birthday party that evening. When it became clear that La Trattoria had forgotten about the booking, Mario was then forced to arrange at the last-minute for the catering services for his guests from an expensive city restaurant at a cost of $120 per person. Mario is now threatening to sue La Trattoria for his additional cost of catering for his celebration.

(a) Alison and Joe completely deny any liability for the damage caused by Eddy to James car, and instead say that, since he is an independent contractor Eddy, he must take full responsibility. With reference to the principles distinguishing employees from independent contractors, explain whether or not Alison and Joe are correct in denying responsibility for James demand for the $4,500 compensation.

(b) What could Eddy do if he was unsure of whether his pay of $15.00 per hour was too low?

(c)Murphy's now refuses to take back the bottles of "Hermitage Champagne" or to refund the purchase price of the wine to La Trattoria's account. With reference to the principles of agency law explain whether or not Murphy's is required to take the wine back and refund the purchase price to La Trattoria's account.