The agreed facts
38The parties agreed to the factual basis for the determination of the question. The agreed facts set out the relevant background to the determinations that are under review. Those agreed facts, with references to supporting material removed, are in the following terms:
"The parties agree the following facts:
Background
The Applicant, John Assadourian, is and has been since 2 November 2004 the sole director, secretary and shareholder of Towman Pty Ltd (Towman).
The Respondent, the Roads and Traffic Authority of New South Wales (RTA), has the function of regulating the tow truck industry in accordance with the Tow Truck Industry Act 1998 (NSW) (the Act) and the Tow Truck Industry Regulation 2008 (NSW) (the Regulations).
From 30 April 2004 to 30 April 2008, Towman held a tow truck operators licence (04023) pursuant to Div 1 of Pt 3 of the Act and carried on business as a tow truck operator. During the same period, Mr Assadourian held a tow truck drivers certificate (41642) pursuant to Div 2 of Pt 3 of the Act.
At all material times, Northern Division Towing Pty Ltd (NDT) and Combined Towing Service (NSW) Pty Ltd (CTS) have also held tow truck operators licences (07051, 00001) and carried on business as tow truck operators. NDT was a wholly-owned subsidiary of CTS and, in practical terms, NDT and CTS operated a single towing business.
On 30 April 2008, Towman ceased to hold a tow truck operators licence. Mr Assadourian has never held a tow truck operators licence.
From 1 May 2008, Mr Assadourian drove a tow truck NDT leased from Towman (the Leased Tow Truck). NDT paid Towman for the towing work which Mr Assadourian had undertaken in the Leased Tow Truck.
A reference in this statement of agreed facts to operating a tow truck should be read as a reference to the operation of that tow truck for the purpose of towing motor vehicles.
History of proceedings
On 2 April 2008, Mr Assadourian advised the RTA that Towman would not be renewing its tow truck operators licence beyond 30 April 2008. Mr Assadourian also advised the RTA that he intended to lease one of Towman's tow trucks (9644TT) (the Leased Tow Truck) to NDT and to sell Towman's two remaining tow trucks to NDT.
On the same day, CTS advised the RTA that Towman had leased to CTS the Leased Tow Truck for a period of five years commencing that day.
On 16 April 2008, the Leased Tow Truck was authorised to operate under NDT's tow truck operators licence.
The Leased Tow Truck was registered in the name of Towman up to 16 April 2008 and in the name of NDT from 16 April 2008.
In November 2008, the RTA determined to renew Mr Assadourian's tow truck drivers certificate by granting a subsequent drivers certificate to Mr Assadourian for a period of one year until 27 November 2009.
By a letter dated 24 November 2008, the RTA expressed its opinion that Towman was breaching section 15 of the Act. The letter stated:
"The RTA understands this decision may affect you significantly as the legal entity. If you continue to operate [as] a SIC [subcontractor] for [NDT] you will be required to obtain an operators licence by the 16 February 2009."
On 24 February 2009, Towman applied to the RTA for a tow truck operators licence. The RTA determined to refuse this application on 27 July 2009.
On 21 October 2009 the RTA received an application from Mr Assadourian for a subsequent tow truck drivers certificate. The RTA determined to refuse this application on 10 December 2009.
On 15 December 2009 Mr Assadourian applied to the NSW Administrative Decisions Tribunal (ADT) for a review of the RTA's refusal to grant a subsequent drivers certificate. On the same day, Mr Assadourian applied for a stay of the RTA's decision.
On 22 December 2009, the ADT determined to stay the RTA's decision.
The Leased Tow Truck
Prior to 30 April 2008, Towman owned and operated three tow trucks as part of its towing business.
Two of the tow trucks were held free of encumbrances, and the third (being the Leased Tow Truck) was mortgaged to CBFC Limited pursuant to an equipment loan and goods mortgage agreement. The mortgage was registered pursuant to the Registration of interests in Goods Act 1986 (NSW).
Under the loan agreement, CBFC Limited agreed to loan to Towman $80,000 for the purchase of the tow truck from Suburban Towing & Equipment Pty Limited. Towman agreed to repay the loan with interest of $27,063, mortgage the tow truck to CBFC Limited and provide personal guarantees from Mr Assadourian and his wife.
Towman also agreed that the credit provided under the agreement was to be applied wholly or predominantly for business or investment purposes (or for both purposes).
In or about April 2008, Towman sold two of its tow trucks to NDT. On 2 April 2008, Towman leased to NDT for a period of five years the Leased Tow Truck that was the subject of the mortgage to CBFC Limited. Since that time, Towman has continued making loan repayments to CBFC Limited with respect to the Leased Tow Truck.
The Leased Tow Truck has, at different times, been identified by different number plates and registration numbers, including 9233TT, 9644TT, AU30WR and 9814TT. There is only one leased tow truck.
Shortly after the lease commenced, NDT arranged for the logos of NDT, Combined Alliance and the NRMA to be affixed to the Leased Tow Truck.
On or about 2 April 2008, Mr Assadourian was recorded on the operators licence of NDT as a close associate, as he was the sole director of the lessor of the Leased Tow Truck.
The relevant certificates of registration for the Leased Tow Truck, under the heading 'Conditions', showed the words 'USAGE: TOW TRUCK - BUSINESS USE'.
Towman has not entered into any other relevant leases.
Mr Assadourian's relationship with NDT
On 30 April 2008, Mr Assadourian signed a document given to him by NDT titled "Employee Acknowledgement' pursuant to which, amongst other things, Mr Assadourian acknowledged that he had been given a copy of, and had read and understood, the requirements of the Act and the Regulations as amended.
At the same time, Mr Assadourian received from NDT a document entitled "Combined Towing Services - Tow Truck Drivers Instruction Manual".
Mr Assadourian drove the Leased Tow Truck pursuant to a contract to which NDT was a party.
The contract with NDT was partly in writing and partly oral. To the extent it was written, Mr Assadourian confirmed that he had read and understood and would comply with all matters detailed in the contents of the Manual. The Manual was applicable to, and adhered to in, the relationship between NDT, Mr Assadourian and Towman to the extent that it was relevant. Policies in the Manual that did not apply to Towman and Mr Assadourian were:
(a) Sick Leave;
(b) Annual Leave;
(c) Salary Review
To the extent it was oral, it was agreed that:
(a) Towman would surrender its operators licence.
(b) NDT would lease the Leased Tow Truck from Towman.
(c) Mr Assadourian would work for NDT as a tow truck driver.
(d) NDT would be responsible, in the first instance, for:
i. Paying for the repairs and maintenance of the tow truck (although on some occasions Towman would itself pay for repairs directly);
ii. Paying the purchase price for the towing authority books;
iii. Providing the use of the portable radios and electronic touch screen computer and the electronic tracker for the tow truck; and
iv. Paying the cost of insurance and registration for the Leased Tow Truck,
and these amounts were deducted from the amounts payable by NDT to Towman as described below in sub-paragraph (h).
(e) Towman would be responsible for its own workers compensation, tax and superannuation.
(f) NDT would charge its customers the maximum fees then prescribed by Part 4A of the Regulations, and NDT would pay to Towman the fees for towing work Mr Assadourian undertook in the Leased Tow Truck for NDT.
(g) NDT would receive the balance of any income generated from the above tows.
(h) NDT would deduct the following costs from the amount to be paid to Towman from time to time:
i. Cost of repairs and maintenance of the tow truck;
ii. The cost of purchasing the towing authority books;
iii. The cost of $60.00 per week for a two-way radio and data tracker;
iv. The cost of insurance and registration for the Leased Tow Truck;
v. The cost of a digital camera (a one-off deduction);
vi. Uniform costs (as occasion arose); and
vii. The cost of sign writing for the tilt tray (a one-off deduction).
(i) NDT would charge Towman a further 9% of the amount paid to Towman each week as an administration fee.
(j) Towman would be responsible for:
i. Paying for the fuel consumed by the tow truck;
ii. Obtaining its own workers compensation; and
iii. Paying its own tax, including GST and company income tax;
iv. Paying Mr Assadourian's income and withholding PAYG amounts on account of Mr Assadourian's personal income tax; and
v. Making any superannuation contributions to or for Mr Assadourian.
(k) Towman was only paid for the work performed by Mr Assadourian - if he did not undertake any towing work, NDT did not make any payments to Towman (or Mr Assadourian).
The relationship between NDT, Towman and Mr Assadourian has been implemented in accordance with what is set out in the previous paragraph.
NDT maintained the records prescribed by the Act and the Regulations. These records included the holding yard register and the tow truck drivers register.
No wages were paid by NDT to Mr Assadourian and, in relation to Mr Assadourian, no amounts were withheld by NDT for income tax purposes.
The insurance policy maintained by NDT in respect of the Leased Tow Truck encompassed compulsory third party, comprehensive, public liability and on-hook insurance.
After Towman ceased to hold an operators licence, Towman did not hold public liability or on-hook insurance. When Mr Assadourian was advised by the RTA that he was required to hold an operators licence, Towman obtained public liability and on-hook insurance in respect of the Leased Tow Truck for the period 17 February 2009 to 13 February 2010. Mr Assadourian has never himself held any relevant insurance policies.
The taking of holidays by Towman and Mr Assadourian was dealt with according to the terms of the manual. Towman and Mr Assadourian were expected to give notice of holidays in line with the requirements of the manual. Towman and Mr Assadourian did not receive pay for any such holidays taken, nor was any pay received for the taking of sick leave.
When performing towing work, Towman and Mr Assadourian were required to adopt, and did adopt, the practices prescribed by NDT, including the general practices applicable to towing work outlined in the manual. NDT also required Mr Assadourian to wear NDT's uniform and keep the Leased Tow Truck in a clean condition.
NDT dispatched towing work to Mr Assadourian and expected Mr Assadourian to undertake the work. Set hours were fixed by NDT during which Mr Assadourian was obliged to answer a dispatch call (these were generally between 6:30 am and 10:30 am and 3:30 pm and 7:00 pm). At other times, Mr Assadourian was on call.
The towing activity
Every tow job carried out by Mr Assadourian was recorded by his completion of an NDT tow docket for the job. The tow docket showed the job number, relevant prices and any additional charges imposed by the driver. Tow dockets were required to be delivered to NDT's reception by 8 am on the morning following the tow job. NDT reserved the right to fine Towman in the event that Mr Assadourian failed to adhere to this time requirement.
NDT issued invoices to insurers for Towman's towing work in the name of NDT and Towman did not issue invoices in its own name or in the name of Mr Assadourian.
At the end of each week, the tow dockets submitted by Towman were compiled by staff of NDT into a spreadsheet referred to as a `log'. The log showed certain details for each tow job, including the distance travelled and the amount payable for that category of tow job.
A computer printout of the log was given to Mr Assadourian at the end of each week. This was to provide Mr Assadourian with the opportunity to check the log to verify that all of his tow jobs were included, that all of the tow jobs had been carried out by him, and that the details for all tow jobs were recorded correctly. If necessary, Mr Assadourian handwrote amendments on the log and returned it to NDT. Staff of NDT would discuss any proposed amendments with Mr Assadourian until both agreed upon the final form of the log.
Once the log was finalised, NDT created a job statement. The job statement was an internal document which showed the aggregate of the amounts payable from the tow jobs recorded in Mr Assadourian's log. This gross amount was described as 'Amount of jobs excluding GST'.
From the gross amount, NDT subtracted 9% as an administrative fee. NDT also added any relevant bonuses and subtracted any relevant deductions.
This net amount was described as 'Amount subject to GST'. NDT then issued to Towman a recipient-created tax invoice in the net amount with the addition of a GST component.
The recipient-created tax invoices were issued pursuant to a written agreement between NDT and Towman made on 1 May 2008.
Finally, NDT paid Towman the amount and the GST component by direct deposit into Towman's bank account.
Once the invoice was issued to Towman, earlier hard copies of the log (showing handwritten amendments) were discarded and only the final log was retained.
Towman's financial statements
In its tax return for the 08/09 FY, Towman described its main business activity as 'Towing service, motor vehicle'. Towman's gross income was $106,106 and Towman claimed a deduction of $29,998 for 'Motor vehicle expenses'.
The return also showed $16,159 for 'salary and wage expenses'. Towman's business activity statements show that $2,054 was withheld from that amount for PAYG income tax withholding.
Towman's only source of trading income for the 08/09 and 07/08 financial years was described in its financial statements as 'Fees Received - Towing' in amounts of $106,106.34 and $155,587.01 respectively.
In both financial years, Towman incurred substantial expenses for depreciation, fuel and oil, repairs and other costs related to its commercial motor vehicles.
Towman has paid to the ATO all amounts of GST paid to Towman by NDT.
Mr Assadourian's financial statements
In his tax return for the 08/09 FY, Mr Assadourian described his main salary and wage occupation as 'Truck - owner-driver'. The payer was stated to be Towman Pty Ltd and the gross amount earned was $16,159 with $2,054 withheld for PAYG.
Relationship between Towman and Mr Assadourian
The Applicant is, and has been since 4 November 2004, the sole director, secretary and shareholder of Towman.
The towing work performed by Mr Assadourian was Towman's only source of income and the fees received by Towman were Mr Assadourian's only source of income.