1. Bank of Queensland Limited is a publicly listed corporation carrying on banking business in the Commonwealth of Australia. As one might suppose, it is headquartered in Queensland. As at 2008 it had some 24 branches in Victoria. In broad terms, the Bank conducted banking business through two species of branch. The first is known as the 'corporate' branch which is staffed by employees of the Bank. The second type of branch is known as the 'owner managed branch' or 'OMB' for short. Each of the 24 branches in Victoria in 2008 was an 'OMB'.
2. In March 2007 a delegate of the Commissioner of State Revenue advised the Bank that it was initiating an investigation 'to assess compliance with the Payroll Tax Act 1971 for the period from 1 July 2003 to the current financial year'. In a letter dated 13 February 2009 which has been treated as a private ruling, an officer of the Commissioner determined that the Bank of Queensland and its Victorian OMBs 'constitute a group under Section 9A(1A)(b), (c) and/or (d) of the Payroll Tax Act 1971 ... and Section 71 of the Payroll Tax Act 2007 ... ie the inter-use of employees provisions'. In the same letter it was stated that the Commissioner had determined that a discretion which he had under Section 9A(1J) of the 1971 Act and Section 79(2) of the 2007 Act 'should not be exercised to exclude BOQ from its OMBs on the basis that the businesses of BOQ and OMBs are not independent and are connected'.
3. Payroll Tax in Victoria has a tax free threshold. It would be anticipated that each 'OMB', viewed individually, would have the advantage of this tax free threshold. The effect of the determination or 'ruling' referred to above was that the Bank and its OMBs in Victoria would be treated as a whole and it would be taxed without the advantage of any tax free threshold because the group would be of a size which would take it beyond the tax free threshold.
4. Solicitors acting for the Bank lodged an objection to the determination dated 6 April 2009. By letter dated 14 September 2010 a delegate of the Commissioner disallowed the objection. At the request of Bank of Queensland an officer of the Commissioner advised the Bank's solicitors that the objection had been referred to this Tribunal for review in accordance with the request made in that respect by letter of 12 November 2010.
5. The proceeding has come on for hearing before me.
6. The evidence called on behalf of the Bank came from two senior officers or former senior officers, the principal of one of the companies operating an OMB in Victoria and from an expert report by a Mr McCoon disclosed the following.

1. Over the term of the period covered by the private ruling, the subject of the present proceeding, two statutes had been in force for the levy of Payroll Tax in Victoria. In the early years the impost was governed by the Payroll Tax Act 1971. Section 9A of that statute provided:

(b) one or more employees of an employer perform duties for or in connection with one or more businesses carried on by the employer and one or more other persons (associates); or

(c) one or more employees of an employer are employed solely or mainly to perform duties for or in connection with one or more businesses carried on by one or more other persons (associates); or

(d) one or more employees of an employer perform duties for or in connection with one or more businesses carried on by one or more other persons (associates), being duties performed in connection with, or in fulfilment of the employer's obligation under, an agreement, arrangement or undertaking for the provision of services to any one or more of the associates in connection with that business or those businesses -

(i) whether the agreement, arrangement or undertaking is formal or informal, express or implied; and

(ii) whether or not the agreement, arrangement or undertaking provides for duties to be performed by the employees or specifies the duties to be performed by them -

the employer and all persons who are related persons or associates in relation to that employer together constitute a group and each is a member of that group.

(1J) If the Commissioner is satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Commissioner considers relevant, that a business carried on by a member of a group, including a group constituted by reason of section 9A(2), is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group, the Commissioner may exclude the member from that group.

The Payroll Tax Act 2007 which repealed and replaced the 1971 Act provides in Sections 71,79(1) and (2) inter alia:

1. Groups arising from the use of common employees

(1) If one or more employees of an employer perform duties for or in connection with one or more businesses carried on by the employer and one or more other persons, the employer and each of those other persons constitute a group.

(2) If one or more employees of an employer are employed solely or mainly to perform duties for or in connection with one or more businesses carried on by one or more other persons, the employer and each of those other persons constitute a group.

(3) If one or more employees of an employer perform duties for or in connection with one or more businesses carried on by one or more other persons, being duties performed in connection with, or in fulfilment of the employer's obligation under, an agreement, arrangement or undertaking for the provision of services to any one or more of those other persons in connection with that business or those businesses, the employer and each of those other persons constitute a group.

(4) Subsection (3) applies to an agreement, arrangement or undertaking -

(a) whether the agreement, arrangement or undertaking is formal or informal, express or implied; and

(b) whether or not the agreement, arrangement or undertaking provides for duties to be performed by the employees or specifies the duties to be performed by them.

(1) The Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group.

(2) The Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group.

1. Mr Crutchfield SC, who appeared with Mr Wheelahan for the applicant, submitted that in the circumstances the Bank's Victorian OMBs should not be 'grouped'. They submitted that in the circumstances the critical question was whether the employees of the OMBs could be regarded as having 'performed duties' for the Bank in terms of Section 9A of the 1971 Act and Section 71 of the 2007 Act. They said it was important to note that Parliament had chosen the word 'duties' in both statutes, rather than the word 'services' and that choice was significant. They continued:

The words 'performed duties' in both the traditional Common Law text used to distinguish an employee/employer relationship from that of an independent contractor.

1. They referred to Liquid Rock Constructions Pty Ltd v Commissioner of State Revenue [2011] VCAT 2164 at [60]. They said that, whilst an independent contractor provides services to another enterprise as part of the contractor's own business, an employee rendering personal services does so as part of the employer's business. They referred to Marshall v Whittaker's Building Supply Co [1963] HCA 26; (1963) 109 CLR 210, 217 per Windeyer J, Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21, [40].
2. They noted that on appeal from this Tribunal's determination in the Liquid Rock Case, Pagone J said:

The task required by the section involves an inquiry into factual behaviour indicating that the 'employee' was performing tasks in a way and manner like that expected of an employee albeit that there was no employee relationship.

[2012] VSC 329 at [8]

1. They said that in the circumstances it could not be determined that the OMB's employees were in an employee-like relationship with the Bank.
2. They said that the relationship was one of franchising, whereby the Bank granted to the franchisee, the OMB, the right to carry on a business. The format of that business was determined by the Bank, and the OMB or franchisee had the opportunity to earn commissions and fees payable for providing agency services to the Bank. In this present case, they said, the evidence showed the shareholder of each OMB established with it a separate entity and owned and controlled it to the exclusion of the Bank. The capital was provided by the owner/manager and used to fit-out premises, acquire equipment and pay initial fees to the Bank. The OMBs took out their own insurance, retained their own staff, incurred and were liable for the OMB's expenses relating to the operation of the branch and prepared their own financial statements and taxation returns from year to year.
3. Therefore, they said the OMBs had the recognised indicia of a business being commercial enterprises which took on risks, engaged in regular activities in pursuit of profits, employed persons, generated goodwill and had tangible assets which were utilised in the business. They referred to Hope v Bathurst [1980] HCA 16; (1980) 144 CLR 1, 8; Minister for Employment and Workplace Relations v Gribbles (2005) 222 CLR 194 at 39; Stevens and Brodridd Sawmill & Co Pty Ltd [1986] HCA 1; (1986) 160 CLR 16, 38; AMP Society v Chaplin [1978] UKPC 7; (1978) 18 ALR 385, 391; Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21, [28].
4. They said the OMBs were in the same position as the agent in Chaplin's case who was required to conduct his own agency in a manner approved by AMP from time to time. In that case, the Judicial Committee distinguished between the business of AMP and of the agency, acknowledging that they were intimately connected but nevertheless, distinct. Their Lordships found that Mr Chaplin was not employed by AMP under a contract of service, placing emphasis on the fact that he had claimed expenses in his tax returns, paid his commission to sub-agent, wages for secretarial staff, depreciation on motor car and office furniture etc. Their Lordships also laid some stress on the power which the agent had to delegate the conduct of his agency business.
5. It followed, they said, that the OMBs were carrying on their own business, not the Bank's. Despite the fact that the Bank may have benefited from the conduct of that business, the purpose of the business was the OMBs. They referred to Forstaff v Chief Commissioner of State Revenue (2004) 56 April 302 at [109].
6. They noted that the disclosure letter sent to Ms Dicks, who is the Principal of the OMB conducted under the Bank's brand in Richmond, Victoria, stated:

The Bank cannot give you any assurances or make any predictions about matters like the costs, revenue or future profitability of your branch or the suitability of its location.

1. They said the evidence of Ms Dicks was that she, as the principal of her own OMB, exercised the right of detailed direction and control over the smaller number of employers there. They referred to Stevens v Brodribb Sawmill and Company [1986] HCA 1; (1986) 160 CLR 16, 36 per Wilson and Dawson JJ. Generally, they said, the test as to whether or not a person was an employee of a putative employer turned on whether the putative employer had control of the method of the employee's performing the work. They referred to the speech of Lord Porter in Mersey Docks and Harbour Board v Coggins and Griffith (Liverpool) Limited [1947] AC, 17.
2. They said the Commissioner's approach stressed 'the concepts of control over the agent with control over the agent's employees'.
3. They said it was the principal of the OMB who made decisions about hiring, made decisions about level of remuneration for employees, paid the remuneration and made decisions about termination of employment. They referred to the evidence of Mr Evans and Mr Sacristani, executives or past-executives of the Bank and to the judgment of Edmonds J in Gothard, in the matter of AFG Pty Ltd (Receivers and Manager Appointed) (in liq) v Davey [2010] FCA 1163; (2010) 80 ACSR 56 at [59] - [60].
4. Insofar as the Commissioner laid stress upon the role played by the OMBs' employees in the Bank's business, they said the Commissioner was:

Invoking strands of what has been termed the "integration test", where the question whether the person is an employee is measured by reference to the extent that his activities form an integral part of another's business.

1. They said that this test had been 'eschewed'. They referred to Federal Commissioner of Taxation v Barrett [1973] HCA 49; (1973) 129 CLR 395, 402; Commissioner of Payroll Tax v Mary Kay Cosmetics Pty Ltd [1982] VicRp 87; [1982] VR 871, 878-9 and Hollis v Vabu Pty Ltd [2001] HCA 44; (2001) 207 CLR 21, [40].
2. Insofar as the Commissioner relied on a decision of Nettle JA (as he now is) in D & D Tollhurst Pty Ltd v Commissioner of State Revenue (1997) 38 ATR 1001, they said this decision could be distinguished on the basis that the agents were individuals who did not have a power of delegation. They said this was one of the bases on which Mr Nettle distinguished the Privy Council's decision in Chaplin's case. He found that the individuals in question were not carrying on their own businesses but the business of Tollhurst.
3. They said that the OMBs were corporate entities and carried on their own businesses in contrast to the findings made in the Tollhurst case. The distinction, they said, was identified and relied on by Gzell J in Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788; (2005) 222 ALR 599. In that case, they said, as here, the alleged employees acted as representatives of Bridges. Bridges operated in a highly regulated environment holding a dealer's licence under the Corporations Law. Its agents were entitled to operate only under proper authority from Bridges and in a manner in accordance with the regulated procedures, guidelines and manuals issued by Bridges. The governing statute required Bridges' agents had to operate in light of the regulatory framework, supervision of representatives, advisers and policy statements and pro forma forms, training provided by Bridges and the requirement to follow detailed procedures for providing planning advice. Despite these matters, the individuals were found not to be employees. This was despite Bridges being able to stipulate by policy statement, minimum service standards and reporting standards with a power to terminate without notice for failure to perform and with Bridges providing training and induction services and technical support. They observed that His Honour concluded that much of the control exerted was rendered mandatory by the controls imposed by the Corporations Law, Stock Exchange requirements and pronouncements by the Australian Securities and Investment Commission. They referred to Wilton v Coal and Allied Operations Pty Ltd [2007] FCA 725; (2007) 161 FCR 300 at [46], [145] - [157], [180] where the Federal Court held that an employee furnished by a labour hire company was not to be regarded as the employee of the mining company to whom the services were provided, despite the mining company's own supervisors having a power to give detailed directions to the employees as to the manner of carrying out their work.
4. In the Bridges case they said the following matters weighed with Gzell J. - the power of delegation exercisable by the representatives, the freedom of the representatives to choose the business structure in which activities were undertaken, the significant ratio of business expenses to which the representatives were subject, the fact that the representatives were free to employ the services of others or cause a family company or trust to employ others and all income tax and worker's compensation payments being the responsibility of the representatives or the representatives' company or trust.
5. As a result, they said, even if the OMBs were conducted by individuals in accordance with the analysis of Gzell J, they would not be regarded as Bank employees. In fact, the OMBs were conducted by corporate entities and this consideration 'ought to be fatal to the Commissioner's case'. The employees of the OMB were, they said, 'another step removed' from the Bank.
6. For all these reasons, they said that the Tribunal should conclude that the OMB employees did not perform duties in connection with the business of the Bank in terms of Section 9A(1)(a) or (d) of the 1971 Act or Section 71(3) of the 2007 Act.
7. Insofar as the Commissioner, as an alternative basis for his determination, said that the Bank and the OMBs could be carrying on the same business, they said this view was untenable. They noted that Ms Dicks' company, Myinsol, produced separate financial statements indicating it had its own income and expenditure for each relevant year from 2005 to 2008. They continued:

Neither party had an equity interest in the other. Neither were entitled to a share of the other's profits.

1. They said the Bank itself was a listed entity providing financial services and was subject to monitoring for the privity and capital adequacy ratios under an entirely different regime from the regimes governing the OMBs. Therefore, they submitted that no findings should be made that the Bank and the OMBs were conducting the same business for the purposes of Section 9A(1a)(b) of the 1971 Act or Section 71(1) of the 2007 Act.
2. They submitted, in any event, even if their primary submissions were rejected and the OMBs were 'grouped' with the Bank, the discretion existing under the 1971 Act and the 2007 Act to 'de-group' should be exercised in the Bank's favour. The factors which should lead to this favourable exercise of discretion, were, they said, the absence of a connection in the day-to-day management and carrying on of the respective businesses as between the Bank and the OMBs. Secondly, they said, the OMBs were entitled to carry out their obligations in any way they saw fit, provided it was in compliance with the agency agreement. The OMBs derived their revenues from the Bank and not from the Bank's customers. They conceded that the relationship between the Bank and the OMBs could be regarded as symbiotic but nevertheless they said the two businesses were quite different. They were carried on, they said, separately. They concluded:

The general exemption under the respective Payroll Tax Acts is designed to operate to the benefit of small businesses such as the OMB. It would be a somewhat perverse result if small franchisee businesses were at risk of becoming grouped with one another and with their franchisor for payroll tax purposes.

1. They also referred to two documents which had been obtained from the State Revenue Office under the Freedom of Information Act 1982. The first was a Memorandum of Advice re Payroll Tax liability of an unnamed franchisor employer where the advice led to the conclusion that grouping should not occur. The opinion concluded by stating 'we believe it is not the policy intent to group a publicly listed corporation with a group of "well known businesses"'. They also referred to a file note taken by an officer concluding that the Bank's franchise arrangement 'does not constitute a regular franchise agreement'. They submitted that his note indicated a misconceived approach on the part of the Commissioner's officer.

1. Mr Young of counsel appeared for the Commissioner. He noted, first, that the Payroll Tax Act 1971 was the applicable statute for the period 1 July 2003 to 30 June 2007. The 2007 Act applied to the year ending 1 July 2007 to 30 June 2008. Mr Young submitted, and Mr Crutchfield and Mr Wheelahan agreed, that there was no material distinction to be drawn between the operation of the two statutes, albeit that different language and drafting structures were employed. Mr Young focussed his submissions on the provisions of the 2007 Act on the footing that the same principles applied to the 1971 legislation.
2. For the purposes of the Commissioner's case it was said the employees of the OMBs which should be the focus of attention were those who dealt directly with customers such as loan officers and customer service officers. The relationship between the relevant entities was governed by an agency agreement. The agreement between the Bank and Ms Dicks' OMB operated by her company, Myinsol Pty Ltd, was to be found in an agency agreement.
3. He noted that since the OMBs were operated by corporate vehicles, they could only act through their employees. The agency rendered Clause 3.1 required the OMBs to operate 'as directed by the Bank'.
4. He laid stress on Clause 28 which dealt with the regime of authorised representatives in accordance with a regulatory regime laid down by the Corporations Act relative to dealings in financial products. The clause enabled an OMB to appoint one or more of its employees as an authorised representative of the Bank. There is also a provision for sub-authorisations. The Bank could terminate appointments of authorised representatives and require the termination of sub-authorisation. The agency agreement by Clause 7.1 requires the OMB to comply with the Bank's policies. Employees of the OMB were required to meet standards laid down by the Bank, Clause 7.3 and to comply with the training requirements of the Bank, Clause 10.4a.
5. He noted that the customers of the OMB were customers of the Bank. Those customers entered into contractual relations with the Bank and not with the OMB. This constituted a major distinction from well-known franchising agreements such as those operating in the fast food industry where customers purchased the fast food from the franchisee and not from the franchisor.
6. He noted that there is a comprehensive regime for the Bank to undertake audits of the OMBs and inspect their records. The Bank might conclude that based on material relative to an OMB's staff, it was not a fit and proper person to act as the Bank's agent. He referred to Clause 2.1(f) of the sample agency agreement.
7. Mr Young submitted that there was nothing in the decision of Pagone J in Commissioner of State Revenue v Liquid Rock Constructions Pty Ltd [2012] VSC 329 which derogated from that analysis. Insofar as the grouping of legislation requires that there be an employee of one employer performing 'duties' for another, this phrase he said did not have a fixed legal meaning. In a particular case, it had to be judged on a practical basis and on the basis of all relevant facts, including the operation of the agency agreement. In contrast to the situation in Liquid Rock Constructions, he said, this was not the 'mere provision of a service to someone by a person employed by another who is otherwise wholly independent'. There was, he said, an employee-like relationship between the loan officers and customer service officers in the Bank. He continued:

Those persons performed tasks in a way and manner like that expected of an employee albeit that there is no actual employer employee relationship.

1. He took me to the decision of Nettle JA as he now is, then sitting as a member of the Administrative Appeals Tribunal of the State of Victoria in D & D Tollhurst Pty Ltd v Commissioner of State Revenue (1997) 38 ATR 1001 where the Tribunal was considering whether financial planners working with a stock broking firm were employees for the purposes of the 1971 Act. Mr Nettle determined that they were.
2. Mr Young said that there was no 'franchising' exemption from the grouping regime in either of the Payroll Tax Acts. It was a distraction from the proper issues to approach this matter upon the assumption that franchising arrangements should necessarily be regarded as outside the statutory grouping regime. Each franchising arrangement needed to be analysed specifically. There was no fixed legal meaning to the concept of franchising. If it were submitted that the Bank's structure had been established with no purpose of payroll tax avoidance, this would not be ultimately significant. The presence or absence of an anti-avoidance purpose in structuring an enterprise was not a criterion either as to the initial determination by the Commissioner to group employers or as to any discretion which the Commissioner might have to de-group.
3. Mr Young submitted that the present was ultimately a simple and clear case for the operation of the grouping provisions. There was involved in the operation of the Bank and its OMBs a single business, namely, the Bank's business. The products being marketed were the Bank's products. The systems used were the Bank's systems. There was an extensive regime of practical and contractual control exercised by the Bank over the operation of the OMBs who were required to adhere in all respects to the Bank procedures and requirements.
4. The OMB employees, he submitted, could be regarded as in a like situation relative to the Bank as the financial planners in the D & D Tollhurst case were to the stockbroking firm where the Tribunal found that they were employees. The relationship here was not the same direct one, but it did constitute the employee-like relationship between the Bank and the OMB employees which distinguished the present case from the one considered by this Tribunal and Pagone J in the Liquid Rock case. The Administrative Appeals Tribunal in D & D Tollhurst found that the financial planners were 'mere conduits' between the customers of the stockbroking firm and the firm itself. The customer-facing employees of the OMBs were in a like situation.
5. All of the contentions related to the operation of Section 71(3) of the 2007 Act and the corresponding provisions of the 1971 Act; nevertheless, said Mr Young, if those contentions were not accepted, the same conclusion could be reached, he said, by reliance on Section 71(1) of the 2007 Act and the corresponding provisions in the 1971 Act. It should be found for the purposes of this submission, he said, that the OMBs in the Bank were 'collectively carrying on the same business of providing banking and financial services'. The agency relationship, he said, distinguished this case from Muirs Electrical Co Pty Ltd v Commissioner of State Revenue [2002] VSC 224 at 35 and from the decision of New South Wales Court of Appeal in Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 at [25] - [28]. He referred to the Bank's annual report stressing the link between the Bank and the OMBs. It followed, he said, that the employees of the OMBs 'perform duties in connection with the banking business that is carried on by [the Bank and the OMBs]'.
6. As to the issue of de-grouping: Section 79 of the 2007 Act and the corresponding provision of the 1971 Act require a consideration of three matters, namely: the nature and degree of ownership and control of the business, the nature of the business and other matters considered relevant by the Commissioner. De-grouping required a finding that the business carried on by the Bank was carried on independently of the business carried on by the OMBs and that the business was not connected with the carrying on of the business by the OMBs. He said both of these matters must be established for a favourable exercise of the discretion. He referred to Conte Mechanical and Electrical Services v Commissioner of State Revenue [2011] VSC 104 at [11].
7. As to these matters, he said, it was conceded that the ownership of each OMB was independent from the Bank but the nature and degree of control by the Bank over the OMB's business was 'critical'. He referred to the matters arising from the agency agreement and to the evidence, generally, establishing the extensive control exercised by the Bank over the OMB's business. He said, under the relevant arrangement, the range of products and services provided by the OMB, the location of its branch, its fit-out and use of the Bank's intellectual property was all subject to the control and approval of the Bank. The OMBs occupy premises leased by the Bank and the OMB was required always to act in the Bank's best interest, even where that was inconsistent with the OMB's best interest, Agency Agreement Clause 3.5(d). The computer system was provided by the Bank. The Bank was reliant on the OMBs in that they provided it with its branch structure. The OMBs had no business without the Bank and their income was generated wholly from the Bank's product. Therefore, it could not be said that the businesses were carried on independently of one another.
8. As to the material obtained by the taxpayer under the Freedom of Information Act, he said both the Commissioner and this Tribunal were bound by the law as laid down by Parliament and authoritatively stated by the Supreme Court. These rules could not be modified or diminished in any way by any expressions of opinion to be found in those documents.

1. Since the decision of the Tribunal [2011] VCAT 2164 and of Pagone J on appeal in the Supreme Court in Commissioner of State Revenue v Liquid Rock Constructions [2012] VSC 329 were extensively referred to, I should say something about the substance of that proceeding and what it might be regarded as having established for present purposes. The 'employee' in question in that case was a Ms Asvestas, an employee of Liquid Rock Constructions Pty Ltd. It was contended by the Commissioner in support of his grouping of the taxpayer and another company known as LRF, that Ms Asvestas was performing duties for LRF by providing typing services to it. I determined that, upon the evidence, whilst she did provide services to LRF, it was in circumstances where the provision of those services was at the discretion of Liquid Rock which controlled the order in which she carried out her typing tasks, whether they were done at a particular time or the following day or the following week. I concluded that it was insufficient for Section 71(3) to lead to a grouping of two employers that the employee of one provided services to the other. Performance of duties for the other required, as I found it, some sort of employee relationship between the worker and the second body or enterprise. On appeal, Pagone J quoted the analysis from my determination at [62] of the Tribunal determination and continued:

The "power" to direct, referred to by the Tribunal, was not a legal power flowing from a legal relationship akin to employment but the practical ability of direction in the performance of the tasks based on the evidence in that particular case. The subsequent reference in paragraph 65 of the Tribunal's decision of an "employee-like relationship" is therefore properly understood as the Tribunal's conclusion that the task required by the section involves an inquiry into factual behaviour indicating that the shared "employee" was performing tasks in a way and manner like that expected of an employee albeit that there was no employee relationship. The Tribunal's finding upon that analysis might not have been what the Commissioner had sought, but any error did not arise from an erroneous inquiry flowing from an erroneous construction of the provision but, at best, from an erroneous factual conclusion based upon the evidence. Accordingly, I do not consider the Commissioner to have shown a sufficient case of arguable error (as distinct, perhaps, from factual error) to warrant either the grant of leave or, if leave had been granted, for the appeal to succeed.

1. It was my reference in that determination, from which leave to appeal was denied, to an 'employee-like relationship' being required for the operation of Section 71(3), that led the parties in this case to an elaborate excursus on the distinction between employees and independent contractors. There is a vast jurisprudence on this subject. The parties placed a large number of judgments on this subject before me, indeed many more than were referred to in oral submission. I must resist the danger of being beguiled into focussing on that endlessly contentious issue to the exclusion of the words of the statutes which govern the outcome of this proceeding. As with the parties, I will focus upon the wording of the 2007 statute.
2. The present case is quite different from the Liquid Rock proceeding, there was no finding and, indeed, no contention that LRF's business was that of agent of Liquid Rock or vice versa.
3. Again, the franchising regime under which the Bank and the OMBs operate must be analysed as to its particular features, rather than being viewed as but an example of some universal phenomenon which has a fixed legal meaning, interpretation and operation. Mr Young was correct to draw the key distinction between this franchising arrangement and the arrangements which typically operate as perhaps the best known franchising arrangements in our society in the fast food industry.
4. It may be accepted, that if there were a direct relationship between the Bank and the 'customer facing' OMB officers, it would be a relationship of employer and employee. The absence of such a direct relationship, however, negates such a finding as a matter of general law. The D & D Tollhurst case is therefore not strictly in point. The High Court of Australia has, in the past couple of decades, repeatedly directed that statutes are properly construed by reference to the meaning of the words in the statutes themselves, rather than by an over elaborate reliance on case law. Focussing now on Section 71(3) with reference to loan officers and counter staff in Victorian OMBs of the Bank, the evidence establishes that they are employees of the OMB. They undoubtedly perform duties for the OMB. The question is, do they perform duties for or in connection with a business carried on by the Bank? Viewed in this light, the question is, what business or businesses is being conducted in the OMB? Is it the Bank's business? Is it the OMB's business or is more than one business being carried on in the branch?
5. Stripped to these essentials, it is surprising that the matter is not covered directly by authority. None of the cases to which I was referred seemed to address the questions raised by the words of the section in this direct manner. According to Halsbury's Laws of Australia:

The traditional view of the term 'agency' connotes an authority or capacity in one person (the 'agent') to create legal relations between the person occupying the position of principal in third parties. However it is not essential for an agent to have the capacity to actually create legal relations on behalf of the principal; an agent may be appointed to represent the principal in a less extensive manner, depending on the terms of the agent's authority, including merely to make representations on behalf of the principal. In each case, though, the critical element of the common law concept of agency is the representative capacity in which the agent acts viz a viz the principal.

Halsbury's Laws of Australia [15-5] 22,021 (Service 313) (footnotes omitted)

Agency is the fiduciary relationship which exists between two persons one of whom expressly or impliedly consents that the others should act on his behalf so as to affect his relations with third parties, and the other of whom similarly consents so to act or so acts. The one on whose behalf the act or acts are to be done is called the principal. The one who is to act is called the agent. ...

1. There is no doubt that the relationship between the Bank and the OMBs falls within these common law concepts. Again, there is no doubt that a person carrying on business solely as agent could be regarded as having his own agency business. An estate agent, for instance, may act solely as agent, albeit for a multiplicity of vendors or lessors.
2. It would be a piece of common usage to refer to an agency business. Memoranda of Association stating the objects and powers of companies which in the past commonly empowered them to carry on various types of agency business. The result seems to be, therefore, that a business is no less a business because it entailed the person or entity acting solely as agent. Again, it is a piece of common usage to speak of someone as 'carrying on business as agent'.
3. What are the features of the present arrangement which have been urged as leading to a finding that there is but a single business and that is the business of the Bank? The most substantial range of matters relied on by the Commissioner pertain to the level of control exerted by the Bank over the operation of the OMBs. It is appropriate to note, however, that there are limits to this level of control. An analysis of the agency agreement shows that the Bank is not given an authority directly to discharge OMB employees. The evidence regrettably did not disclose exactly who amongst the employees were necessarily appointed as authorised representatives or sub-authorised representatives for the persons of the Corporations Act. Mr Crutchfield and Mr Wheelahan drew attention to Section 766A of the Corporations Act which excluded from the concept of authorised representatives, persons who discharge the function of cashiers and clerks. The proposition, therefore, that all customer-facing employees would necessarily have to hold authorisations or sub-authorisations from the Bank appears not to be accurate. In any event, an OMB employee who had fallen out of favour with the Bank could still remain an OMB employee in a non-customer facing role, for instance, doing back office work.
4. Aside from questions of legal authority, as the evidence before me in this case showed, there is a very substantial practical measure of control accruing to the Bank given that the OMB operates though a computerised system. The Bank supplies the computer system, therefore the OMB must conduct processes entirely according to the Bank's computer model or its transactions cannot be completed. This practical compulsion is additional to any legal entitlements which the Bank has (and they are very extensive) to dictate particular modes of operation under the Agency Agreement. Does this measure of control mean that the business conducted at the branch is the Bank's business and not the OMBs? In my view it does not. Mr McComb, a franchising consultant said in an expert statement admitted into evidence:

The best known type of franchise today is the Business Format Franchise. The franchisor has developed a comprehensive system for doing business and permits the franchisee to use that full system in their own business. Each franchise operates according to a standard format. There are many examples of the Business Format Franchise in Australia, especially in retailing and the services sector.

We are all familiar with major chains that operate a Business Format Franchise model: fast food companies such as McDonalds, KFC and Pizza Hut; convenience food operators such as 7-Eleven and BP Express; automotive servicing groups such as Midas, Goodyear Auto and Ultra Tune; ...

1. As Mr Young observed, the goods or services supplied by these franchisees are goods and services of the franchisee itself, therefore, the franchisee contracted its customers as principals. The franchisee's business is necessarily, as a matter of law, separate from the franchisor's in these circumstances. The element of control which entails, as Mr McComb describes it, the imposition of a 'standard format' with no doubt similarly extensive and pervasive controls for the franchisor as possessed by the Bank here, does not alter this. Control in itself does not exclude the possibility that there is a separate business being conducted by the franchisee.
2. The very fact that these OMBs operate solely as agencies, does not, for the reasons already given, exclude the possibility that they are carrying on separate businesses. Clearly, an estate agent in the example which I gave earlier may operate as a separate business, albeit for a multiplicity of principals. Is the fact that there is but a single principal in the case of the Bank's arrangements fatal to the possibility of there being a separate business? I was referred to no authority that would render this consideration fatal to the existence of a separate business. These various factors therefore, do not exclude the possibility that the OMB conducts its own business, nor does it seem that the combination of these factors would be fatal either. Each OMBs, on the basis of the Richmond example and the evidence from its Director, Ms Dicks, has all of the indicia of an entity conducting its own business. They have income by way of commission and outlays for rent, depreciation, wages and salaries etc. As observed above, whilst there is a pervasive level of control both by legal entitlement and practical necessity (though the computer system) there are limits to this level of control, as previously explained. The provision in the agency agreement which Mr Young placed some reliance on, requiring the OMB to prefer the Bank's interests to its own, merely makes explicit what is implicit in the duties of an agent, as Bosted and Reynolds in the passage quoted above observe, agency is a fiduciary relationship and the obligation to prefer the interest of another over one's own is inherent in the very nature of fiduciary relationships. I conclude that the business conducted at the OMB is the OMB's business.
3. Reliance was also placed by the Commissioner on Section 71(1) of the 2007 Act which requires for its operation that there be one or more businesses 'carried on by the employer and one or more other persons'. The considerations which I have mentioned above lead me to the conclusion that the business which is carried on at the OMB is the OMB's business and not the Bank's. This conclusion would necessarily exclude any reliance on Section 71(1).
4. These conclusions render it strictly unnecessary for me to reach any conclusions as to the de-grouping discretion. It might be thought desirable for me to express a view against the possibility that this proceeding will go further. The problem is, however, that the de-grouping discretion would only become relevant if my reasoning above is found to be legally deficient. It is difficult for me to anticipate precisely the basis of any reversal which my determination might suffer. Accordingly, I could not be confident as to the premises upon which it might become appropriate to consider the exercise of the de-grouping discretion. In those circumstances, it is speculative and unhelpful to attempt to express a view as to de-grouping.