Bonner v Chief Commissioner of State Revenue

Statutory framework: NCAT review of determination made by Chief Commissioner

1. A taxpayer who is dissatisfied with an assessment or other decision of the Chief Commissioner may lodge a written objection with the Chief Commissioner: s 86(1) of the Taxation Administration Act 1996 (NSW). The Chief Commissioner must consider an objection and either allow the objection in whole or in part, or disallow the objection: s 91(1) of the Taxation Administration Act.
2. Where, as here, a taxpayer is dissatisfied with the Chief Commissioner's determination of an objection, they may apply to NCAT for administrative review of that determination under the Administrative Decisions Review Act 1997 (NSW): s 96(1)(a) of the Taxation Administration Act. In an application for review the applicant taxpayer has the onus of proving their case: s 100(3) of the Taxation Administration Act.
3. In determining an application made under s 96(1)(a) of the Taxation Administration Act, the Tribunal is to decide what the correct and preferable decision is, having regard to the material then before it: s 63(1) of the Administrative Decisions Review Act. The Tribunal may affirm or vary the reviewable decision, or set it aside and make another decision in substitution for that decision or remit the matter for reconsideration by the Commissioner: s 63(3) of the Administrative Decisions Review Act.

Statutory framework and principles: "employment agency contracts"

1. In New South Wales, payroll tax is imposed on all "taxable wages": s 6 of the Payroll Tax Act. The employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages: s 7 of the Payroll Tax Act.
2. Headed "Employment agents", Div 8 of Pt 3 of the Payroll Tax Act provides: … 37 Definitions (1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent. (2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client. (3) In this section - contract includes agreement, arrangement and undertaking. 38 Persons taken to be employers For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer. 39 Persons taken to be employees For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent. …
3. In Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058 ("Banfirn") at [25] Payne J summarised the principles applying to the operation of the above provisions: (1) The employment agency provisions were not intended to apply only to employment agents or labour hire firms as those expressions are said to be generally understood. That appears from the text of s 3C (the statutory predecessor to s 37) and s 37 and from the language used in other legislation at the relevant times regulating the licensing of employment agents. (2) The word "procure" in s 37(1) of the Payroll Tax Act means more than facilitate or enable and requires that the employment agent cause the services of a contract worker (or service provider) to be provided to the employment agent's client, with the expenditure of care or effort by the employment agent. (3) Section 37(1) of the Payroll Tax Act should be construed as referring to a contract under which a person (the employment agent) procures the services of another person "in and for the conduct of the business of the employment agent's client". (4) A number of verbal formulations have been offered about the identity of the contracts to which s 37(1) applies as being contracts: (a) where the services are provided by individuals "who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business"; (b) to help the client "conduct its business in the same way, or much the same way, as it would do through an employee"; and (c) where the service providers are "working in the client's business". (5) I agree with Ward CJ in Eq [in Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 at [105], [266]] that the question of whether a service provider is working "in and for" the conduct of the client's business can involve a fact-sensitive analysis with a focus on the manner in which the services are provided for the client. (Footnotes omitted.)

Grounds of appeal

1. Bella has a right to appeal against a decision made by the Tribunal on any question of law or, with the leave of the Appeal Panel, on any other ground: s 80(2)(b) of the Civil and Administrative Tribunal Act 2013 (NSW) ("NCAT Act").
2. The grounds of appeal centred on three purported findings made by the Tribunal: 1. that the models work "on site" of the clients: at [47]-[49] of the decision; 2. that the models were continuously or regularly employed by the clients: at [50]-[52]; 3. that the models were akin to the clients' staff: at [53]-[59].
3. In written submissions, Bella asserted that these findings were "factually incorrect and, even if factually correct, were wrong at law as a misapplication of the relevant tests".
4. In the Notice of Appeal Bella stated it did not seek leave to appeal. At the hearing of the appeal it reversed that position. For convenience, in addressing Bella's challenges in respect of the above three findings, we will not distinguish between those that could be characterised as giving rise to a question of law and those requiring leave of the Appeal Panel.

Decision under appeal

1. At paragraph [42] of its decision, the Tribunal summarised the submissions made by the Chief Commissioner, which it characterised as being largely accepted by Bella: (1) The Applicants acted as intermediaries between the clients and models. They sourced models for their clients and clients for their models: [10] (2) The models entered standard written agreements with the Applicants under which each model appointed the relevant Applicant at the time (Bella) as his or her exclusive agent for all branches of the modelling industry. The agreements required Bella to advise the model, offer career guidance, attempt to find suitable modelling jobs, negotiate modelling contracts between Bella 's clients and the model, and administer those modelling contracts by liaising between the client and model. The agency agreements require the model to "perform every [modelling] contract entered by you or on your behalf, fully and to the best of your ability": [12]. (3) Bella operated on a job-by-job basis and the models could accept or decline each job. Once a job had been accepted, and terms agreed with Bella negotiating on the half of the model, a written contract would usually be entered into although on occasions Bella negotiated and confirmed the terms of engagement by email without a formal contract: [13]. (4) The model attended a location determined by the client and worked under the client's supervision and direction. Neither Bella nor the model had any "significant control over the creative, casting or on-set decisions made during a shoot": [14]. (5) After completion of the job, Bella, on behalf of the model, invoiced the client for the model's work. Bella received payment from the client and then paid the model after deducting Bella's commission: [15].
2. The Tribunal went on to find: 1. Bella's models worked at locations selected by Bella's clients: at [49]; 2. some models worked regularly for the same client: at [50]-[52]; 3. it was unlikely the models determined entirely for themselves how they would work in a practical sense. However, the evidence was not clear as to where demarcation lines of "creative" control would lie: at [53]-[56]; 4. "having regard to the evidence … as a whole, and the positive onus on [Bella], I am not satisfied that the models, as service providers, are not effectively added to the workforce of the client for the conduct of the client's business…" at [57]-[58].
3. Applying those findings, the Tribunal concluded at [60] that for the purposes of s 37 of the Payroll Tax Act, Bella was an "employment agent", the models were "service providers" and the agreements between Bella and the models were "employment agency contracts".
4. The Tribunal went on to affirm the Determination, subject to reductions where payroll tax had already been paid by third parties, and penalty tax being remitted for the period from 14 March 2016: [98] and [100].

Impugned Finding 1: the models worked "on site" of the client

1. Bella contended that in finding that the models worked at a location determined by the client, the Tribunal made the "unavailable leap" that the models worked at "a worksite of the client". Bella contends that a location nominated by, say, retailer David Jones for a photo shoot, could not be said to be the "worksite" of David Jones.
2. In addition, Bella contended that there are more meaningful factors than the location where a model is required to attend to provide their services, which the Tribunal could have taken into account in determining whether they were working "in and for" the business of Bella's client. Bella contrasted the position of models who provide services to its "end users" and "brands", with the position of cleaners or security guards who work regular and predictable hours and are brought into a client's business on a regular basis. Bella contends that a more apt comparator would be a medical practitioner brought in to provide treatment to a sports player at a location nominated by the client sports organisation. That the practitioner provided services at a location nominated by the sports organisation could not be said to render the practitioner as working "in and for" that organisation.

Consideration

1. It is settled law that an "employment agency contract" within the meaning of s 37 of the Payroll Tax Act is a "contract" (defined by s 37(3) to include an "arrangement") under which a person (the "employment agent") procures the services of another person "in and for the conduct of the business of the employment agent's client": UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852 at [62]; JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 ("JP Property") at [72]; H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 at [118]; Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 ("Bayton Cleaning") at [94]; Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 at [67]; Banfirn at [25].
2. In deciding whether the services of Bella's models were provided "in and for" the conduct of the business of Bella's clients, the Tribunal examined three factors, coined by the Chief Commissioner as the "Bayton factors": see [44], referring to the Chief Commissioner's submissions dated 7 February 2020 at par 32.
3. The so-called "Bayton factors" is a reference to Bayton Cleaning in which Ward CJ in Eq considered whether cleaners provided by the plaintiffs (Bayton Cleaning Company Pty Ltd and International Hotel Services Pty Ltd) to their respective clients, which included aged care facilities, retirement villages and hotels, were working "in and for the conduct of the business" of each of those clients. At [267] Ward CJ in Eq stated: Insofar as the issue whether individuals are working "in and for the conduct of the business of the employment agent's client" is determined by reference to whether the "individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client's business" (to adopt the language in JP Property Services per Kunc J at [72]) or the individuals' services are provided to help the client conduct its business "in the same way, or much the same way, as it would through an employee" (to adapt the language of White J in UNSW Global), the more meaningful factors, in my opinion, are whether the services are provided on-site, whether they are provided with a degree of continuity or regularity (or are ad hoc), and the extent of interaction and supervision with or by the client's staff (and, where relevant, the client's customers or, in the case of retirement villages or aged care centres or hospitals or schools, the residents or users of services in those places). (Emphasis added.)
4. In our view the above passage is not authority for the proposition that the "more meaningful factors" identified by Ward CJ in Eq in Bayton Cleaning will necessarily be the "more meaningful factors" in all cases in determining whether the subject individuals are working "in and for" the conduct of the business of the employment agent's client. Her Honour prefaced her analysis with an express acknowledgement that the question of whether an individual's services are provided "in and for" the conduct of the client's business requires "a fact sensitive analysis" and "there may be nuances in the application of the test": at [105], [266]. That analysis requires consideration of the service provided, the business of the client and the connection between the two: JP Property at [75].
5. In this matter, the grounds of appeal were framed as a challenge to the three findings made by the Tribunal in respect of the "Bayton factors". In oral submissions Bella sought to enlarge those grounds by suggesting that there were more meaningful factors which the Tribunal should have taken into account in determining whether a model was working "in and for" the business of Bella's client. That contention was not raised in the Notice of Appeal or the written submissions in support of the appeal. Nor did Bella squarely identify the factors it subsequently contended the Tribunal should have taken into account. For these reasons, we will not address whether, as suggested, the Tribunal erred by restricting its consideration to the "Bayton factors".
6. The challenge by Bella to the "on-site" finding was made on two bases. First, Bella contended that that finding was "factually incorrect"; second, in making that finding, the Tribunal was said to have misapplied Bayton Cleaning.

Factually incorrect?

1. With respect to the first contention, the proposition that the Tribunal made the "unavailable leap" that the location where the models were required to provide their services was the client's usual workplace or place of business, must be rejected. The Tribunal simply noted the unchallenged evidence that the models were engaged to work at sites determined by each client: [47]. The Tribunal did not go on to decide whether those sites were the clients' usual workplaces or places of business.

Misapplication of Bayton Cleaning?

1. We understand this contention to be based on the Tribunal's reference at [48] to the expression "on-site", used by Ward CJ in Equity in Bayton Cleaning at [267] and set out at [26] above. We accept, as Bella contended, that Ward CJ in Equity used that term as a shorthand expression to describe the place of the client's workplace or business. However, Bayton Cleaning is not authority for the proposition, as Bella appears to have contended, that the provision of subject services at the place of business or workplace of the employment agent's client is a pre-condition to a finding that the subject individuals are working "in and for the conduct of the business" of that client. Rather, as discussed above, her Honour considered that in that case it was one of the "more meaningful factors" relevant to the determination of that question.
2. The Tribunal had before it competing submissions about whether the models worked at the place of business or workplace of Bella's clients. The Chief Commissioner urged the Tribunal to find that the models worked at the same workplace as Bella's clients, said to be "the sets or locations used by the clients to create advertising or promotional material": at [44]. Bella, on the other hand, urged the Tribunal to find that the location of a photo shoot was "an irregular and largely irrelevant location to the end user's business": at [45].
3. The Tribunal concluded at [49] that, "the selection by the clients of relevant locations for 'shoots' of the models is more important in these proceedings than whether the locations were or were not described by any particular persons as being 'on-site'". The Tribunal was not required to resolve the competing submissions made by the parties about whether those locations were or were not the usual place of business or workplace of the client. Nor was the Tribunal required to be satisfied that a location selected by the client was the client's usual place of business or workplace. Given the fact-sensitive nature of the analysis the Tribunal was required to undertake, it was for the Tribunal to determine the factors relevant to whether the models were working "in and for" the conduct of the business of Bella's clients and the weight to be given to each of those factors.
4. This ground of appeal is rejected.

Impugned Finding 2: the models were continuously or regularly employed

1. At [50]-[52] under the heading "Continuity or regularity of models as staff", the Tribunal rejected the submission made by Bella that there was no continuity of work: The models work ad hoc and on call: there is no expectation of future or further work.
2. At [51] the Tribunal considered an agreement between one of Bella's clients, fashion retailer Pretty Girl Fashion Group, and one of Bella's models, which provided that: 1. the model would be paid a fee payable by 12 equal monthly instalments; 2. during a specified 12 month "exclusivity period" the model was not permitted to work for a specified list of the client's competitors; 3. the model was required to be available for eight campaign and fortnightly "shoot dates" at dates to be advised; 4. the client was entitled to use the model's image in "instore POS, locks, swing tags and ticket toppers as well as other presentations including online, magazines, blog interview and banner advertising"; 5. without written permission from the client, the model was not permitted to alter her appearance; 6. at the election of the client, the agreement could be extended on a "12 x 12 month basis".
3. Bella contended that Impugned Finding 2 was against the weight of evidence and, further, misstated the nature of the engagements between its models and clients. In addition, Bella contended that the Tribunal gave selective consideration to the evidence, pointing out that the only contract referred to in the Tribunal's decision was the Pretty Girl Fashion Group contract. Bella argued that had the Tribunal taken into account the totality of the evidence, including that given by Bella's financial adviser Ms Maria Pollard, it would have reached a different conclusion. In an affidavit dated 2 October 2019, at par 5, Ms Pollard stated "models are engaged for specific jobs, and there is no expectation of return work from the same client".
4. In addition, Bella contended that even if the Tribunal's consideration was limited to the Pretty Girl Fashion Group contract, the model's engagement could not be said to be continuous but rather was limited to a "single campaign of a fixed duration".

Consideration

1. In the proceedings before the Tribunal, Bella had the onus of proving its case: s 100(3) of the Taxation Administration Act. In Cornish Investments Pty Ltd v Chief Commissioner of State Revenue (RD) [2013] NSWADTAP 25 an Appeal Panel of one of NCAT's predecessors, the NSW Administrative Decisions Tribunal, explained at [30]: The starting position is that the Tribunal must accept that the assessments are correct and that there is no entitlement to an exemption. If neither party adduced any evidence, the assessments would stand. This suggests that the Appellant's case must move the Tribunal away from the starting position.
2. The Tribunal concluded that the available material did not support the "no continuity of work" contention advanced by Bella. As the Chief Commissioner pointed out, the evidence before the Tribunal included other examples of models who were not engaged on an "ad hoc" basis. The Chief Commissioner referred to the letter before the Tribunal provided by another of Bella clients, fashion retailer 17 Sundays Pty Ltd, which stated "the talent we use will become a brand asset of 17 Sundays for a set time frame".
3. While there was evidence before the Tribunal of models being engaged by clients for a single day or a one-off engagement (see for example, s 58 documents pp 219-220, 223-230), there was also evidence of models who were not engaged on that basis, as the Pretty Girl Fashion Group and 17 Sundays contracts reveal. We reject the submission that the Tribunal made a "selective" finding.
4. The Tribunal did not find, as Bella suggested in this appeal, that in all cases there is a "degree of continuity or regularity" in the work performed by models for an individual client. The Tribunal simply rejected the contentions as framed by Bella that, "[t]he models work ad hoc and on call", and that, "there is no expectation of future or further work". It was open to the Tribunal to conclude that Bella failed to establish those contentions.
5. This ground of appeal fails.

Impugned Finding 3: the models were akin to the client's staff

1. Bella contended that the purported finding that the "models were akin to the client's staff" was "clearly wrong where the entire point of using [a] talent agency to procure a model's services is to obviate the need to keep various models employed as staff all year".
2. In addition, Bella contended that the Tribunal misapprehended the nature of the workforce of Bella's clients. Referring to David Jones, Bella asserted that its staff are the "individuals manning the counter and attending on customers at the store". Bella contended that, in contrast, David Jones engages models because "they bring benefits entirely absent from the David Jones workforce. They are not another cleaner, or another floor attendant, or even another member of the executive team". At the highest it could be said the models are working for David Jones not "in and for" the conduct of David Jones' business. This proposition is made good, Bella contended, by considering a model of notoriety such as the footballer, Cristiano Ronaldo or actor, Nicole Kidman, neither or whom could be said to supplement David Jones' workforce. Bella contended that a lesser known model is in exactly the same position.
3. It could not be said, Bella argued, that the fact that the models are required to follow directions on a photo shoot means that they are working "in and for" the business of David Jones. Their position, Bella contended, is analogous to that of an architect who, although given directions by the client, could not be said to be working "in and for" the client's business or to be a member of its ancillary staff.
4. The Chief Commissioner contended that as a "matter of common sense" Bella's clients would need to supervise and direct Bella's models on set, in order to achieve the desired "look" or "shot". He asserted that the limited evidence available to the Tribunal (pointing to the letters in evidence provided by fashion retailers 17 Sundays Pty Ltd and Taking Shape Pty Ltd), confirms the assertion that neither the model nor Bella has "any input into creative, casting or on-set decisions".

Consideration

1. Bella's challenge to Impugned Finding 3 conflates two questions: 1. whether the models were subject to the supervision and direction of the client?; and 2. whether the models were "effectively added to the workforce of the client for the conduct of the client's business"?

Supervision and direction

1. At [53]-[60], under the heading "Creative input by the models", the Tribunal considered whether, as contended by the Chief Commissioner and disputed by Bella, the "models worked under the clients' supervision and direction, with Bella and the models having essentially no creative input": [53]. The Tribunal observed at [54] that several of the agreements between Bella's clients and models, that were in the evidence, were largely silent on "which party could or would provide creative input or was required to observe creative directions". At [56] the Tribunal stated: [I]t is unlikely that the models solely determined for themselves how they would work in a practical sense. However, the evidence is not clear as to where demarcation lines of 'creative' control would lie.
2. The Tribunal was not positively satisfied that the models "had no creative input", as the Chief Commissioner contended. Nor was the Tribunal positively satisfied that, as Bella contended, the models did have creative input. Rather, it found the evidence to be "unclear" as to where the demarcation lines of creative control lay.
3. Bella's challenge to the supervision and direction/creative input finding was variously expressed as being against the weight of evidence and evidencing a misapprehension of the nature of the services provided by the models. Missing from the arguments advanced by Bella was any reference to the evidence before the Tribunal which supported Bella's contention that the models had creative control and were not subject to the supervision of the client.
4. The contention that the finding made by the Tribunal at [56] was "clearly wrong" or against the weight of evidence is rejected.

Addition to the workforce

1. At [58] the Tribunal stated: With respect I observe, and accept as applicable in this matter, Ward CJ in Equity's terminology at [271] in Bayton Cleaning "I consider that, having regard to the evidence as a whole, in a practical sense [the models formed]... an addition to the client's workforce and did provide [their] services in much the same way as the client's staff would otherwise have done had the services not been outsourced."
2. At [59], after referring to the "positive onus" born by Bella, the Tribunal went on to conclude: … I am not satisfied that the models, as service providers, are not effectively added to the workforce of the client for the conduct of the client's business in circumstances where those models have agreed to provide services to the relevant client in accordance with agreements negotiated between the relevant model and the client and perform work in accordance with those agreements.
3. While appearing under the heading "Creative input by the models", read in context it is plain that the conclusion expressed by the Tribunal at [59] was not based on Impugned Finding 3 but rather on the three impugned findings.
4. Apart from asserting that David Jones' workforce comprises shop assistants and the like, and that celebrities used to promote that retailer and/or its goods and services could not reasonably be considered to be added to David Jones' workforce, Bella failed to articulate the basis for the contention that the finding at [58] of the Tribunal's decision was against the weight of evidence or evidenced a misapplication of a purported legal principle. In addition, Bella failed to refer to the evidence which supported its contention that the models could not be considered to add to its clients' workforce. The Nicole Kidman argument does little to advance Bella's contention.
5. Arguably the Tribunal could have expanded on the reasons for its finding at [58]. Nonetheless we are not persuaded that that finding was against the weight of evidence or evidenced a misapplication of a legal principle.
6. This ground of appeal fails.

Leave to appeal

1. In oral submissions Bella sought to appeal on various grounds including that the impugned findings were against the weight of evidence or amounted to a "factual error that was … clearly mistaken". The premise on which the grant of leave is sought is not established; therefore it is not necessary to decide whether a "sound basis" for granting leave has been established: Collins v Urban [2014] NSWCATAP 17 at [84].

Orders 1. Leave to appeal is refused. 2. The appeal is dismissed.

I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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. Decision last updated: 22 June 2021