Bonner v Chief Commissioner of State Revenue

Solicitors: Mitry Lawyers (Plaintiffs) Crown Solicitor for NSW (Defendant) File Number(s): 2021/207323 Decision under appeal Court or tribunal: Civil and Administrative Tribunal Citation: [2021] NSWCATAP 180 Date of Decision: 22 June 2021 Before: A Britton (Principal Member) Dr J Lucy (Senior Member) File Number(s): 2020/371091; 2019/165259

Judgment

1. BASTEN J: The plaintiffs (each for a separate period of time) operated a business, acting as agents for persons seeking work as models in advertising and promotional material. The business also involved entering into contracts with clients to supply the services of such models. The clients involved both major retailers and separate production companies, the latter providing material on contract for other businesses, such as retailers.
2. The respondent, the Chief Commissioner of State Revenue, assessed the plaintiffs' liability for payroll tax under the Payroll Tax Act 2007 (NSW). The assessments covered the financial years 2014, 2015, 2016 and the first five months of the 2017 financial year. Up until 1 July 2016, the business was operated by the first plaintiff, Ms Chelsea Bonner. Thereafter, it was operated by Bella Management Group Pty Ltd ("Bella") of which Ms Bonner was at the relevant times the sole director.
3. Payroll tax is payable by an employer who pays "taxable wages". [1] Taxable wages are wages paid or payable by an employer for services performed. [2] The term "wages" means not only remuneration, commission, bonuses and allowances, but also "an amount that is included as or taken to be wages by any other provision of this Act". [3] The "other provision" relied upon by the Chief Commissioner was s 37, which appears in Pt 3, Div 8 of the Payroll Tax Act, a Division entitled "Employment agents".
4. Before the Chief Commissioner, the plaintiffs filed an objection on the basis that their contracts were not covered by s 37. The Chief Commissioner rejected the objection and the plaintiffs sought review of that decision by the Civil and Administrative Tribunal (NSW) ("the Tribunal"). On 15 September 2020 the Tribunal, constituted by Senior Member N S Isenberg, affirmed the decision under review, subject to minor amendments which are of no consequence for present purposes. [4] The assessment so confirmed included amounts for interest and penalty tax.
5. On 12 October 2020 the plaintiffs filed a notice of appeal in the Tribunal. The appeal was heard and determined by an Appeal Panel constituted by Principal Member A Britton and Senior Member Dr J Lucy. The Appeal Panel delivered its decision on 22 June 2021, both refusing leave to appeal and dismissing the appeal. [5] The significance of those orders will be noted shortly.
6. By summons filed on 20 July 2021 the plaintiffs sought leave to appeal to this Court. Pursuant to ss 82 and 83 of the Civil and Administrative Tribunal Act 2013 (NSW) ("the Tribunal Act") the appeal is limited to questions of law and leave is required.

Leave to appeal

1. The plaintiffs supported their application for leave to appeal on four bases. First, it was submitted that the amount in issue (some $315,000) was not insignificant and that the business would be subject to ongoing liabilities. Secondly, the operation of the employment agency provisions in the Payroll Tax Act involve matters of public importance. Thirdly, at least one aspect of the plaintiffs' case before the Appeal Panel had not been dealt with at all, namely their liability for penalty tax. Fourthly, the challenge to the decision of the Appeal Panel had sufficient merit, being more than reasonably arguable.
2. The Chief Commissioner opposed a grant of leave, primarily on the basis that no arguable error of law had been established on the part of the Appeal Panel.
3. The matter having been listed for a concurrent hearing of the leave application and the appeal, it is unnecessary, with one qualification, to address the merits of the arguments presented by the plaintiffs on a preliminary basis. Nor is it necessary to determine whether, as was assumed in the course of submissions, the relevant criteria for a grant of leave are those which have been applied by the Court of Appeal in granting applications for leave to appeal to that Court.
4. With respect to the matters set out in grounds 3(a) and (b) in the summons, which address the liability of the plaintiffs under s 37 of the Payroll Tax Act, there should be a grant of leave for the reasons identified by the plaintiffs. With respect to ground 4, dealing with the failure to consider issues relating to penalty tax, leave should be refused. For reasons which will be explained in more detail below, no arguable question of law was raised in that regard. Further, and perhaps consequentially, the ground involved no issue of public importance; the amount of the tax in issue was not relied upon.
5. For the reasons set out below, the appeal must be dismissed.

Statutory scheme

1. The source of liability relied upon by the Chief Commissioner, s 37 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.
2. There are certain consequential provisions. First, the employment agent under an employment agency contract is taken to be an employer: s 38. The "person who performs the 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": s 39. Finally, and sufficiently for present purposes, [6] "any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract" is taken to be wages paid or payable by "the employment agent" under an employment agency contract: s 40(1)(a).
3. Each of ss 37-40 is to be understood as definitional. There are two other provisions in Div 8. Section 41 recognises that there may be more than one person liable for payroll tax on the amounts paid to the service provider, pursuant to Div 8. It precludes double liability. Section 42 is an anti-avoidance provision which operates where "the effect of an employment agency contract is to reduce or avoid the liability of any party to the contract to the assessment, imposition or payment of payroll tax." The Chief Commissioner is empowered to disregard the contract.

Judicial glosses

1. In 2016, in dealing with assessments which had been made some 25 years after the commencement of s 37, the Court held that the intended scope of s 37(1), and in particular the words "procures the service of another … for a client of the employment agent", was limited to "a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client." [7] The italicised words are a gloss on the statute. They have acquired a label - the "in and for" test.
2. The justification for this gloss on the statutory language will be considered below. [8] However, uncertainty as to the intended scope of the additional words has led to a proliferation of glosses upon the gloss. Each additional phrase relied on for the purpose of limiting the statute has, on occasion, been applied as a matter of generality, without regard to (i) the circumstances in which it arose, (ii) the absence of textual support, and (iii) the other sections in Div 8.
3. In Banfirn Pty Ltd v Chief Commissioner of State Revenue, [9] Payne J noted a number of constraints on the operation of Div 8 which had been identified in earlier cases. Payne J identified "[a] number of verbal formulations [which] have been offered [in the cases] about the identity of the contracts to which s 37(1) applies". They were: [10] "(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'; [11] (b) to help the client 'conduct its business in the same way, or much the same way, as it would do through an employee'; [12] and (c) where the service providers are 'working in the client's business'. [13] "
4. I read Payne J's reasons in Banfirn, and in the earlier decision in Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue, [14] as guarded acceptance of these formulations, no contrary view having been argued. Each of the formulations lacks a basis in the statutory text, and, significantly, in each case the focus of the proposed qualification is upon the operation of the client's business, not on the contract to which s 37(1) applies.
5. In Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue, [15] Ward CJ in Eq also qualified her application of the judicial glosses. As summarised in Banfirn, [16] she held 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." [17] On the analysis set out above, it is an error to focus on the manner in which the services are provided for the client, unless such material would in some way assist in the characterisation of the contract. However, that was not the purpose of the proposed analysis, which turned on acceptance of the "in and for" test, but sought to limit the use of the cases as governing precedents.
6. It will be necessary to return to the reasoning in Bayton, which was said to have given rise, in direct contravention of the stated need for a "fact-sensitive analysis", to a set of "Bayton factors", which the plaintiffs contended should not have been applied by the Appeal Panel.

Legislative history

1. The legislative history need not be rehearsed, except to the extent that commentary based on earlier provisions has been repeated in disregard of changes in the statute.
2. In 1985 the Pay-roll Tax Act 1971 (NSW) was amended to include as "wages" "any amount paid or payable by way of remuneration by an employment agent … to a person who was engaged to perform services for a client of the employment agent". [18] At the same time s 3(4) was introduced: (4) For the purposes of paragraph (f) of the definition of "wages" in subsection (1), a person (… the "agent") is an employment agent if the person procures by an arrangement the services of a person (… the "worker") for another person (… the "client"), under which arrangement - (a) the worker does not become the employee of either the agent or the client but does carry out duties of a similar nature to those of an employee; and (b) remuneration is paid directly or indirectly by the agent to the worker or to some other person in respect of the services provided by the worker.
3. There was a patent lack of clarity in identifying a worker as someone who does not become an employee but does "carry out duties of a similar nature to those of an employee". That language was apt to focus attention on the business of the client in many cases, and, although it has long since been removed from the statute, the underlying concept continues to find reflection in the case law. The plaintiffs said the service provided must be "akin to an employee" and the models must work "in the same way as would an employee of the client". [19]
4. The 1985 amendments included two other provisions of limited direct relevance. The first was s 3A which introduced the concept of a "relevant contract". That concept included a contract under which a person supplied services to another person, subject to some substantial exclusions, including an exclusion of services of the kind "not ordinarily required" by the other person where the supplier "renders services of that kind to the public generally." Secondly, s 3B conferred broad powers on the Chief Commissioner to disregard an agreement, transaction or arrangement which had the effect of the reducing or avoiding the liability for payroll tax.
5. An explanatory note to the Bill identified the main relevant purpose as "to combat certain avoidance practices in relation to pay-roll tax". That description aptly caught s 3B; however, it was also intended to refer to s 3A, the explanatory note stating that the definition of "relevant contract" was "directed to capture several means of disguising the employer-employee relationship".
6. The concept of services "not ordinarily required" by the client has also continued to find reflection in the discussion of later provisions which do not contain that language.
7. The Parliament vacillated as to whether the employment agent or the client should be responsible for payment of payroll tax. Amendments by the Pay-roll Tax (Amendment) Act 1987 (NSW), Sch 1, changed the structure of the legislation, and made the clients of employment agents liable for payroll tax on wages paid to workers who performed services for them. (The identification of the party responsible had particular significance for the calculation of the threshold under which tax was not payable.)
8. The last of the significant amendments to the 1971 Act was effected in 1998. [20] Relevantly for present purposes, s 3A was amended to exclude from the category of "relevant contracts" employment agency contracts, which were in turn separately defined in s 3C. Section 3C was ultimately restructured in the 2007 Act as Pt 3, Div 8. It also identified the employment agent as the deemed employer liable to pay tax on the amounts paid to the contract worker by the employment agent. Section 3C used the term "contract worker" to refer to the person undertaking the work, rather than the current use of "service provider".
9. Significance has been placed in the cases on aspects of the Second Reading speech for the 1998 Bill. The Bill included amendments to seven separate statutes, of which the Pay-roll Tax Act 1971 was only one. Relevantly the Second Reading speech stated: [21] "The Pay-roll Tax Act currently provides that wages paid to temporary staff provided through employment agents are taxable in the hands of the end user of the labour services. … Traditionally, the majority of temporary staff have been accepted as common law employees of the end user. Some are deemed to be employees under the relevant contract provisions. The relevant contract provisions are anti-avoidance provisions designed to bring to tax wages paid to persons who are, to all intents and purposes, performing duties similar to those of employees. … To secure the traditional tax base and make taxpayers' obligations and point of liability absolutely clear, the Bill introduces specific provisions relating to payments to workers engaged through employment agents. The agent will not be liable for payroll tax, bringing New South Wales into line with Victoria, Western Australia, South Australia and Queensland."
10. Subsequent cases have treated the Minister as stating that the provisions relating to employment agents are "anti-avoidance provisions" which address persons "performing duties similar to those of employees." [22] In fact, that statement expressly referred to the "relevant contract" provisions from which category the Bill expressly excluded employment agency contracts. But even if s 3C were an anti-avoidance provision, the concept of anti-tax avoidance is inherently imprecise. It operates at the boundaries of tax liability and provides no substitute for close attention to the language adopted by the legislature. While it is not language which can readily be "substituted for the text of the law", [23] it is even less acceptable to treat such a provision as providing carte blanche to the courts to read down the effect of the statutory language. Such a reading down is, in effect, an attempt to limit or contradict the declared statutory purpose.
11. It is, accordingly, important to focus upon the statutory language in the present case.

Impermissible constraints

1. It is clear that the concept of procuring services of another person "for a client" is language of significant generality. It is clearly wide enough to encompass procurement which results in the client employing the service provider: so much is recognised by s 37(2) which excludes that case from the operation of subs (1). Nevertheless, language used in some cases, embraced by the plaintiffs, suggests that subs (1) must be read down to include only "employee-like" arrangements between service provider and client. Such a gloss finds no foothold in the statutory language; nor is it clear what it means. The most obvious example of such an arrangement is an independent contractor, but the plaintiffs sought to exclude such a possibility, which might be thought to include them. In their anxiety to limit s 37(1), agents tend to propose constraints which would eviscerate it.
2. The implication of an "employee-like" relationship between the service provider and the client is not consistent with the statutory language. For example, the taxable "wages" include amounts payable "by" the employment agent to the service provider. Further, the service provider is taken to be (for the purposes of the Act) an employee of the employment agent. The implication of an "employee-like" relationship between service provider and client is irrelevant to this structure.
3. A similar idea may have underlain the plaintiffs' submission that models were not, as a class, "homogenous", meaning that one could not necessarily or automatically replace another. Factually that may be so; however, its relevance to the construction of s 37(1) was obscure.
4. Again contrary to factors considered significant in some cases, there is no necessary implication that the work is to be performed "at" the workplace of the client, or that it be integral to or part of the "core business" of the client. For example, there is no reason to exclude a chauffeur obtained by an employment agency to drive the managing director of a client from the director's home to business premises, or between sites, or to meetings offsite. There is no room under the statutory scheme to impose some geographic limitation on where the work may be performed, nor to dissect the elements of the client's business to identify its "core". In defining an "employment agency contract" the statute focuses on the arrangement between service provider and employment agent.
5. The plaintiffs submitted that the Payroll Tax Act had to be construed by reference to the constraints and protections provided by the Entertainment Industry Act 2013 (NSW). That Act assumes that "performers" are independent contractors in relation to "a performer representative", a person having similar functions to that of an employment agent. Nothing in the Pay-roll Tax Act seeks to negate that assumption. There is no inconsistency requiring adjustment to render the legislative provisions harmonious. To derive some element of inconsistency from the deemed employment under s 39 would be to give s 39 too broad an effect. The deeming provision operates only for the purposes of the Pay-roll Tax Act. It has no more general consequence.
6. Next, the plaintiffs sought to draw a distinction between the "work" performed by the service provider and the "services" supplied by the employment agency to the client. The submission took different forms, but relied upon two propositions. The first was that the term "services" excluded the provision of a "result". Thus it was submitted that the models were engaged to provide "a result, not labour." [24] This distinction was said to follow from the definition of "services" for the purposes of the relevant contract provisions which stated that "services includes results (whether goods or services) of work performed": s 31. The absence of a similar provision in Div 8 was said to give rise to the inference that the provision of a "result" was excluded.
7. It is difficult to give meaning to this submission. Indeed, it is difficult to understand, except in a deliberately expansive sense, the intention of the definition in s 31. Division 8 must be construed according to its own language.
8. Secondly, the plaintiffs relied upon the linking term "for" in s 37, namely that the agency procures the services of the performer "for" a client of the agent. The plaintiffs submitted that the phrase "for a client" meant "in the business of a client". [25]
9. Neither of these submissions finds support in the language of the Division 8. Section 37(1) refers to a contract under which the employment agent "procures the services of" a model, in this case, "for a client of the employment agent." The service provided by the agency to the client is that of procurement of the model or service provider. The service provided by the model or service provider to the client is a different service. However, it is the service for which he or she was procured. Thus s 37(1) envisages that the service provider is a person who performs work "for and in relation to which" services are supplied to the client: there is no equation of work and services and the connection is expressed in terms permitting a significant degree of flexibility. The same point is articulated in s 40(1), referring to the amount paid "to or in relation to" the service provider, "in respect of" the provision of services, the services being rendered "in connection with" the employment agency contract.
10. Because the present case was dealt with by both parties in the Tribunal and before the Appeal Panel on the basis that the "in and for" test was correct, this appeal must be dealt with on that basis. However, it is also apparent from the above analysis that, properly construed, the same result (namely dismissing the appeal) should be upheld on a textual basis.

Nature of contracts

1. Evidence before the Tribunal included a document described as "an example management agreement between the models and Bella dated 2016." The first page included the name and address of the model, tax file number, superannuation details and bank account details. The terms covered a further two and a half pages. The first term read as follows: "(i) You appoint Bella Management … to be your Manager/Agent throughout Australia and Mother Agent throughout the world in relation to all branches of the modelling industry including: as a photographic model; as a performer in film, television and live commercials; appearances and performances as a mannequin; stage screen and television acting performances; all public social media representation; all activities related to your endorsing of products or services; and in respect of every other contractual arrangement which may be entered into to exploit your name or take advantage of your profession as a model/actor ('Activities'). (ii) In order to ensure you comply with the ATO guidelines and on the occasion that any client who engages your services does not itself deal with taxation and superannuation on your behalf, Bella will require your tax file number and will distribute any pay all tax and superannuation contributions on your behalf and you expressly agree that you have contracted us to facilitate the handling of your finances in regards to the contract."
2. The agreement was said to continue for three years. Under the heading "Manager's functions and duties" was the following: "You authorise and instruct us, and we agree, to do the following: (i) Advise you in all matters concerning your career and offer you guidance in all matters affecting you Activities; (ii) Promote you to our clients for all or any of the Activities; (iii) Negotiate all terms of contracts relating directly or indirectly to the 'Activities' and execute such agreements on your behalf; (iv) Administer any contract between you and a client; (v) Assist you to maintain, update and revise as necessary all your publicity material, social media, photography and portfolio; (vi) Upon your request and at your expense, arrange expert legal and accounting advice, if and when this becomes necessary; (vii) Endeavour to collect all your earnings from clients and to account to you for such earnings; (viii) Keep full accounts and financial records."
3. Under the heading "Manager's remuneration" the agreement read: "(i) We will deduct a commission of twenty percent (20%) calculated on the total gross sum of all moneys, wages, fees, sponsorships, advances, endorsements, royalties and other remuneration from all sources, obtained or earned by you in respect of your Activities for a period of three years from the date of signing. (ii) Commission is payable on all contracts negotiated and/or entered during the Agreement, whether they are fulfilled during or after the termination/expiration of the Agreement whether income or payment is received before or after such termination/expiration. (iii) If you accept remuneration in goods or some form other [than] money we shall be entitled to commission on the monetary value of that remuneration. We may deduct this sum from any money held on your behalf. (iv) It is specifically agreed that we may charge an agency fee of 10-15% to clients that engage your services. We will be solely entitled to that fee."
4. The agreement also provided for the manager to deduct the model's expenses incurred by the manager on the model's behalf. There was an agreement by the model for the manager to assign the benefit of the contract for the purposes of "corporate reconstruction or as part of a sale of all or any part of our business." The clause with respect to payment provided: "(i) We will pay on or before seven days from receipt of payment by the client. (ii) You will be paid the gross invoice sum in respect of your services less our commission, expenses and loans recoveries. (iii) If any invoice is not subsequently paid by the client we will make all attempts to recover the fee on your behalf but are not responsible for the payment if it is not eventually recovered. [Paragraph (iii) was repeated.]"
5. The agreement was not an employment contract with the models: it was, as it said, a management agreement for the purposes of obtaining work for the models with clients of the agency. The agency was required to negotiate contracts between the model and the client, administer the contract, receive payment from the client and, having deducted a commission and expenses, pay the balance to the model.

Issues in this Court

1. As stated in the plaintiffs' written submissions, apart from the appeal with respect to penalty tax, this was "a statutory construction case". [26] That engaged the condition for an appeal to this Court, an error on the part of the Appeal Panel in deciding a question of law. Although the plaintiffs' grounds of appeal contended that the Appeal Panel's decision to refuse leave to appeal and dismiss the appeal was "vitiated by error of law", it was not clear that the refusal of leave to reconsider factual findings was said to involve an error of law.
2. Paragraphs 1 and 2 under the heading "Grounds" in the Summons identified questions raised, not grounds.
3. Paragraphs 3 and 4 identified two relevant grounds which were structured as follows: "3 The Appeal Panel erred in dismissing the plaintiffs' appeal and erred in refusing to give leave to appeal for the following reasons: a. The Appeal Panel did not properly construe and apply the provisions of Division 8 of the [Payroll Tax Act], by reference to its text, context and purpose …. … b. The Appeal Panel did not properly construe and apply the provisions of Division 8 of the [Payroll Tax Act], by reference to the Entertainment Industry Act 2013 (NSW), as a relevant consideration of the statutory framework…. … 4 The plaintiffs' grounds of appeal included challenging the imposition of penalties and the remission of penalties (Ground 4). The Appeal Panel denied procedural fairness to the plaintiffs because it did not address Ground 4 in its reasons." Each of 3a and 3b had numerous particulars, which will be set out shortly. The structure demonstrates that questions of law were raised, but without demonstrating errors.
4. The thrust of the plaintiffs' case was identified in written submissions as follows: [27] "12. Properly construed, Division 8 of the [Payroll Tax Act] does not apply where the service provider (ie, the Performing Artist) is quintessentially independent, is retained to provide a result for the Client, and is not integrated into the Client's business."
5. It is convenient then to set out in full ground 3a from the summons, including its particulars, to identify the relevant errors. "3 The Appeal Panel erred in dismissing the plaintiffs' appeal and erred in refusing to give leave to appeal for the following reasons: a. The Appeal Panel did not properly construe and apply the provisions of Division 8 of the [Payroll Tax Act], by reference to its text, context and purpose, including that: i. The purpose of the employment agency provisions in the [Payroll Tax Act] (and its predecessor) is to ensure that employee-like arrangements do not escape payroll tax merely because there is an agent between the employee-like service provider and the client. ii. The 'mischief' against which they are directed is the avoidance of payroll tax through the interposition of an agent to give the appearance of a contractor relationship where one does not exist in substance. iii. The provisions' purpose, however, is not to expose all tripartite arrangements to payroll tax, and on their proper interpretation, they do not have that outcome. iv. It was Parliament's intention that that the employment agency provisions apply to, in substance, employee agency firms, as that term is commonly understood (that is, where the relevant individual is performing employee-like functions albeit by contracting with an intermediary rather than via an employment contract) - the legislative history and extrinsic material do not identify any other target. v. Thus, in the plaintiffs' case, neither the arrangements with the models or the clients can be an employment agency contract under the [Payroll Tax Act]. vi. The Appeal Panel's failure to properly construe s 37 of the [Payroll Tax Act] to the plaintiffs' case, by reference to its text, context and purpose led the Appeal Panel to err at AP [33], [41]-[42], [52], [57] and [59]."
6. The final reference to "AP … [59]" raised a challenge to the refusal of the Panel to grant leave to challenge a particular finding of fact, though ground 3a did not identify any error of law in that refusal.
7. The errors of law engaged by this ground remained obscure. Implicit in particular (iv) are two propositions, namely (i) the defined term in s 37 is to be given its "commonly understood" meaning, (ii) which catches an individual who is performing "employee-like functions" albeit by contracting through an agent rather than "via an employment contract". However, (i) was a proposition squarely rejected in UNSW Global and was not pursued in submissions, while to succeed on (ii) it was necessary to identify it as a legal criterion of liability, and one rejected by the Appeal Panel.
8. It is possible that the application of a legal principle may reveal an error of law in cases where the principle is correctly stated; however, application is more likely to involve a factual error than a legal question. Thus, particular (v), stating that the arrangements could not be an employment agency contract, purported to identify an error of law, but was an empty proposition without identifying the relevant established factual basis.
9. The written submissions for the plaintiffs did not focus on the particulars, but rather set out general propositions about the construction of the Payroll Tax Act. Discussion of the Appeal Panel's reasons was sparse and muted. The over-arching submission, as crystallised in writing and as pursued in oral argument, was stated in writing as follows: "64. Bella accepts that the 'in and for' test requires a fact-sensitive analysis of the client, its business and the services provided. However, the indicia arising from the cases that followed UNSW Global are only ever a guide and not a substitute for the text of the statute. The Appeal Panel (and the Tribunal) took too rigid an approach in applying the indicia espoused by the authorities (which both the Tribunal and Appeal Panel called the 'Bayton factors' - adopting the Chief Commissioner's term). The "Bayton factors" are not a replacement for the proper construction and application of s 37 of the [Payroll Tax Act], read in its text, context and purpose. 65. Properly construed, the Appeal Panel (and the Tribunal) should have interpreted s 37 of the [Payroll Tax Act] in the same manner as White J in UNSW Global. That is, in conducting the 'in and for' test it must be appreciated that the employment agency provisions were 'intended to apply to cases where the employment agent provides individuals who comprise, or would be added to, the workforce of the client for the conduct of the client's business': UNSW Global at [63]. And further, that the 'mischief apprehended by the legislature … was … the avoidance of payroll tax because it muddied the waters as to whether the individuals concerned might be classified as independent contractors, although they would be serving the same function for the client as its employees': UNSW Global at [63]."

Issues before the Appeal Panel

1. In order to demonstrate error of law on the part of the Panel, it is necessary to give close attention to the legal which the Panel was required to address, or which underlay its reasoning. [28] The internal appeal from the Tribunal to the Appeal Panel was an appeal as of right on a question of law and, with leave, on any other ground. [29] It is convenient to start with the grounds of the internal appeal.
2. The grounds of appeal before the Appeal Panel were identified in a notice of appeal filed on 12 October 2020 and read as follows: "1. The Senior Member was correct so far as allowing [a concession], but erred in otherwise affirming the Chief Commissioner's decision because the relevant models were not employment agents of the Appellant for the purposes of s 37 of the Payroll Tax Act 2007 (NSW). 2. The Senior Member erred in finding that the models: (a) worked 'on site' (at [49]); (b) contracting had elements of continuity or regularity as staff (at [51]-[52]); (c) did not determine their contracting processes (at [56]); and (d) were an addition to the clients' respective workforces (at [58]-[59])."
3. These grounds were unsatisfactory. Ground 1 did not identify an error of law, nor was it clear that the matters identified in ground 2 involved errors of law. However, the plaintiffs were permitted to reformulate their grounds before the Appeal Panel, which they did immediately following the hearing. Because there was a dispute as to whether the ground concerning penalty tax was pursued before the Appeal Panel, it is convenient to record the reformulated grounds, as they appear in the document filed on 22 January 2021: "1. The Senior Member erred in holding (at [49]) that the end client's ability to choose a location for modelling services, where the location was not the usual place of business of that end client, supported the conclusion that the model was working 'in and for' the end client. 2. The Senior Member erred in holding (at [52]) that there was no evidence supporting the models' engagement being ad hoc or on call because it was against the preponderance of evidence and limited itself to one agreement out of the entirety of the evidence before the Tribunal, such that the correct finding was that the models engagement being ad hoc or on call and, therefore, supports the conclusion that the models were not working 'in and for' the end client. 3. The Senior Member erred in holding (at [58]) that the end client or their staff had the ability to direct or control the performance of the modelling, the correct conclusion being that the end client did not have such ability and, therefore, supports the conclusion that the models were not working 'in and for' the end client. 4. Subject to relevance, based on the Appeal Panel's determinations, all penalties, not just from 14 March 2016 (when advice was obtained and in evidence), should be remitted because: they did use professionals and followed advice; they were acting in accordance with the industry standard and have a good compliance with their lodgements and tax affairs."
4. Whether any of grounds 1-3 involved a question of law remains obscure. The Appeal Panel stated: "[15] 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]. [16] 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'. [17] 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."
5. At [59], in refusing leave to appeal, the Appeal Panel stated: "[59] 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]."
6. Because the Panel, favourably to the plaintiffs, did not reject particular grounds as not involving any question of law, challenges to the Panel's findings can only be undertaken in this Court by first undertaking that task. The starting point is the Appeal Panel's reasons.

Finding 1: work done "on site"

1. The first issue identified by the Appeal Panel was the finding that the models worked "on site" for the clients. In the amended grounds of appeal to the Panel, the finding which was challenged was that "the end client's ability to choose a location … where the location was not the usual place of business of that end client, supported the conclusion" that the Senior Member erred in "finding that the model was working 'in and for' the end client."
2. The relevant conclusion of the Appeal Panel challenged in the summons was that set out at [33] of the Panel's reasons. It is convenient, however, to set out the reasoning which led to that conclusion.
3. First, the Appeal Panel accepted the test of work being done "in and for the conduct of the business of the employment agent's client", derived from UNSW Global. The Panel then identified what were described as the "Bayton factors" which the plaintiffs accepted that the Tribunal had applied but which they now say it should not have applied. (There was an element of approbation and reprobation in this approach.) The reasoning of the Appeal Panel was as follows: "[25] 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' …. [26] The so-called 'Bayton factors' is a reference to Bayton Cleaning in which Ward CJ in Eq considered whether cleaners provided by the plaintiffs … 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.) [27] 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]. [28] 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'."
4. It follows that the present challenge to the Panel's reliance on the "Bayton factors" was misconceived: to the (limited) extent the factors were adopted and with reservations as to how they should be approached in quite different factual circumstances, that approach involved no legal error. The fact that they were addressed at all was, as the Panel explained, an unavoidable consequence of the way the plaintiffs ran their case in the Tribunal and before the Panel. That explanation was not controverted in this Court.
5. The Panel's conclusions as to the alleged legal error were as follows: "[31] 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. [32] 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]. [33] 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."
6. On the hypothesis that the UNSW Global test was applicable, two propositions were correctly accepted by the Appeal Panel, based on the reasoning of Ward CJ in Eq in Bayton Cleaning. The first was that the test was to be applied having regard to what might be "the more meaningful factors" in the circumstances of the particular case. That in turn required a "fact-sensitive analysis" which would depend on the service provided, the business of the client and the connection between the two. In relation to cleaning services, the question whether the services were to be provided "on site", that is at the usual place of business of the client, was a meaningful consideration. In other circumstances, it may be less relevant or even patently irrelevant. There is no purpose in giving examples. There was no legal error identified in the reasoning of the Appeal Panel in this respect.

Finding 2: continuous or regular employment

1. The second impugned finding addressed by the Panel was whether or not the models were "continuously or regularly" employed by the client. The summons identified the challenged findings as those at [41]-[42] of the Appeal Panel reasons.
2. The concept of services being provided "with a degree of continuity or regularity" was language derived from the judgment in Bayton. How it was deployed by the plaintiffs in the present case appears from the submission noted by the Appeal Panel: "[37] 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'."
3. However, the submission that there was "no expectation of future or further work" was precisely the issue addressed by the Tribunal, as a factual matter, at [50]-[51]. The findings of the Appeal Panel under challenge were as follows: "[41] 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. [42] 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."
4. This was self-evidently the rejection of a challenge to a factual finding. The precise error of law revealed by the finding was not articulated. Indeed, the discussion occurs in a passage of the written submissions which accepted that "the indicia arising from the cases that followed UNSW Global are only ever a guide and not a substitute for the text of the statute." [30] So much may be accepted, but the next step was to state the proposed "in and for" test at a high level of generality: [31] "The relevant question therefore should first have been, are the Performing Artists independent contractors? And second, are the Performing Artists working for the Clients in the same way as would an employee of the Client (in essence, do the Performing Artists work in the Clients' business)?"
5. If the question of law raised in this Court were that the Appeal Panel misunderstood the question of law raised before it, that was not exposed by the grounds in the summons, nor in the course of submissions. The ground of appeal before the Appeal Panel was that the Tribunal had erred in holding that "there was no evidence supporting the models' engagement being ad hoc or on call". The finding of the Appeal Panel in that regard was twofold. First the question before the Tribunal was whether the evidence supported a conclusion that there was "no continuity of work" and "no expectation" of future or further work. The Tribunal rejected that submission, on the basis that the evidence demonstrated that there was a degree of continuity and an expectation of further work in some cases.
6. The plaintiffs' case before the Tribunal appears to have been run on the basis that no contracts constituted employment agency contracts for the purposes of s 37. One might have thought that that could only be determined by looking at the nature of the contracts with the service providers. It was difficult to understand how the criterion of taxation depended upon individual expectations. In any event, the Appeal Panel's conclusion turned on the proposition that all the Tribunal had done was to reject a particular criterion put forward by the plaintiffs as not established on the evidence. It is not possible to derive an error of law from that reasoning.

Finding 3: models akin to clients' staff

1. The challenge to the decision of the Tribunal was that "the end client or their staff had the ability to direct or control the performance of the modelling". The correct conclusion was said to be that "the end client did not have such ability". The finding in the reasoning of the Tribunal at [58], the subject of the challenge in the ground of the appeal to the Appeal Panel, followed the setting out of three passages from the reasons of Ward CJ in Eq in Bayton. The Senior Member continued: "[58] 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.'" She continued, saying that she was "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": at [59].
2. The Appeal Panel considered that the challenge to these findings conflated two questions, namely "whether the models were subject to the supervision and direction of the client", and whether the models were "effectively added to the workforce of the client for the conduct of the client's business". There was then said to be a dispute as to whether or not the models had "creative input" into the work. The Tribunal had accepted the plaintiffs' submissions that the models did have creative input. [32] However, it found the evidence "unclear" as to where the demarcation lines of creative control lay. The Tribunal concluded: "[51] This submission is not consistent with the Applicants' evidence. For example, the Applicants provided details of agreements entered into by their models at [12] to [15]. A particular example referred to at footnote 12 in [15] relates to a 'Bella model management' agreement made in November 2014. The agreement, at pp 181 - 183 of the s 58 documents, is signed on behalf of a named model by Ms Bonner for Bella and by a Group Marketing Manager of one of Bella's clients. The agreement includes the following terms: a fee divided into 12 equal monthly payments, exclusivity for the 12 month period and an agreement that the model will not work for a specified list of competitors during that period; 8 shoot dates comprising six full days and two half days with the dates to be advised; fortnightly shoot dates (again, dates to be advised); use of the models in on instore POS, locks, swing tags and ticket toppers as well as other presentations including online, magazines, blog interview and banner advertising. The model shall not alter her appearance for the duration of the contract without written permission from the client, nor shall she bring the brand into disrepute. The agreement includes a possible extension on a 12 X 12 month basis as required by the client. [52] Having regard to the contents of the above paragraph, I find that the Applicants' submission is not supported by the evidence before me and I reject the submission."
3. With respect to whether the models were "effectively added to the workforce of the client", the Appeal Panel set out the findings of the Tribunal at [58] and [59], noting that the final conclusion was based on the three impugned findings. The Panel then noted the submission that David Jones' workforce comprised shop assistants and that celebrities used to promote the retailer could not reasonably be considered as having been "added to" David Jones' workforce: at [56].
4. The Panel stated that the Tribunal "could have expanded on the reasons for its findings at [58]", but the Panel was not persuaded that the finding "was against the weight of evidence or evidenced a misapplication of a legal principle": at [57].
5. Two comments may be made about that conclusion, although neither of them favours the plaintiffs. The first relates to the apparent attempt to treat language found in judicial decisions as if it were language in the statute. Factual considerations which might be useful in one context may or may not be useful in another, or may be useful in a different way. To identify factors which may assist in knowing whether the amounts payable to a service provider under an employment agency contract are taxable or not depending on whether the service provider ends up in an "employee-like" relationship with the person for whom the services are provided, or undertakes the work "as if" added to the client's workforce, is to employ language with no precise application and no precise legal meaning, so that its misapplication could not constitute an error of law.
6. Secondly, the Panel's apparent assumption that a finding which was "against the weight of evidence" involved an error of law was mistaken. It is sufficient to refer to the well-known statement of Glass JA in Azzopardi v Tasman UEB Industries Ltd [33] dealing with the limits of an appeal for error of law: "To say of a finding that it is perverse, that it is contrary to the overwhelming weight of the evidence, that it is against the evidence and the weight of the evidence, that it ignores the probative force of the evidence which is all one way or that no reasonable person could have made it, is to say the same thing in different ways. Upon proof that the finding of a jury is vitiated in this way, it will be set aside because it is wrong in fact. Since the Act does not allow this Court to correct errors of fact, any argument that the finding … is vitiated in the same way discloses no error of law and will not constitute a valid ground of appeal."
7. There may be a qualification to be made with respect to this reasoning in relation to a manifestly unreasonable finding or a finding for which there is no probative material which would support it. However, as Glass JA further noted, the party bearing the onus of proof cannot rely on such a ground because "alleged insufficiency of evidence to prove a fact always raises a question of law but alleged sufficiency of evidence to the point of conclusiveness cannot, since it assumes that the evidence has been accepted. The party not bearing the onus puts an argument, which assumes against himself that the evidence has been accepted, but submits that it is not capable of establishing the fact. The party saddled with the onus on the other hand cannot assume in his favour that the evidence is or ought to be accepted since this trenches upon the liberty of the tribunal of the fact to accept or reject any evidence." [34]
8. Whatever the weight of that authority, it is difficult to identify any error of law in the reasoning of the Appeal Panel. None was identified by the plaintiffs.
9. For these reasons, ground 3a, in so far as it challenged specific findings of the Appeal Panel, must be rejected. To the extent that the particulars extended beyond any specific ground, they cannot establish error in the Appeal Panel on any question of law presented to it or which was implicit in submissions made to it.

Ground 3b: failure to apply the Entertainment Industry Act

1. Although this ground may be rejected on a limited basis, it is appropriate to set out the ground in full with its particulars: "b. The Appeal Panel did not properly construe and apply the provisions of Division 8 of the [Payroll Tax Act], by reference to the Entertainment Industry Act 2013 (NSW), as a relevant consideration of the statutory framework: i. The plaintiffs' arrangements are subject to the provisions of Division 1 of Part 2 of the Entertainment Industry Act 2013 (NSW) (Entertainment industry obligations). ii. The plaintiffs are and were a 'performer representative', as defined in s 5 of the Entertainment Industry Act 2013 (NSW). iii. A performer representative is a person who, for financial benefit, provides or agrees to provide specified services to a 'performer'. iv. The term 'performer' is defined in s 4 of the Entertainment Industry Act 2013 (NSW) to mean (emphasis added) 'any actor, singer, dancer, acrobat, model, musician or other performer of any kind who enters an entertainment industry agreement with a performer representative'. v. By s 5 of the Entertainment Industry Act 2013 (NSW), a 'performer' is not, inter alia, an employee of the 'performer representative'. vi. The models are not the plaintiffs' employees as prescribed by ss 4 and 5 of the Entertainment Industry Act 2013 (NSW). vii. It was necessary for the Appeal Panel to consider the Entertainment Industry Act 2013 (NSW) in order to properly construe and apply s 37 of the [Payroll Tax Act], including that the models are not the plaintiffs' employees. viii. The proper construction of s 37 of the [Payroll Tax Act] is mandated by reference to the text, context and purpose of the section, the relevant legislative history and extrinsic material, and ss 4 and 5 of the Entertainment Industry Act 2013 (NSW) - provisions and material which were the subject of the plaintiffs' submissions to the Appeal Panel but, at least in relation to the Entertainment Industry Act 2013 (NSW), were ignored by the Appeal Panel. ix. Having regard to the text, context and purpose of s 37 of the [Payroll Tax Act], and ss 4 and 5 of the Entertainment Industry Act 2013 (NSW), neither the arrangements with the models or the clients can be an employment agency contract under the [Payroll Tax Act]. x. The Appeal Panel's failure consider to the effect of the Entertainment Industry Act 2013 (NSW) and therefore failure to properly construe s 37 of the [Payroll Tax Act] by reference to the Entertainment Industry Act 2013 (NSW) led the Appeal Panel to err at AP [33], [41]-[42], [52], [57] and [58]."
2. The Entertainment Industry Act was referred to but briefly in the plaintiffs' written submissions. The thrust of the analysis of the Entertainment Industry Act was that the industry is regulated "on the basis that the performers are not employees of the performer representative or the client and it is not envisaged that an employment relationship exists between these entities." [35] It was then stated that "the Appeal Panel did not have regard to the terms and operations of the Entertainment Act" in interpreting s 37 of the Payroll Tax Act.
3. There were three problems with this submission. First, the Entertainment Industry Act post-dated s 37 of the Payroll Tax Act by 15 years. It was not explained how the meaning of s 37, properly construed, should be affected by such later legislation. For reasons already explained, the two Acts covered entirely different territory. Nothing in the Payroll Tax Act affected the relationship of the parties for other purposes.
4. Secondly, while it is true that the Appeal Panel did not consider the operation of the Entertainment Industry Act, it did not do so because it was not raised as a ground of appeal before it. The Panel did not err on any relevant question of law by failing to take the Entertainment Industry Act into account.
5. Thirdly, and no doubt unsurprisingly given the first difficulty, no error was identified in the reasoning of the Tribunal, which might in some way have been implicit in the reasoning of the Appeal Panel. The plaintiffs relied upon the Entertainment Industry Act to establish that "the models are not their employees". [36] However, that Act was not identified by the parties as giving rise to any issue for determination. [37] To the extent that the discussion at [125]-[128] took the matter any further, it was merely to note that the Tribunal rejected the submission that "because the industry is regulated on the premise that there is no employment, or wage, relationship between the applicants and the talent", that supported "the applicants' contentions otherwise set out in these submissions". [38] As a matter of fact, the Tribunal did not accept that the plaintiffs operated under the Entertainment Industry Act as they conceded that "income derived from work by models was paid by the [the plaintiffs] into a Bella Management general account" and that "no trust account was operated by [the plaintiffs]". [39]
6. The proposition in ground 3b(vi) that the models were not the plaintiffs' employees for the purposes of the Entertainment Industry Act may be accepted, if that Act applied to their operations at the relevant time. However, as explained above, that has no consequence for the construction and application of s 37 of the Payroll Tax Act. Accordingly, there is no substance in the ground: ground 3b must be rejected.

Ground 4: failure to consider penalty tax

1. Ground 4 stated that the revised grounds of appeal filed after the hearing included a challenge to the imposition of penalties and the failure to accept an application for remission of penalties. The failure to consider the ground was said to constitute procedural unfairness to the plaintiffs.
2. There is no dispute that issue 7 before the Tribunal asked whether penalty tax should be remitted. Section 33 of the Taxation Administration Act 1996 (NSW) provides for the Chief Commissioner to remit penalty tax "in such circumstances as the Chief Commissioner considers appropriate". The plaintiffs bore the onus of demonstrating grounds upon which the tax should have been remitted. The plaintiffs' submission was based on the proposition that they "took reasonable care to comply with the taxation law". They accepted that they bore the onus of establishing that they had done so. [40] The Tribunal found there was "no evidence … that [the plaintiffs] sought relevant professional internal or external advice before 14 March 2016." [41] The Tribunal was therefore not satisfied that the plaintiffs took reasonable care to comply with the tax law. [42] (The Chief Commissioner had accepted that the plaintiffs obtained relevant advice on 14 March 2016 and no penalty tax was levied thereafter.)
3. The plaintiffs' notice of appeal to the Appeal Panel did not mention the finding with respect to penalty tax in the statement of grounds. The plaintiffs did seek relief from penalty tax and interest, but presumably on the basis that they were not otherwise liable for payroll tax.
4. In these circumstances, it is necessary to go to the proceedings before the Appeal Panel to note how the issue arose and came to be included in the revised statement of grounds of appeal filed after the hearing in the Appeal Panel.
5. In written submissions dated 25 November 2020, the plaintiffs stated, under the heading "Penalties": "42. It is clear that the Appellants: (a) were acting in accordance with advice from professionals, properly engaged; (b) were acting in accordance with the industry standard; and (c) have not had any other tax issues or disputes with the Chief Commissioner …. 43. For these reasons, and the reasons advanced before the Senior Member, the proper application of the penalty provisions is to impose not [no?] penalties or otherwise remit them in full." In order to provide evidence to support the factual allegations, two further affidavits were proffered.
6. In written submissions in response filed on 15 December 2020, the Chief Commissioner noted his concession (accepted by the Tribunal) that the plaintiffs took reasonable care to comply with the taxation law from 14 March 2016 because they had received advice on that date from a registered tax agent, to the effect that they were not liable for payroll tax. The Chief Commissioner also agreed that the penalty tax would fall away if the primary tax were not payable. Otherwise he submitted that there was "no reason to revisit the issue of penalty tax. The appellants' attempt … to reopen the issue based on new evidence should be rejected. No explanation has been given for failing to adduce that evidence at first instance." [43]
7. The plaintiffs' written submissions before the Appeal Panel had identified three critical findings in par 17, namely that the models (a) worked on site for the client, (b) were continuously or regularly employed, and (c) were akin to the client's staff.
8. Early in the course of the hearing on 22 January 2021, counsel for the plaintiffs summarised the issues in dispute by reference to the three matters noted above. [44] The Principal Member then took him to the three errors set out in par 17 of the written submissions and went through each of (a), (b) and (c) with him. [45] It then appeared that there had been some difficulty in identifying the footnotes in the document provided to the Appeal Panel and counsel offered to provide a further copy, an offer accepted by the Principal Member, who continued: [46] "And what we would also ask, just so there can be no cross-purposes and noting that we will probably prepare this before we have the benefit of transcript, is that, if you could put in writing the grounds that you have just read out, the three grounds, as framed." Subsequent discussion addressed the "three grounds". [47]
9. After counsel for the plaintiffs (Mr Bennett) had completed his submissions, the following exchange took place: [48] "MS BRITTON: Okay. Thank you. Now, you foreshadowed at the start, Mr Bennett, that you wanted to raise this issue of penalty. Given the discussion we had in relation to ground 2 and what I've characterised as 'an ambitious requested order', is penalty relevant? MR BENNETT : Most likely not. I was merely going to make a submission in case it became relevant in your examination and to be upfront about it, the submission is actually one that may assist the Chief Commissioner. We put the submission regarding penalty in our written submissions at 42 and we stated the three bases ... justified full remission … relying on advice from professionals ... the industry standard and …. But the only submission I wanted to make further for completeness and openness is that, if the tribunal looks to Mr Stretton's submissions they note the concession fairly made by the Chief Commissioner that penalties were remitted from the date we could prove we received advice regarding payroll specifically. The only point I intended to make when I raised these earlier in the appeal is, whilst we press our submission, if we get to the issue of penalty, I also ... have to be heard again ... Mr Stretton's position because that is a - an obvious integer in time and there's a concession we say fairly made by Chief Commissioner. And, whilst we press the penalty submission, we don't …. MS BRITTON: Excuse me for a moment. I am having a little bit of difficulty of just understanding precisely that. Mr Bennett, are you saying that we ought not consider the - I mean, ... are you withdrawing the penalty issue? MR BENNETT: No. In fact, I will withdraw the submission I just made. I don't need to be heard on that. ... And I accept in doing that, I accept that it may be that the appeal panel ... to the issue of penalties because the - what we've discussed when you used the 'ambition' shorthand. MS BRITTON: Yes. Okay. So I think - I take that as you sort of accept that we probably won't get to the penalty point, even if you were successful. MR BENNETT: Yes. MS BRITTON: Yes. Thank you. Mr Stretton, anything further from you on any of those issues? MR STRETTON: Principal Member, just on the issue of penalties, I'm not entirely sure where we ended up on that, but, just for the record, I object to any new evidence being read on the issue of penalties ... specifically the affidavit of Ms Bonner …. MS BRITTON: Okay. MR BENNETT: We don't seek to read that affidavit. … MS BRITTON: Thank you. … So just coming back to the housekeeping, Mr Bennett, if you could send a copy of the - your submissions and attend to the footnoting issue that we raised earlier and also, as we've requested, if you could just put in writing the formulation of the grounds as you outlined today. MR BENNETT: May it please, I will do that this afternoon."
10. It was clear from these exchanges that no further evidence was read with respect to the remission of penalty tax. There was no challenge to the finding of the Tribunal that there was "no evidence" to warrant remission of tax before the conceded date, namely 14 March 2016. No submissions were made in respect of penalty tax, other than the Chief Commissioner's objection to the claims noted at [94] above, made without evidence. Finally, the leave granted to reformulate the grounds patently related to the three grounds discussed earlier in the passages from the transcript noted above. These did not include any challenge in relation to penalty tax.
11. There are two possible ways in which the inclusion of ground 4 (penalty tax) in the reformulated grounds may be addressed. First, because no leave was given to rely upon such a ground the inclusion of it in the document provided after the hearing was an abuse of process. If so, there was no need for the Appeal Panel to address it in its reasons for decision.
12. Alternatively, if it were permissible to include the additional ground, there was no evidence to support it, no application for leave to rely upon new evidence to challenge a factual finding, and no submissions in support of the ground other than the statement that certain facts existed, contrary to those found by the Tribunal. Again, there being nothing material to support the ground, the Appeal Panel was not required to address it.
13. The preferable view is that the inclusion of ground 4 was an abuse of process. However, on either view, there was no obligation on the Appeal Panel to address the ground. It could not, therefore, be said that there was some constructive failure to complete the task on which the Appeal Panel was engaged. Ground 4 in the summons must be rejected.

Determination of appeal

1. For these reasons, the appeal must be dismissed with costs.

A textual construction of s 37

1. The range of implied constraints on the statutory language proposed in the case law has already been addressed: it was suggested at [41] above that, absent the impermissible glosses, the appeal would founder on a textual approach to s 37. In 1960, in a case involving the meaning of the phrase "in the course of his employment" in workers' compensation legislation, Windeyer J stated: [49] "To prefer the gloss to the text is an old and besetting temptation for lawyers, and, judging by many judicial protests, one much yielded to in this branch of the law. For example, Lord Loreburn said in 1917: 'I should not have thought it possible that the process of perverting an Act of Parliament by divorcing judicial expressions from their context and from the subjecta materies could have been carried so far as it has been in some of the arguments I have heard on this statute'. [50] " Windeyer J returned to the theme some eight years later in a case dealing with s 92 of the Constitution: after noting the "old and besetting temptation" he continued: [51] "There is often not only a preference for new words instead of the old, but also a mistaken use of analogy. The text becomes submerged in the illustrations."
2. The temptation besets the construction of s 37. In UNSW Global, with which the analysis of the parties in this case commenced, White J declined to give the provision its natural and ordinary, or literal, meaning because that would lead to "an absurd or unreasonable result." [52] Examples were given of "far reaching and unintended consequences." [53]
3. White J noted that the Chief Commissioner "accepted", or "ultimately accepted", that the scope of the employment agency contract definition should be "confined by the notion that it applied only to a person who could otherwise be regarded as an employment agent, that is to say, could be regarded as an employment agent otherwise than merely from the fact that he or she or it procured the services of another person for a client." [54] White J continued: "[51] This argument was propounded by the taxpayer in Freelance. I there rejected the argument. I said …: '[151] If s 3C (or s 37) were intended to apply only to the activities of the employment agents, as that expression is said to be commonly understood, subs (1) would not have defined an 'employment agent' for the purposes of the Act by reference merely to any person who by arrangement procured the services of another for a client of the employment agent etcetera. The section could simply have provided that an employment agency contract was one under which an employment agent procured the services of another for a client of the employment agent etcetera. If Parliament thought that there was not a common understanding of what an employment agent is, then there was a definition readily to hand in s 702 of the Industrial Relations Act 1991 (NSW) (and formerly in s 145B of the Industrial Arbitration Act 1940 (NSW)) which provided that a person carried on the business of a private employment agent if he acted as an agent for the purpose of finding or assisting to find a person to carry out work for a person seeking to have work carried out, or finding or assisting to find employment for a person seeking to be employed, whether pursuant to a contract of employment or otherwise (see later s 60P introduced to the Fair Trading Act 1987 in 2002). [152] I do not consider that the fact that the activities of employment agents or labour hire firms was an intended focus of the provisions justifies the conclusion that it was the only intended focus of the provisions such that the word 'procure' should be construed as applying only to the activities of employment agents or labour hire entities in sourcing, vetting and supplying persons to clients. Freelance carries on the last activity, that is, supplying persons' services to clients on Freelance's behalf. It procures those services by arranging or causing the performance of work by the contractors for the client to occur through the contracts it enters into with its clients and the business structure provided to its contractors.'"
4. The judge ultimately abandoned the approach adopted in Freelance Global, [55] preferring a "purposive construction" advanced by UNSW Global which was not advanced in Freelance Global. [56]
5. With respect, this reasoning is not altogether persuasive, for several reasons. First, the difference between the argument propounded by the taxpayer and rejected in Freelance Global and that advanced by UNSW Global appeared to be more a matter of degree than novelty. Secondly, there was no consideration of the extent to which a single judge of the Court is bound by an earlier judgment on precisely the same legislation in similar circumstances, whether or not it was given by the same judge. Arguably the test which applies to earlier judgments of intermediate courts, namely that there must be "compelling reasons" to depart from the earlier decision, should apply in principle to single judges of the Supreme Court. [57]
6. As to the substance, the starting point for the change in reasoning was a submission that, were the Chief Commissioner's contentions to be accepted, "many like arrangements would attract payroll tax which could not have been contemplated by Parliament." [58] Examples were given: it suffices to consider two. The first was said to be "barristers engaged by a law firm for clients of that firm … [which] would be liable to pay payroll tax on the payments made by the law firm to a barrister chosen by the law firm, for the services provided by the barrister to the client of the law firm." A second example was identified as "[p]ayments to an interior designer engaged by an architect to design the interiors of the architect's client's home". The assumption was that each of these examples would be caught by s 37 if the language of that section were given its ordinary and literal meaning. It was then concluded that that outcome would be "absurd and unreasonable" and that the text must therefore be "read down" so as to avoid that conclusion.
7. However, White J in UNSW Global, as he had done in Freelance Global, rejected a contention that weight should be placed on the ordinary meaning of "employment agency", in place of, or as a constraint on, the defined term. The rejection of the submission was undoubtedly correct. The submission disregarded clear statements in the High Court dismissing such an approach, as in Owners of the Ship 'Shin Kobe Maru' v Empire Shipping Co Inc, [59] and noting the potential circularity of such reasoning, as in Independent Commission Against Corruption v Cunneen. [60]
8. Rather, UNSW Global placed weight on the intended "mischief" addressed by the amending legislation of 1998, as derived from the Second Reading speech set out at [29] above. As has been noted, it is by no means clear, (i) that the Minister was referring to employment agency contracts as opposed to "relevant contracts", and (ii) what was being identified as "tax avoidance". Division 8 is not expressly an anti-avoidance measure; rather, it has an anti-avoidance measure within it, namely s 42. The definitional provisions in Div 8 contain no requirement of a tax avoidance intention or effect. Nor have the glosses on the statutory language expressly adopted such a criterion. Indeed, it is not possible to define an implied limitation by reference to such an indefinite criterion.
9. Thus, supposing Div 8 is a set of tax avoidance provisions, it may be doubted whether significant assistance as to the boundaries of its operation may be gleaned from statements at high levels of generality. On occasion the High Court has placed significant emphasis on such extrinsic material, as in The Queen v A2, [61] but less often in tax cases. As Gleeson CJ said in Carr v Western Australia: [62] "[5] … In the interpretation of a provision of an Act, a construction that would promote the purpose or object underlying the Act is to be preferred to a construction that would not promote that purpose or object.… That general rule of interpretation, however, may be of little assistance where a statutory provision strikes a balance between competing interests, and the problem of interpretation is that there is uncertainty as to how far the provision goes in seeking to achieve the underlying purpose or object of the Act. Legislation rarely pursues a single purpose at all costs. Where the problem is one of doubt about the extent to which the legislation pursues a purpose, stating the purpose is unlikely to solve the problem. For a court to construe the legislation as though it pursued the purpose to the fullest possible extent may be contrary to the manifest intention of the legislation and a purported exercise of judicial power for a legislative purpose."
10. It is true that the Minister asserted that amendments would not affect "genuine independent contractors". But again, it is difficult to be sure to what he was referring. It may have been to the practice of a small trader, such as a licensed electrician, operating through a company. There the tradesperson initiates contact with the client and performs the services. It would be artificial to describe the sole trader company as procuring the services of its employee and controller for a customer. That arrangement is not caught by s 37. However, where an agent provides services of another person to a customer, the service provider must be an independent contractor of the customer or s 37(2) would exclude the arrangement (no doubt because the customer would be liable to pay tax under other provisions).
11. It is not necessary to decide whether each of the examples of "absurd" results identified in UNSW Global required the reading of words into the definition. Indeed, that exercise could not properly be undertaken without reference to the specific contractual arrangements between the agent and the service provider. However, when one examines the contractual arrangements in the case of barristers, it is clearly arguable that there is no relevant arrangement between the solicitor (the putative agent) and the barrister (the putative service provider) which would result in the payment made to the barrister by the solicitor to be taken as wages paid by the solicitor under the terms of Div 8. To focus on the relationship between the barrister and the client is to disregard the element of the arrangement to which the tax liability attaches.
12. Furthermore, to rely on examples which do not arise on the facts under consideration to construe a statute risks "[t]he text becom[ing] submerged in the illustrations."
13. This is a case where it is not possible to say that the drafter has made a mistake, or achieved an absurd and unintended result, where an alternative construction is reasonably clear. It follows that the general principles espoused, but departed from, in Cooper Brookes (Wollongong) Pty Ltd v Commissioner of Taxation [63] should be applied. As stated by Gibbs CJ: [64] "It is an elementary and fundamental principle that the object of the court, in interpreting a statute, 'is to see what is the intention expressed by the words used'…. It is only by considering the meaning of the words used by the legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with the assumption that words mean what they say…. There are cases where the result of giving words their ordinary meaning may be so irrational that the court is forced to the conclusion that the draftsman has made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case…. However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust. … The danger that lies in departing from the ordinary meaning of unambiguous provisions is that 'it may degrade into mere judicial criticism of the propriety of the acts of the Legislature', … it may lead judges to put their own ideas of justice or social policy in place of the words of the statute."
14. It is not an acceptable construction of the statute to adopt language which has been used in the past but removed and replaced. The existing case law warrants appellate review.

Conclusions

1. Counsel for the plaintiffs disclaimed reliance on the so-called "Bayton factors", referring to the approach identified in Bayton v Chief Commissioner. He submitted that the Court should uphold the appeal by construing s 37(1), and that the Appeal Panel was in error in addressing the case on the basis of the Bayton factors. However, he did not embrace the alternative construction suggested above.
2. Counsel for the Chief Commissioner, while focusing on the matters which had been presented in submissions to the Appeal Panel, and on which it decided the case, acknowledged that the Court was not bound to adopt the readings of the statute proposed by the parties.
3. Nevertheless, the issues raised above should not, and cannot, be resolved in this case. An assessment of the correctness of the approach of various judges of the Court, some more cautious than others, should await a case where it is directly addressed. It is sufficient that, whether on the arguably conflicted construction of the Act it was asked to apply, or on a different approach following more closely the text of Div 8, the appeal must be rejected.

Orders

1. The Court makes the following orders: 1. Grant the plaintiffs leave to appeal. 2. Dismiss the appeal. 3. Order that the plaintiffs pay the Chief Commissioner's costs in this Court.

Endnotes

1. Payroll Tax Act, ss 6, 7.
2. Payroll Tax Act, s 10(1).
3. Payroll Tax Act, s 13(1)(e).
4. Bonner v Chief Commissioner of State Revenue [2020] NSWCATAD 231 ("Tribunal decision").
5. Bonner v Chief Commissioner of State Revenue [2021] NSWCATAP 180 ("Appeal Panel").
6. Section 40(1) has other provisions relating to fringe benefits and superannuation contributions.
7. UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577 at [62] (White J).
8. See at [103]-[106].
9. [2019] NSWSC 1058.
10. Banfirn at [25(4)].
11. UNSW Global at [63]; JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391; 106 ATR 639 at [72]; HRC Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820; 108 ATR 84 at [153].
12. UNSW Global at [64].
13. UNSW Global at [65].
14. [2019] NSWSC 744 at [86], [94]; Banfirn at fn 14.
15. [2019] NSWSC 657.
16. Banfirn at [25(5)].
17. Bayton at [105], [266].
18. Pay-roll Tax (Amendment) Act 1985 (NSW), Sch 1(1), inserting s 3(1), definition of "wages" at (f).
19. Plaintiffs' written submissions, 11 February 2022, pars 31, 66.
20. State Revenue Legislation (Miscellaneous Amendments) Act 1998 (NSW), Sch 6.
21. New South Wales Legislative Council, Parliamentary Debates (Hansard), 21 October 1998, vol 267, p 8691; State Revenue Legislation (Miscellaneous Amendments) Bill.
22. UNSW Global at [41]; Securecorp at [81].
23. See the warning against such a use in Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 (Mason CJ, Wilson and Dawson JJ); [1987] HCA 12.
24. Plaintiffs' written submissions, pars 53-59.
25. Plaintiffs' written submissions, pars 60-63, referring to UNSW Global at [62].
26. Plaintiffs' written submissions, 11 February 2022, par 11.
27. Plaintiffs' written submissions, par 12.
28. Kostas v HIA Insurance Services Pty Ltd (2010) 241 CLR 390; [2010] HCA 32.
29. Tribunal Act, s 80(2)(b).
30. Plaintiffs' written submissions, par 64.
31. Plaintiffs' written submissions, par 66.
32. Appeal Panel at [50].
33. (1985) 4 NSWLR 139, pp 155-156.
34. Azzopardi, p 156.
35. Plaintiffs' written submissions, par 40.
36. Tribunal decision at [18].
37. Tribunal decision at [35].
38. Submissions summarised in the Tribunal decision at [125].
39. Tribunal decision at [127].
40. Tribunal decision at [109].
41. Tribunal decision at [111].
42. Tribunal decision at [114].
43. Written submissions, par 72.
44. Appeal Panel Tcpt, p 4(25)-(45).
45. Tcpt, pp 7(20), 8(40), 9(45).
46. Tcpt, p 12(5).
47. See, eg, Appeal Panel Tcpt, p 22(7)-(10), (20)-(25).
48. Tcpt, p 30(40).
49. Kavanagh v The Commonwealth (1960) 103 CLR 547 at 578; [1960] HCA 25.
50. Dennis v A J White and Co [1917] AC 479 at 490.
51. Damjanovic & Sons Pty Ltd v The Commonwealth (1968) 117 CLR 390 at 408; [1968] HCA 42.
52. UNSW Global at [46].
53. UNSW Global at [50].
54. Ibid.
55. Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127.
56. UNSW Global at [62].
57. R v XY (2013) 84 NSWLR 363; [2013] NSWCCA 121 at [65]; Nezovic v Minister for Immigration and Multicultural and Indigenous Affairs (No 2) (2003) 133 FCR 190; [2003] FCA 1263 at [52] (French J); Takapana Investments Pty Ltd v Teco Information Systems Co Ltd (1998) 82 FCR 25 at 32 (Goldberg J); and see generally, D C Pearce, Statutory Interpretation in Australia (9th ed, 2019, LexisNexis Butterworths) at [1.12], [1.17].
58. UNSW Global at [23].
59. (1994) 181 CLR 404; [1994] HCA 54.
60. (2015) 256 CLR 1; [2015] HCA 14.
61. (2019) 269 CLR 507; [2019] HCA 35.
62. (2007) 232 CLR 138; [2007] HCA 47.
63. (1981) 147 CLR 297; [1981] HCA 26.
64. Cooper Brookes at 304-305. 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: 13 April 2022