Chief Commissioner of State Revenue v E Group Security Pty Ltd

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

HEADNOTE [This headnote is not to be read as part of the decision] E Group Security Pty Ltd sought a review pursuant to s 97 of the Taxation Administration Act 1996 (NSW) of payroll tax assessments made by the Chief Commissioner of State Revenue, determining that it was liable for payroll tax as an employment agent under the Payroll Tax Act 2007 (NSW). Division 8 of Part 2 of that Act deems an "employment agent" who procures the services of a "service provider" for one of the employment agent's clients to be an "employer", and the person who does the work for the client to be an "employee", with the effect that the employment agent may be liable to pay payroll tax on payments made by it to the employee. It was common ground before the primary judge that the definition of "employment agency contract" in s 37 of the Payroll Tax Act was to be construed in accordance with the reasoning in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 102 ATR 577 at [62], that an employment agency contract was 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". After the hearing at first instance but before the hearing of the appeal, judgment was delivered in Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441, which suggested that that construction was erroneous and warranted appellate review. By grounds 1-3 of an amended notice of appeal filed 10 May 2022, the Chief Commissioner contended that UNSW Global had been wrongly decided and that s 37 should have been construed according to its ordinary and natural meaning. The unamended grounds of appeal related to the application of the grouping provisions of the Payroll Tax Act. The principal issue on appeal was whether the line of authority stemming from UNSW Global should be reconsidered. The Court heard full argument on grounds 1-3 and determined that the balance of the appeal be heard separately. The Court held, dismissing grounds 1-3 of the amended notice of appeal: There should be no departure from the construction of s 37 in the existing case law, where the Payroll Tax Act had been reviewed and amended regularly, and where the Chief Commissioner had himself consistently propounded the test in UNSW Global, originally proposed by him in 2016. Discussion of: (a) the significance of the legislative history of the antecedents to s 37, which had previously included a "proviso" excluding from the operation of the provisions dealing with employment agents cases where "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: at [23]-[26]. (b) the significance of the legislative amendments made to the Payroll Tax Act subsequent to UNSW Global, which were numerous and from which it could be inferred that the Legislature was taken to have endorsed the construction in UNSW Global: at [27]-[41]. Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4; Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309; [2004] HCA 40; Olde English Tiles Australia Pty Ltd v Transport for New South Wales [2022] NSWCA 108 considered. (c) the absence of a compelling reason to depart from the UNSW Global test: at [42]-[47]. (d) the significance of the harmonised payroll tax legislation in other jurisdictions, in which circumstances it is better for the law to be changed, if it is to be changed, by legislation: at [48]-[51]. Compass Group Education Hospitality Services Pty Ltd v Commissioner of State Revenue [2021] QCA 98; Jackmain (a pseudonym) v R (2020) 102 NSWLR 847; [2020] NSWCCA 150 referred to.

Judgment

1. THE COURT: This appeal is brought from a judgment of the primary judge revoking various payroll tax assessments which had been made by the Chief Commissioner: E Group Security Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1190. The underlying dispute turned on the relationship between various subcontracting companies which supplied security services, the taxpayer E Group Security Pty Ltd and three related companies, and the ultimate companies receiving the services (which included the operators of hotels, sports grounds, hospitality venues and others), and in particular whether E Group Security was deemed to have paid assessable wages to the security guards under either (a) the grouping provisions of the Payroll Tax Act 2007 (NSW) (the Act) or (b) the provisions concerning employment agents in Division 8 of Part 3 that Act. The Court was told that the subcontracting companies themselves, which made the security guards available and seem likely to have paid their wages, were under the payroll tax threshold.
2. Before the primary judge, the Chief Commissioner had contended that the definition of "employment agency contract" in s 37 of the Act was to be construed in accordance with the reasoning in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577 at [62]. This had been common ground, and was duly applied by the primary judge.
3. Some two months before the appeal was listed for hearing it was suggested in Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441 that that construction was erroneous and warranted appellate review. Grounds 1-3 of the amended notice of appeal took up the invitation in Bonner to reconsider the existing case law. If the Chief Commissioner's submissions were accepted, the balance of the appeal would fall away.
4. This Court heard full argument on grounds 1-3 of the Chief Commissioner's amended notice of appeal, and reserved its decision. No time was lost in taking that course, because almost all of the day which had originally been set down for hearing argument on the unamended grounds of the appeal was occupied by argument on the new grounds.
5. For the reasons which follow, there should be no departure from the construction of s 37. Grounds 1-3 of the amended notice of appeal must be dismissed.

Division 8 of Part 3 of the Payroll Tax Act

1. Division 8 of Part 3 of the Act is titled "Employment agents". In its current form, it provides as follows: "36A Division not applicable to wages paid to common law employees This Division does not apply in relation to wages that are exempt wages under section 66B and clause 13B of Schedule 2. 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. 40 Amounts taken to be wages (1) For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract - (a) 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, (b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee, (c) any payment made in relation to the service provider that would be a superannuation contribution if made in relation to a person in the capacity of an employee. (2) Subsection (1) does not apply to an employment agency contract to the extent that an amount, benefit or payment referred to in that subsection would be exempt from payroll tax under Part 4 (other than under section 50 or Division 4 or 5 of that Part), or Part 3 of Schedule 2 (other than clause 5 or 13A), had the service provider performed the services as an employee of the client, if the client has given a declaration to that effect, in the form approved by the Chief Commissioner, to the employment agent. 41 Liability provisions Subject to section 42, if an employment agent under an employment agency contract - (a) by arrangement procures the services of a service provider for a client of the employment agent, and (b) pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract, no other person (including any other person engaged to procure the services of the service provider for the employment agent's client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client. 42 Agreement to reduce or avoid liability to payroll tax (1) If 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 may - (a) disregard the contract, and (b) determine that any party to the contract is taken to be an employer for the purposes of this Act, and (c) determine that any payment made in respect of the contract is taken to be wages for the purposes of this Act. (2) If the Chief Commissioner makes a determination under subsection (1), the Chief Commissioner must serve a notice of the determination on the person taken to be an employer for the purposes of this Act. (3) The notice must set out the facts on which the Chief Commissioner relies and the reasons for the determination. (4) This section has effect in relation to agreements, transactions and arrangements made before, on or after the commencement of this section."
2. In 2017, shortly following the decision in UNSW Global, s 36A was inserted and a corresponding change was made to s 40. The effect of those changes is that the deeming provisions do not apply where the services are provided to an exempt person (for example, some charities) which would not be subject to payroll tax if the exempt person had in fact employed the service provider. Otherwise the provisions of Division 8 have remained unchanged since 2016. It will be necessary later in these reasons to return to the legislative history of this Division.
3. The point of the Division is seen most clearly from the deeming provisions in ss 38, 39 and 40. Where an "employment agent" procures the services of a "service provider" to one of the employment agent's "clients", then the employment agent is taken to be an employer, the person who does the work for the client is taken to be an employee, and certain amounts specified in s 40 are taken to be wages paid by the employment agent. The latter may in turn give rise to a liability to pay payroll tax on the part of the employment agent. Thus the provisions expand the operation of the concept underlying the statute, by treating some persons who would not otherwise be employers paying assessable wages as deemed employers paying deemed assessable wages.
4. Two further points may be observed. The first is that s 37 only applies when no contract of employment is created between the service provider and the client. In such a case, the client will be an employer and will be subject to the direct operation of the statute upon the client's own payroll.
5. The second is that s 41 prevents double taxation (which could occur if the person doing the work were regarded as a common law employee of the client) but only insofar as the employment agent pays payroll tax.

UNSW Global and the cases which followed

1. In UNSW Global, White J concluded that the definition in s 37 should be construed as follows: "the definition of an employment agency contract as being a contract under which a person (the employment agent) '... procures the services of another ... for a client of the employment agent' can be read as meaning 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. That was the intended scope of the provisions. It does not do too much violence to the text (Taylor v The Owners - Strata Plan 11564 at [40]) to confine the operation of the phrase 'for a client' in that way, rather than as meaning for the client's benefit" (emphasis added).
2. That reasoning has been followed in a large number of cases, including JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391; 106 ATR 639 at [6] and [54], H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820; 108 ATR 84 at [98]-[107] and [118], Southern Cross Group Services Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 666; 110 ATR 16 at [57], [59], Bayton Cleaning Company Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; 109 ATR 879 at [94]-[96] and [105], Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 at [87], Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058 at [25], Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [238]-[246] and Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441 at [67].
3. Of these, further attention should be given to four.
4. First, JP Property Services Pty Ltd v Chief Commissioner of State Revenue was first heard prior to UNSW Global, and Kunc J relisted the proceedings for further submissions after UNSW Global was brought to his attention while judgment was reserved. It is clear from 54 that the Commissioner invited his Honour to apply UNSW Global. His Honour did so. Indeed, Kunc J stated at [70] that had the case been decided on the basis of the previous law, the outcome may well have been different. There was no appeal.
5. Secondly, Payne J stated in Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 at [89] that "Care needs to be taken to ensure that White J's construction of s 37 in UNSW Global is not over-read". That comment was directed to Securecorp's submission that there was implicit in the statute a notion of "end user" which restricted the operation of s 37. The submission was that Securecorp supplied the services of people who provided cleaning and security services to the companies which managed shopping centres, which in turn provided services to the owners of shopping centres. It was said that the companies managing shopping centres were closer to the end user, and as a consequence Securecorp fell outside the definition of employment agent. It may also be noted that in the same case, the Commissioner expressly submitted that UNSW Global should be followed (see at [67]-[70]), and as noted above, Payne J proceeded on the basis that the test in UNSW Global was the correct one.
6. Thirdly, in Southern Cross Community Healthcare Pty Ltd v Chief Commissioner of State Revenue [2021] NSWSC 1317 at [239]-[241], Emmett AJA wrote in relation to White J's construction in UNSW Global of s 37 of the Act: "239 That language does not appear in s 37. However, the mischief to which s 37 was directed was the avoidance of payroll tax through the interposition of an agent to give the appearance of a contractor relationship where none existed in substance, rather than an employment relationship. The employment agency provisions were designed to bring to tax wages paid to persons who are, to all intents and purposes, performing duties similar to the duties of employees. 240 The provisions were not intended to apply only to employment agents and labour firms, as those expressions may generally be understood. Rather, s 37 should be construed as referring to a contract under which a person, the employment agent, procures for the client the services of another person, the service provider, in the sense of procuring the services "in and for the conduct of the business of the client of the employment agent". The service provider is in a sense in loco mercenarii in relation to the client. That is to say, the service provider is in the position of an employee in relation to the client. 241 Thus, an employment agency contract is one where the services are provided by individuals who would comprise, or would be added to, the workforce of the client for the conduct of the business of the client, in order to help the client to conduct its business in the same way, or in much the same way, as the client would conduct its business through an employee. Where the services, although provided for the benefit of the client, are not provided by the service provider working in the business of the client, the provisions will not apply. Focus on whether the services are provided in and for the conduct of the business of the client leads to emphasis being placed on the nature of the business of the client."
7. Fourthly, and in marked contrast to the series of first instance decisions which preceded it, in Bonner v Chief Commissioner of State Revenue [2022] NSWSC 441 Basten J was critical, in obiter dicta, of the approach which had been taken in the line of decisions commencing with UNSW Global. His Honour expressed the view that in the absence of any mistaken drafting, or absurd and unintended result, there was no basis for what he regarded as a gloss upon the statute, and accordingly the ordinary meaning of the words should be applied. His Honour concluded at [116]: "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."
8. The reference to language which has been "used in the past but removed and replaced" is a reference to the legislative history, which is addressed below.

The Chief Commissioner's submissions

1. There are no appellate decisions on this aspect of the construction of s 37. Hence, as the Chief Commissioner explained in oral submissions, there is a difficulty in the operation of the provisions for the future, and real scope for disputation, with the consequent expense to the parties and delay in courts and tribunals, until the issue is resolved. Accordingly, by amendments to his notice of appeal, the Chief Commissioner seized upon the present appeal in order to have the questions posed in Bonner resolved promptly. That was an understandable and responsible course of action for the Chief Commissioner to take, especially when it is borne in mind that some taxpayers might seek to take advantage of the broader approach suggested in Bonner (this is explained in [37] below).
2. In this Court, the Chief Commissioner's principal submission echoed the points made in Bonner. It was put that the UNSW Global construction imposed an unwarranted gloss upon the definition of employment agency contract, thereby departing from and narrowing the statutory text, contrary to ordinary principles of statutory construction. It was also said to involve the restoration of a statutory proviso which had been removed from the legislation. The construction was said to have adverse practical consequences in the operation of the legislation. In particular, the requirement that the services be provided "in and for" the conduct of a business of a client excluded from the scope of the Division cases where entities caused services to be provided domestically (for example nursing services being supplied at home).
3. The Chief Commissioner submitted that his best point turned upon the legislative history of the antecedents to s 37. The first introduction of provisions dealing with employment agents occurred by ss 3(4) and 3A inserted by the Pay-roll Tax (Amendment) Act 1985 (NSW). Those provisions included a proviso excluding from their operation cases where "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". The amendments introduced in 1985 were repealed two years later by the Pay-roll Tax (Amendment) Act 1987 (NSW) (see Schedule 1 items (1) and (2)). Thereafter, in 1998, s 3C was inserted into the legislation by the State Revenue Legislation (Miscellaneous Amendments) Act 1998 (NSW), and the current provisions are in materially identical form. The Chief Commissioner's point was that the proviso that the worker "carry out duties of a similar nature to those of an employee" is absent, and that the gloss on the word "for" in UNSW Global in practice re-instated the proviso which the Legislature was to be taken to have deliberately omitted.
4. It was put thus in oral address: "I just wish to end by making my best point about why the UNSW Global test is wrong and that is this. In 1998 when the legislature introduced the test, in substantially the form it is today, it clearly enough copied many features from the previous legislation, being the 1985 legislation. What it did not copy over was the condition that a person is an employment agent only if the worker carried out duties of a similar nature to those of the employee. That, the fact it did not copy that over, is relevant to the intention of the legislature, we say. We say that shows that the intention of the legislature was not to limit the section in that way. The UNSW Global test does limit the section in that way and for that reason it is inconsistent with the legislative purpose and should be rejected."

Consideration

1. We agree that the submission based on the legislative history is the Chief Commissioner's best point. However, we do not agree that it provides a sound basis to overturn the line of first instance authority since 2016.

The significance of the 1980s legislative history

1. One obstacle to accepting the submission based upon legislative history is that it is difficult confidently to draw any inference from the absence of a proviso in 1998 legislation when the previous legislation had been repealed a decade before, and when the 1998 legislation was hastily enacted. The second reading speech makes it plain that the 1998 provisions were inserted in response to Drake Personnel Ltd v Commissioner of State Revenue (Vic) (1998) 40 ATR 304, a first instance decision delivered on 23 June 1998. The Minister with its carriage in the Legislative Assembly referred in terms to "recent judicial pronouncements" in his speech less than 4 months later (Parliamentary Debates, Hansard, Legislative Assembly, 14 October 1998, p 8287), and the bill was given considerable expedition, passing through the Legislative Council the following week. (It turned out that the concern was likely misplaced, in light of the decision of the Victorian Court of Appeal: Drake Personnel Ltd v Commissioner of State Revenue (2000) 2 VR 635; [2000] VSCA 122.)
2. The timing suggests that the bill was drafted hastily. There is nothing explicit in the extrinsic materials to suggest that regard was had to the legislation which had been in force in 1986 and 1987, still less that a conscious decision was made to depart from it. However, it is not unlikely in the scheme of things that some of the instructing officers would have recalled that short-lived measure.
3. But telling against that inference is a different aspect of the legislative history, namely, that the Act can be readily amended in response to the decisions of courts. Indeed, the Act has been amended no fewer than 15 times since UNSW Global was decided. The amendments include amendments to Division 8, although not to the definition in s 37 itself. The provisions of Division 8 broadly speaking have equivalent counterparts in all other Australian jurisdictions save for Western Australia.

The significance of the legislative amendments subsequent to UNSW Global

1. The considerations stated by the High Court in Probuild Constructions (Aust) Pty Ltd v Shade Systems Pty Ltd (2018) 264 CLR 1; [2018] HCA 4 at [52] bear upon the Chief Commissioner's submission: "This understanding of the scheme of the Security of Payment Act accords with the earlier decision of the Court of Appeal of the Supreme Court of New South Wales in Brodyn Pty Ltd v Davenport. In the present case, the Court of Appeal followed Brodyn in this respect. It was right to do so. It would have been a strong thing for that Court, as indeed it would be for this Court, to have taken any other course. Since the decision in Brodyn, the Parliament of New South Wales has twice had occasion to revisit the Security of Payment Act to make substantial amendments to its provisions. No amendment was made to alter the effect of the decision in Brodyn. That circumstance is a powerful reason for rejecting any suggestion that the understanding of the legislation adopted in Brodyn, and given effect in the decision of the Court of Appeal in this case, was other than a faithful reflection of the intention of the legislature.
2. The Chief Commissioner made no challenge to that principle of construction. Instead, he submitted that there had been no "substantial" amendment to the Payroll Tax Act since 2016 so as to engage it. We do not accept that submission.
3. The principle of construction invoked identifies the circumstances when legislative amendment to other provisions in a statute sustains the inference that a legislature is to be understood as endorsing the construction given to unamended provisions of the same statute. Much depends on the particular statute and the particular amendments.
4. The Building and Construction Industry Security of Payment Act 1999 (NSW) considered in Probuild concerns the interim rights as between themselves of developer and contractor. In contrast, the Payroll Tax Act is a taxing act, which will in ordinary cases only give rise to litigation involving the Chief Commissioner and a taxpayer. The Chief Commissioner has been a party to every case which has considered s 37. There is no reason to doubt that the Chief Commissioner actively reviews the legislation he administers and the litigation to which he is party. Indeed, the 2020-21 Annual Report of the Department of Customer Service (the Minister for Customer Service is jointly responsible with the Treasurer and the Minister for Finance and Small Business for administering the Payroll Tax Act) includes a section on "Significant Judicial Decisions" including at p 162 a summary of Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126, which was a payroll tax appeal.
5. Some of the numerous statutes amending the Payroll Tax Act have been enacted urgently, and directed to a particular end. Examples may be seen in the COVID-19 Legislation Amendment (Emergency Measures - Treasurer) Act 2020 (NSW), the State Revenue Legislation Amendment (COVID-19 Housing Response) Act 2020 (NSW) and the Payroll Tax Amendment (Jobs Plus) Act 2021 (NSW). Nothing can be drawn from the failure of those statutes to amend Division 8.
6. However, the pattern of legislation shows that in most years, the government has made changes to the Payroll Tax Act, typically, within legislation described as a "State Revenue Legislation Amendment Act". The enacted legislation tends to confirm what would in any event be expected, namely, that the executive government keeps closely under review decisions on its taxation legislation, especially those which have an impact upon revenue.
7. In circumstances where the Chief Commissioner has regularly commenced and defended litigation based on the employment agency contract deeming provisions (including this proceeding, at first instance), has consistently propounded the test originally proposed by him in 2016, and where the legislation has been reviewed very regularly, there is a powerful inference that the Legislature is to be taken to have endorsed the construction in UNSW Global.
8. Moreover, we do not accept the Chief Commissioner's assertion that none of the amending legislation was "substantial" within the meaning of the passage from Probuild extracted above. There have been at least one and arguably two substantial amendments since 2016.
9. It is debatable whether the State Revenue and Other Legislation Amendment Act 2019 (NSW) contained a substantial amendment (a new Division 3 in Schedule 2) for the calculation of estimated monthly payroll tax (see item 5 of schedule 3 of the 2019 statute). Although there was a new Division, with significant practical consequences, it may also be seen as administrative.
10. But on any view of the matter, the State Revenue Legislation Amendment Act 2017 (NSW) falls into a different category. That statute did not merely insert s 36A into Division 8 and amend s 40. It also introduced s 66B which provided: "66B Employment agents supplying their common law employees Wages are exempt wages as provided for in clause 13B of Schedule 2" and inserted new cl 13B of Schedule 2: "13B Employment agents supplying their common law employees (1) Wages are exempt wages if - (a) they are paid or payable for services that were performed under an employment agency contract by a service provider for a client of an employment agent, and (b) the service provider performed the services as an employee of the employment agent, and (c) the wages would be exempt wages under Part 4 (other than section 50 or Division 4 or 5 of that Part), or Part 3 of Schedule 2 (other than clause 5 or 13A), had the service provider performed the services as an employee of the client, and (d) the client has given a declaration to the effect of paragraph (c), in the form approved by the Chief Commissioner, to the employment agent. (2) A reference in this clause to an employee does not include a reference to a person who is an employee only because the person is taken to be an employee by Division 8 of Part 3 or any other provision of this Act."
11. Those new provisions identified an area in which the extended operation of the statute, brought about by the deeming provisions in Division 8, would not apply. Significantly, this was not merely an additional area of exemption. Instead, if a person could establish that it was an employment agent and had common law employees who were providing services to a client and the client, if it had employed the employee would be exempt, then the wages paid by the employment agent to its common law employees would be exempt. The significance of that change is that whereas formerly it was to the inevitable fiscal disadvantage of a person to fall within the definition of an employment agent, there is now an incentive for some persons to fall within that definition, insofar as they have clients which are exempt (such as some religious institutions and schools and hospitals). In short, following the 2017 amendments, the Act used the definition of employment agency contract both to treat some payments which were not wages as deemed wages, and also to treat some payments which were in fact wages as exempt wages.
12. Such an amendment is "substantial" in the sense stated in Probuild. It alters the legal and practical effect of the term in issue. The 2017 statute is an amendment which takes the pre-existing scope of a defined term and adds to the legal consequences of falling within it in a markedly different way from the position which previously obtained.
13. The issue can also be approached as follows. There is no artificiality in attributing to the Legislature an understanding that the term "employment agency contracts" bore the meaning given in UNSW Global. The 2017 amending legislation was a government bill. It would have been the result of the continuous review of the operation of the Payroll Tax Act by the Chief Commissioner. It is the opposite of the position mentioned by Gleeson CJ in Electrolux Home Products Pty Ltd v Australian Workers' Union (2004) 221 CLR 309; [2004] HCA 40 at [8] that "there are circumstances in which it is artificial, and unpersuasive, to attribute to Parliament a consciousness of a judicial interpretation which might have been placed upon an expression, perhaps years before, and in some different context." The Chief Commissioner had actual knowledge of the UNSW Global test because he was contending for its application in case after case in and after 2017 (including in the further hearing and further submissions in JP Property Services). The Minister with responsibility for administering the Payroll Tax Act is to be taken to have had that knowledge.
14. Still further, the 2017 amendments correspond quite closely with the significance attributed by this Court, constituted by five judges, to a subsequent amendment to different legislation, once again in circumstances where a challenge was made to a long-standing construction of legislation. In Olde English Tiles Australia Pty Ltd v Transport for New South Wales [2022] NSWCA 108 Basten AJA said, with the agreement of Ward P, Gleeson and Mitchelmore JJA and Preston CJ of LEC at [73] and [78]: "The 2016 amendments were substantive and material changes to the Land Acquisition Act. In making provision for compensation for disadvantage resulting from relocation, they had a direct effect on circumstances in which such compensation was available, but no change allowed for some broader set of interests to engage the right to compensation for relocation. This legislation clearly engaged the principles stated in Probuild, militating against departure from the earlier decision of this Court in Hornsby Council, were that otherwise being considered. … the fact that the Parliament has legislated to make substantial amendments to the Land Acquisition Act in 2016 without overturning, or making amendments inconsistent with, the earlier decisions of this Court is a factor militating strongly against this Court overturning any earlier decisions as to the scope and operation of the Land Acquisition Act."
15. Likewise, the enactment of the 2017 amendments militate strongly against overturning the construction given to the statute in 2016.

There is no compelling reason to depart from the UNSW Global test

1. Even so, if the construction in UNSW Global were palpably wrong, this Court would overturn it. However, there is no suggestion that the construction in UNSW Global was unsatisfactory or inefficient or in any way took the Chief Commissioner by surprise. Indeed, White J recorded at [26] that it was the Chief Commissioner who propounded the test which he adopted as correct: "the Chief Commissioner stated that he assumed that the 'commonly understood' description of a 'labour hire firm/agent' is an entity that procures persons to provide their labour 'in, and for the purpose of, the ordinary conduct of the clients' businesses'. In his contentions the Chief Commissioner agreed that EOS consultants typically did not perform services 'in and for the purpose of, the ordinary conduct of the clients' businesses' and were required to undertake only limited reporting, advisory and consultation tasks."
2. (The reference to the Chief Commissioner's contentions was to the formal document filed in the Court which must be taken to have been carefully reviewed and approved and filed on instructions from the Chief Commissioner.)
3. Thus the Chief Commissioner has consistently propounded that very test in a series of cases, including the present case. He has never, until around two months ago, sought to depart from it.
4. As Mr Hmelnitsky SC who appeared with Mr Lewis both in this Court and at first instance submitted, the construction in UNSW Global reflects a not unnatural meaning of the statutory words "procures the services of another person for a client of the employment agent". It is to be borne in mind that the primary subject matter of the Act is a tax upon payroll - which is to say a tax upon the wage and salary earnings of employers, and that the provisions in Division 7 dealing with relevant contracts and Division 8 dealing with employment agents to an extent expand common law notions of employment.
5. The construction in UNSW Global accords with the purpose of the Act, by taking relationships which fall short of traditional employer/employee relationships and deeming them to be such. There is nothing to suggest however that Division 8 should entirely outflank its role as an add-on to common law notions of employment. This is not impermissibly to gloss the section. It is to recognise that the preposition "for" is protean and is capable of bearing a very wide range of meanings depending upon context, and the presently relevant context is its appearance in provisions which create a legal fiction - a deemed relationship of employer and employee - in a Payroll Tax Act.
6. The broader construction for which the Commissioner contends gives rise to difficulties. Section 41 addresses the possibility that more than one person may be liable to payroll tax. That possibility is ever-present in a Division which deems persons who are not employees to be employees. But if the operation of Division 8 extends more broadly than persons who provide services in and for the business of a client, then to that extent it will be difficult for the client and the person who answers the description of an employment agent to know that payments are deemed to be assessable wages. We would not place great weight on this consideration on which the respondent relied, but nonetheless disfavouring impractical outcomes is an orthodox principle of construction.
7. Another consideration upon which reliance was placed in Bonner was that the text of s 37(1) did not bear upon the relationship between the person providing the services and the client: see Bonner at [18]-[19]. True it is that s 37(1) read alone does not explicitly deal with that topic. However, as Mr Hmelnitsky observed, it is necessary to have regard to all three subsections of s 37 in order to apply the definitions. Subsection (2) carves out from the definition of employment agency contract any contract which results in the creation of the contract of employment between the service provider and the client. In order to determine whether there is an employment agency contract, it is always necessary to have regard to the relationship between the service provider and the client.

The significance of the harmonised legislation in other jurisdictions

1. There are comparable provisions in other jurisdictions. The Court was told and it may be accepted that there is at the administrative level a working relationship between those administering payroll tax legislation throughout the country in order to enhance harmonisation in the tax provisions. But this is a further reason not to depart from the established meaning.
2. This Court's construction of harmonised payroll tax provisions would be apt to be given a deal of precedential weight in other jurisdictions, especially at first instance and in administrative tribunals, as may be illustrated by the reasoning in Compass Group Education Hospitality Services Pty Ltd v Commissioner of State Revenue [2021] QCA 98. The consequence is that for practical purposes, the Chief Commissioner is inviting this Court to alter the legal meaning of legislation which is in force not merely in New South Wales, but throughout the country.
3. Still further, the effect of this Court accepting the Chief Commissioner's invitation is that the change in the legal meaning of the law will have retrospective effect. It is far from improbable that there will be pending disputes and pending litigation which will be affected. As well, a number of harmonised rulings have been issued which turn on the operation of the employment agency contract provisions (including PTA027, PTA028 and PTA029, each of which is in force in every State save for Western Australia).
4. It is in those circumstances far better for the law to be changed, if indeed it is to be changed, by legislation, and with clearly stated transitional provisions. Considerations of this nature were noted, albeit in a different context, in Jackmain (a pseudonym) v R (2020) 102 NSWLR 847; [2020] NSWCCA 150 at [163]-[165].

Conclusion and orders

1. For those reasons, these grounds of appeal should be dismissed. The issues arising on grounds 1, 2 and 3 are self-evidently severable, and there is no reason to depart from the usual rule that costs follow the event.
2. The balance of the appeal, which has not as yet been heard, will be listed before the Registrar on a date to be fixed.
3. The Court makes the following orders:
4. Grounds 1, 2 and 3 of the amended notice of appeal, dismissed with costs.
5. The balance of the appeal to be listed for directions before the Registrar on a date to be advised.

Amendments 08 July 2022 - In Headnote: "E Group Security contended that UNSW Global had been wrongly decided" changed to ''the Chief Commissioner contended that UNSW Global had been wrongly decided" 12 August 2022 - Paragraph numbering at [36] corrected 29 March 2023 - References to "Pt 2" at [1] and [6] corrected to "Pt 3" "102 ATR 577" corrected to "104 ATR 577" in [2] 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: 29 March 2023