Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd

ons Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; 203 CLR 194 Cody v JH Nelson Pty Ltd [1947] HCA 17; 74 CLR 629 Commissioner of Stamps v Garrett F Hunter Pty Ltd (1977) 69 SASR 275 Commissioner of State Revenue v Muir Electrical Co Pty Ltd [2003] VSCA 112; 8 VR 200 Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; 57 NSWLR 113 House v The King [1936] HCA 40; 55 CLR 499 John French Pty Ltd v Commissioner of Pay-roll Tax (Qld) [1984] 1 Qd R 125 Mead Packaging (Aust) Pty Ltd v Commissioner of Pay-roll Tax (NSW) (1978) 8 ATR 477 Muir Electrical Co Pty Ltd v Commissioner of State Revenue [2001] VSCA 86; 4 VR 70 New South Wales Crime Commission v Vu [2009] NSWCA 349 Norbis v Norbis [1986] HCA 17; 161 CLR 513 Osland v Secretary, Department of Justice (No 2) [2010] HCA 24; 241 CLR 320 Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 R v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; 180 CLR 322 Samad v District Court of New South Wales [2002] HCA 24; 209 CLR 140 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2009] NSWSC 1007; 77 ATR 394 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; 85 ALJR 1183 Ward v Williams [1955] HCA 4; 92 CLR 496 Category: Principal judgment Parties: Chief Commissioner of State Revenue (Appellant) Tasty Chicks Pty Ltd (First Respondent) Angelo Transport Pty Ltd (Second Respondent) Souris Holdings Pty Ltd (Third Respondent) Minas Souris (Fourth Respondent Jenny Souris (Fifth Respondent) Representation: Counsel: Mr G C Lindsay SC, Mr I C Latham (Appellant) Mr C J Bevan, Ms A Tsekouras (Respondents) Solicitors: I V Knight, Crown Solicitor (Appellant) Legal Ease Lawyers (Respondents) File Number(s): CA 2008/277732 Decision under appeal Citation: Tasty Chicks Pty Ltd & Ors v Chief Commissioner of State Revenue [2009] NSWSC 1007 Date of Decision: 2009-09-25 00:00:00 Before: Gzell J File Number(s): SC 2008/1769

Judgment 1MEAGHER JA: This appeal concerns the application of statutory provisions which enable the grouping of companies for payroll tax purposes. The significance of grouping in this case is that if the taxpayers had not been treated as a group, each would have been entitled to a payroll tax threshold of $600,000 for each year of the six year period from 1 July 2001 to 30 June 2007. The appeal is from a decision of Gzell J (primary judge) revoking assessments of the liability of the respondents (respectively Tasty Chicks, Angelo Transport, Souris Holdings and M&J Souris): Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2009] NSWSC 1007; 77 ATR 394. 2This determination of that appeal follows an earlier decision of this Court: Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2010] NSWCA 326; 80 ATR 205. That decision was the subject of a successful appeal to the High Court concerning the jurisdiction and powers conferred on the Supreme Court when conducting a review under s 97 of the Taxation Administration Act 1996 (the Administration Act) of a decision of the appellant (Chief Commissioner). The High Court held that the jurisdiction and powers conferred on the Supreme Court on such a review entitled it to address afresh the questions before the Chief Commissioner having regard to the material before it, including questions as to jurisdictional "satisfaction" and the exercise of discretionary power: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue [2011] HCA 41; 85 ALJR 1183. 3At [22] the High Court concluded: "The Court of Appeal should not have allowed the Chief Commissioner's appeal by proceeding on the basis that the jurisdiction and powers conferred upon the Supreme Court were such that before Gzell J it had been for the taxpayers to show that the Chief Commissioner had erred on the materials before the Chief Commissioner and to show that the exercise of discretion by the Chief Commissioner was vitiated by error of a kind referred to in Avon Downs. The appeal to this court should be allowed with costs, the orders of the Court of Appeal dated 4 January 2011 set aside, and the matter be remitted to that court for further hearing."

The Chief Commissioner's assessments and determination 4The Chief Commissioner issued notices of assessment dated 4 September 2007 to each of the taxpayers for the six year period ending 30 June 2007. Those assessments treated the taxpayers as part of a group. The respondents objected to the Chief Commissioner's assessments under s 86(1) of the Administration Act by a notice of objection dated 27 September 2007. That notice objected to the inclusion of Tasty Chicks and Angelo Transport in a group which included M&J Souris and Souris Holdings. In the relevant period, the principals of the M&J Souris partnership, Minas and Jenny Souris, conducted a chicken meat processing business under the name M&J Chickens. They were also the sole directors and shareholders of Souris Holdings which owned premises at Marrickville. Parts of those premises were occupied by M&J Chickens, Tasty Chicks and Angelo Transport. 5By letter dated 8 January 2008, the Chief Commissioner disallowed the objection to those assessments. The Chief Commissioner determined that M&J Souris, Tasty Chicks, Angelo Transport and Souris Holdings together with Pelagia Investments Pty Ltd and KD Land Pty Ltd constituted a group in each of the relevant years. That was done on the basis that Tasty Chicks and M&J Chickens and Angelo Transport and M&J Chickens constituted separate groups which were then subsumed into the larger group by reason of common members in those and other smaller groups. In arriving at that conclusion the Chief Commissioner determined that no order should be made excluding Tasty Chicks or Angelo Transport from the smaller groups. His reasons for doing so were extracted by the primary judge: [2009] NSWSC 1007 at [87]. 6Differing legislative provisions applied over the six years to which the assessments relate. That makes it necessary to consider the Chief Commissioner's assessments and determinations for three periods. Those periods are 1 July 2001 to 30 June 2003 (first period), 1 July 2003 to 30 June 2005 (second period) and 1 July 2005 to 30 June 2007 (third period). Assessments for the first period were governed by the Pay-roll Tax Act 1971 (the Pay-roll Tax Act), ss 16A, 16C, 16E and 16H. Assessments for the second period were governed by ss 16A, 16B and 16C of the Pay-roll Tax Act and ss 106H and 106K of the Administration Act. Assessments for the third period were governed by ss 16A, 16B and 16C of the Pay-roll Tax Act and ss 106E, 106H and 106K of the Administration Act.

The decision of the primary judge 7By a summons filed on 7 March 2008, the respondents applied to the Supreme Court under s 97 of the Administration Act for a review of the Chief Commissioner's disallowance of their objections. The primary judge, following his earlier decision in Affinity Health Ltd v Chief Commissioner of State Revenue (NSW) [2005] NSWSC 663; 205 ATC 4637, held that he was not limited, when reviewing any discretionary determination of the Chief Commissioner, to the principles stated in Avon Downs Pty Ltd v The Federal Commissioner of Taxation [1949] HCA 26; 78 CLR 353. The primary judge proceeded on the basis that he was to consider afresh the questions before the Chief Commissioner, a view subsequently upheld by the High Court: [2009] NSWSC 1007 esp at [148], [164], [165], [166]. In doing so he dealt with the position in each of the three periods as follows. 8As to the first period: The primary judge held that the Chief Commissioner was not entitled to group Tasty Chicks with M&J Chickens or Angelo Transport with M&J Chickens: [2009] NSWSC 1007 at [88]-[115]. That conclusion turned on the application of s 16C(a) and (b) to the facts as found by the primary judge. Whilst the Chief Commissioner contended that each provision applied, he relied primarily on s 16C(b). However, the primary judge held that neither paragraph applied. Having done so, his Honour did not proceed to consider the exercise of the discretion under s 16H(1) to exclude members from a group or de-group: [2009] NSWSC 1007 at [116]. The Chief Commissioner had determined that this discretion could not be exercised because the businesses carried on by the three entities were not carried on "substantially independently" of each another. 9As to the second and third periods: It was common ground that Tasty Chicks and Angelo Transport should be grouped with M&J Chickens because of the application of s 106H(1) of the Administration Act. The issue was whether the Chief Commissioner could and should have exercised the discretion to exclude them as members of the smaller groups. For each period, that discretion is given by s 16B(1). The exercise of the discretionary power is constrained by s 16C(3) which is to be applied in respect of each period having regard to s 16C(4). Section 16C(3) was amended for the third period to provide that the prohibition on the exercise of the discretion did not apply to a business which the Chief Commissioner was satisfied had been continuously carried on "substantially independently" of the other members of the group. The prohibition in the earlier version of s 16C(3) did not apply if the Chief Commissioner was satisfied that the person seeking exclusion from a group had continuously carried on the business "substantially independently" of the other members of the group. 10The primary judge addressed the exercise of the discretion to exclude or de-group on the evidence before him. He was satisfied as to the "substantially independently" condition in respect of Tasty Chicks and M&J Chickens and in respect of Angelo Transport and M&J Chickens: Accordingly, he concluded that the Court was not prevented by s 16C(3) from exercising the discretion under s 16B(1): [2009] NSWSC 1007 at [142]. His Honour then determined that "on the facts" as he had set them out, the discretion ought to have been exercised in favour of the respondents: [2009] NSWSC 1007 at [143], [166].

The appeal to this Court 11The Chief Commissioner's grounds of appeal to this Court fall into two parts. Grounds 1 to 7 challenge the primary judge's decision as to the nature of the review under s 97 of the Administration Act. Grounds 8 to 15 contend that the primary judge misconstrued and misapplied the grouping and de-grouping provisions of the relevant legislation. 12In its earlier decision, this Court (constituted by Giles JA, Macfarlan JA and Handley AJA) allowed the Chief Commissioner's appeal and set aside the judgments and orders of the primary judge. It upheld grounds 1 to 7. Its decision in respect of those grounds was overturned by the High Court. This Court also addressed the issues raised by grounds 8 to 13. It did not address the issues raised by grounds 14 and 15 because it had upheld grounds 1 to 7 and because it had concluded in relation to grounds 12 and 13 that the Chief Commissioner had not erred in not being satisfied as to the "substantially independently" condition: [2010] NSWCA 326 at [113], [117]. 13On the further hearing of the appeal before this Court there was argument as to how the Court should regard those earlier conclusions in relation to grounds 8 to 15. Ultimately, it was accepted by the Chief Commissioner that this Court must consider the issues presented by grounds 8 to 15 afresh and in accordance with the reasons of the High Court. That concession was correctly made. The High Court allowed the appeal from this Court's earlier decision and set aside its orders. The effect of its doing so was to reinstate the orders made by the primary judge: Osland v Secretary, Department of Justice (No 2) [2010] HCA 24; 241 CLR 320 at [30], [32], [70]. The consequence is that this Court on remitter must determine afresh the Chief Commissioner's appeal on grounds 8 to 15 in the light of the decision of the High Court: [2011] HCA 41 at [12].

The issues on appeal 14There are four issues raised by the appeal. 15The first is whether, in relation to the first period, the primary judge erred in failing to hold that s 16C(a) or (b) applied as between Tasty Chicks and M&J Chickens and as between Angelo Transport and M&J Chickens with the result that they constituted groups which were, by s 16E(1), subsumed into a larger group. This issue is the subject of grounds 8 to 11. 16The second issue, related to the first, is what should this Court do if it concludes that the primary judge erred in failing to hold that either or both of s 16C(a) and (b) applied. In that event the respondent taxpayers submit that the question whether the discretion in s 16H(1) is available to be and should be exercised must be remitted to the Supreme Court for further hearing and determination. That position as stated in oral argument, as will become apparent, is not consistent with the position taken in paragraph 1 of their notice of contention. The Chief Commissioner submits that this Court should address these questions as to jurisdictional 'satisfaction' and the exercise of the discretionary power under s 16H(1). This issue is not the subject of a separate ground of appeal. 17The third issue is whether, in relation to the second and third periods, the primary judge erred in being satisfied of the "substantially independently" condition in s 16C(3). This issue is the subject of grounds 12, 12A and 13. 18The fourth issue is whether in relation to each of the second and third periods, the primary judge erred when exercising the discretion under s 16B(1). This issue arises if the Chief Commissioner fails in relation to the third issue. It is the subject of grounds 14 and 15. 19Before considering these issues, it is necessary to deal with the respondents' application to file their notice of contention out of time.

The Notice of Contention 20This notice was filed on 10 November 2011. It should have been filed within 28 days of the notice of appeal: UCPR r 51.40(1)(b). The notice seeks to support the primary judge's decision on two bases. The first contention is that the primary judge's conclusion that the assessments for the first period should be set aside could have been supported by his being satisfied of the "substantial independently" condition and his exercise of the discretion to exclude each of Tasty Chicks and Angelo Transport from any group with M&J Chickens. The second contention is relevant to whether the primary judge erred when deciding whether he was satisfied as to the "substantially independently" condition in s 16C(3) for the second and third periods. Section 16C(4) provides that when addressing that question the Chief Commissioner is to have regard to "the nature and degree of ownership or control of the business of each member of the group, the nature of each of those businesses and any other matter that the Chief Commissioner considers relevant". The respondents contend that the expression "any other matter" should be read as limited, by the application of the ejusdem generis rule, to other matters of ownership, control or the nature of the businesses. It is then said that if the primary judge approached the question as to independence only by reference to the "ownership, control and nature of the businesses", he did not err in doing so. 21There has been delay in the filing of the notice of contention. However, the Chief Commissioner does not suggest that there is any prejudice by reason of that delay. More significantly, the arguments sought to be made relate to issues which are already before this Court. As to the first contention, it remains arguably relevant to the second issue identified above. The respondents' primary position is that any question as to the exercise of the de-grouping discretion for the first period should be remitted to the Supreme Court. The second contention addresses, in relation to the third issue identified above, whether the primary judge erred in failing to take into account relevant matters. It does not raise any fresh issue or argument. In the circumstances, an order should be made extending the time for the respondents to file the notice of contention.

First period: the application of the grouping provisions in s 16C(a) and (b) 22Section 16C provided in this period: "16C. For the purposes of this Act, where: (a) an employee of an employer, or two or more employees of an employer, performs or perform duties solely or mainly for or in connection with a business carried on by that employer and another person or other persons or by another person or other persons, or (b) an employer has, in respect of the employment of, or the performance of duties by, one or more of his or her employees, an agreement, arrangement or undertaking (whether formal or informal, whether expressed or implied and whether or not the agreement, arrangement or undertaking includes provisions in respect of the supply of goods or services or goods and services) with another person or other persons relating to a business carried on by that other person or those other persons, whether alone or together with another person or other persons, that employer and: (c) each such other person, or (d) both or all of those other persons, constitute a group." 23Where a person is a member of two or more groups, all of the members of those groups constitute one group: s 16E(1). It was only necessary to consider the position as between Tasty Chicks and M&J Chickens and, separately, the position as between Angelo Transport and M&J Chickens. If Tasty Chicks and Angelo Transport were not grouped at that level, there was no other basis for including them in any larger group. 24The decision of the primary judge involved the application of s 16C(a) and (b) to the facts as found by him. Each party accepted that, on an appeal by way of re-hearing in this Court, the Chief Commissioner must identify error on the part of the primary judge in construing those provisions, or in finding facts or in the application of those provisions to the facts as found: Norbis v Norbis [1986] HCA 17; 161 CLR 513 at 518; Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission [2000] HCA 47; 203 CLR 194 at [14]. No challenge is made to the findings of fact made by the primary judge.

Application of s 16C(a) 25The Chief Commissioner argued that there was a single business conducted by M&J Chickens, Tasty Chicks and Angelo Transport and that the employees of Tasty Chicks and Angelo Transport performed duties solely or mainly for or in connection with that business. Within the provisions of s 16C(a) that business was carried on by Tasty Chicks and Angelo Transport and "another person or other persons". It was conceded that this grouping argument must fail if each of those companies carried on different businesses: [2009] NSWSC 1007 at [94]. The Chief Commissioner did not rely on the closing words of s 16C(a) "or by another person or other persons" as justifying an argument that it was sufficient if the employees of Tasty Chicks or Angelo Transport performed duties in connection with a single business carried on by another person such as M&J Chickens. 26The Chief Commissioner also faintly argued that "business" in s 16C(a) included the plural "businesses" so as to accommodate a finding that each of M&J Chickens, Tasty Chicks and Angelo Transport conducted separate businesses. The primary judge rejected that argument. He construed "business" in s 16C(a), as referring to a single business. In doing so he agreed with and applied the reasoning of the Victorian Court of Appeal in Commissioner of State Revenue v Muir Electrical Co Pty Ltd [2003] VSCA 112; 8 VR 200 at [14]. That case was concerned with the construction of s 9A(1A)(c) of the Pay-roll Tax Act 1971 (Vic) which was in the same terms as s 16C(a) except that it referred only to duties performed "for or in connection with a business carried on by another person or other persons" and did not include the closing words of s 16C(a). Section 9A(1A)(b) of the Victorian Act separately contained a provision dealing with the performance of duties in connection with a business "carried on by the employer and another person". 27The primary judge also rejected the Chief Commissioner's argument that the three entities were engaged in a single business. He did so on the basis of the findings he made. In general terms they were that each entity conducted a business which involved different activities and which was owned or controlled by different persons. The primary judge found that the business of Tasty Chicks was the provision of secretarial, accounting, sales, marketing and clerical services; that those services were provided to a number of different entities; that the Tasty Chicks business was controlled by Victoria and Sam Phylactou; and that no one else was involved in the management of that business: [2009] NSWSC 1007 at [3], [14], [17], [18], [19], [21]. In relation to Angelo Transport the primary judge found that its business was the operation of a fleet of temperature controlled vehicles for transporting chicken and other meat; that its major but not sole client was M&J Chickens; and that this business was owned and operated by Michael Souris: [2009] NSWSC 1007 at [4], [42], [45], [48]. The primary judge found that the business of M&J Chickens was the processing and supply of chicken meat to wholesale customers such as restaurants and take-away shops; that although this business received services from Tasty Chicks and Angelo Transport, it also had a number of its own employees; and that the business was owned and managed by Minas and Jenny Souris: [2009] NSWSC 1007 at [1], [39]. 28In his written submissions, the Chief Commissioner relied upon the decision of Doyle CJ, sitting as a single judge, in Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 69 SASR 275. In that case the corporate trustee of a unit trust employed staff to provide secretarial, administrative and other services to three medical practice companies which each employed a specialised ear, nose and throat surgeon. The immediate issue was whether the corporate trustee and each medical practice company constituted a group. It was held (at 282-283) that a secretary, whose services were mainly provided to one surgeon, was performing duties mainly for or in connection with the business carried on by the medical practice company which employed that surgeon. That was sufficient to engage the grouping provision in s 18C(a) of the Pay-roll Tax Act 1971 (SA) because, like s 16C(a), it included after the words "a business carried on by that employer and another person or other persons", the additional words "or by another person or other persons": Garrett F Hunter at 279-280, 281. That decision does not assist the Chief Commissioner's argument either as to the construction of s 16C(a) or as to its application. The Chief Commissioner does not rely upon the closing words of s 16C(a) and the question whether the three entities conducted a single business is essentially one of fact. The primary judge's conclusions as to the construction of s 16C(a) and as to the question whether there were separate businesses involved no error.

Application of s 16C(b) 29For s 16C(b) to apply, the employer must have agreement which satisfies two criteria. They are that it be "in respect of the employment of, or the performance of duties by" employees of that employer and that it be with another person relating to a business carried on by that other person. The primary judge considered that for the first of these criteria to be satisfied, the agreement must in terms deal in some way or another with the manner of employment or performance of duties by the employees: [2009] NSWSC 1007 at [104]. In reaching that conclusion, he applied the decision of the Victorian Court of Appeal in Muir Electrical Co Pty Ltd v Commissioner of State Revenue [2001] VSCA 86; 4 VR 70 which considered an equivalent provision in s 9A(1A)(d) of the Pay-roll Tax Act 1971 (Vic) and said (at [13]) that it was not sufficient that the agreement has that result. 30The primary judge held that, subject to one matter, the relevant agreements or arrangements were contained in the deeds of agreement signed each year between Tasty Chicks and M&J Chickens and between Angelo Transport and M&J Chickens: [2009] NSWSC 1007 at [35], [40], [105], [113]. The form of those agreements did not change from year to year in the six years under consideration. He also found that the deeds of agreement between Tasty Chicks and M&J Chickens had been varied by conduct to the extent that Tasty Chicks did not exercise general management over the employees of M&J Chickens: [2009] NSWSC 1007 at [39], [112]. 31The provisions of the deed of agreement between Tasty Chicks and M&J Chickens dated 1 July 2006 included the following. The references to the "Company" are to Tasty Chicks and to the "Partnership" are to Minas and Jenny Souris trading as M&J Chickens: "... WHERAS [sic] the Partnership carries on business in the State of New South Wales of retailers and wholesalers of fresh and frozen, processed and unprocessed poultry and related products AND WHEREAS the Company is the provider of managerial, consulting and related professional services AND WHEREAS the parties have agreed that the Company shall provide to M&J Chickens the Managerial services hereinafter set forth ... 2. ENGAGEMENT OF THE COMPNY [sic] The Partnership hereby appoints the Company who shall provide managerial services, general business advisory and consultancy services in the conduct of the Partnership's business and without limiting the generality of the foregoing shall provide the following services: i. Running of accounts systems; ii. Financial accounts to management; iii. To collect and pay accounts; iv. Improve efficiency in running of the business; v. To purchase items related to the running of the business including cleaning, maintenance of premises, uniforms and related items; vi. To prepare the payroll for all employees, payroll tax and other State and Federal fiscal records and requirements, ... ... IT IS NOTED AND AGREED that in providing such services the Company shall in the absence of agreement to the contrary employ the greater part of it's staff at ... Marrickville occupied by the Company as Lessee or Licensee. ... ... 5. DILIGENCE AND SKILL During the continuance of this Agreement the Company and its employees shall faithfully and to the best of their skill and ability conduct and manage the Partnership's business as the Company shall direct and use their best endeavours to promote and improve the same. ... 7. COMPLIANCE WITH PARTNERS DIRECTIONS AND LEGAL REQUIREMENTS Subject to such orders and directions as may be given to it by the Partnership from time to time (all of which orders and directions the Company shall promptly and faithfully obey, observe and comply with) the company shall at all times have control of the business and shall carry on the business in strict conformity with every other law including industrial laws and all awards made in pursuance thereof for the time being in force in the state ... ... 11. EMPLOYEES The Company shall (subject to the directions of the Partners) have the general management of all persons employed in or about the Business PROVIDED THAT: (a) The Company shall not discharge any person employed in the business without the previous consent of the Partners even in the case of serious misconduct or sudden emergency in which case he shall immediately report such matter to the Partners for action. (b) The Company shall not without the consent of the Partners in writing make any arrangement whereby the aggregate weekly amount now paid in respective [sic] wages in connection with the business shall be increased other than in compliance with any statutory award or the like." 32The primary judge made the following findings concerning the performance of the agreement between Tasty Chicks and M&J Chickens: "[39] Those provisions in the deed of agreement were honoured in the breach rather than the observance. M&J Souris paid an amount each month into Tasty Chicks bank account to cover the monthly amount of the management fee. Tasty Chicks and its employees did not manage the business of M&J Souris. The latter had its own employees managed by Minas and Jenny Souris. Tasty Chicks provided administrative services to M&J Souris. M&J Souris did not exercise any restraint of trade against Tasty Chicks and its employees. ... Victoria and Sam Phylactou conducted the business of Tasty Chicks in providing services to M&J Souris without orders or directions from M&J Souris as to the manner in which those services would be provided. Tasty Chicks did not draw against a M&J Chickens bank account for petty cash, wages and its remuneration. Victoria and Sam Phylactou had authority to sign cheques and to make electronic funds transfers only when Minas Souris was not available. Tasty Chicks did not exercise general management over the employees of M&J Souris." 33The agreements between Angelo Transport and M&J Chickens for the relevant period were, with one exception, in substantially the same terms. They included provisions in the terms of cll 2 and 7. They did not include a provision equivalent to cl 11. They described the services provided by Angelo Transport as "Transporting the goods of the p/ship to the customers on time and with the appropriate temperatures". 34The Chief Commissioner submitted that the requirements that Tasty Chicks employ the greater part of its staff at the Marrickville premises and that those employees comply with any orders and directions given by M&J Chickens dealt with the manner of employment or performance of duties by Tasty Chicks employees. The primary judge rejected that argument for two reasons. First, he considered that the requirement that Tasty Chicks employ the greater part of its staff at the Marrickville premises was not "sufficient" to attract the operation of that provision in the absence of "other controls" of the way in which Tasty Chicks' employees were to work in the provision of services to M&J Chickens: [2009] NSWSC 1007 at [111]. Secondly, he did not regard cl 11 as an arrangement with respect to the performance of duties by employees of Tasty Chicks, but rather as one with respect to the control of employees of M&J Chickens: [2009] NSWSC 1007 at [110]. These conclusions do not pay sufficient regard to cll 2 and 7 and involve too restrictive a construction of cl 11. 35The services provided by Tasty Chicks in accordance with cl 2 paras (i), (ii), (iii), (v) and (vi) were secretarial, accounting, sales, marketing and clerical services. The primary judge made a number of findings as to what those services involved at a practical level and as to how they were provided during the relevant period: [2009] NSWSC 1007 at [23]-[32]. The effect of the covenants in cll 2 and 7 in respect of the performance of duties by Tasty Chicks employees becomes apparent in the light of those findings. 36The office of Tasty Chicks was on the first floor of the premises at Marrickville. The ground floor of those same premises was occupied by M&J Chickens. It comprised a refrigerated processing room, a packing area, cool rooms and a loading dock. Angelo Transport also had an office in part of that ground floor near the loading dock. Adjacent premises were also occupied by M&J Chickens and used for the purpose of further processing vacuum-packed products and for the manufacture of cooked products. Tasty Chicks had a staff of 17 which included Sam and Victoria Phylactou. The Tasty Chicks staff at the Marrickville premises took orders for chicken products on behalf of M&J Chickens. They did so by telephone and in response to facsimiles and emails. They prepared packing slips for product which had been ordered. Those packing slips were sent to the processing plant downstairs. When orders were made up, the packing slips were returned to Tasty Chicks' office where labels for packing boxes and invoices were prepared. The invoices were then entered into the debtors' ledger. Tasty Chicks staff also received and processed payments for product which had been sold. Those payments were received in cash, often from Angelo Transport drivers, by electronic funds transfer or by cheque. Tasty Chicks staff also processed invoices received from creditors of M&J Chickens. Financial reports, including as to debtors and creditors and as to M&J Chickens' cash position, were prepared. These reports were provided to Minas Souris on a daily basis and discussed with Sam Phylactou. In the course of or as a result of those discussions, Minas Souris made decisions as to the order in which accounts were to be paid and gave instructions to Tasty Chicks staff for those payments to be made. Sam Phylactou also participated in meetings with major customers of M&J Chickens and assisted in marketing and in the preparation of tenders as directed by Minas Souris. 37These findings show that the activities undertaken by Tasty Chicks staff were closely integrated with those undertaken by M&J Chickens staff and that it was either necessary or highly desirable for those activities to be undertaken at the same premises and in close proximity to the management and employees of M&J Chickens. They also indicate that some of the activities undertaken by Tasty Chicks staff were the subject of daily direction by Minas Souris on behalf of M&J Chickens and that others of those activities could, depending upon the circumstances, require specific direction as a result of decisions taken by M&J Chickens. 38In this context the provision in cl 2 is significant. It required that the place of employment of the majority of Tasty Chicks staff be the Marrickville premises and that they perform their duties at those premises. Clause 7 assured that, with respect to the performance of their duties, those employees would comply with the orders and directions of M&J Chickens. It was a means by which M&J Chickens could "control" employees of Tasty Chicks. Each of these provisions dealt directly with the performance of duties by the employees of Tasty Chicks relating to the business carried on by M&J Chickens. For that reason each was sufficient to result in the agreement between Tasty Chicks and M&J Chickens being one to which s 16C(b) applied. 39Clause 11 in its terms applies to persons employed "in or about" the M&J Chickens business. That description would include persons employed by Tasty Chicks who provide services to M&J Chickens' business as well as employees of M&J Chickens working in that business. On that basis, cll 11(a) and (b) would prevent Tasty Chicks, without the consent of M&J Chickens, from discharging any Tasty Chicks employees who were providing services to the M&J Chickens' business or increasing the amount paid to those employees other than in compliance with any statutory award. Taking account of the variation to this agreement found by the primary judge (that Tasty Chicks did not exercise general management over the employees of M&J Chickens), cl 11 still applied to the general management of its employees engaged in the M&J Chickens business and restricted what Tasty Chicks could do in relation to two aspects of the employment of those employees. The primary judge erred in treating this clause as only concerned with the control of employees of M&J Chickens. 40The same reasoning in relation to cll 2 and 7 applies to the relationship between Angelo Transport and M&J Chickens. Angelo Transport had a fleet of 20 or so temperature controlled vehicles used for the transportation of chicken meat. M&J Chickens provided 99 per cent of its business. It employed 14 drivers who were engaged in loading and unloading goods into vans and trucks and maintaining those vehicles. Those drivers made 300 to 400 deliveries per day from the Marrickville premises. It had an office on the ground floor of the Marrickville premises which contained the M&J Chickens refrigerated processing room, packing area and loading dock and also leased a portion of those premises for parking its vehicles. The requirements that Angelo Transport employ the greater part of its staff at those premises and that those staff comply with any orders or directions given to them by M&J Chickens were with respect to the performance of duties by Angelo Transport employees. For that reason, s 16C(b) also applied to the agreement between Angelo Transport and M&J Chickens.

First period: the exercise of the de-grouping discretion in s 16H(1) 41Section 16H(1) provided: "(1) Where the Chief Commissioner is satisfied, having regard to the nature and degree of ownership or control of the businesses, the nature of the businesses and any other matters that the Chief Commissioner considers relevant, that businesses carried on by members of a group constituted under s 16C are carried on substantially independently of, and are not substantially connected with, the carrying on of a business or businesses of another member or other members of the group, the Chief Commissioner may, by order in writing served on those first mentioned members, exclude them from that group." 42The Chief Commissioner did not exercise the discretion under this or similar provisions in the second and third periods because he was not satisfied that the businesses were "carried on substantially independently of one another" and, in the first period also, because he considered that they were "substantially connected with" each other. (This latter requirement is not in the later provisions.) The primary judge did not address whether the discretion under s 16H(1) could and should be exercised because he held that neither of the grouping provisions applied. 43The respondents were, in accordance with their right of review under s 97 of the Administration Act, entitled to have the Supreme Court in the exercise of its original jurisdiction consider whether, if the grouping provisions applied, the discretion to exclude or de-group could and should be exercised. Where that has not occurred, the appropriate order is that this question be remitted to the Supreme Court for further hearing and determination. 44In this context, there is one further matter to which reference should be made. The effect of s 16E is that the two smaller groups comprised by Tasty Chicks and M&J Chickens and Angelo Transport and M&J Chickens ceased to be groups and were replaced by a larger group comprising those three entities together with any other entities which were members of a group which included M&J Chickens: Mead Packaging (Aust) Pty Ltd v Commissioner of Pay-roll Tax (NSW) (1978) 8 ATR 477 at 487; John French Pty Ltd v Commissioner of Pay-roll Tax (Qld) [1984] 1 Qd R 125 at 135-136. It would seem to follow that the group which must be addressed when considering the application of s 16H(1) in this first period is that larger group and its members and not those smaller groups.

Second and third periods: the application of the de-grouping provisions in ss 16C(3) and 16C(4) 45Section 16B provided during the second and third periods: "16B(1) The Chief Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group." Section 16C(3) provided during the second period: "16C(3) The Chief Commissioner must not make a determination under s 16B unless satisfied that the person who is the subject of the determination has continuously carried on the business concerned, and will continue to carry on that business, substantially independently of the other members of the group." In respect of the third period s 16C(3) provided: "16C(3) The Chief Commissioner must not make a determination under s 16B unless satisfied that the business carried on by the person the subject of the determination has been continuously carried on, and will continue to be carried on, substantially independently of the other members of the group." Section 16C(4) provided during the second and third periods: "16C(4) In determining whether a person carries on business substantially independently of the other member or members of a group, the Chief Commissioner is to have regard to the nature and degree of ownership or control of the business of each member of the group, the nature of each of those businesses and any other matter that the Chief Commissioner considers relevant." 46It was common ground that whether the primary judge erred in being satisfied of the "substantially independently" condition involves an appeal from a discretionary decision in the sense that the Chief Commissioner (and the Court on a review) was required to be "satisfied" about a matter which involves some degree of subjectivity: Coal and Allied Operations v Australian Industrial Relations Commission at [19], [21]; Perpetual Trustee Company Ltd v Khoshaba [2006] NSWCA 41; 14 BPR 26,639 at [35]-[39], [108]; New South Wales Crime Commission v Vu [2009] NSWCA 349 at [9]-[12]. Accordingly, the Chief Commissioner must establish error of the kind described in House v The King [1936] HCA 40; 55 CLR 499 at 505. See also Avon Downs at 360; Norbis v Norbis at 518-519; Coal and Allied Operations v Australian Industrial Relations Commission at [21]. 47The Chief Commissioner, in oral argument, identified the respects in which it maintained that the primary judge had erred in being satisfied of the "substantially independently" condition by reference to the observations of Handley AJA in the earlier decision of this Court at [109], [111] and [112]. During the course of argument, the Chief Commissioner was given leave to amend the grounds of appeal so as to specify those errors. That was done by ground 12A of the further amended notice of appeal. That ground identified those errors by reference to paragraphs of the primary judge's reasons: "(a) at [126], he erroneously restated the statutory test in terms only of "ownership, control and nature of the businesses". (b) in [125]-[142], he failed to take into account that s.16C(4) required or allowed the decision-maker to take into account any other matter that the decision-maker regarded as relevant. (c) in [125]-[142], he failed to take into account the cumulative effect of factors relied upon by the Chief Commissioner in determining whether he ought to have been satisfied of "substantial independence"." 48In its earlier decision, this Court approached this issue on the basis that the Chief Commissioner had to establish error on the part of the primary judge when determining an appeal from a discretionary decision of the Chief Commissioner to which those same principles applied: [2010] NSWCA 326 at [110], [113]. The High Court held ([2011] HCA 41 at [22]) that this approach was wrong because of the nature of the jurisdiction and powers conferred by s 97. Nevertheless, at [109] and [111], Handley AJA did consider whether the primary judge had addressed the correct question as follows: [109] Gzell J considered the factors relied upon by the Commissioner one by one and, with respect, explained them away or treated them as of little weight without considering whether, in combination, they brought the group within s 16C(3). In addition, with respect, he asked himself the wrong questions. In [126] he said with reference to s 16C(3): "The independence of the person or the business conducted by the person required by the statute is to be judged in terms of ownership, control and [the] nature of the businesses." [111] Moreover the test in s 16C(3) is whether the taxpayer "has continually carried on the business concerned ... substantially independently of the other members of the group". The ownership and control of the business is not the test. They must be considered but the test is whether the relevant business has been carried on substantially independently of the group. 49Although ground 12A(a) describes the error as wrongly restating the statutory test, the argument also asserted the application of the wrong test. The respondents addressed the Chief Commissioner's argument understood in this way. It was submitted that the primary judge erred in formulating and applying the test in two ways. First, he confined his consideration to matters concerning the ownership, control and nature of the businesses and did not give effect to s 16C(4) which required attention to "any other matter" considered relevant. Secondly, the relevant question was not whether the businesses were independent judged in terms of ownership, control and their nature, but whether the relevant business had been carried on substantially independently of the other members of the group. 50Before considering those arguments it is necessary to identify the relevant "group". Section 106K of the Administration Act provides that if a person is a member of two or more primary groups, the members of all the groups together constitute a primary group. The effect of s 106K, which applied in the second and third periods, is that Tasty Chicks and Angelo Transport were members of the larger primary group comprised of M&J Chickens and any entities in smaller primary groups of which M&J Chickens was also a member. Section 106K does not in terms provide that on its application, the smaller primary groups cease to be groups and s 106L provides that a person may be a member of more than one primary group. However, s 16C(1) states that a determination under s 16B may only be made in respect of a person who would, but for the determination, be a member of a group arising under s 106H. Accordingly, the question whether s 16C(3) applies must be determined by reference to the smaller primary groups comprised of Tasty Chicks and M&J Chickens and Angelo Transport and M&J Chickens. 51Having set out s 16C(3) and (4), the primary judge noted at [126] that the question of independence "is to be judged in terms of ownership, control and nature of the businesses". The words "is to" are used in s 16C(4) to require that regard be had to those three specified matters. In relation to his findings as to those matters, the primary judge observed at [130]: "Those matters to be taken into account suggest that the businesses are carried on substantially independently of each other and there is no suggestion other than that they will continue to be so." 52The primary judge's description of those matters as ones "to be taken into account" is correct as a statement of specifically described matters required to be considered: see R v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; 180 CLR 322 at 329. It would be incorrect if it was also understood to be a statement that those were the only matters to be considered. The primary judge then dealt with the ten further matters relied on by the Chief Commissioner. He dealt with each, expressly or implicitly, by reference to whether it suggested or demonstrated a lack of independence and was to that extent relevant to the question he had to address. A number of those matters did not, on their face, involve questions of ownership, control or the nature of the businesses: for example, the existence of inter-entity loans, the use of the same commercial bank and the retainer of the same external accountant. Because the primary judge gave consideration to these other matters and rejected them as not relevant, it cannot be said that he only had regard to matters concerning ownership, control or the nature of the businesses or that he failed to take account of s 16C(4). 53This conclusion makes it unnecessary to consider, other than briefly, the respondents' argument that the words "any other matter" in s 16C(4) are limited by the application of the ejusdem generis rule to matters said to be of the same kind as the "nature and degree of ownership or control" or "nature" of the businesses. Additionally, the respondents submit that the phrase "any other matter" should be construed as limited to those matters having regard to the purpose of the legislation which is said to be to avoid the "splitting" of business activities among separate employers. These arguments were made in response to the first way in which it was said that the primary judge had misapplied the relevant test. 54The ejusdem generis rule is one of a number of guides which may be used in the process of interpreting a statutory provision. That process directs attention to the provisions being construed and its context as well as the scope and purpose of the statute: Project Blue Sky v Australian Broadcasting Authority [1998] HCA 28; 194 CLR 355 at [69], [70], [78]. The rule provides a grammatical justification for reading general words down so as to limit their operation. For its application it requires that there be an enumeration of things of a particular kind or class so that the general words might then be read as applying only to things of the same kind or class as those enumerated: Cody v JH Nelson Pty Ltd [1947] HCA 17; 74 CLR 629 at 648-649; Deputy Commissioner of Taxation v Clark [2003] NSWCA 91; 57 NSWLR 113 at [125]-[130]. 55The ejusdem generis rule cannot be applied in relation to s 16C(4) because the specific matters referred to do not possess any common feature which enables a single genus to be identified. Nor is it necessary to resort to that rule in circumstances where the words "that the Chief Commissioner considers relevant" provide the limitation by reference to which the otherwise general words "any other matter" are to be read down. They require actual persuasion of relevance to the question to be determined arrived at reasonably. So construed, the provision gives the Chief Commissioner a discretion to look beyond the specifically enumerated matters to any other matters bearing on the question of substantial independence. 56The second way in which it is said that the primary judge applied the wrong test emphasises that the Chief Commissioner is required to determine whether the business of the person sought to be excluded is carried on substantially independently of other members of the group. That directs attention to the conduct of the activities of that business and its inter-relationship, if any, with the conduct of the activities of the businesses of the other members of the group. The ordinary meaning of independent includes not depending on the existence or actions of others and not being influenced by others in matters of conduct. A business may not be carried on independently of another business if its existence or continued operation depends upon the existence or custom of that other business. The primary judge did not address whether the businesses of Tasty Chicks and Angelo Transport were carried on substantially independently of that of M&J Chickens in this sense. Instead, his Honour focussed upon the ownership and control of each of the three businesses, and the fact that their business activities were separate and distinct in the narrow sense that the activities of each were different and distinct: [2009] NSWSC 1007 esp at [126]-[130]. Significantly, he concluded at [129]: [129] The nature of the businesses are separate and distinct. M & J Chickens processes chicken meats. Tasty Chicks provides administrative services. Angelo Transport provides the services of a fleet of refrigerated vehicles and drivers. 57In John French Pty Ltd v Commissioner of Pay-roll Tax (Qld), McPherson J (with whom Campbell CJ and Matthews J agreed) considered (at 141-142) that an inquiry as to whether a business was carried on substantially independently, and was not substantially connected with another business, made it necessary to consider the inter-relation of the activities of the businesses and the ability of a principal of one business to influence the management and decision-making of the other. The provision there under consideration was in the same terms as s 16H(1) of the Pay-roll Tax Act as it applied in the first period. Notwithstanding the absence in s 16C(3) of the "substantially connected" consideration in s 16H(1), the matters referred to were said to be relevant to each part of s 16H(1) and to prevent a conclusion that the relevant business was carried on substantially independently of the other business. The same approach was adopted by Doyle CJ in Garrett F Hunter (at 285). He concluded that the corporate trustee providing the secretarial and other services to the three medical practice companies could not be said to be carried on "substantially independently of" the business of each medical practice company. That was because each was one of only two or three clients of the corporate trustee and because its business was so closely connected with that of each practice that decisions by the practice company as to the manner in which its business would be conducted necessarily influenced the conduct of the trustee's business of providing services to the practice (at 285-286). 58In failing to address in this way whether the Tasty Chickens and Angelo Transport businesses were carried on substantially independently of M&J Chickens, the primary judge applied the test too narrowly and as a result did not take into account matters which he was bound to consider with respect to the "nature" or activities of the various businesses. 59Therefore this Court must address that question. The following matters, as found by the primary judge, are relevant to whether the Tasty Chicks business was being carried on substantially independently of M&J Chickens. First, the businesses were carried on from the same premises and were closely integrated. The activities undertaken by Tasty Chicks employees for M&J Chickens were activities which had to be undertaken for or by M&J Chickens as part of its business of processing and supplying chicken meat products to wholesale customers. Those activities involved secretarial, accounting, sales and marketing functions which would often, if not ordinarily, be undertaken by employees of the business. Secondly, 75 per cent of Tasty Chicks' income was generated from services provided to M&J Chickens in New South Wales and Victoria. Only one per cent of its overall revenue was provided by customers independent of the broader M&J Chickens group. This meant that the continuance of Tasty Chicks' business as then conducted was dependent on the custom of M&J Chickens. Thirdly, M&J Chickens was in a position to influence the ongoing conduct of the business of Tasty Chicks as well as give directions as to how Tasty Chicks' employees were to carry out their duties and how Tasty Chicks' services were provided from day to day. In the conduct of the business, Tasty Chicks had to take close account of decisions made by M&J Chickens. Ultimately the nature and extent of the services provided from year to year, and the number of Tasty Chicks staff and the duties they would perform, depended on the outcome of the budgetary and other decisions made by M&J Chickens: see Garrett F Hunter at 286. 60In these circumstances, although the businesses were separately owned and controlled, the business of Tasty Chicks was not carried on substantially independently of M&J Chickens and its business. The analysis and outcome is the same in respect to Angelo Transport. Ninety-nine per cent of its revenue was generated from services provided to M&J Chickens. The transportation and other activities undertaken by Angelo Transport as part of its business were also closely integrated with the business of M&J Chickens and the latter was able to influence decisions made in the conduct of the business of the former in the same ways. 61The Chief Commissioner also argues that the primary judge did not consider whether there were other matters which should be taken into account as relevant. That argument should be rejected. Section 16C(4) required that the primary judge address whether there were other matters which he considered relevant. If there were matters which he considered relevant he was bound to take them into account. The primary judge considered the ten additional matters identified by the Chief Commissioner: [2009] NSWSC 1007 at [131]-[141]. He did so by reference to whether they suggested any lack of independence between the businesses and concluded that they did not. Either he dismissed them as irrelevant or had regard to them as relevant. 62Finally, the Chief Commissioner argues that the primary judge did not consider the cumulative effect of those ten additional matters. The Chief Commissioner's submissions do not identify what that cumulative effect was or why it was significant other than by reference to the argument as to the application of the wrong test and consequent failure to have regard to relevant matters. That argument has been addressed. I do not understand this argument to raise any other questions of substance.

Second and third periods: the exercise of the de-grouping discretion in s 16B(1) 63This issue does not arise in view of the resolution of the third issue in favour of the Chief Commissioner. Nevertheless I will consider briefly the issues raised. The Chief Commissioner says that the primary judge failed to give any or any adequate reasons for the exercise of this discretion and failed to address the grounds upon which the discretion could and should be exercised. 64Assuming s 16C(3) did not prevent the exercise of the discretion to exclude under s 16B(1), in my view the primary judge did not err in either of the respects relied upon. He did not overlook the need to exercise the discretion provided by s 16B(1): [2009] NSWSC 1007 at [143]. His Honour did not proceed upon the basis that if the prohibition did not apply the discretion "must" be exercised: see Interpretation Act 1987, ss 5, 9; Ward v Williams [1955] HCA 4; 92 CLR 496 at 505-506; Samad v District Court of New South Wales [2002] HCA 24; 209 CLR 140 at [33]-[34]. He gave reasons, albeit very short, for his determination that the discretion should be exercised. They were that "on the facts set out" in the judgment the discretion ought to have been exercised: [2009] NSWSC 1007 at [166]. The reference to "the facts" is to be understood as a reference to the facts found or discussed at [127]-[142]. In so doing the primary judge also sufficiently identified the basis on which he considered that the discretion should be exercised.

Conclusion 65In accordance with the decision of the High Court, the appeal on grounds 1 to 7 should be rejected. For the reasons given above, the appeal on grounds 8 and 9 should be rejected and the appeal on grounds 10, 11, 12, 12A and 13 should be upheld. Grounds 14 and 15 do not arise. 66In the circumstances, the orders that I propose be made are as follows: (1)Time for filing the notice of contention be extended to 11 November 2011. (2)Appeal allowed in part. (3)Judgment and orders of Gzell J set aside. (4)In relation to the respondents' application for review of the appellant's determination made on 8 January 2008 disallowing the respondents' objection dated 27 September 2007 against assessments of payroll tax made by the appellant on 4 September 2007: (a)Order that the review of that determination in respect of the assessments of payroll tax for the period 1 July 2001 to 30 June 2003, and specifically the decision not to exercise the discretion under the former s 16H of the Pay-roll Tax Act 1971 in favour of the first and second named respondents for those periods, be remitted to the Equity Division of the Court for further hearing and determination in accordance with the reasons for judgment of this Court. (b)Otherwise order that the application for review of that determination in respect of the assessments of payroll tax made on 4 September 2007 and issued to the first to fifth named respondents for the periods 1 July 2003 to 30 June 2007 be dismissed. (5)Liberty to apply within 7 days of the date of this judgment in respect of the terms of these orders. (6)The parties to lodge and serve written submissions as to the orders that should be made in relation to the costs of the proceedings before Gzell J and this Court as follows: (a)Within 14 days of the date of this judgment, the appellant to lodge and serve submissions as to the orders that should be made; (b)The respondents to lodge and serve submissions in response within 10 days thereafter; The Court will determine what orders should be made as to costs on the basis of these submissions. 67BARRETT JA: The orders that Meagher JA proposes should be made. I concur in his Honour's reasons for the making of those orders. 68SACKVILLE AJA: I agree with the orders proposed by Meagher JA and with his Honour's reasons.

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: 21 June 2012