Commissioner of Taxation v Scone Race Club Limited

Counsel for the Respondent: N Williams SC and C Withers

Solicitor for the Respondent: Balazs Lazanas & Welch LLP

BETWEEN: COMMISSIONER OF TAXATION Appellant

AND: SCONE RACE CLUB LIMITED Respondent

JUDGES: GRIFFITHS, DERRINGTON AND STEWARD JJ DATE OF ORDER: 16 DECEMBER 2019

1. The appeal be allowed.
2. The orders made below on 21 June 2019 be set aside, and in lieu thereof it be ordered that the applicant's appeal against the respondent's objection decision of 17 August 2017 be dismissed. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

GRIFFITHS J: 1 By an amended notice of appeal dated 20 November 2019 the Commissioner of Taxation appeals from orders made by the Court on 21 June 2019. Those orders gave effect to a judgment of a single Judge of the Court in which he allowed the respondent's appeal against an objection decision in respect of assessments made under the Superannuation Guarantee (Administration) Act 1992 (Cth) (the SGA Act) for the quarterly periods from 1 July 2009 to 30 June 2014 (relevant period). The primary judge's reasons for judgment are reported as Scone Race Club Limited v Commissioner of Taxation [2019] FCA 976. The judgment was published several months after the primary judge published his reasons for judgment in Racing Queensland Board v Commissioner of Taxation [2019] FCA 509; 371 ALR 358. That judgment raises some similar, but not identical, issues. That judgment was also appealed and the appeal was heard immediately after this appeal. The Full Court published reasons for judgment in that appeal on 16 December 2019 (see Commissioner of Taxation v Racing Queensland Board [2019] FCAFC 224). The appeal was allowed. As will be explained later, there are, however, significant differences between the two appeals, not the least being the nature and extent of the accounting and industry evidence adduced by the respective taxpayers in those proceedings. The gaps and inconsistencies in the taxpayer's evidence in the Racing Queensland Board appeal were central to the Full Court's decision that the appeal should be allowed because, contrary to the primary judge's conclusion, the Board had not discharged its onus of demonstrating that the relevant assessments were excessive. 2 In brief, in the present proceeding, the primary judge held that the Commissioner was wrong to determine that Scone Race Club Limited (Club) was an employer of jockeys who rode in races held at the Club during the relevant period and was thus liable to pay a superannuation guarantee charge (SGC) under ss 5 and 6 of the Superannuation Guarantee Charge Act 1992 (Cth) (SGC Act). The primary judge held that the Club was not liable to pay SGC for that period because the Club was not an employer of the jockeys within the meaning of s 12(8)(a) of the SGA Act. 3 For the reasons which follow, I consider that the appeal should be dismissed, with no order as to costs because the proceeding is the subject of test case funding by the Commissioner. 4 I will now describe the relevant legislative and regulatory framework within which the appeal is to be determined, before describing in a little more detail the relevant facts and evidence below. I will identify relevant parts of the primary judge's reasons in addressing each of the five grounds of appeal.

The legislative and regulatory frameworks summarised 5 SGC is imposed by s 5 of the SGC Act on any superannuation guarantee shortfall of an employer for a quarter. Section 16 of the SGA Act provides that the charge imposed on an employer's superannuation guarantee shortfall for a quarter is payable by the employer. Calculation of a superannuation guarantee shortfall is the subject of s 17 of the SGA Act: 17 Superannuation guarantee shortfall If an employer has one or more individual superannuation guarantee shortfalls for a quarter, the employer has a superannuation guarantee shortfall for the quarter worked out by adding together: (a) the total of the employer's individual superannuation guarantee shortfalls for the quarter; and (b) the employer's nominal interest component for the quarter; and (c) the employer's administration component for the quarter. 6 Under s 19 of the SGA Act, individual superannuation guarantee shortfall for each employee is calculated as a function of the quarterly salary or wages base in respect of the employee. That figure is calculated by taking the total salary or wages paid by the employer to the employee for the quarter less any sacrificed salary or wages. 7 The expression "salary or wages" is defined in s 11(1)(d) of the SGA Act to include the payments made to a person for work of the kind referred to in s 12(8). 8 The expressions "employee" and "employer" are defined in s 12(1) of the SGA Act. 12 Interpretation: employee, employer (1) Subject to this section, in this Act, employee and employer have their ordinary meaning. However, for the purposes of this Act, subsections (2) to (11): (a) expand the meaning of those terms; and (b) make particular provision to avoid doubt as to the status of certain persons. 9 Section 12(8)(a) of the SGA Act plainly expands the ordinary meaning of the expression "employee" (emphasis added): (8) The following are employees for the purposes of this Act: (a) a person who is paid to perform or present, or to participate in the performance or presentation of, any music, play, dance, entertainment, sport, display or promotional activity or any similar activity involving the exercise of intellectual, artistic, musical, physical or other personal skills is an employee of the person liable to make the payment; 10 Subsections 12(2) to (11) undoubtedly expand or clarify the ordinary meaning of the word "employee", but none of those provisions directly addresses the counterpart position regarding the meaning of "employer". In response to the Court's invitation, the parties filed brief post-hearing written submissions on this issue. As Griffiths and Derrington JJ pointed out in the Racing Queensland Board appeal at [51] the drafting of s 12 is not ideal. For the reasons given by their Honours there (with which Steward J agreed), ss 12(2) to (11) should be construed as expanding (or clarifying) in a coordinated way the meaning of both "employee" and "employer". Accordingly, although there is no explicit provision which expands the meaning of the term "employer" with respect to s 12(8)(a), the proper construction is that the term "employer" is expanded coordinately so as to apply to the person who is liable to make the payment referred to in s 12(8)(a). 11 Section 12(8)(a) operates by reference to a person who falls within its terms as being "an employee of the person liable to make the payment" (emphasis added). The mere fact that a person makes a payment is not determinative - there has to be a liability to make the payment for the purposes of s 12(8)(a). The scheme operates on the basis that that person is the employee's employer to whom the obligation to pay SGC under s 16 of the SGA Act applies. This gives rise to the central issue in these proceedings, namely whether the Club discharged its onus of showing that it was not liable to pay jockeys for riding in races (or barrier trials) conducted by the Club. 12 It is convenient to now say something regarding the regulatory framework within which the Club operates in conducting thoroughbred racing events. The following summary draws heavily on the primary judge's description of that framework, which description is not disputed. 13 The thoroughbred racing industry in New South Wales is regulated by the combined operation of relevant provisions in the Thoroughbred Racing Act 1996 (NSW) (Thoroughbred Racing Act), the Australian Rules of Racing (ARR) and Local Rules of Racing (LRR). 14 There is no dispute that: (a) thoroughbred horse racing is a sport; (b) the Club is a "race club" within the meaning of s 3 of the Thoroughbred Racing Act; and (c) it was also a "Club" within the definition in ARR 1 (all references are to the ARR as during the relevant period). 15 The ARR are made and administered by Racing Australia Limited (Racing Australia), a company limited by guarantee. 16 Racing NSW is a body corporate established by s 4(1) of the Thoroughbred Racing Act. It is a "Principal Racing Authority" (PRA) for the purposes of both s 13 of the Thoroughbred Racing Act and ARR 1. 17 Under s 13 of the Thoroughbred Racing Act, Racing NSW had the following functions (including during the relevant period): (1) Racing NSW has the following functions: (a) all the functions of the principal club for New South Wales and committee of the principal club for New South Wales under the Australian Rules of Racing, (b) to control, supervise and regulate horse racing in the State, … (e) such functions as may be conferred or imposed on Racing NSW by or under the Australian Rules of Racing or any other Act … 18 As a PRA, Racing NSW is empowered to make the LRR, provided that they are not inconsistent with the ARR (see ARR 6). Together, the ARR and the LRR comprise the "Rules of Racing", which form the regulatory framework for racing in NSW, administered by Racing NSW (Thoroughbred Racing Act ss 3, 13 and 14). It might observed that unlike the local rules in the Racing Queensland Board appeal, the LRR are not themselves statutory instruments (see Racing Act 2002 (Qld) s 101). 19 On and from 1 July 2000 (i.e. coinciding with the commencement of the GST regime) and throughout the relevant period, LRR 72(1) provided: Clubs shall pay such fee for a jockey or apprentice jockey in consideration for their riding a horse in a race or a barrier trial as may be set from time to time by the Board [i.e. Racing NSW]. One of the differences between this appeal and that in Racing Queensland Board is that there is no equivalent provision to LRR 72(1) in that other matter. 20 During the relevant period the Club (via Racing NSW) paid fees to jockeys in respect of riding in horse races and barrier trials (riding fees). The position was different in Racing Queensland Board because individual clubs had no involvement in paying riding fees to jockeys. The payments were made by the Board itself. 21 It may be noted that, after expiry of the relevant period, LRR 72(1) was amended such that, on and from 1 July 2014, it provided: (a) Clubs shall at the direction of Racing NSW pay, on behalf of the owners of a horse, such fee for a jockey or apprentice jockey in consideration for their riding a horse in a race or a barrier trial as may be set from time to time by the Board. (b) Nothing in this LRR 72(1) makes the Clubs personally liable for those fees, other to the extent that they are making those payments on behalf of the owners as part of the returns to owners. 22 The Commissioner issued notices of assessment to the Club for unpaid SGC in respect of superannuation guarantee shortfalls during the relevant period. He did so on the basis of his view that the Club was the employer of the jockeys during the relevant period, having regard to s 12(8)(a) of the SGA Act and the then terms of LRR 72. The Commissioner's view was that the Club was "the person liable to make the payment" concerning riding fees for the purposes of s 12(8)(a) of the SGA Act. 23 As noted, the Club lodged a notice of objection to these assessments but the objection was disallowed in full. The Club appealed that decision to the Court in its original jurisdiction under s 14ZZ of the Taxation Administration Act 1953 (Cth) (TA Act). The Club accepted that it had the burden of proving that the relevant assessments were excessive (see s 14ZZO(b)(i) of the TA Act). The primary judge held that the assessments were excessive. This conclusion was substantially based upon the primary judge's findings in respect of the regulation of the racing industry and its customs and practices. It will be necessary to refer in more detail below to the evidence relied upon by the primary judge in making these findings. For present purposes, it is sufficient to note that the primary judge found that although riding fees were paid by the Club (via Racing NSW) to jockeys during the relevant period, they did so on behalf of owners and not because the Club was "liable" to do so within the meaning of s 12(8)(a) of the SGA Act. 24 I will now set out my reasons why all the Commissioner's five grounds of appeal are rejected. I will summarise and address the parties' primary submissions in the following section.

Consideration and determination 25 Each of the five grounds of appeal will be addressed in turn.

(a) Ground 1 - the Commissioner did not contend that the relationship between jockeys and the Club was contractual 26 This ground turns on [51] and [56] of the primary judge's reasons for judgment, in which there is a reference to the Commissioner having made a concession that there was no contract between jockeys and the Club. Those paragraphs are as follows: 51. As to whether LR 72 created a legal liability on the part of the Club to pay a riding fee to a jockey, the Commissioner expressly eschewed any contention that the relationship between the Club and jockeys was contractual. More particularly, the Commissioner expressly conceded that, it was "no part of [his] case that the [Club] and jockeys should have, or should be found to have, entered into a contractual arrangement which accords with and gives effect to particular provisions of the [LR]". Instead, it was submitted that, "by virtue of the [Club's] liability to pay riding fees to jockeys in accordance with [LR]72(1), the Court should find that the [Club] is 'the person liable to make the payment' of riding fees to jockeys for the purposes of subsection 12(8) of the SGAA". … 56. What is pellucid on the evidence is that no race club, especially the Club, engaged a jockey to ride in a race. That would be contrary to the evidence as to the established and ongoing practice in the New South Wales thoroughbred racing industry. So the Commissioner's concession as to no contract which included LR 72 was the foundation for the Club's liability to pay was well made. 27 The Commissioner contends that he made no such concession, nor was it part of his case that there was no contract between jockeys and the Club. He contends that that was a matter about which the Club could choose to lead evidence but it formed no part of the Commissioner's case below. The Commissioner contends that this error by the primary judge then provided the basis for a further related error at [57], where the primary judge reasoned that, in the absence of any contractual relationship, the Commissioner had to fall back on an estoppel case. The Commissioner contends that, by requiring him to prove that an estoppel would preclude the Club from reneging on an obligation to pay riding fees, this involved an impermissible reversal of the onus of proof. He contends that it was a matter for the Club to prove that it was not liable to pay riding fees, whether by reason of an estoppel or some other source of legal obligation. 28 Ground 1 is unsustainable when regard is had to the conduct of the proceedings below. 29 As the Club points out, it was well understood that the Commissioner's position below was that the Club carried the onus of proving that the assessments were excessive. Furthermore, the Club accepted that, if the existence or absence of a contractual relationship between the Club and the jockeys was an essential element, the Club had the burden of proof. The Club pointed out that this is the reason why the hearing was adjourned part heard on 25 June 2018 and the Club was given leave to reopen its case. This occurred in the context of the Commissioner's senior counsel clarifying in the course of the hearing below that it was no part of the Commissioner's case whether or not there was a contractual relationship. Rather the Commissioner submitted below that there was an absence of evidence before the primary judge in relation to this matter, one way or the other, and this meant the Club was unable to discharge its burden under s 14ZZO of the TA Act. At this point, the proceedings were adjourned to allow the Club to reopen its case and adduce further evidence and make submissions on this matter. 30 The Club's further evidence on whether or not there was a contractual relationship took the form of affidavit evidence given by the former CEO of the Club (between 1999 and 2011), Ms Helen Sinclair, and a further affidavit dated 25 October 2018 from the General Manager of Racing NSW - Industry and Analysis, Mr Scott Kennedy. Both were cross-examined when the hearing resumed on 29 October 2018. In addition, the Club provided supplementary submissions on why there was no contractual relationship. The Commissioner provided supplementary submissions in response and argued that, irrespective of contract, the Club was liable to pay riding fees to the jockeys on the basis of equitable estoppel. This contention was met by the Club's reply submissions which stated that the Club had discharged its burden to prove that there was no contractual relationship which entitled jockeys to sue the Club for unpaid jockeys' fees. 31 Contrary to the Commissioner's position in the appeal, it is evident that the primary judge understood that the Club accepted that it carried the onus of proving that there was no contractual relationship under which it was liable to pay the riding fees so as to fall within s 12(8)(a) of the SGA Act. This is reflected in the primary judge's extensive review of the Club's evidence at [15] to [63] of his reasons for judgment. This evidence described the highly regulated nature of thoroughbred horse racing in NSW, as well as industry customs and practices relating to such matters as the engagement of jockeys and the payment of riding fees. After summarising that evidence, the primary judge concluded at [54] that it was the trainer, on behalf of owners, who engaged jockeys to ride in races and that it was inherently likely during the relevant period that "all contracts to ride so formed incorporated the practice that the related riding fees would be paid on behalf of the owner by a race club" (at [54]). 32 I accept the Club's submission that the primary judge's description at [56] of the Commissioner's concession regarding the absence of any contract as being a concession which was well made should be understood as referring to the Commissioner's decision not to advance a positive case that there was such a contract. This is further confirmed by the reference at [57] to no reliance being placed by the Commissioner on the existence of any contract between the Club and jockeys. 33 As to estoppel, although the Commissioner denies that he made a "positive case related to the operation of the doctrine of estoppel", he acknowledges that he "identified equitable estoppel as a potential source of the Club's liability to pay riding fees". In his supplementary submissions dated 10 September 2018 below the Commissioner submitted at [16] that a jockey could rely upon equitable estoppel to prevent the Club from refusing to pay riding fees. The primary judge considered and rejected contract and equitable estoppel as two potential sources of liability on the part of the Club to pay riding fees to jockeys without ever suggesting that the Commissioner carried the burden of proof on either potential source. The primary judge well understood that the Club carried the burden of establishing that the assessments were excessive, as is reflected most plainly in his Honour's express statement to that effect at the end of [12]. 34 For these reasons, I consider that ground 1 fails accurately to reflect the primary judge's reasoning and it is rejected.

(b) Ground 2 - jockeys were deemed employees of the Club pursuant to s 12(8)(a) of the SGA Act 35 Under this ground the Commissioner complains that the primary judge failed to take into account a considerable volume of evidence concerning changes to the nature of payments of riding fees following the implementation on 1 July 2000 of a policy developed by Racing NSW, namely the Stakes Payment System (SPS). The implementation of this policy coincided with the commencement of the GST regime. The Commissioner contends that the primary judge failed to have regard to this volume of evidence, which was relevant to the central issue of who was liable to pay riding fees during the relevant period. 36 In his written submissions in chief in the appeal the Commissioner identified at [22]-[24] the evidence which he claimed was not referred to by the primary judge. It relates to part of the evidence given by Mr Kennedy, Ms Sinclair and Mr Paul Heaton (an accountant who was involved in preparing the Club's annual audited financial statements during the relevant period). The Commissioner submits that this evidence was inconsistent with the primary judge's view that during the relevant period riding fees were paid by the Club on behalf of owners, conformably with a longstanding industry practice prior to the introduction of the GST on 1 July 2000. 37 The evidence identified by the Commissioner goes to the issue of payments to jockeys after GST began. Instead of owners and trainers paying riding fees directly to jockeys, Racing NSW paid the fees directly to jockeys and recorded them as debits in the SPS accounts which were maintained by Racing NSW for each club, as described by the primary judge at [45]. It is uncontroversial that clubs generally never sought repayment of the fees which were debited to their SPS accounts from either owners or trainers. 38 The Commissioner submits that the evidence not referred to by the primary judge establishes that there was a change made from 1 July 2000 as to the way in which, and the person by whom, riding fees were paid to jockeys. In particular, the Commissioner says that this evidence indicates that: (a) riding fees were never passed on to owners; (b) no recoupment was ever sought from owners; (c) the riding fees were always reflected as a debit to the Club's SPS account and that debit was never matched by a credit to that account of the amount of riding fees paid by the Club; and (d) the Club treated the riding fees as its own expenses in respect of which it claimed input tax credits (relying on Ms Sinclair's evidence at T 88, L 37-45). 39 The Commissioner also relied upon the clarification given by Mr Kennedy in cross-examination concerning [8] of his affidavit dated 25 October 2018 where he had deposed: "When preparing the Chart [of accounts], I put the jockeys (sic) ride fees under the subcategory of 'Returns to Owners' to reflect the fact that, … , from mid-2000, such payments were treated by Racing NSW and the clubs as payments made to jockeys on behalf of owners via the Stakes Payment System". In cross-examination, Mr Kennedy agreed that this meant "paid by the race clubs". 40 In essence, the Commissioner's complaint is that the primary judge erred in drawing the inference that the industry custom prior to 1 July 2000 of clubs paying riding fees to jockeys on behalf of owners (or connections) continued after 1 July 2000. The Commissioner contends that this inference was not open if regard was had to all the relevant evidence below. 41 The Commissioner's contention necessarily requires careful attention to be given to the nature and scope of the Court's appellate function in reviewing findings of fact and related inferences by the primary judge.

(i) The nature and scope of appellate review 42 After the Court raised with the Commissioner's senior counsel the issue of the nature and scope of the Court's appellate function, he said: … we do say as a matter of law this is a rehearing. We do say that we accept that it's necessary to show error. We say the error is that the inference drawn by his Honour is wrong, and it's wrong - the reason it's wrong is because he failed to have regard to other evidence which, when regard is had to it, demonstrates that the inference is wrong, and when the evidence is taken as a whole it's wrong… . 43 The Commissioner cited no authorities relating to the nature and scope of appellate review of such an inference. Having regard to the Commissioner's challenge on appeal to the correctness of the primary judge's inference (and related fact finding), it is desirable, however, briefly to restate relevant authorities on the scope of appellate review in the nature of a rehearing and, in particular, to note the subtle and complex nuances which are not sufficiently acknowledged in the Commissioner's broad response recorded immediately above. 44 In Robinson Helicopter Company Inc v McDermott [2016] HCA 22; 331 ALR 550 at [43], the Court (French CJ, Bell, Keane, Nettle and Gordon JJ) said (footnotes omitted): The fact that the judge and the majority of the Court of Appeal came to different conclusions is in itself unremarkable. A court of appeal conducting an appeal by way of rehearing is bound to conduct a "real review" of the evidence given at first instance and of the judge's reasons for judgment to determine whether the judge has erred in fact or law. If the court of appeal concludes that the judge has erred in fact, it is required to make its own findings of fact and to formulate its own reasoning based on those findings. But a court of appeal should not interfere with a judge's findings of fact unless they are demonstrated to be wrong by "incontrovertible facts or uncontested testimony", or they are "glaringly improbable" or "contrary to compelling inferences". In this case, they were not. The judge's findings of fact accorded to the weight of lay and expert evidence and to the range of permissible inferences. The majority of the Court of Appeal should not have overturned them. 45 As Allsop CJ recently explained in Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 at [3], the footnotes to [43] of Robinson Helicopter and the balance of the judgment make plain that there was no intention to depart from the longstanding principles of appellate review of fact finding discussed in cases such as Warren v Coombes [1979] HCA 9; 142 CLR 531, Fox v Percy [2003] HCA 22; 214 CLR 118 and State Rail Authority (NSW) v Earthline Constructions Pty Ltd (in liq) [1999] HCA 3; 160 ALR 588. The Chief Justice explained that the references to Fox v Percy at [28] and [29] in Robinson Helicopter "are plainly to findings of fact reached after assessing competing witnesses for their reliability and credibility". With reference to the citations in [43] of Robinson Helicopters, Allsop CJ added at [3] of Aldi Foods (emphasis in original): … The reference to Miller & Associates Insurance Broking Pty Ltd v BMW Australia Finance Ltd (2010) 241 CLR 357 at [76] is an indirect reference, in the context of fact-finding involving witnesses, to Fox v Percy at [23]-[29]. These latter references to Fox v Percy are important because they recognise the importance of the advantages of the trial process discussed by Kirby J in SRA v Earthline at [89]-[91] and adopted by Gleeson CJ, Gummow J and Kirby J in Fox v Percy at [23]. The whole of [20]-[31] of Fox v Percy is important and I do not read the Court in Robinson Helicopter as saying at [43] that any finding of fact made by a trial judge can only be interfered with if the expressions referred to above and derived from Fox v Percy are satisfied. The findings of fact of the trial judge in Robinson Helicopter were made after a trial of five weeks in which close to 20 witnesses gave oral evidence, whose evidence had to be assessed, balanced and evaluated as the case unfolded. The trial judge had the advantages of seeing lay and expert witnesses in assessing their credit and reliability, and he also had the advantages of the kind discussed in SRA v Earthline including "the unique benefit of viewing two helicopters of the kind which crashed … [and] … the opportunity to consider all of the evidence in its totality and to reflect upon its interaction": 90 ALJR; 331 ALR at [57]. 46 The Chief Justice then referred at [6]-[7] in Aldi Foods to what the Full Court had said in Optical 88 Ltd v Optical 88 Pty Ltd [2011] FCAFC 130; 197 FCR 67 about the use of "sound bites" (such as "plainly or obviously wrong" or "sufficiently clear difference of opinion") as being, in effect, inadequate tools of analysis in their own right and that a more sophisticated approach is required. The Chief Justice set out the following passages from Optical 88 at [33] (citations omitted): 33. The second point is that the task of this appellate Court is a complex one. It cannot be captured by brief 'sound-bites' such as "plainly or obviously wrong" or "sufficiently clear difference of opinion". It is an approach which requires consideration of several principles, not just one. This approach is best explained by Allsop J in Branir at [28]-[29]: 28 … First, the appeal court must make up its own mind on the facts. Secondly, that task can only be done in light of, and taking into account and weighing, the judgment appealed from. In this process, the advantages of the trial judge may reside in the credibility of witnesses, in which case departure is only justified in circumstances described in Abalos v Australian Postal Commission; Devries v Australian National Railways Commission and SRA v Earthline. The advantages of the trial judge may be more subtle and imprecise, yet real, not giving rise to a protection of the nature accorded credibility findings, but, nevertheless, being highly relevant to the assessment of the weight to be accorded the views of the trial judge. Thirdly, while the appeal court has a duty to make up its own mind, it does not deal with the case as if trying it at first instance. Rather, in its examination of the material, it accords proper weight to the trial judge's views. Fourthly, in that process of considering the facts for itself and giving weight to the views of, and advantages held by, the trial judge, if a choice arises between conclusions equally open and finely balanced and where there is, or can be no preponderance of view, the conclusion of error is not necessarily arrived at merely because of a preference of view of the appeal court for some fact or facts contrary to the view reached by the trial judge. 29 The degree of tolerance for any such divergence in any particular case will often be a product of the perceived advantage enjoyed by the trial judge. Sometimes, where matters of impression and judgment are concerned, giving "full weight" or "particular weight" to the views of the trial judge might be seen to shade into a degree of tolerance for a divergence of views [various authorities]… However, as Hill J said in Commissioner of Taxation (Cth) v Chubb Australia Ltd "giving full weight" to the view appealed from should not be taken too far. The appeal court must come to the view that the trial judge was wrong to interfere. Even if the question is one of impression or judgment, a sufficiently clear difference of opinion may necessitate that conclusion. 47 The Chief Justice concluded at [9] of Aldi Foods that a "… test of "plainly or obviously wrong" (whatever its precise content) is blunt and lacks nuance. It invites the setting of a standard of appellate review higher than it should be, by its formulaic false simplicity and false clarity". Justice Markovic agreed with the Chief Justice's reasoning (at [169]). 48 Further guidance on the nuanced and complex nature and scope of appellate review in an appeal by way of rehearing was provided by Perram J in Aldi Foods at [45] to [50] (with which Allsop CJ agreed at [2] and Markovic J agreed at [169]). 49 Although Aldi Foods is an intellectual property case, the reaffirmation of the principles in Branir are not confined to such a case. They have a wider application, including in taxation cases, as is well illustrated by the Full Court's decision in Commissioner of Taxation v Amway of Australia Ltd [2004] FCAFC 273; 141 FCR 40. 50 When an appellate court reviews a primary judge's conclusions which are evaluative in nature, the relevant question is not whether it disagrees with those conclusions but is rather whether it detects error. Where error is found this indicates not merely that the appellate court has a different view from the primary judge, but that the primary judge's view is wrong even having regard to the advantages enjoyed by the primary judge and even taking into account the subject matter. The extent of the perceived advantages of the primary judge in any particular case is relevant to how extensive the difference of opinion must be to warrant appellate court intervention (see Aldi Foods at [2], [7]-[8], [49]-[50] and [169]).

(ii) Application of these principles to the circumstances here 51 Although the primary judge did not refer to every aspect of the evidence given by Ms Sinclair, Mr Kennedy and Mr Heaton as identified by the Commissioner, I am satisfied that his Honour took all that evidence into account. This is reflected at [15] and [16] of the primary judge's reasons for judgment and, in particular, to the primary judge's express statement at [16] that he had considered this evidence, together with other matters, "collectively". Furthermore, the primary judge made extensive references to particular aspects of the evidence of both Ms Sinclair and Mr Kennedy. 52 I do not accept the Commissioner's claim that the primary judge ignored the evidence given by Mr Kennedy under cross-examination in relation to [8] of his affidavit dated 25 October 2018. This is made plain at [50] of his Honour's reasons for judgment which squarely addresses this part of Mr Kennedy's evidence in cross-examination. The primary judge correctly emphasised the limitations of Mr Kennedy's evidence on the issue of the Club's legal liability to pay riding fees: 50. Mr Kennedy asserted in evidence that LR 72 constituted a formalisation of the returns to owners policy which had been implemented in and from 1999. But this assertion, cannot, with respect, govern the interpretation of LR 72 or whether it thereby created a legal liability on the part of the Club to pay a jockey a riding fee. 53 As the Club points out, there was no need for the primary judge to reproduce all of the evidence now identified by the Commissioner in support of ground 2. For example, it was common ground below that, under the arrangements after 1 July 2000, racing clubs never sought repayment of riding fees which were paid by Racing NSW and were recorded as debits to the relevant club in the SPS accounts. 54 Nor do I accept the Commissioner's submission that the evidence he claims was not taken into account is inconsistent with the primary judge's findings that riding fee payments to jockeys by clubs (via Racing NSW) were made on behalf of owners and that this constituted a continuation of the previous and established practice prior to 1 July 2000. 55 The primary judge described the evidence given by each of Ms Sinclair, Mr Kennedy and Mr Heaton as being "honest and reliable evidence" (at [15]). He relied upon their evidence to make findings about industry custom and practice both prior to, and during, the relevant period. The primary judge made the following findings: (a) there was an established practice by which jockeys were engaged by the trainer to ride a horse in a race (at [30]); (b) neither Racing NSW nor the clubs had any involvement in the making of agreements between a trainer and the jockey (at [30]); (c) nor did Racing NSW or the clubs have any involvement in, or control over, the decision as to which rider would be declared to ride a horse in a particular race (at [33]); and (d) prior to 1999, trainers paid riding fees to jockeys on behalf of owners at the race meeting (at [36]). 56 The concept of "returns to owners" was viewed by the primary judge as significant in resolving the appeal. His Honour emphasised at [37] that, before, during and after the relevant period, "returns to owners" was "an umbrella term used in the industry to refer to amounts paid by race clubs or, as the case came as related below to be, Racing NSW to and on behalf of owners". The concept extended to include riding fees. The primary judge explained the concept of "returns to owners" at [39]: Commencing in the late 1990s (and continuing to this day), Racing NSW developed and implemented policies aimed at maximising returns to owners as a means of improving the viability of a racehorse owner participating in thoroughbred racing. Racing NSW regarded the possibility of reasonable returns to owners as a means of broadening the range of persons who could participate in the industry via the ownership of a thoroughbred racehorse and as complementing the social and intrinsic benefits of being involved in racing a thoroughbred. Representing as it did the extent to which owners were collectively compensated for the expense of acquiring and breeding horses to race and the costs of their training, spelling, veterinary care and racing, Racing NSW regarded (and continues to regard) returns to owners as an important measure of the health of the thoroughbred racing industry in New South Wales. 57 These findings were plainly based on the primary judge's acceptance of Mr Kennedy's evidence at [34] and [35] of his affidavit dated 20 April 2018. 58 The primary judge acknowledged that the implementation of the GST on 1 July 2000 provided the catalyst for various administrative and accounting changes. Despite these changes, however, the primary judge concluded that, consistently with past custom and practice, riding fees continued to be paid to jockeys on behalf of owners and as an aspect of the policy of "returns to owners". In support of that conclusion, the primary judge referred to the following evidence: (a) the Chart of Accounts used in preparing each club's MYOB accounts, in which riding fees were classified as a "Race Meeting Expenditure" under the explicit heading "Returns to Owners" (see at [40] with reference to Ms Sinclair's evidence); (b) the primary judge noted at [40] that, during the relevant period, riding fees were categorised as "wages" in the Club's financial reports but he doubted the correctness of that categorisation because it was "pellucid" on the evidence that the Club did not engage jockeys to ride in races (see at [56]); (c) NSW Racing Calendars for May, June and July 2000 described riding fees as being "paid by clubs on behalf of connections", i.e. owners (at [41]); (d) a central account maintained by Racing NSW as part of the SPS, called the "Stakes Payment Account", operated during the relevant period under which Racing NSW debited the Stakes Payment account of individual race clubs for inter alia riding fees (at [45]); (e) the SPS, which is a centralised system operated and managed by Racing NSW from 1 July 2000, was a clearing house for all money that passed through the State's thoroughbred racing industry. This system reduced the administrative burden which would otherwise fall on individual clubs, trainers and jockeys in complying with the GST regime (at [44]-[46]). This finding was based in part on Mr Kennedy's evidence at [47] of his affidavit dated 20 April 2018 that, since 1 July 2000, Racing NSW has paid jockeys their riding fees on behalf of the owners via the SPS. Mr Kennedy explained that this "is to ensure that jockeys are paid in a timely matter (sic) through a centralised system, meet all GST requirements and are not required to chase payment from potentially hundreds of owners each month (bearing in mind that many racehorses have up to 20 owners)"; (f) Racing NSW's Cash Flow Management Policy included Racing NSW issuing statements of account to stakeholders, including owners, trainers, jockeys and race clubs (at [47]-[48]); and (g) the system by which jockeys did not generate tax invoices but were paid a riding fee which was based on information automatically generated from the confirmation of race results in the SPS under which trainers declared who would ride their horses (at [49]). 59 Having regard to all this evidence, and despite the Commissioner's heavy reliance on LRR 72 as supporting his contention that the Club was liable to pay riding fees, the primary judge reasoned that LRR 72 did not alter the existing and established industry practice under which riding fees were paid on behalf of owners. This is made clear at [62], where the primary judge said (emphasis added): It is not difficult to see how, having regard to s 12(8)(a) of the SGAA and reading LR 72 in isolation, the Commissioner might reasonably have formed the view which he did as to the Club's liability. However, once the regulation of the industry and its customs and practices are understood, that view is not sustainable. 60 As noted at [38(d)] above, the Commissioner complains in the appeal that the primary judge did not address the evidence below concerning input tax credits. That evidence was rather obscure. Under cross-examination, Ms Sinclair said at one point that "… jockeys were paying GST, and we were reporting the GST as we would with any other subcontractor through the BAS system". When then asked whether the BAS system presented any challenge as to what to do with payments to jockeys, Ms Sinclair responded by saying: It was very clear how to treat it. They were subcontractors, and we were paying the GST accordingly. The topic was not taken any further. 61 The Commissioner's position on this issue in the appeal is also somewhat obscure. Initially, senior counsel stated that input tax credits was not an issue and that he was "happy" to withdraw it. After the Court asked for clarification, senior counsel said that he would confirm his instructions. Later in the hearing senior counsel drew the Court's attention to Ms Sinclair's evidence regarding GST, as referred to immediately above. But no further submissions were made by the Commissioner in respect of that topic. I am not satisfied that the primary judge fell into appealable error in not referring directly to that evidence. 62 As was the case in Amway, not all the evidence below pointed in the one direction but I consider that the findings and inferences drawn by the primary judge on the central question of industry practice were open on the evidence before him, particularly when regard is had to his findings on the operation of the continuing policy of "returns to owners". His conclusion that the Club had not assumed legal liability to pay riding fees followed from these findings. No appealable error has been shown in the primary judge's reasoning or ultimate finding that, although the Club paid riding fees to jockeys (via Racing NSW) and did not seek reimbursement or recovery from owners, it was under no legal liability to make the payments and they were made on behalf of owners. 63 In construing LRR 72 and its interaction with s 12(8)(a) of the SGA Act, the primary judge was entitled to have regard to matters of context, including past and continuing industry custom and practice. It is true that the LRR are not themselves legislative instruments, but they are rules to which racing participants were contractually bound and they are given statutory consequences and recognition in provisions such as s 3 of the Thoroughbred Racing Act (see New South Wales Thoroughbred Racing Board v Waterhouse [2003] NSWCA 55; 56 NSWLR 691 at [35] per Hodgson JA and McHugh v Australian Jockey Club Limited (No 13) [2012] FCA 1441; 299 ALR 363 at [1414] per Robertson J (noting that the Full Court dismissed an appeal on other aspects of Robertson J's judgment in McHugh v Australian Jockey Club Ltd [2014] FCAFC 45; 314 ALR 20)). Matters of context are relevant to the construction of LRR 72, as also are its text and purpose. 64 The following observations of Leeming JA in Mainteck Services Pty Ltd v Stein Heurtey SA [2014] NSWCA 184; 89 NSWLR 633, with reference to the notion that language is "unavoidably contextual", are apposite to the proper construction of LRR 72: 75. … Words do not have a "natural" meaning that can be determined in isolation ... 76. What is the legal meaning of a promise to sell "my Dürer drawing", if the vendor's wife owns a Dürer drawing which is on display in their home, and the vendor keeps another secretly in his study? What is the meaning of a gift "to my niece Eliza Woodhouse during her life" in a will, if the testator had no such niece, but a grandniece of that name, and another grandniece, who was illegitimate, who lived with him: cf In re Fish; Ingham v Rayner [1894] 2 Ch 83? What is the meaning of cl 7 of the Wild Dog Destruction Regulation 1999, which provided "The Wild Dog Destruction Regulation 1994 is repealed"? Contracts, wills and statutes are very different legal texts, to the process of ascertaining whose legal meaning different rules apply, yet all are based on language, and language is unavoidably contextual. If I may repeat what I wrote of the uncertain meaning of the Wild Dog Destruction Regulation in Resolving Conflicts of Laws (Federation Press 2011), p 13 fn 64, "The meaning of even the seemingly clearest legal text can be unclear; hence the importance of attending to context in the first instance." 65 The policy developed and implemented by Racing NSW relating to returns to owners provides relevant context within which LRR 72 is to be construed. It strongly supports the primary judge's conclusion that LRR 72 did not impose a legal liability on the Club to pay riding fees Rather, in accordance with the industry custom and practice, riding fees were paid to jockeys by the Club (via Racing NSW) on behalf of owners or connections during the relevant period. 66 It is notable that the policy of returns to owner assumed much greater prominence in these proceedings than was the case in Racing Queensland Board. It provides a central point of difference between the proceedings. Another important point of difference is the significance in the appeal in Racing Queensland Board of the gaps and inconsistencies in the taxpayer's evidence in that matter, as highlighted by Griffiths and Derrington JJ at, for example, [5], [19], [21], [34], [49], [61] and [72] of the joint reasons for judgment.

(c) Ground 3 - "published practice" did not make it likely that riding fees would be paid on behalf of the owner by a race club 67 This ground relates to what the primary judge said at [54] and [58] (emphasis added): 54. For reasons which I gave in RQB v FCT, especially at [62]-[64], it seems inherently likely that there likewise existed in the New South Wales thoroughbred racing industry "vertical" and "horizontal" contracts. Further, by longstanding custom and practice, within the industry it was trainer (sic), on behalf of owners, who engaged jockeys to ride in races for reward. Once again, such was the publicised practice of race clubs paying riding fees on behalf of owners, it is inherently likely that, during the Relevant Period, all contracts to ride so formed incorporated the practice that the related riding fees would be paid on behalf of the owner by a race club. … 58. An immediate difficulty with this submission is that the Club was not the author of LR 72, nor did it ever, on the evidence, make any representation to any jockey during the Relevant Period in terms of LR 72. As with all LR, LR 72 was made by Racing NSW. Further, on and from 1999, the policy and practice of the industry, as published in the Calendar, was that riding fees would be paid on behalf of owners. LR 72 was not inconsistent with this practice and procedure. Any assumed state of affairs in relation to an expectation of a jockey would have to include this policy and practice and the fact that Racing NSW invariably made the payment of a riding fee to a jockey. 68 The Commissioner's complaint is that, on the totality of the evidence below, "published practice" was not reflected by the practice under the SPS of paying riding fees to jockeys on behalf of owners during the relevant period. The Commissioner contends that there was no evidence of any such practice under the SPS and, indeed, the evidence was to the contrary, being that riding fees were paid by Racing NSW on behalf of the Club to jockeys and that such payments were not made on behalf of owners. 69 A fundamental difficulty with this ground is that the primary judge's finding at [54] is not limited to "published practice". Rather, the primary judge had regard to all the evidence before him regarding industry practice and custom, including that given by Ms Sinclair and Mr Kennedy, whose evidence he accepted unreservedly. The practice was also reflected in the Racing Calendar for the months of May, June and July 2000, to which the primary judge made express reference at [41] and [58]. These Calendars contained explicit statements in respect of various provincial races that the local clubs would pay rider fees "on behalf of connections". Although Scone Race Club was not expressly referred to in any of the Calendars, it was open to the primary judge to infer that the statements applied generally to provincial race programs. 70 The Commissioner next contends that, even if the primary judge's finding at [54] was not based solely on "published practice" and also took into account evidence below as to industry practice, the primary judge overlooked evidence relating to the accounting treatment of riding fees in the accounts of both the Club and Racing NSW. He contends that this evidence demonstrated that the Club paid riding fees on its own account and that this was the only conclusion which the evidence admitted. 71 I do not accept that the primary judge overlooked the accounting evidence referred to by the Commissioner. It is adequately summarised by the primary judge in his description of the SPS at [44] to [49]. The primary judge inferred that the object of the SPS was to streamline the flow of funds throughout the State's thoroughbred racing industry, including by reducing the administrative burden which would otherwise fall on clubs, trainers and jockeys in respect of compliance with the GST regime. The primary judge did not regard the accounting evidence as determinative of the issue whether the Club had a legal liability to pay riding fees. It was open to him to take that view because, for example, the fact that the riding fees were debited to the Club in the SPS was equally consistent with two alternative and competing inferences, namely (a) an inference that the Club itself had a legal liability to pay riding fees; and (b) an alternative inference that although the Club is recorded as paying the riding fees it did so gratuitously as part of the continuing policy of "owners returns", and without any legal liability to make such payments. It was open to the primary judge to prefer the second of these inferences after weighing the significance of the accounting evidence against the broader regulatory framework as well as the evidence of industry custom and practice relating to owners' returns. 72 His Honour's findings were not "glaringly improbable" or "contrary to compelling inferences", (using these expressions cautiously in the light of the discussion in cases such as Aldi Foods). The Commissioner seeks to set aside the primary judge's findings by mere identification of evidence which, if accepted or interpreted in a particular way would be capable of supporting a contrary finding and without demonstrating appealable error.

(d) Ground 4 - LRR 72 was inconsistent with a term incorporated from industry practice as notified in the Racing Calendar that a race club paid riding fees on behalf of an owner 73 The Commissioner contends that LRR 72, as in force during the relevant period, is inconsistent with the "published practice" referred to by the primary judge at [54]. Therefore, it was submitted, LRR 72 was inconsistent with incorporation of any term based on industry practice in any contracts with owners or jockeys. He emphasises that there is no express reference in LRR 72 to riding fees being payable on behalf of owners. Furthermore, the Commissioner contends that the construction of LRR 72 should not take account of Mr Kennedy's evidence, as referred to by the primary judge at [50] and that LRR 72 formalised the "owner returns" policy which had been implemented in 1999. Rather, the Commissioner contends that Mr Kennedy's evidence was consistent with the Commissioner's position, namely that there had been a change to industry practice and the payment of riding fees from 1 July 2000 (with the introduction of the GST), such that riding fees were not paid on behalf of owners but on behalf of clubs and that the charges were not from that time passed on to owners. 74 A central difficulty with the Commissioner's position is that merely because clubs did not pass on to owners riding fees paid to jockeys does not mean that it was not open to the primary judge to find at [42] that the industry understanding was that such fees were paid on behalf of owners without assumption of legal liability for making the payments. The Commissioner referred in his reply submissions to the primary judge's statement at [55] that "LR 72 is silent as to whether the Club is making a payment of a riding fee in its own right or on behalf of an owner". This statement was the basis for the primary judge's conclusion that "even if LR 72 were incorporated into a contract between an owner and a jockey, its incorporation would not be inconsistent with a term incorporated from industry practice as notified in the Racing Calendar that a race club paid riding fees on behalf of an owner". 75 Ultimately, the issue of the proper construction of LRR 72 falls to be determined by reference to its text, when viewed in the light of context and purpose. There was ample evidence to support the primary judge's findings regarding the industry understanding, when viewed in the context of industry custom and practice with particular reference to the practical and accounting operation of the SPS and the policy of "owner returns".

(e) Ground 5 - LRR 72 required that race clubs pay riding fees to jockeys and did not require that race clubs do so on behalf of owners or trainers 76 The Commissioner's basic contention is that the express terms of LRR 72 are consistent with the evidence below of Racing NSW's policy, as implemented on 1 July 2000, of maximising returns to owners by reducing the fees, including riding fees, payable by them in connection with race events. 77 This contention fails to grapple with the primary judge's analysis of the evidence and his Honour's ultimate findings that payment of riding fees through the SPS was viewed by the industry as part of the "owner returns". The primary judge considered these matters in some depth at [24] to [49] of his reasons for judgment. As the Club submits, this meant that the benefit inured to owners through the payment on their behalf of an expense that they previously paid directly themselves" (emphasis added). 78 As with the other grounds of appeal, LRR 72 and the evidence identified by the Commissioner is consistent with both his contention that the Club assumed legal liability to pay riding fees and the primary judge's contrary view that the returns to owners' policy was implemented by payment of the fees without assumption of liability to do so. As explained earlier, that is an insufficient basis to impeach the primary judge's factual findings and the legal conclusions which followed from them.

Conclusion 79 For these reasons, I consider that the appeal should be dismissed. There should be no order as to costs having regard to the test case funding mentioned at [3] above. I certify that the preceding seventy-nine (79) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.

DERRINGTON J: 80 I agree with the reasons and orders of Steward J. I certify that the preceding one (1) numbered paragraph is a true copy of the Reasons for Judgment herein of the Honourable Justice Derrington.

STEWARD J: 81 It is with regret that I find myself unable to agree with the judgment of the learned primary judge below and with the judgment of the learned presiding judge on this appeal. With the greatest of respect, I do not think that Scone Race Club Limited (the "taxpayer") discharged its onus of proof pursuant to s 14ZZO of the Taxation Administration Act 1953 (Cth) (the "TAA"). I do not think that the evidence the taxpayer relied upon justified the drawing of an inference that it was not liable to make payments of riding fees to jockeys during the period 1 July 2009 to 30 June 2014. 82 The applicable legislation is set out in the reasons of Griffiths J. which I gratefully adopt. I also respectfully agree with his Honour's reasons and conclusions concerning ground one of the Amended Notice of Appeal (as set out by Griffiths J.). It is otherwise unnecessary for me to consider grounds three to five as set out in that Notice. That is because, in my opinion, ground two is made out. That is sufficient to dispose of this appeal. For convenience, I reproduce ground two as follows: The primary judge: 2.1. erred in finding (Reasons [62] and [63]), contrary to the evidence before him, that s 12(8)(a) of the SGAA did not apply so as to make the jockeys employees of the Club because that finding was contrary to the evidence; and 2.2. should have found that the Club failed to prove pursuant to s 14ZZO of the Taxation Administration Act 1953 that the assessments issued to it under the SGAA for the relevant periods were excessive, as s 12(8)(a) of the SGAA applied so as to make the jockeys employees of the Club. 83 In considering this ground of appeal I make two observations: (a) first, I respectfully agree with and adopt Griffiths J.'s analysis of the "nature and scope of appellate review" in this Court. That requires an appellate court, in a case of this kind, to accord "proper weight" to the facts as found by the trial judge to the extent of that judge's "perceived advantage"; (b) secondly, I adhere to what I said in Commissioner of Taxation v Cassaniti [2018] FCAFC 212 at [88(1)]: … where the onus is on the taxpayer (whether pursuant to s 14ZZO of the TAA or otherwise) the degree or standard of proof required is that which ordinarily applies in civil proceedings. The direction given to a jury in civil cases aptly describes that onus by reference to a pair of scales and to the arguments of each party being placed at each end. As Hunt J said in Allied Pastoral [Holdings Pty Ltd v Commissioner of Taxation [1983] 1 NSWLR]: ... if the plaintiff succeeds ... in weighing down those scales ever so slightly in his favour then he has discharged the burden he carries ... 84 As Griffiths J. has observed, the issue for determination is whether the taxpayer "discharged its onus of showing that it was not liable to pay jockeys for riding in races … conducted by" the taxpayer. Fundamentally, the taxpayer led no direct or actual evidence about who was liable to pay riding fees. It could not point to any contemporaneous document which established that someone else was liable to pay such fees. Instead, its case rested on the drawing of an inference from the evidence about the legal capacity of Racing NSW when it physically made payments of riding fees to jockeys "on behalf of" the taxpayer during the period in dispute. 85 The evidence led by the taxpayer largely comprised the following: (a) four affidavits affirmed by Mr Scott Kennedy. He was, during the period in question, the "General Manager - Industry and Analysis" for Racing NSW. He was never employed by the taxpayer; (b) an affidavit affirmed by Ms Helen Sinclair. She was the Chief Executive Officer ("CEO") of the taxpayer from 1999 to 2011; and (c) an affidavit affirmed by Mr Paul Heaton. He is an external accountant who was involved in the preparation and auditing of the taxpayer's annual financial reports during the relevant period. 86 It would appear that the current CEO of the taxpayer, a Mr Courtney, also gave evidence below in the form of an affidavit. However, this affidavit was not reproduced in the Appeal Book. Neither party referred to anything Mr Courtney might have said in that affidavit. He was also not cross-examined. It would seem that his evidence played no significant role below. It is not described by the learned primary judge in his Honour's reasons for judgment. Rather, the findings made by the primary judge about industry practice were, it would appear, "sourced" from the evidence of Mr Kennedy (see [24]). 87 The only evidence of industry practice prior to 1999 was given by Mr Kennedy and comprised the following paragraph from his first affidavit: As I understand it, based on my various discussions over the years with senior and experienced racing officials, historically riding fees were paid by trainers on behalf of owners at the race meeting. In those days, trainers would pay for the ride fees, nomination and acceptance fees to the race club (these monies being advanced by or recouped from owners). The jockeys would be paid their ride fees at the end of the day's racing. Behind Tab 10 is a single page extract of the AR which were current until 30 June 2000. It shows AR91 which sets out the requirement for the payment of riding fees prior to the race. 88 It is noteworthy that Mr Kennedy only commenced working for Racing NSW in 1998. His "understanding" was based on discussions with racing officials, none of whom were called to give evidence. I note that the learned primary judge inferred (at [36]) that prior to 1999 the physical act of payment of riding fees was undertaken by the racing clubs on behalf of owners. 89 Mr Kennedy did not give evidence that a term of the contracts entered into between owners and jockeys, or between trainers on behalf of owners and jockeys, included a promise by owners or trainers to pay riding fees. His evidence about those contracts of engagement was highly generalised and comprised the following: Jockeys are engaged by the trainer either directly or through their agent, to ride a horse in a race. These agreements are often verbal and usually unwritten, although some stables may email riders or their agents to confirm bookings. Many jockeys have their own agent who will approach trainers in the hope of obtaining for their client, a ride on a particular horse. Jockey's agents are licensed persons. Neither Racing NSW nor the race clubs have any involvement in the agreements between jockey and trainer. Jockeys often have a pre-existing relationship with a particular trainer and will be selected to ride a horse on the strength of that relationship. Some jockeys may be 'stable riders' who ride either exclusively for that trainer or only take outside rides where not required by the trainer. In other cases, a jockey may ride track work for a particular horse or horses in the hope of being engaged to ride that horse or others in upcoming races. 90 The evidence that Mr Kennedy gave about who was liable to pay riding fees after 1999 only took the form of assertions about that issue. Here is that evidence: 'Returns to owners' is an umbrella term used in the thoroughbred racing industry to refer to amounts paid by race clubs and Racing NSW to and on behalf of owners. The concept and use of returns to owners as a metric commenced in the late 1990s as efforts began to reduce the direct costs to owners of contesting individual races. This included clubs ceasing to charge nomination and acceptance fees for most races and paying on behalf of owners the riding fees payable to jockeys. Returns to owners include: (a) prize money and BOBS Bonuses - approximately $210.7 million; (b) riding fees and superannuation paid to jockeys - approximately $11.6 million; (c) jockeys insurance - approximately $4.3 million; and (d) appearance fees (being the $200 fee paid to each horse that starts in a NSW race - excluding picnic races - but which does not receive prizemoney) - approximately $1.1 million. … In 1999, as I noted in paragraph 34 above, racing clubs started paying riding fees to jockeys and jockeys insurance on behalf of the owners. Behind Tab 11 are extracts from the NSW Racing calendars for May, June and July 2000 which all state "Riding fees for starters paid by clubs on behalf of connections" (or words to that effect). In the thoroughbred racing industry, the word 'connections' means owners. … On 1 July 2000 Racing NSW took over the administration of the race club's function (as imposed by LR72(1)) of making payments of riding fees to jockeys on behalf of the owners. Since that time, Racing NSW has paid jockeys their riding fees on behalf of the owners via the Stakes Payment System. This is to ensure that jockeys are paid in a timely matter through a centralised system, meet GST requirements and are not required to chase payment from potentially hundreds of owners each month (bearing in mind that many race horses have up to 20 owners). Over the years, riding fees have been paid to jockeys first by trainers, then by race clubs and now by Racing NSW. At all times these payments have been made on behalf of the owners. As such, the riding fees paid to jockeys by Racing NSW through the SPS forms part of the 'returns to owners'. 91 The "racing calendars" referred to by Mr Kennedy include a statement that riding fees are paid "on behalf of connections". I do not think that this statement adds much. The primary judge thought otherwise. His Honour said at [42]: The Racing Calendar is thus a means by which changes in the regulation of the industry are notified to the industry at large. On the evidence, it is inherently likely, and I find, that, on and from the implementation of the returns to owners maximisation policy and the related notification in the Racing Calendars, participants in the New South Wales thoroughbred industry, including owners, trainers, race clubs (including the Club) and jockeys conducted their economic relations, including the engaging of jockeys and the related riding of racehorses by jockeys on the basis that "Riding fees for starters paid by clubs on behalf of connections". In other words, from 1999 and prior to 1 July 2000, the practice of the New South Wales thoroughbred industry, inferentially mutually understood at the time when a jockey was engaged as described above, was that a race club paid riding fees on behalf of owners (who engaged jockeys via their trainers). Thus, this feature of the implementation of the returns to owners' maximisation policy did not affect the industry practice as to who engaged and was responsible for the payment of jockeys. To the contrary, by providing that a race club paid "on behalf of connections", it was predicated upon the historic practice of the thoroughbred racing industry. 92 With great respect, what the phrase "on behalf of" meant was never established. As Griffiths and Derrington JJ. observed in Commissioner of Taxation v Racing Queensland Board [2019] FCAFC 224, these words have no necessary or precise meaning: at [58]. They might simply indicate the undertaking of some act for the benefit of another. As such, and without more, they insufficiently identify the source of the legal liability to pay riding fees. A similar observation can be made about Mr Kennedy's assertion that riding fees were paid "on behalf of the owners". Such an inexact pronouncement, in and of itself, does not establish that the liability to pay riding fees lay with the owners. 93 Mr Kennedy's second affidavit did not take things much further, and was similarly conclusive in nature. His evidence was as follows: Annexed to this affidavit and marked 'SJK2' are single page extracts entitled 'Racing Statistics' from the Australian Fact Book for the years 2009 to 2014 inclusive. Each of these extracts includes, at the base of the statistical table, the following statement: "Other Returns to Owners include starter rebates, appearance fees, float rebates, fees paid on behalf of owners etc. Fees paid by owners include, nominations acceptances, bonus scheme registration" Based on my nearly 20 years of experience working in the NSW thoroughbred racing industry, I know that the line item labelled "Other Returns to Owners" includes riding fees with such fees being included in the component entitled "fees paid on behalf of owners" in the above statement. 94 The basis for Mr Kennedy's interpretation of the "Racing Statistics" was not established; he was not, it would appear, the author of the extracts he exhibited. Moreover, the extracts again used the words "on behalf of"; that phrase, for reasons already given, is inherently vague. 95 Mr Kennedy's third affidavit attempted to deal with the fact that the taxpayer had booked riding fees in its annual accounts, not only as an expense, but as "Wages - jockeys (including bonus)". This affidavit has no probative value because Mr Kennedy was not involved in the preparation of those accounts. His review of annual reports prepared by other racing clubs (as against the taxpayer's reports) again has little or no probative value; he was not employed by those other clubs. 96 Mr Kennedy's fourth affidavit describes a "Chart of Accounts" sent to "all country racing clubs" for use in applying MYOB software. It states that riding fees were to be categorised as "Race Meeting Expenditure" under the sub-heading "Returns to Owners". There is simply no evidence that Mr Heaton, in preparing the taxpayer's accounts which categorised riding fees as wages, in any way relied upon this document. Significantly, this document directs racing clubs to book riding fees as an expense of each club. 97 Mr Heaton gave no evidence about industry practice either before or after 1999. He gave no evidence that riding fees were not a liability of the taxpayer or that they were a liability of the owners of race horses. He gave no evidence that they were paid on behalf of another person. He said he could not recall why he treated in the accounts of the taxpayer riding fees as "Wages - jockeys (including bonus)". 98 Unlike Messrs Kennedy and Heaton, Ms Sinclair worked for the taxpayer at Scone. However, she did not give any evidence about who was liable to pay riding fees. Her evidence about industry practice was essentially no more than the following: In the 12 years I worked there, the Club had no relationship or interaction with the jockeys except to provide a venue for them to ride in races. On race days held by the Club, the jockeys interacted with owners, trainers, stewards (who are employees of Racing NSW) and stable hands. Jockeys were, in effect, quarantined in the jockeys' room and mounting area immediately upon arrival at the Club. In my experience this same practice is observed throughout the racing industry since it is intended to maintain the integrity of the races. There was, therefore, little or no opportunity for them to interact with Club staff. During my time at the Club, I never had any dealings with jockeys except in a social setting. So far as I am aware, the Club never employed a jockey and I never gave instructions to a jockey on behalf of the Club. The Club had no right to review the performance of the jockeys, negotiate their salary or handle complaints against them. 99 In my view, whilst it may be accepted that each of the foregoing witnesses gave "honest and reliable evidence" as found by the primary judge (at [15]), their evidence concerning the issue of liability was nonetheless thin, vague, sometimes hearsay and sometimes conclusionary in nature. 100 I nonetheless accept that the taxpayer did not "engage" jockeys to ride horses. In that respect, the riding fee might be seen as one of a number of costs of racing that owners in the past had been liable to pay. In such circumstances, it might be thought, one should hesitate to infer that this liability had been transferred to the taxpayer and the other racing clubs. However, the force of that contention is very much diminished by the explanation of the "returns to owners" policy described below. 101 I also, without any hesitation, accept the accuracy of the learned primary judge's description of industry practice (save for his conclusion about who was liable to pay riding fees). I accept that the taxpayer was and is a conductor of race meetings; I accept that trainers nominated which horses ran which races; I acknowledge that trainers "accept" races to confirm the nomination of horses; I accept that jockeys were engaged by trainers (on behalf of owners); and I accept that trainers could declare which jockeys would ride which horses. I also accept the correctness of the following finding at [33] below: Further, throughout the Relevant Period, neither Racing NSW nor the individual race clubs such as the Club had any involvement in, or control over, the decision as to which riders would be declared to ride a horse in a particular race. 102 However, it is not the case that the taxpayer had no involvement with jockeys. Racing NSW, on behalf of the taxpayer, paid riding fees to jockeys. In any event, and with great respect, the findings made about industry practice did not justify the conclusion that owners were liable to pay riding fees during the period in dispute. That is because those findings said nothing about the locus of that liability. They never descended to that level of detail. 103 The evidence against the drawing of an inference that the taxpayer was not liable to pay riding fees during the period in dispute was, in my view, extensive. It was as follows: (a) first, the physical payments of riding fees were made by Racing NSW as agent for the taxpayer (no one suggested that Racing NSW was liable to pay riding fees). No payments were made by any owner or trainer; (b) secondly, it was accepted that neither the taxpayer nor Racing NSW ever sought to recover the fees from any owner or trainer (or indeed from anybody else). The complete assumption of the economic burden of paying riding fees by the taxpayer is at odds with the proposition that owners were legally liable to pay such fees. What, one may ask, would be the point of such a liability being retained by owners given those circumstances; (c) thirdly, the riding fees were booked in the accounts of the taxpayer as a "race day expense". In cross-examination, Mr Heaton accepted that the riding fees "reduced the profit of the club". In my view, if the taxpayer had never been liable to pay riding fees, but only paid such fees on behalf of owners or trainers, such payments would probably not have been booked as an expense in the accounts in this way. Whether they should also have been described as "wages" may, as the trial judge observed, be doubted. Mr Kennedy's evidence was that they should have been booked as a category of "Race Meeting Expenditure" entitled "Returns to Owners". That concept is discussed below. For the moment, I note that on his evidence this category included payments which were clearly not paid on behalf of owners, or anyone else. For example, it included "prize money", "trophies" and "bonuses". All of these appear to describe liabilities which may be incurred by a racing club. In my view, in the absence of contradictory evidence, the taxpayer's accounts comprised "prima facie" evidence of its liability to pay riding fees: s 1305 of the Corporations Act 2001 (Cth); (d) fourthly, in cross-examination Ms Sinclair stated that the jockeys were "subcontractors" of the taxpayer. As such, she said the taxpayer was "reporting the GST as we would with any other subcontractor though the BAS system". This answer can only mean that the taxpayer claimed, for GST purposes, input tax credits in its "BAS" statements for the payment of riding fees and that it treated the jockeys, regarded as subcontractors, as making taxable supplies to it. The claiming of such input tax credits under the A New Tax System (Goods and Services Tax) Act 1999 (Cth) (the "GST Act") by the taxpayer is consistent with the presence of a legal liability to make such a payment: s 11-5 of the GST Act; (e) fifthly, the concept of "returns to owners" does not support the conclusion that the liability to pay riding fees during the relevant period was imposed on owners. In his affidavit, Mr Kennedy described this concept as a "metric" used "to reduce the direct costs to owners of contesting individual races". Ms Sinclair gave evidence in cross-examination that the "free racing concept" included the payment of riding fees by the taxpayer and not by the owners and trainers. She said that the concept resulted in jockeys being "guaranteed their income". Mr Kennedy, in cross-examination, described the "returns to owners" as a "way that we measured the success of racing and offsetting the costs of owners" (emphasis added). The following exchange then took place: But that's why you talk about it as on behalf of owners, because you're capturing some information about something that used to be paid by owners that's now being paid by the clubs?---That's correct. It's not a reflection that it - you're not seeking to convey any legal statement. You're not a lawyer, and you don't seek to tell his Honour that any such payments are legally on behalf of owners?---No. It's just this context of how you've recorded it in the accounts as an expense of the club under the heading Returns To Owners?---That's correct. In my opinion, the forgoing shows that the "returns to owners" concept represented a subsidy, or assumption of liability, paid by the clubs to promote horse racing in New South Wales. As Mr Kennedy expressly recognised in his first affidavit, without the benefit of this policy: … the costs of owning a race horse would be prohibitive for all but the very wealthiest people in our society and even then, would be too costly to attract interest. Racing NSW develops and implements policies aimed at maximising returns to owners as a means of improving the viability of participating in racing as a racehorse owner. The possibility of reasonable returns to owners complement the social and intrinsic benefits of being involved in racing a thoroughbred. In other words, it was in the interests of the racing clubs to assume the liability to pay riding fees, as a way of promoting the sport of racing horses. It was paid "on behalf of" owners in the sense that it was paid for their benefit. The contention that owners somehow retained a legal liability to pay riding fees is, I think, inconsistent with the very purpose of this policy; (f) sixthly, no evidence was called from any owner, trainer or jockey. Given that agreements between owners/trainers and jockeys were "often verbal", the lack of such evidence is telling. No written contracts were otherwise tendered into evidence. Indeed, no documents were tendered from any owner, trainer or jockey. If the owners were here truly liable it would have been a simple matter to call a sample of them to declare their liability; perhaps even one might have been enough; (g) seventhly, none of Mr Kennedy, Ms Sinclair or Mr Heaton gave any evidence that it was a term of the contracts entered into between owners/trainers and jockeys, that owners were liable to pay riding fees. Mr Kennedy and Ms Sinclair only gave evidence of their respective understanding that the taxpayer paid such fees "on behalf" of such owners. It was by no means clear to me that this was evidence about anybody's liability to pay these fees. On one view, consistently with the evidence given about the "returns to owners" concept, the statements made by Mr Kennedy and Ms Sinclair merely demonstrated that riding fees were paid by the taxpayer for the benefit of owners; (h) eighthly, examples of statements of accounts sent by Racing NSW to the taxpayer, and to an owner, a trainer and a jockey, were in evidence. These had been prepared in accordance with Racing NSW's "Cash Flow Management Policy". The statement of account sent to the taxpayer shows debits for a "rider payment". This is consistent with Racing NSW on-charging the riding fees it paid in relation to race meetings held at Scone to the taxpayer. The statement of account sent by Racing NSW to an owner records a crediting of that account for prize money. There is no debiting of the account for riding fees. The statement of account sent to the trainer records a series of credits for the receipt of prize money. Again, there is no debiting of the account for riding fees. The statement of account sent to the jockey contains a series of credits for prize money and for riding fees. It contains a "GST summary". These "statements of account" were prepared consistently with the "Stakes Payment System" operated by Racing NSW. This was a "centralised system" for the processing of amounts paid to and received from stakeholders in the racing industry. Respectfully, that "System" and those statements of account, do not support the existence of a liability on owners to pay ridings fees to jockeys. Rather, they only show Racing NSW paying riding fees and billing the taxpayer for those fees. 104 The plain meaning of former Local Rule 72 (applicable at the time) does not support the proposition that the taxpayer was not liable to pay riding fees. That rule is set out in the reasons of Griffiths J., but is set out again below for convenience: Clubs shall pay such fee for a jockey or apprentice jockey in consideration for their riding a horse in a race or a barrier trial as may be set from time to time by the Board [i.e. Racing NSW]. 105 Both the learned primary judge and Griffiths J. have observed that the rule is silent as to whether the taxpayer must make the payment of riding fees in its own right or on behalf of an owner. With respect, the taxpayer does not advance its evidentiary burden through such silence. The fact is: (a) Local Rule 72 rule identified the clubs as the entities that "shall pay" the riding fee. It did not identify anyone else. It also expressed that such a fee shall be paid "in consideration" for a jockey riding a horse. The language of this rule may usefully be compared with the applicable language of s 12(8)(a) of the Superannuation Guarantee (Administration) Act 1992 (Cth) (the "SGA Act") as follows: a person who is paid to perform … sport ... is an employee of the person liable to make the payment; In a very real sense, Local Rule 72 tells one precisely the identity of the person who is liable to make the payment of riding fees to jockeys: it is the Club who "shall" make such payments; and (b) the Local Rule simply does not state that the Clubs are to make the payment "on behalf of" owners, or anyone else. In my view, if owners are truly liable to make such payments Local Rule 72 would have expressly said so. 106 Like Griffiths J., I am more than satisfied that the learned primary judge took account of all the evidence before his Honour. No evidence was ignored. That was not the error that I think was made below. Rather, the error was in deciding that the evidence sufficiently supported the drawing of an inference that the liability to pay riding fees had never been imposed on the taxpayer during the relevant period, which had only ever paid such fees on behalf of owners. As his Honour said at [41] below: I further so infer, that, responding to this policy, race clubs (including the Club) throughout New South Wales ceased to charge owners nomination and acceptance fees for most races and also commenced paying on behalf of owners the riding fees payable to jockeys. The existence of this policy response by race clubs is evident from advice in these terms or to this effect in New South Wales Racing Calendars for the months of May, June and July 2000, "Riding fees for starters paid by clubs on behalf of connections". Within the New South Wales thoroughbred racing industry, "connections" is an industry specific term generally understood to mean owners. 107 With great respect, the evidence did not support, on the balance of probabilities, the drawing of this inference. In that respect, I note that this is not a case about the credibility of witnesses. Nor is this a case about matters of impression or evaluative judgment. This is a case in which a mixed conclusion of fact and law concerning the locus of liability was inferred from the totality of the evidence. In drawing the inference set out at [41], I do not think that the learned primary judge enjoyed any significant advantage as a trial judge. Like this Court, his Honour relied upon the affidavits and their exhibits; his Honour also had the benefit of the answers given in cross-examination. Transcripts of that cross-examination were before the Court. Given the nature of the issue the subject of this appeal, and the content of those answers, the advantage of hearing those answers (and seeing the witnesses), as distinct from reading them, is I think slight. This is a case where the following observation of Hill J. in Federal Commissioner of Taxation v Chubb Australia Ltd (1995) 56 FCR 557 (described as a "very helpful judgment" by Allsop C.J. in Aldi Foods Pty Ltd v Moroccanoil Israel Ltd (2018) 261 FCR 301 at 309 [10]) at 573 is apt: To paraphrase what was said in Warren v Coombes (1979) 142 CLR 531, albeit in a slightly different context, an erroneous decision should not be upheld, nor should demonstrated error be perpetuated. However, while that case made it clear that it is the duty of an appellate court to decide both fact and law for itself, subject to the case where the trial judge has had the advantage of observing the witnesses, it nevertheless recognises that the appeal court should give "full weight" to the decision of the trial judge and only where the appeal court considers that that judgment was wrong must they give effect to their own judgment. 108 As to the drawing of inferences, in Warren v Coombes (1979) 142 CLR 531 at 551, the majority of the High Court said: … in general an appellate court is in as good a position as the trial judge to decide on the proper inference to be drawn from facts which are undisputed or which, having been disputed, are established by the findings of the trial judge. In deciding what is the proper inference to be drawn, the appellate court will give respect and weight to the conclusion of the trial judge but, once having reached its own conclusion, will not shrink from giving effect to it. Cited with approval by Gleeson C.J., Gummow and Kirby JJ. in Fox v Percy (2003) 214 CLR 118 at 127 [25]. 109 In this case the taxpayer contended that owners of race horses, and not it, were liable to pay riding fees. It bore the onus of establishing this. The salient factors were that Racing NSW paid the fees on behalf of the taxpayer; that the taxpayer never sought to recover the fees from owners or anybody else; that the taxpayer booked the fees as an expense in its accounts; that it claimed input tax credits for GST purposes when it paid the fees to jockeys which it treated as "subcontractors"; that the concept of "returns to owners" was concerned with the elimination of costs which had been imposed on owners in order to promote racing in New South Wales; and that Local Rule 72 clearly stated that the taxpayer, as a club, "shall" pay such fees to jockeys. In addition, no evidence was led that it was a term of any contract entered into between owners and jockeys that the owners were liable to pay riding fees; and no evidence was led from any owner, trainer or jockey. No statement of account sent out by Racing NSW suggested that liability lay with the owners. In these circumstances, the taxpayer nonetheless asserts that it was not liable to pay the riding fees. In my view, given these factors, the trial judge erred in inferring that the riding fees were paid on behalf of owners, in the sense that the owners, and not the taxpayer, were liable to pay such fees. The evidence in favour of the drawing of that inference was simply overwhelmed by the evidence denying its existence. 110 I otherwise agree with Griffiths J.'s construction of s 12(8)(a) of the SGA Act which followed from this Court's reasons for judgment in Commissioner of Taxation v Racing Queensland Board [2019] FCAFC 224. 111 This appeal should be allowed. I certify that the preceding thirty-one (31) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Steward.