Conrad Linings Pty Limited v Chief Commissioner of State Revenue

Judgment 1HIS HONOUR: This is an application under s 97 of the Taxation Administration Act 1996 (NSW) for the review of two decisions of the Chief Commissioner of State Revenue. The first decision conveyed by letter dated 3 December 2010 was to assess the plaintiff ("Conrad") as liable for payroll tax, penalty tax and interest for the financial years ended 30 June 2008 and 30 June 2009 in amounts of $469,412.06 and $605,034.01 respectively. The assessment was made on the basis that Conrad was a group member with another company called Salex Interiors Pty Limited ("Interiors") pursuant to s 72(2)(c)(i) and 72(2)(e) of the Payroll Tax Act 2007 (NSW) ("the Act"). 2The Chief Commissioner determined that as a group member with Interiors, Conrad was jointly and severally liable pursuant to s 81 of the Act for amounts payable by Interiors. Interiors went into liquidation on 1 June 2010. 3An objection to the assessment was disallowed on 10 May 2011. On 8 July 2011 Conrad filed a summons seeking a review of the decision to make the assessment. On 13 July 2012 Conrad applied without admissions to the Chief Commissioner for exclusion from a payroll tax group pursuant to s 79 of the Act. That application was disallowed on 13 September 2012 and objection to the disallowance was rejected on 26 February 2013. By its amended summons the plaintiff also seeks review of the decision of 13 September 2012 to reject its exclusion application. 4 At the hearing Conrad conceded that by reason of s 72(2)(e) it and Interiors were both members of a group for the years in question. Section 79 relevantly provides: "79 Exclusion of persons from groups ... (2) The Chief Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group." 5The issue was thus whether the Court, standing in the shoes of the Chief Commissioner, should exercise the discretion in s 79 to exclude Conrad as a member of the group. 6The onus of establishing that the discretion should be exercised in its favour lies on Conrad (Taxation Administration Act, s 100(3)). I am not satisfied that the onus has been discharged. Accordingly, Conrad's amended summons will be dismissed and the assessment confirmed. 7These are my reasons. 8Interiors was incorporated on 18 October 2004. Until at least April 2009 it had three shareholders, namely, Mr Kasim Salagic, Mr Nikola Jurleta and Mr Samir Decevic. Mr Decevic is the sole director of Conrad. He said that he, Mr Salagic and Mr Jurleta became business partners in 2004 in the building industry, in particular in fixing walls and ceilings with plasterboard sheets. Interiors was incorporated for the purpose of operating that business. Each of the three shareholders became a director of Interiors. 9Conrad was incorporated on 11 May 2006. It was then called Salex National Pty Limited. It changed its name to Conrad by resolution passed on 3 March 2010. As I have said, Mr Decevic was its sole director. There were three issued ordinary shares in Conrad. From incorporation each of Messrs Decevic, Salagic and Jurleta held one share. Messrs Jurleta and Salagic continued to hold their shares until 10 September 2009, at which time Mr Decevic became the sole shareholder. 10Interiors conducted its business from a warehouse in Bonds Road, Riverwood. The premises were owned by the three individual shareholders. According to the returns lodged with the Australian Securities and Investments Commission ("ASIC"), that was the principal place of business of Interiors from 16 July 2008. According to the ASIC records, it was also the principal place of business of Conrad, then called Salex National, from the same date up to 8 February 2010. 11Mr Decevic deposed that from about October 2008 there were arguments between he and Messrs Salagic and Jurleta about the way Interiors' business was being conducted. He said that he was being consistently outvoted. Accordingly, he resigned as a director of Interiors on 13 March 2009. In his affidavit he deposed that on that date he left Interiors holding no shares and having no remaining ties with Interiors. He deposed that he transferred his shares to his two other directors and that, "I asked the company's tax agent, Cassiniti & Associates, to record the share transfers and resignation from the board of Salex [Interiors] with Australian Securities and Investments Commission." He also deposed: "13. On 20 March 2009 I agreed with Kasim and Nikola on returning to work for Salex as an employee with no administrative or decision-making role other than to supervising the workers in performing work on the company's building projects." 12In a statutory declaration made on 29 April 2011 in support of Conrad's objection to the assessment, Mr Decevic declared: "7. The shareholders in Interiors were Kasim, Nikola and myself until 13 March 2009 when I transferred my shares to Kasim." But in the same declaration he also said: "10. These disputes [between him and the other directors] worsened in late 2008 and when, by 13th March 2009, there had been no resolution, I resigned as a director and offered to transfer my shares to the remaining shareholders and left the employment of the company. 11. The share transfers were eventually effected by the company's accountant." (My emphasis) 13The returns lodged with ASIC record that on 21 April 2009 Mr Salagic's share in Interiors was transferred to Mr Decevic who became the holder of two of the three issued shares in Interiors. Mr Decevic says that this was a mistake. This appears to be so in the sense that it was not the course the parties had intended to take. But the parties appeared to have proceeded on the basis that the transaction took place as recorded in the return. A minute described as a minute of a meeting of Interiors held on 16 October 2009 records a resolution of the directors that Mr Decevic's shares be decreased by two, bringing his shareholding as at 16 October 2009 to zero, and that those shares be transferred to Mr Jurleta, bringing Mr Jurleta's total shareholding to three. It appears from another return that Mr Salagic acquired those three shares on 29 January 2010 14Section 72 of the Act relevantly provides: "72 Groups of commonly controlled businesses (1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a group. Note. Section 79 (Exclusion of persons from groups) allows the Chief Commissioner, for payroll tax purposes, to exclude persons from a group constituted under this section in certain circumstances. (2) For the purposes of this section, a person or set of persons has a controlling interest in a business if: ... (c) in the case of a business carried on by a corporation: (i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation, or (ii) a director or set of directors of the corporation that is entitled to exercise more than 50% of the voting power at meetings of the directors of the corporation is under an obligation, whether formal or informal, to act in accordance with the direction, instructions or wishes of that person or set of persons, or ... (e) in the case of a business carried on by a corporation that has a share capital-that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50% of the voting power attached to the voting shares, or any class of voting shares, issued by the corporation." 15The Chief Commissioner had treated Conrad and Interiors as members of the same group on the basis of the shareholdings appearing in the ASIC returns. In rejecting Conrad's objection to the assessment, the delegate for the Chief Commissioner said: "Your objection has been disallowed and we consider that the assessments have been correctly issued. For the period 1 July 2007 to 21 April 2009 Samir Decevic, Kasim Salagic and Nikola Jurleta together held 100% of the shares in Conrad Linings Pty Limited. As such they held a controlling interest in this business in terms of section 72(2)(e) of the Payroll Tax Act 2007 (the PRT Act). For the same period Samir Decevic, Kasim Salagic and Nikola Jurleta together held 100% of the shares in Salex Interiors Pty Limited. As such they held a controlling interest in this business in terms of section 72(2)(e) of the PRT Act. Because the same persons held a controlling interest in each of these businesses, they constitute a group in terms of section 72(1) of the PRT Act. For the period 22 April 2009 to 30 June 2009 Samir Decevic and Nikola Jurleta together held greater than 50% of the shares in Conrad Linings Pty Limited. As such they held a controlling interest in this business in terms of section 72(2)(e) of the PRT Act. For the same period Samir Decevic and Nikola Jurleta together held greater than 50% of the shares in Salex Interiors Pty Limited. As such they held a controlling interest in this business in terms of section 72(2)(e) of the PRT Act. Because the same persons held a controlling interest in each of these businesses, they constitute a group in terms of section 72(1) of the PRT Act. For the period 22 April 2009 to 30 June 2009 Samir Decevic was the sole director of Conrad Linings Pty Limited. As such he held a controlling interest in this business in terms of section 72(2)(c)(i) of the PRT Act. For the same period Samir Decevic held greater than 50% of the shares in Salex Interiors Pty Limited. As such he held a controlling interest in this business in terms of section 72(2)(e) of the PRT Act. Because the same person held a controlling interest in these two businesses, they constitute a group in terms of section 72(1) of the PRT Act." 16The reason Conrad concedes it was a group member with Interiors for the tax years in question is that it concedes that Mr Salagic and Mr Jurleta had the right to exercise more than 50 per cent of the voting power of the shares in each of Conrad and Interiors in those years. It does not really matter what is the basis upon which s 72 applies but, in case it does matter, I consider that s 72 applies for the reasons given by the Office of State Revenue quoted above. 17In any event, even if the apparent transfer of Mr Salagic's share to Mr Decevic on 21 April 2009 should be disregarded as being mistaken, the evidence would still not demonstrate that any shares had been transferred in Interiors before 30 June 2009. Nor was there any completed transfer of shares in Conrad before that date. In that event, the same set of persons, namely, the three shareholders, could have exercised a hundred per cent of the voting power attached to the voting shares of both companies for the tax years in question and the companies would be grouped pursuant to s 72(2)(e). 18However the question is approached, s 72(2) applies. 19The returns lodged with ASIC record Mr Decevic's resignation as a director of Interiors effective on 13 March 2009. I accept that he ceased to be a director of Interiors at that date. The nature of his role within Interiors after that date is relevant to assessing the independence and lack of connectedness, if any, of the businesses after that date and before it. 20I have already set out Mr Decevic's evidence in paragraph 13 of his affidavit. He also said: "14. On 29 April 2010 Kasim and Nikola askemd me to lend them $79,000 to pay payroll tax to the Office of State Revenue of about $60,000 and for other expenses payable by Salex [Interiors]. I lent the money to them as requested to help them out. 15. The $19,000 balance of the money I lent was paid to CGU Insurance Limited ($7,000) for workers compensation insurance premiums, Johnson's Glass ($1,000), cash at bank ($1,000) for working capital and the ATO ($10,000) for a tax payment. I know how the money was spent by Kasim and Nikola because I asked them for details of the payments and paid them out of my business account directly to the creditors of Salex [Interiors]. 16. On 1 May 2010 I was approached by Kasim and Nikola who offered to sell me the fittings and the furniture of Salex [Interiors] as repayment for my loan to them and I accepted their offer. The sale proceeds were set off against the amount of the loan. 17. On 1 June 2010 I was told, together with the remaining employees of Salex [Interiors], that the company was placed into liquidation." 21Mr Decevic gave the following evidence in his affidavit about the business of Conrad: "19 I registered Conrad Linings Pty Limited (Conrad) as a company on the 11 May 2006 to enable me to carry out a small building job in Queensland. 20 I was doing small jobs until January of 2010 when I received an opportunity to get a couple of new contracts. I tendered for some small jobs in the name of Conrad but did not succeed. I only managed to pick up day labour work for a small job which started in April 2010 with Grocon Constructions Pty Limited. 21 I have had a few small building jobs but all jobs have been on a day labour basis in my own name rather than operating through Conrad. From time to time Conrad supplies workers to do steel framing for an hourly rate agreed with the companies that it works for. It is a small company that does not do the kind of work that Salex [Interiors] used to do. 22 Conrad is a one director company operating with a minimum overhead expenses so that it can survive. 23 Conrad started to do production of profiles hope that it would become a wholesaler of profiles but that did not work out so now it is installing gladding vitra panels [sic]. 24 Conrad was inactive as a trading company until early 2010. It did not conduct any business before early 2010 save for the few small jobs I did in its name (when Conrad had no employees other than myself), which is referred to in paragraph 16 of the statutory declaration dated 29 April 2011 reproduced at SD-1 tab 22. 25 Conrad has never had any business connection or other commitments with Salex [Interiors]. 26 Conrad has never performed work on the same building sites as Salex [Interiors]. 27 There have not been any workers employed by Conrad who were also employed by, or worked in, the business of Salex [Interiors]. 28 Conrad was a steel-frame installer and more recently is a gladding vitra panel installer. It has never conducted business as an installer of Gyprock plaster panels. 29 Salex [Interiors] had only ever installed Gyprock plasterboard panels for walls and ceilings." 22In paragraph 24 above Mr Decevic referred to paragraph 16 of his statutory declaration. He there said: "16. On 11th May 2006, Salex National Pty Ltd ('Salex') [Conrad] was incorporated to carry out a small job in Queensland. I operated the company independently of Interiors doing small jobs which Interiors could not do." 23In that statutory declaration he also said: "18. The businesses of Interiors and Conrad were entirely independent and not related in any way. 19. Interiors specialised in plasterboard installations. Conrad is a steel frame builder and office fitout specialist. 20. Annexed hereto and marked with the letter 'B' is a list of employees of Interiors. 21. Annexed hereto and marked with the letter 'C' is a list of employees of Conrad." 24The list of employees in annexure B to the statutory declaration named a large number of individuals (over 100). Annexure C listed six individuals as employees and two as subcontractors. It named Mr Decevic as a director, but not an employee, although in his affidavit he described himself as an employee of Conrad. Two individuals named in annexure C, being, the list of employees of Conrad, were also listed in annexure B as employees of Interiors. 25In his oral evidence Mr Decevic said that before September 2009 Conrad was a dormant company that did not trade and did not do any work. If that were so, there would not have been two businesses in which a person or a set of persons had a controlling interest. If Conrad did not carry on a business in the tax years in question it could not be a group member. That is inconsistent with the plaintiff's case and with much of the evidence. 26In its objection to the assessment of 3 December 2010 Conrad admitted that for the relevant tax years it did carry on a business. In its objection to the refusal of its application for exclusion from the group Conrad asserted that it had no business before 13 March 2010 (which is a date on which it was said Conrad took an assignment from Interiors of the lease of the premises in Bonds Road, Riverwood). 27The Office of State Revenue rejected the argument that Conrad did not have a business. It observed that it was apparent from the statutory declaration of Mr Decevic that Conrad was carrying on a business. No issue was raised in the plaintiff's appeal statement, or in its amended appeal statement, that it did not carry on a business in the relevant years. The concession that Conrad is grouped with Interiors is contrary to that contention. 28Mr Decevic's evidence that the company was dormant and had no business in the relevant years is inconsistent with other evidence of his. It appears from paragraph 16 of the statutory declaration quoted above that Conrad (then called Salex National) was "operated" independently of Interiors, doing small jobs after 11 May 2006 which Interiors could not do. In paragraph 24 of his affidavit Mr Decevic said that Conrad was "inactive as a trading company" until early 2010, but he also said that it did not conduct any business before early 2010 "save for the few small jobs I did in its name", which necessarily implies that it did carry on business to the extent of carrying out a few small jobs. 29In answer to a questionnaire signed by Mr Decevic on 29 November 2007 he gave the Bonds Road, Riverwood address as Salex National's address of business and stated that Interiors provided administrative services to Salex National's business. In the application for exclusion from grouping signed by Mr Decevic on 12 July 2012 he declared that the information provided in the application was correct in every particular. In response to the question, "What is the history and reason for the set up/acquisition of each business?", he replied that for Conrad Linings: "The company erects steel frames for homes which use steel rather than timber frames. It operates as a subcontractor to licensed builders. In the tax years assessed the company employed between eight and twenty qualified steel fixers." (My emphasis) 30Inconsistently with that, but also inconsistently with the assertion that Conrad did not carry on business in the tax years in question, Mr Decevic in his statutory declaration of 29 April 2011 listed six persons as employees, not including himself and two subcontractors. In cross-examination Mr Decevic initially said that the list annexure B was a list of Conrad's employees at the time he signed the declaration. If so, the list would have been irrelevant. It was put to him that as at 29 April 2011 Conrad had more than six employees and two subcontractors. He said he did not remember. He admitted that by that date Conrad was doing work for Grocon as well as erecting steel frames, that it was doing significant amounts of work for Hansen Yuncken, and was engaging contractors to do aluminium facades, glazing, joinery and carpentry for the Nepean Hospital. 31It was again put to him that the list of Conrad's employees in annexure C to his statutory declaration had been put forward by him as a list of employees for the two tax years in question. He agreed. After Mr Decevic had agreed that he had put forward the list in annexure C as a list of Conrad Linings' employees in the period of the two tax years 1 July 2007 to 30 June 2009 I asked, "Do you appreciate you said something different earlier, or not?" He said, "Yes, I did." 32I do not accept the submission made for the plaintiff that Mr Decevic did not appreciate that he was resiling from earlier evidence he had given that the list of employees was a list of employees as at 29 April 2011. Having regard to the course of cross-examination and his acceptance of the extent of the work that Conrad was doing by 29 April 2011, I am satisfied that he acknowledged that in putting forward the list of employees in the statutory declaration he was putting forward a list of persons employed at the relevant time, and not as at April 2011. 33Accordingly, I would not accept Mr Decevic's evidence that Conrad did not trade at all, that is, that it did not have a business in the years in question, even if it were open on the issues litigated for Conrad to make that contention. 34Conrad tendered no financial information about its business. No tax returns, financial statements, cash books, ledgers, journals or any other financial records were tendered by it. Nor did Conrad seek to corroborate Mr Decevic's evidence from any other source. Neither Mr Salagic nor Mr Jurleta, nor any employee of either business, nor any accountant retained for either business, was called. 35Mr Decevic's explanation for the absence of supporting documentary evidence was that: "34. I do not have the records of Conrad relating to the tax years in question. They were held by the company's tax agent, Cassiniti & Associates, and lost or destroyed when Mr Cassiniti was arrested for tax fraud, convicted and sentenced to a term of imprisonment. The records of Salex were also lost or destroyed by the tax agent before the liquidator of Salex [Interiors] could obtain them, so far as I'm aware. I referred to this in paragraph 50 of the questionnaire in support of the Exclusion Application to the Chief Commissioner lodged in July 2012 ..." 36In paragraph 50 of that questionnaire Mr Decevic had said for both companies: "The financial statements are no longer available. They were prepared, and custody of them was retained, by the company's external accountants, Cassiniti & Associates. The principal of that firm was subsequently prosecuted for tax fraud. Before his prosecution, Mr Cassiniti either lost or destroyed his clients' files, including the company's only copies of its financial statements." 37The tax years in question are 1 July 2007 to 30 June 2009. Evidence tendered by the Chief Commissioner shows that Mr Cassiniti was imprisoned on 30 May 2005, released on bail pending an appeal on 22 September 2006, returned to custody on 27 October 2006 and was released on parole on 25 July 2008. In other words, the files could not have been lost or destroyed by Mr Cassiniti before his prosecution, nor on his arrest, conviction or sentence. They would not have then come into existence. Mr Cassiniti could not have been preparing the records for Conrad or Interiors for the financial year 1 July 2007 to 30 June 2008 because he was then in prison. If he were preparing financial records for the companies for the following financial year, his earlier arrest, conviction and sentence provides no reason for the loss or destruction of the files. 38Conrad's case depends on Mr Decevic's being accepted as a reliable witness. There is no corroborative material adduced by the plaintiff. Some material which is arguably corroborative of Mr Decevic's assertion that Conrad carried on no business in the years in question appears from documents tendered by the Chief Commissioner. 39The Chief Commissioner tendered Business Activity Statements discovered by Conrad for the years in question. It appears from the face of the documents that they were lodged. They show zero total sales and zero purchases. 40The Chief Commissioner also tendered documents produced on subpoena by the ANZ Bank and by the National Australia Bank. Only the ANZ Bank produced documents in relation to Conrad. The bank statements produced by it commence in February 2010. 41These documents are consistent with Conrad's not having any business in the years in question. However, Mr Decevic made no reference to this material in his evidence. For example, he did not give evidence to the effect that Conrad had no bank account in the years in question with any other bank. The absence of any sales or purchases shown on the Business Activity Statements would be consistent with any of three things: either there being no business, or any sales or purchases not having been reported, or any sales or purchases having been put through another business. I do not think that the documents tendered by the Chief Commissioner make out Conrad's case in this respect. 42I have already referred to some inconsistencies in Mr Decevic's evidence. In cross-examination he was frequently compelled to concede that evidence he had given was not correct. Mr Bevan of counsel who appeared for Conrad submitted that I should accept the evidence as ultimately given by Mr Decevic in the witness box and accept him as a witness of truth notwithstanding inconsistencies with and within his statutory declaration, affidavit and other documents signed by him. Counsel submitted in effect that those who prepared documents for Mr Decevic to sign may not have properly understood what he intended to convey, or that there were problems in translation or in understanding which led to documents being prepared in the form they were and to his signing the documents without appreciating the significance of what he signed. I do not draw that conclusion. It did not appear to me that Mr Decevic had trouble in understanding the questions he was asked. I think the problems he faced arose from inconsistencies in what he put forward on various occasions and those difficulties are not to be explained on the basis that his first language might not have been English, as to which there is no evidence, or on the basis of miscommunication between him and his lawyers. 43I have already referred to paragraph 13 of Mr Decevic's affidavit in which he said that on 20 March 2009 he agreed to return to work for Interiors with no administrative or decision-making role other than to supervise workers in performing work on Interiors' building projects. He said in effect that he had fallen out with his co-directors and had resigned as a director. The impression from his affidavit is that his only continuing involvement with Interiors was as an employee supervising the company's workers until he lent $79,000 either to Interiors or to Messrs Salagic and Jurletta on 29 April 2010. 44As set out above he also deposed at paragraph 25 of his affidavit that, "Conrad has never had any business connection or other commitments with Salex [Interiors]". In fact Mr Decevic did have at least a continuing administrative role with Interiors and there was a substantial business connection between Conrad and Interiors. As to the former, on 15 June 2009 Mr Decevic and Interiors' account manager Ms Tania Bloodworth met with an employee of the Office of State Revenue and made a proposal for the payment of Interiors' debt over a period of six months. The OSR employee was under the impression that Mr Decevic was a director of Interiors. On 10 August 2009 he signed objections on behalf of Interiors addressed to the Office of State Revenue in relation to the imposition of penalty tax for the financial years 2006-07, 2007-08 and 2008-09. He said he did so merely because he was asked to do so by the account manager but that indicates that she considered he had a continuing administrative role and he performed that role. According to a file note of the Office of State Revenue on 8 February 2010, "Sam and other directors of [Interiors] came to the office ... client [sic] asked us not to pursue the w/up and give them another arrangement...". I infer that the "Sam" referred to was Mr Samir Decevic. This behaviour is inconsistent with paragraph 13 of his affidavit. 45As to the asserted absence of any business connection between Conrad and Interiors Mr Decevic was cross-examined about paragraph 25 of his affidavit (set out at [21] above). He gave the following evidence: "Q. That's the position; in your affidavit, which is at paragraph 25, you said Conrad has never had any business connection or other commitments with Salex; that was not a true statement of the historical position, was it? A. Salex National at the time was operating from the offices of Salex Interiors, yes, that's correct. Q. Answer my question, the statement you made at paragraph 25 of your affidavit sworn on 22 October 2013 that Conrad has never had any business connection or other commitments with Salex A. Correct. Q. Was not true, was it? A. Salex National at the time has, Conrad Linings after 2009 hasn't. Q. So when you say "Conrad" in paragraph 25 we should understand that as meaning Conrad after what date? A. Some time in September 2009. Q. Do you think, so you want us to understand 25 as meaning after some date in September Conrad Linings never had any business connection or other commitments with Salex, is that what you want us to understand? A. Yes. Q. It's not obvious from the words, is it? A. That might be true. Q. And it's not in fact correct either, is it; there were dealings between Conrad Linings after September 2009 and Interiors, weren't there? A. How so? I don't understand. Q. Well, I'm asking, you say there were none? A. None that I know of, no. Q. You're saying you don't know, you can't remember? A. There were none. There were none." 46Mr Decevic was then taken to a report as to affairs signed by Mr Salagic in connection with the liquidation of Interiors. It showed Conrad as a creditor of Interiors in the sum of $534,997. 47The cross-examination continued: "Q. And it records Conrad Linings being a creditor of Interiors for $534,997 dollars? A. Correct. Q. So there were dealings whereby Conrad Linings or Salex International, Salex National A. Mm hmm. Q. Provided funds of over half a million dollars or, sorry, provided credit of over half a million dollars to Interiors? A. Correct. Q. So there were, there must have been dealings after that date, wherever it is in September 2009, that you suggest should be read in paragraph 23 I think it is of your affidavit? HIS HONOUR: 25. LYNCH: 25, thank you. HIS HONOUR Q. I think the question is, do you agree with what is put? A. Correct. Q. You do? A. Yes, I do... LYNCH: ... even as you say 25 was intended to convey [sic], the statement in 25 of your affidavit is not correct, is it? A. Correct. Q. Can you explain how you came to make, how that comes to be so significantly wrong, that statement? A. I cannot. Q. I'm sorry? A. I cannot." 48In re-examination Mr Decevic said that the debt arose because it was material purchased through a series of suppliers, that is, as I understand his evidence, that materials which had been ordered or paid for by Conrad were supplied to Interiors. He said that this took place over two to three months in September 2009 or thereabouts. Accordingly, Mr Decevic admitted that when Interiors went into liquidation it owed Conrad a debt of over half a million dollars. He said the debt arose from the supply of materials to Interiors that I infer were paid for by Conrad. 49Notwithstanding that he initially denied any business connection, and gave contradictory evidence as to when the dealings took place, I am asked to find on the basis of his evidence that the dealings were all post 30 June 2009. In the absence of corroborative material I am not prepared to make any such finding. I think there is a distinct possibility, not rebutted by Mr Decevic's evidence, that Conrad was providing such support for Interiors during some or all of the tax years in question. The absence of financial records which would show the dealings that gave rise to the debt is not adequately explained. I infer that such records would not support the plaintiff's case. 50Conrad is required by s 79(2) (and s 100(3) of the Taxation Administration Act) to demonstrate that the business carried on by Conrad was carried on independently of and was not connected with the business carried on by Interiors. The onus is on it to do so. Moreover whilst the focus is on the independence in the way the businesses are carried on and the lack of connection between them, the degree of ownership as well as the degree of control of the two businesses is a relevant matter. 51On the issue of independence and connection, or lack of it, the following matters appear to me to be of particular relevance. The first is that Mr Decevic was the sole director of Conrad and there is no evidence that the other shareholders participated in the management of Conrad's business. Secondly, at least for the substantial part of the years in question the same persons were the shareholders of both businesses. Any profits deprived by Conrad would have been for the benefit of the shareholders. Mr Bevan submitted that to take this factor into account would be to emasculate the effect of s 79 because it would always be the case or at least would usually be the case, where businesses are grouped pursuant to s 72(2)(e), that there would be common ownership. There is some force in that submission. Nonetheless ownership is a matter that by the terms of s 79(2) has to be taken into account. 52Ownership was considered by the Chief Commissioner in disallowing the objection to the application for exclusion from grouping. The delegate for the Chief Commissioner said: "We have noted the extent to which the businesses shared common control and management and in particular the influence of Mr Samir Decevic over both businesses. We note Mr Decevic has been a key person of influence around whom the businesses underwent changes, including share transfers, from March to October 2009. We also note the common shareholders for some of the periods. These shareholders are persons who were directly interested in the daily operations of the businesses and accordingly as common shareholders would have been in a position to make decisions for both businesses. We cannot be satisfied that during the period under review any decisions concerning one business were made completely independently of decisions concerning the other business." 53In the absence of evidence from the other shareholders I think there is substance in that position. Whilst there is no evidence that the other shareholders participated in the management of Conrad's business, nor is there evidence to corroborate Mr Decevic's evidence to the effect that he alone managed Conrad. I think the substantial commonality of ownership in the period in question is relevant to determining the existence or absence of independence and connection. 54The third relevant matter is the evidence of the debt owed by Interiors to Conrad which shows that Conrad provided financial support to Interiors. Whilst there is no evidence that it did so in the two tax years in question, there is also no acceptable evidence that the support provided was provided wholly outside that period. This is an issue on which evidence would have been expected to have been adduced from Conrad. There is no satisfactory explanation for the absence of such evidence. 55The fourth relevant matter is that both companies had the same place of business. Fifthly, at least as at November 2007, Interiors provided administrative services to Conrad. Mr Decevic said in re-examination that the only service provided was that Conrad shared the same office (the office was leased by Interiors from the three shareholders), but I do not think that that evidence is reliable. He also said at the same time, and in much the same breath, that Conrad was dormant and not trading, which is evidence I have rejected. 56Next, there were some common employees. According to his affidavit Mr Decevic himself was an employee of Conrad, although he denied it in his oral evidence. He was also an employee of Interiors for the whole of the period in question and a director of Interiors for most of it. Ultimately he accepted that the persons listed in Annexure C to his statutory declaration were employed by Conrad in the years in question. There were two employees who were common to Conrad and Interiors and it is probable that the subcontractors used by Conrad were persons who were subcontractors to Interiors. 57Next, there is a question as to whether the businesses were completely different. As shown earlier in these reasons Mr Decevic said that the businesses were different, that Interiors conducted business as an installer of gyprock plaster panels but Conrad carried on business as a steel frame installer and recently as a "Vitrapanel" cladding installer. The same statements were made in the answers to question 24 in the application for exclusion from grouping. But in that same application Mr Decevic described Conrad's business as being that of "gyprock installation contractor". This suggests that notwithstanding the evidence referred to, at least part of Conrad's business was of the same kind as the business carried on by Interiors, namely that of a gyprock plaster installer. 58Ultimately the question is whether Conrad has discharged the onus of establishing independence in the carrying on of Conrad's business in the years in question and lack of connection between its business and Interiors' business. For the reasons I have given that onus has not been discharged. 59Subject to anything counsel may have to say as to the appropriate form of orders I think the appropriate orders are that: