Freelance Global Ltd v Chief Commissioner of State Revenue

The legislation 7Sections 7 and 8 of the Payroll Tax Act 1971 require an "employer" by whom "taxable wages" are paid or payable to pay payroll tax on those taxable wages. "Taxable wages" means wages that under s 6 are liable to pay-roll tax. Section 6 provides in substance that the wages liable to payroll tax under the Act are wages paid or payable by an employer for services where the wages are paid or payable in New South Wales or are paid or payable outside New South Wales for services performed in New South Wales. 8"Wages" is defined by s 3AA as follows: "3AA Wages (1) In this Act, wages means (subject to this section) any wages, salary, commission, bonuses or allowances paid or payable (whether at piece work rates or otherwise and whether paid or payable in cash or in kind) to an employee as such. (2) Wages includes: ... (e) any amount deemed by or under a provision of this Act to be wages." 9Two sections of the Payroll Tax Act 1971 are pivotal. The first is s 3C. It relevantly provides: "3C Employment agents (1) For the purposes of this Act, an employment agency contract is a contract under which a person (in this section referred to as an employment agent) by arrangement procures the services of another (in this section referred to as a contract worker) for a client of the employment agent (by a means other than a contract of employment between the contract worker and the client) and as a result receives directly or indirectly payment in respect of the services provided by the contract worker to the client, whether by way of a lump sum or ongoing fee, during or in respect of the period when the services are provided. (2) For the purposes of this Act: (a) the employment agent under an employment agency contract is taken to be an employer, and (b) the contract worker under an employment agency contract is taken to be an employee of the employment agent, and (c) an amount, the value of a benefit or a payment, being: (i) any amount paid or payable to the contract worker in respect of the provision of services in connection with an employment agency contract, and (ii) the value of any benefit provided for or in relation to the provision of services in connection with an employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee, and (iii) any payment made in relation to the contract worker that would be a superannuation benefit if made in relation to a person in the capacity of an employee, is taken to be wages paid or payable by the employment agent. ... (4) An employment agent is not liable to pay-roll tax under this Act in relation to an employment agency contract: (a) if the contract worker is liable to pay pay-roll tax (as the employer of the person who actually provides the services to the client of the employment agent under the contract) in respect of wages paid for those services and a declaration to that effect has been given by the contract worker to the employment agent, or (b) if the wages that the amount, value of the benefit or payment under subsection (2) (c) is taken to be would have been exempt from pay-roll tax under section 10 had the contract worker been paid those wages by the client of the employment agent and a declaration to that effect has been given by the client to the employment agent, or (c) if the client of the employment agent: (i) is not registered or required to be registered as an employer under this Act, and (ii) would not be required to be registered as an employer under this Act if the client were the employer in respect of the wages paid or payable under all the employment agency contracts to which the client is a party, and a declaration to that effect has been given by the client to the employment agent. (5) If a contract worker gives a declaration to an employment agent under subsection (4) (a), and that paragraph does not apply or at any time ceases to apply to the contract worker, the employment agent is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract during any period in which the paragraph does not apply. (6) If a client of an employment agent gives a declaration to the employment agent under subsection (4) (b), and that paragraph does not apply or at any time ceases to apply in respect of the wages paid or payable under the employment agency contract, the client, and not the employment agent, is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract during any period in which the paragraph does not apply. (7) If a client of an employment agent gives a declaration to the employment agent under subsection (4) (c), and that paragraph does not apply or at any time ceases to apply to the client, the client, and not the employment agent, is liable to pay pay-roll tax in respect of the wages paid or payable under the employment agency contract at any time during the financial year in which the paragraph does not apply." 10The second is s 3A. It relevantly provides: "3A Application of this Act to certain contracts (1) A reference in this section to a relevant contract in relation to a financial year is a reference to a contract under which a person (in this subsection referred to as the designated person), during that financial year, in the course of a business carried on by the person: (a) supplies to another person services for or in relation to the performance of work, (b) is supplied with the services of persons for or in relation to the performance of work, or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of those goods to a designated person or, where the designated person is a member of a group, to another member of that group, but does not include a reference to a contract of service or a contract under which the designated person, during a financial year, in the course of a business carried on by the designated person: (d) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person, (e) is supplied with services for or in relation to the performance of work where: (i) those services are of a kind not ordinarily required by the designated person and are rendered by a person who ordinarily renders services of that kind to the public generally, (ii) those services are of a kind ordinarily required by the designated person for less than 180 days in that financial year, (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services: (A) provided by a person by whom similar services are provided to the designated person, or (B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year, (iv) the payment of the consideration under the contract is made at a rate that is not less than $800,000 per annum, or (v) those services are supplied under a contract to which subparagraphs (i)-(iv) do not apply and the Chief Commissioner is satisfied that those services are rendered by a person who ordinarily renders services of that kind to the public generally, or (f) is supplied by a person (in this paragraph referred to as the contractor) with services for or in relation to the performance of work under a contract to which paragraphs (d) and (e) do not apply, where the work to which the services relate is performed: (i) by 2 or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, (ii) where the contractor is a partnership of 2 or more natural persons, by 1 or more of the members of the partnership and 1 or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (iii) where the contractor is a natural person, by the contractor and 1 or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, unless the Chief Commissioner determines that the contract under which the services are so supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person. (1A) For the purposes of this section, a contract under which: (a) a person is supplied with services ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them, (b) a person is supplied with services for or in relation to the procurement of persons desiring to be insured by the person, or (c) a person is supplied with services for or in relation to the door-to-door sale of goods to consumers on the person's behalf, is not a relevant contract, unless the Chief Commissioner determines that the contract was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person. (1B) For the purposes of this section, a contract under which services are supplied by an employment agent, or a contract worker is procured by an employment agent, under an employment agency contract within the meaning of section 3C is not a relevant contract. (2) For the purposes of this Act: (a) a person: (i) (Repealed) (ii) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work, or (iii) who during a financial year, under a relevant contract, gives out goods to other persons, shall be deemed to be an employer in respect of that financial year, (b) a person who during a financial year: (i) performs work for or in relation to which services are supplied to another person under a relevant contract, or (ii) being a natural person, under a relevant contract, re-supplies goods to an employer, shall be deemed to be an employee in respect of that financial year, (c) amounts paid or payable by an employer ... during a financial year for or in relation to the performance of work relating to a relevant contract ... shall be deemed to be wages paid or payable during that financial year, and ... (5) Where, in respect of a payment for or in relation to the performance of work that is deemed to be wages under this section, pay-roll tax is paid by a person deemed under this section to be an employer: (a) no other person shall be liable to pay-roll tax in respect of that payment, and (b) where another person is liable to make a payment for or in relation to that work, that person shall not be liable to pay-roll tax in respect of that payment unless it or the payment by the person so deemed to be an employer is made with an intention either directly or indirectly of avoiding or evading the payment of tax whether by that deemed employer or another person. (6) In this section: (a) a reference to a contract includes a reference to an agreement, arrangement or undertaking, whether formal or informal and whether express or implied, ..." 11The Payroll Tax Act 2007 applies from the financial year commencing 1 July 2007. Section 6 of that Act provides that payroll tax is imposed on all taxable wages. Section 7 provides that the employer by whom taxable wages are paid or payable is liable to pay payroll tax on the wages. Subsection 40(1) provides: "40 Amounts taken to be wages (1) For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract: (a) any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract, (b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee, (c) any payment made in relation to the service provider that would be a superannuation contribution if made in relation to a person in the capacity of an employee." 12An "employment agency contract" is defined in s 37 as follows: "37 Definitions (1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent. (2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client. (3) In this section: contract includes agreement, arrangement and undertaking." 13Sections 38 and 39 provide: "38 Persons taken to be employers For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer. 39 Persons taken to be employees For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent." 14Sections 37-40 are modelled on s 3C of the Payroll Tax Act 1971, although there is a material difference in relation to subs 3C(4) of the 1971 Act and the provisions of the 2007 Act. 15The "relevant contract" provisions in s 3A of the Payroll Tax Act 1971 are substantially reproduced in ss 31-36 of the 2007 Act. Sections 31-36 of the Payroll Tax Act 2007 provide: "31 Definitions In this Division: contract includes an agreement, arrangement or undertaking, whether formal or informal and whether express or implied. relevant contract has the meaning given in section 32. re-supply of goods acquired from a person includes: (a) a supply to the person of goods in an altered form or condition, and (b) a supply to the person of goods in which the first-mentioned goods have been incorporated. services includes results (whether goods or services) of work performed. supply includes supply by way of sale, exchange, lease, hire or hire-purchase, and in relation to services includes the providing, granting or conferring of services. 32 What is a relevant contract? (1) In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person: (a) supplies to another person services for or in relation to the performance of work, or (b) has supplied to the designated person the services of persons for or in relation to the performance of work, or (c) gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group. (2) However, a relevant contract does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person: (a) is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person, or (b) is supplied with services for or in relation to the performance of work where: (i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally, or (ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year, or (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services: (A) provided by a person by whom similar services are provided to the designated person, or (B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year, or (iv) those services are supplied under a contract to which subparagraphs (i)-(iii) do not apply and the Chief Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year, or (c) is supplied by a person (the contractor) with services for or in relation to the performance of work under a contract to which paragraphs (a) and (b) do not apply where the work to which the services relate is performed: (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (ii) where the contractor is a partnership of two or more natural persons, by one or more of the members of the partnership and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (iii) where the contractor is a natural person, by the contractor and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, unless the Chief Commissioner determines that the contract or arrangement under which the services are so supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person, or (d) is supplied with: (i) services ancillary to the conveyance of goods by means of a vehicle provided by the person conveying them, or (ii) services solely for or in relation to the procurement of persons desiring to be insured by the designated person, or (iii) services for or in relation to the door-to-door sale of goods solely for domestic purposes on behalf of the designated person, unless the Chief Commissioner determines that the contract or arrangement under which the services are so supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person. (3) For the purposes of this section, an employment agency contract under which services are supplied by an employment agent, or a service provider is procured by an employment agent, is not a relevant contract. 33 Persons taken to be employers (1) For the purposes of this Act, a person: (a) who during a financial year, under a relevant contract, supplies services to another person, or (b) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work, or (c) who during a financial year, under a relevant contract, gives out goods to other persons, is taken to be an employer in respect of that financial year.(2) If a contract is a relevant contract under both section 32 (1) (a) and (b): (a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work is taken to be an employer, and (b) despite subsection (1) (a), the person who under the contract supplies the services is taken not to be an employer. 34 Persons taken to be employees For the purposes of this Act, a person who during a financial year: (a) performs work for or in relation to which services are supplied to another person under a relevant contract, or (b) being a natural person, under a relevant contract, re-supplies goods to an employer, is taken to be an employee in respect of that financial year. 35 Amounts under relevant contracts taken to be wages (1) For the purposes of this Act, amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are taken to be wages paid or payable during that financial year. (2) If an amount referred to in subsection (1) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract or the re-supply of goods by an employee under the relevant contract is as determined by the Chief Commissioner. (3) An amount paid or payable for or in relation to the performance of work under a relevant contract is taken to include: (a) any payment made by a person who is taken to be an employer under a relevant contract in relation to a person who is taken to be an employee under the relevant contract that would be a superannuation contribution if made in relation to a person in the capacity of an employee, and (b) the value of any share or option (not otherwise included as wages under this Act) provided or liable to be provided by a person who is taken to be an employer under a relevant contract in relation to a person who is taken to be an employee under the relevant contract that would be included as wages under Division 4 if provided to a person in the capacity of an employee. 36 Liability provisions If, in respect of a payment for or in relation to the performance of work that is taken to be wages under this Division, payroll tax is paid by a person taken under this Division to be an employer: (a) no other person is liable to payroll tax in respect of that payment, and (b) if another person is liable to make a payment for or in relation to that work, that person is not liable to payroll tax in respect of that payment unless it or the payment by the first-mentioned person is made with an intention either directly or indirectly of avoiding or evading the payment of tax whether by the first-mentioned person or another person."

The issues 16The Chief Commissioner primarily relies on s 3C of the 1971 Act and ss 37-40 of the 2007 Act ("the employment agency contract provisions"). He contends that Freelance is an "employment agent" as that expression is defined and that its agreements with its clients are "employment agency contracts" as defined so that amounts paid or payable by Freelance to the contractors (the "contract workers") are taken to be wages payable by Freelance who is taken to be the contract workers' employer. 17Alternatively, the Chief Commissioner contends that Freelance and its contractors enter into relevant contracts within the meaning of s 3A of the 1971 Act and s 32(1) of the 2007 Act under which Freelance is supplied with services by the contractors and the distributions paid to the contractors or secondary beneficiaries nominated by them are taken to be wages paid or payable by Freelance for or in relation to the performance of work relating to the relevant contract. 18If the Chief Commissioner's first contention fails but his second succeeds, questions will arise as to whether the exceptions in s 3A(1)(d)-(f) and (1A) of the 1971 Act or s 32(2) of the 2007 Act apply, necessitating a case by case examination of the circumstances of the individual contractors. 19Accordingly, on 8 March 2012 Gzell J ordered that: "There be a separate determination of: (a) the applicability of the exceptions to the relevant contract provisions set out in s 3A(1)(d)-(f) and (1A) of the Payroll Tax Act 1971 ("1971 Act") and s 32(2) of the Payroll Tax Act 2007; and (b) if necessary, the application of s 3AC of the 1971 Act; after the determination of all other issues in the proceedings." 20Freelance contends that s 3C of the 1971 Act and ss 37-41 of the 2007 Act apply to employment agents or labour hire firms of which it is not one. It submits that it does not "procure" the services of individual contractors for the companies or clients with which it contracts. It submits that it does not engage in the placement of contractors or otherwise supply contractors to clients in the manner commonly undertaken by employment agents, labour hire firms or recruitment agencies. Freelance does not source or recruit contractors to provide services to clients and does not seek or respond to any request from clients for the services of contractors. It does not maintain a pool or list of vetted or pre-screened contractors and does not vet or screen contractors to assess their suitability to provide the agreed services. 21In relation to s 3A of the 1971 Act and s 32 of the 2007 Act Freelance submitted that the only "relevant contract" is one whereby Freelance supplies services to the individual contractors for or in relation to the performance of work. It would contend that those services are ordinarily rendered by Freelance to the public generally, and therefore its arrangements with the individual contractors fall within the scope of exclusion in s 3A(1)(e)(i) of the 1971 Act and s 32(2)(b)(i) of the 2007 Act, although the question of exclusions is not an issue for determination at this stage.

The decisions challenged 22Freelance challenges separate decisions of the Chief Commissioner. The first decision was given in response to a letter dated 17 October 2007 from Freelance pursuant to which Freelance requested what it called "reassessments" under the Taxation Administration Act for the period from 1 April 2003 to 30 June 2003 and for the years ending 30 June 2004, 2005, 2006 and 2007 of its liability to payroll tax. The letter was written by KPMG Tax Lawyers Pty Ltd on behalf of Freelance. KPMG stated that Freelance had made payments to the NSW Office of State Revenue for payroll tax on distributions made to the beneficiaries of the Freelance Trust No. 1, that is, the independent contractors who became beneficiaries of the trust or secondary beneficiaries nominated by them who received distributions as a result of the contractors having performed services for Freelance. The amount of payroll tax said to have been paid in respect of such distributions between 1 April 2003 and 30 June 2007 was $1,055,309.44. KPMG contended that payroll tax was not payable pursuant to s 3AC of the Payroll Tax Act 1971, nor s 3A of the Act. (No issue arose on the hearing before me concerning s 3AC.) 23KPMG requested that the amount of $1,055,309.44, being the payroll tax that was said to have been incorrectly paid, be refunded to Freelance. KPMG said that Freelance sought a "reassessment" of the quantum of payroll tax levied by the Chief Commissioner in his payroll tax assessment for the years ended 30 June 2003, 30 June 2004, 30 June 2005, 30 June 2006 and 30 June 2007. 24On 17 November 2009 the Chief Commissioner refused Freelance's request. He said that he had concluded that the arrangements between Freelance and the beneficiaries fell within the definition of employment agency contracts under the Payroll Tax Act and as such, under s 3C(2) any amounts paid to the contract worker or the beneficiaries in respect of their services in connection with the employment agency contract, including any distributions made to them, were taken to be wages paid by Freelance. 25The other decision that was the subject of challenge was the Chief Commissioner's decision to issue notices of assessment for the periods of 12 months ended 30 June 2008 and 30 June 2009. Those assessments were also issued on 17 November 2009. Freelance does not contend that those were "reassessments". 26The Chief Commissioner assessed Freelance's liability to pay payroll tax for the year ended 30 June 2008 in the sum of $1,257,840.63 in addition to the amounts of payroll tax for that year previously paid. He assessed Freelance as liable to pay additional payroll tax for the year ended 30 June 2009 in the sum of $1,125,300.93. Freelance objected to the assessments. Its objections were disallowed. In disallowing the objections the Chief Commissioner stated: "On the information provided we are of the view Freelance Global procures the services of individuals for clients of Freelance Global by arranging for services to be supplied by worker contractors. Freelance Global, as a result, receives a payment in respect of the services provided by the individual contract worker to the client, during or in respect of the period when the services are provided. This means that there is an employment agency contract under the provisions of s 3C of the Payroll Tax Act 1971 and the provisions of Div 8, ss 37-42 of the Payroll Tax Act 2007."

Was the first decision of 17 November 2009 a reassessment? 27Freelance submitted that the Chief Commissioner's decision refusing to adjust Freelance's liability for payroll tax for the periods from 1 April 2003 to 30 June 2007 was a "reassessment" within the meaning of s 9(1) of the Taxation Administration Act. Section 9 relevantly provides: "9 Reassessment (1) The Chief Commissioner may make one or more reassessments of a tax liability of a taxpayer. (2) A reassessment of a tax liability is to be made in accordance with the legal interpretations and assessment practices generally applied by the Chief Commissioner in relation to matters of that kind at the time the tax liability arose except to the extent that any departure from those interpretations and practices is required by a change in the law (whether legislative or non-legislative) made after that time." 28Freelance contended that the characterisation of the services provided by Freelance to its beneficiary contractors and to clients of those contractors as "employment agency contracts" was not in accordance with the legal interpretations and practices generally applied by the Chief Commissioner during this relevant period. 29The Chief Commissioner denied that his decision conveyed by his letter of 17 November 2009 was a reassessment. He contended that in any event his decision was in accordance with the legal interpretations and assessment practices he generally applied during this period. 30The Chief Commissioner did not issue notices of assessment of payroll tax for the years ended 30 June 2003, 30 June 2004, 30 June 2005, 30 June 2006, or 30 June 2007. Senior counsel for the plaintiff said that in respect of those years the taxpayer simply lodged a return, paid the money and the money was accepted. It was an example of what is commonly called self-assessment. Freelance submitted that sub silentio the Chief Commissioner necessarily assessed that tax was payable by his acceptance of the return and of the money paid. 31Section 17 of the Taxation Administration Act provides: "17 Acceptance of money or return not necessarily an assessment The acceptance of money by the Chief Commissioner paid in connection with the lodging of a return or other document, or the acceptance of a return or other document, is not, only because of the acceptance, an assessment." 32Notwithstanding s 17, Freelance argued that the Chief Commissioner must be taken to have made an assessment in respect of tax liabilities where a return is lodged and the Chief Commissioner is satisfied with that return. It argued that whilst the mere acceptance of a return or payment of money does not in itself amount to an assessment, an assessment should be taken to have been made once the Chief Commissioner was satisfied with the return. Freelance relied on s 14 of the Taxation Administration Act. It relevantly provides: "14 Notice of assessment, reassessment or withdrawal of assessment (1) The Chief Commissioner may issue a notice of assessment (showing the amount of the assessment). (2) If the Chief Commissioner has not issued a notice of assessment of the tax liability of a taxpayer, the Chief Commissioner must issue the notice if a request to do so is made by the taxpayer within 5 years after the liability arose. (3) If the Chief Commissioner makes a reassessment, the Chief Commissioner must issue a notice of assessment (showing the amount of the reassessment)." 33Freelance submitted that an assessment must be taken to have been made where the Chief Commissioner is not dissatisfied with the return lodged and payment made because otherwise the Chief Commissioner would not be obliged under subs 14(2) to issue a notice of assessment. A notice of assessment is not itself an assessment. Freelance argued that because the Chief Commissioner was required to issue a notice of assessment if requested to do so by a taxpayer within five years after the liability arose, it was implied that there must already be an assessment in respect of which the notice would be given. I do not agree. The implication from subs 14(2) is that if such a request is made and if no assessment has yet been made, the Chief Commissioner is then to make an assessment and issue the notice. It does not imply that there must already have been an assessment. That implication would be contrary to s 17. 34Section 8 of the Taxation Administration Act provides: "8 General power to make assessment (1) The Chief Commissioner may make an assessment of the tax liability of a taxpayer. (2) An assessment of a tax liability may consist of a determination that there is not a particular tax liability." 35Freelance submitted that notwithstanding the use of the word "may" in subs 8(1), the Chief Commissioner was obliged to make an assessment to give effect to a tax liability that arises by operation of the statute. 36Freelance does not dispute that the liability to pay payroll tax arises from the Payroll Tax Act itself. Section 8 of the Payroll Tax Act provides that: "Pay-roll tax shall be paid by the employer by whom the taxable wages are paid or payable." 37Subsection 7(1) relevantly provides: "7 Imposition of pay-roll tax on taxable wages (1) Subject to, and in accordance with, the provisions of this Act, there shall be charged, levied, collected and paid, for credit of the Consolidated Fund in the Treasury, on all taxable wages pay-roll tax: ... (d) ascertained in accordance with Schedule 4 in respect of such of those wages as are paid or payable after the month of June 2001." 38Section 6 of the 2007 Act provides: "Payroll tax is imposed on all taxable wages." 39Section 7 provides: "The employer by whom taxable wages are paid are payable is liable to pay pay-roll tax on the wages." 40Section 8 provides: "The amount of pay-roll tax payable by an employer is to be ascertained in accordance with Schedules 1 and 2." 41An assessment by the Chief Commissioner is not necessary to give effect to the liability that arises by operation of those provisions. 42In support of its submission that the Chief Commissioner was obliged to make an assessment following receipt of the taxpayer's return and on acceptance of its payment counsel for Freelance referred to Gunasti v Chief Commissioner of State Revenue [2012] NSWADT 218 where a member of the Administrative Decisions Tribunal, Mr Block, said (at [29]): "[29] It is clear that the Chief Commissioner is obliged, by virtue of ss 8(1) and 9(1) of the Act, to make an assessment of a taxpayer's land tax liability. The word 'may' in both of those subsections is obligatory rather than discretionary." 43The Tribunal also said: "[34] The issue of an assessment, or reassessment, is a matter of machinery by which the matter of substance (the liability to land tax) is given effect. The Chief Commissioner is obliged to issue the assessment, or reassessment, where a land tax liability exists." 44The issue raised by the taxpayer in Gunasti v Chief Commissioner of State Revenue was that according to the taxpayer the Chief Commissioner did not act fairly when he issued an assessment for five previous land tax years. The taxpayer contended that the Chief Commissioner was precluded from issuing a notice of assessment because to do so was unjust. The Tribunal rejected this argument because the Chief Commissioner was obliged to apply the dictates of the statute. The Tribunal referred to s 61 of the Taxation Administration Act which provides that the Chief Commissioner has the general administration of taxation laws and may do all such things as are necessary or convenient to give effect to the taxation laws. The Tribunal said (at [32]) that: "Once the Land Tax Management Act rendered the Applicant liable to 'tax' ... the circumstances required the Chief Commissioner to act. To do otherwise would cause the Chief Commissioner to fail in giving 'effect to ... the taxation law'". 45Nothing in Gunasti v Chief Commissioner of State Revenue, nor in Brataniec v Chief Commissioner of State Revenue [2013] NSWADT 65 to which Freelance also referred, provides support for the proposition that the Chief Commissioner is required to make an assessment where there is no necessity to do so. By reason of s 17 of the Taxation Administration Act it cannot be said that the Chief Commissioner is taken to have made an assessment by accepting the returns lodged and the payments made by Freelance. 46The Chief Commissioner's decision of 17 November 2009 rejecting Freelance's request for a reassessment was not a reassessment within the meaning of s 9(1) of the Taxation Administration Act, whatever Freelance called it. The Chief Commissioner had not made an assessment of Freelance's liability to pay payroll tax in respect of the period in question. When the question of Freelance's liability to pay payroll tax for that period was raised by KPMG by its letter of 17 October 2007, the Chief Commissioner was not required to reassess Freelance as liable for payroll tax for that period. Instead, he was required to consider whether Freelance's own assessment of its liability for payroll tax for that period was correct or incorrect. In deciding that Freelance's own assessment of its payroll tax liability was correct, or not incorrect, the Chief Commissioner was not making a "reassessment" for the purposes of s 9 of the Taxation Administration Act. The question whether the Chief Commissioner's decision was in accordance with legal interpretations and assessment practices generally applied by him in relation to matters of that kind did not arise. 47Even if that question had arisen, I do not accept Freelance's contention that the Chief Commissioner adopted a different legal interpretation or assessment practice from that generally applied. The particular type of arrangement between Freelance and its contractors had not previously been considered by the Chief Commissioner. There was no existing assessment practice that was generally applied to businesses of the same kind as that of Freelance. 48Freelance contended that the Chief Commissioner's interpretation as expressed in rulings or in Seminar Notes published by the Office of State Revenue were inconsistent with his decision. For the most part the matters relied on do not establish any such inconsistency. The same issues of interpretation arise in relation to the Chief Commissioner's paraphrasing of the requirements of the legislation as arise in relation to the interpretation of the legislation itself. Freelance particularly relied upon Seminar Notes on Payroll Tax dated July 2012 produced by the Office of State Revenue. There was no dispute that there had been no change to the Chief Commissioner's interpretation and practices between the end of the relevant period, that is 30 June 2009, and the publication of the Seminar Notes. The Seminar Notes included the following: "Employment agency contracts Employment agents are taken to be employers under the Payroll Tax Act to the exclusion of any other party. The employment agency is taken to be the employer, the service provider is taken to be an employee and the money paid by the agency to the service provider is taken to be wages. An employment agency contract exists when a person (employment agency) procures the services of another person (service provider) for a client of the person (employment agent). The offer of work is from the client to the agency who then provides a person acceptable to the client. If the offer of work is direct between the client and the worker then Revenue Ruling PTA029 applies and the client becomes the potentially liable employer. When the employment agency has procured a worker for a client al monies paid in connection with that work are wages for the agency. This is so even if the monies are paid to a corporation or another agency. Example A bank uses an agency to supply three workers for four months. The bank pays $50 an hour for each worker to the agency and the agency pays each worker $35 dollars an hour. The agency, not the bank, is the liable employer and the liable wages are the $35 an hour not the $50 per hour." 49Revenue Ruling PTA029 deals with recruitment agencies and distinguishes a recruitment agent from an employment agency or labour hire firm. It states that in a recruitment agency situation there is usually a contract between the client and the worker and that where such a contract exists liability for payroll tax is borne by the client even if the client pays the worker via the recruitment agency. 50The Seminar Notes do not deal with the present situation. The Seminar Notes distinguished only between employment agents, as that business is generally understood, on the one hand, and recruitment agents where the contract is made between the end client and the worker directly on the other hand. The present case does not fall within either category. 51If s 9(2) applied, it would not avail Freelance. There was no relevant legal interpretation or assessment practice applicable to the present case. It is unnecessary to consider what would be the significance of a finding that s 9(2) required the Chief Commissioner to apply his legal interpretations and assessment practices to a reassessment in an appeal under ss 96 and 97 of the Taxation Administration Act where the Tribunal or Supreme Court must make a decision de novo.

Freelance's business 52The parties agreed on some of the relevant facts. It was agreed that Freelance provided, amongst other services, services to independent contractors who desire to provide services to corporate entities (called clients). Freelance also provided services to such clients who desired to engage contractors. As previously noted, it did not maintain a pool or a list of vetted or pre-screened independent contractors. Although not an agreed fact, I accept Freelance's submission that it did not vet or screen contractors to assess their suitability. It did not recruit contractors to provide services to clients. Nor did it hold itself out or represent to clients that it could provide suitable independent contractors for the client's business. Occasionally a contractor was referred, or directed to Freelance by a client where the client was aware of Freelance's services and permitted or desired contractors engaged by it to use Freelance's services and business structure. It was more common for contractors to approach Freelance without any such referral or direction. 53It was an agreed fact that notwithstanding the terms of any of its contracts with its clients, Freelance did not supervise or otherwise control in any manner the provision of the agreed services by the contractor to the client.

Arrangements with contractors 54Freelance's business started in the early 1990s. On 1 July 1992 a discretionary trust was established of which Freelance is the trustee. In the early days of its business Freelance dealt almost exclusively with recruitment agencies and independent contractors recruited by such agencies. Such independent contractors were invited to become beneficiaries of the Freelance trust. At that time Freelance had no contact with the clients of the recruitment agencies for whom the independent contractors provided services. The managing director of Freelance, Mr Kelson, deposed that at that time individuals who were recruited on a contract basis by a recruitment agency were either engaged as employees of the recruitment agency or had their own corporate structures. He said that Freelance offered a third alternative in the form of a third party corporate vehicle, which could facilitate the contractor's 'back office' or administrative functions and also provide compliance advice and services to the independent contractor. The contractors achieved convenience and greater flexibility and had all their tax work done by Freelance. 55Following the introduction in about 2001 of Part 2-42 of the Income Tax Assessment Act 1997 (the personal services income tax legislation) Freelance also carried out a formal assessment as to whether the contractors in question could properly be characterised as independent contractors and not employees. Only persons whom Freelance assessed as satisfying criteria to be treated as an independent contractor were admitted as beneficiaries of the Freelance trust. If a person did not meet the criteria in the personal services income tax legislation the person was treated as an employee. Currently Freelance has approximately six to 700 beneficiary contractors throughout Australia and around 300 employee contractors. The latter are not beneficiaries of the Freelance trust. This case is concerned with the "beneficiary contractors". 56Mr Kelson deposed that contractors can go back and forth between being an employee contractor and a beneficiary contractor and are reassessed whenever a new assignment is secured by a contractor or an extension of an existing contract is offered. 57Freelance no longer deals exclusively with contractors engaged through recruitment agencies, but increasingly enters into direct contracts with corporate clients for whom a beneficiary contractor has arranged to do work. The services provided by Freelance to such contractors were described by Mr Kelson as follows: "(a) provision of a corporate structure, thus avoiding the need for the contractor to establish his or her own company; (b) assessment of the contractor's status and advice as to the most appropriate structure; in other words, determining whether the contractor is an independent contractor or an employee; (c) contract negotiation; (d) administrative services, including invoicing, payroll, debt collection; (e) salary packaging (applicable to employee contractors only); (f) wealth management and financial services; (g) taxation services; and (h) insurances." 58A contractor wishing to become a beneficiary of the Freelance trust completes an application form. The application form contains terms and conditions for the person's admission as a beneficiary of the trust. The contractor acknowledges that he or she has no right to any income or capital of the trust except as Freelance might in its absolute discretion determine. The contractor agrees that: "Unless Freelance agrees to hire me as an employee, I will provide any services to Freelance clients as an independent contractor of Freelance, and may delegate the performance of any such services unless this is prohibited under Freelance's contract with a client." 59Freelance charges beneficiary contractors a management fee, the amount of which varies depending on the services provided by Freelance. It is usually between about four and six per cent of the income generated for Freelance by the work done by the contractor in providing the services that Freelance undertakes to provide to its client. The services include access to Freelance's business model. That is, instead of an individual seeking to enter into a contract in his or her own name with a client, or seeking to do so through a company controlled by the individual, Freelance will enter into the contract for the provision of services to the client and be paid for those services at the rate that has been agreed upon between the contractor and the client. 60Freelance carries on business as the trustee of a discretionary trust and although not required to distribute the income it receives from the client as the result of the contractor's provision of services, in practice it distributes to the contractor a sum that is equal to the reward agreed on between the contractor and the client, less Freelance's management fee. 61Mr Kelson said that the most important reason for contractors coming to Freelance and taking advantage of its services was for the provision of a corporate structure in which the contract can be administered. He said that the custom in corporate Australia is such that no business will engage an independent contractor other than through a corporate entity (which must be news to many professionals). No doubt the preference for engaging some independent contractors only through a corporate entity is because this is a factor, although not a decisive factor, in favour of characterising a relationship as one of independent contractor and client, rather than employee and employer. By using Freelance an individual contractor can be saved the cost and administrative burden of establishing his or her own corporate entity. 62Freelance offers other services to beneficiary contractors, including tax advice, tax return preparation, financial planning, and access to an in-house financial advisor. It is mandatory for all beneficiary contractors to have income protection insurance. Each beneficiary contractor is offered the option of subscribing to Freelance's policy of income protection insurance. Freelance also holds public liability and professional indemnity insurance in respect of the work undertaken under its contracts with clients. It charges a fee to the beneficiary contractor for the provision of such insurance cover. 63Freelance commonly makes distributions of income from the trust to the beneficiary contractors prior to the end of the financial year that are described as fixed distributions of trust income, albeit that the distributions are described as being conditional upon Freelance's reasonable satisfaction that the beneficiary contractor performs consulting services for such Freelance clients as Freelance reasonably nominates and requires. Mr Kelson explained that the reason for these fixed distributions of income was to enable beneficiary contractors to claim deductions against the income. He said that such deductions could only be claimed if the beneficiary of the trust had a fixed right to that amount of income. The amount of fixed distributions of income were low compared with the anticipated income to be derived from the contractor's services. 64Apart from such amounts of fixed income distribution, the beneficiary contractors receive payment as Freelance receives payment from the clients. Such payments are by way of advances. Although under the terms of the trust deed the beneficiary contractors had no right to any distribution of income (other than the fixed distributions of income described above), in practice, Freelance determined to make distributions to beneficiaries in the amounts paid by the clients to Freelance for the work that the contractors did, less the appropriate management fee. 65Beneficiary contractors may request that Freelance admit as a beneficiary a person such as a family member, or the trustee of a family trust associated with the contractor. These are known as related or secondary beneficiaries. Towards the end of each financial year Freelance enquires whether a beneficiary contractor wishes the trustee to consider making a distribution to a related beneficiary. Payments to a related beneficiary are in respect of the work done by the beneficiary contractor that generated the income to Freelance to be distributed. 66This current practice applied to the tax periods in question.

Services to clients 67Mr Kelson deposed that Freelance also provided services to corporate "end clients". He said that the core services offered to corporate clients by Freelance were workforce risk management, compliance and administration services. He said that Freelance audited the relationship between the company and its workforce to ensure that all individuals within that workforce were being properly engaged as employees or independent contractors. Freelance worked with the corporate client to ensure that all staff were engaged compliantly or else to restructure workplace roles or assignments to minimise compliance risks. He said that in some cases those companies then referred their contractors to Freelance or offered Freelance as an engagement option to their contractors. In such cases Freelance generally entered into an overarching master agreement with the company for the provision of services with separate schedules being prepared thereafter for each contractor referred to Freelance by the company. 68In fact, the services Freelance provides to clients are not confined to provision of workforce risk management, compliance and administration services. Under its contracts with its clients Freelance provides the services performed by its contractors.

Freelance's contracts with its clients 69As part of its investigation into Freelance's request of 17 October 2007 for a purported reassessment of its liability for payroll tax for the years ended 30 June 2003 to 30 June 2007, the Chief Commissioner asked Freelance to provide samples of contracts between Freelance and the end user of the services provided by Freelance's beneficiary contractors. Freelance provided copies of sample contracts with Tollhurst Limited ("Tollhurst") and GHD Services Pty Ltd ("GHD") and said that those contracts were representative of the contracts entered into between Freelance and its clients. 70The agreement between Freelance and GHD described Freelance as the "Contractor". The agreement recited that GHD was a consultant for a project described in item 2 of the reference schedule and that Freelance had represented to GHD that it had the capacity, staff skills, experience and certifications necessary to provide the services described in item 4 of the reference schedule and had agreed to the terms attached and forming part of the Agreement. It recited that GHD had agreed to appoint Freelance to carry out the Services on the terms attached to and forming part of the Agreement. (The reference schedule was not provided.) The attached terms recited that GHD was engaged or about to engage in a project described in the reference schedule and would provide professional services for its client. It recited that the project needed professional services described under the heading "Services Required" in the Reference Schedule. It recited that: "The Contractor [Freelance] has available certain persons who are capable of supplying the required services and who have the qualification to carry out the same", and that: "The Contractor [Freelance] has agreed to supply GHD with the required services for the agreed provisional sum ..." 71By clause 2 Freelance agreed to provide the services requested by GHD from time to time. Clause 3 provided: "3 Contractor's Personnel (a) The Contractor shall ensure that the individuals named in Item 6 of the Reference Schedule are available to provide the Services Required to GHD. (b) In addition to the individuals referred to in sub-clause (a) the Contractor shall be entitled subject to the consent in writing of GHD (which will not unreasonably be withheld) to use other competent personnel to provide the Required Services. (c) All persons employed or engaged by the Contractor in providing the Services Required shall be and remain personnel of the Contractor which shall be solely responsible for all payment to and entitlements of each of them and the Contractor shall indemnify and shall keep GHD indemnified in respect thereof. (d) In relation to all personnel engaged by the Contractor in carrying out its obligations under this Agreement the Contractor will comply with all Federal and State Legislation, Industrial Awards and Legislation, as appropriate, and in particular the provisions relating to: Group tax payments Long service leave Payroll tax Workers compensation Fringe benefits tax Public liability Annual leave Superannuation guarantee levy

(e) Further in respect of the obligation under 3(d) the Contractor shall take out and maintain for the currency of this Agreement insurance policies covering its liabilities in respect of workers compensation, if appropriate." 72Freelance warranted that it was ordinarily engaged in the business of providing the Required Services and that it would ensure that services provided were prepared by it or its servants, agents or subcontractors with the degree of skills, care and diligence normally exercised by members of their profession in performing services of a similar nature. 73GHD promised to make payment to Freelance calculated on the time properly occupied by "its personnel" at the rates set out in the Reference Schedule. 74The agreement between Tollhurst and Freelance described Freelance as "the Contractor". It recited that Tollhurst was willing to engage Freelance for provision of the Services as set out in the Agreement. "Services" was defined to mean: "The provision of services by the Contractor [Freelance] including without limitation the performance of work and the provision of skills, expertise, goods, materials and other things to be provided by the Contractor to complete an Assignment in accordance with the terms and conditions of the Agreement." 75An "Assignment" was defined to mean: "An Assignment(s) of work(s) to be completed by the Contractor [Freelance] for the Company as specified in item 5 in a schedule hereto involving the provision of Services." 76Tollhurst was a financial services licensee. Clause 2.1 provided that Tollhurst would appoint Freelance as a corporate Authorised Representative pursuant to s 916A of the Corporations Act 2001 (Cth). 77Clause 4.1 provided that Freelance would undertake and complete the services as described in item 5 in each schedule for the proper execution and completion of each Assignment. Each Assignment would be given a separate Schedule describing the Services to be performed. Clause 4.4 provided that Freelance would exercise its independent discretion as to the most appropriate and effective manner of performing the Services of the Assignment. Clause 4.5 provided that with Tollhurst's approval Freelance might delegate, substitute or subcontract all or part of the Contractor Services in association with the Assignment provided always that such person was an Authorised Representative. 78Tollhurst had approximately 120 financial advisers whom it had authorised to provide financial services on its behalf as its authorised representatives. Each of the advisers was an independent contractor who was paid purely on a results basis. Many of the authorised representatives became beneficiary contractors of Freelance. 79Many other contracts with clients were in evidence. Typically the contract provided that Freelance would undertake and complete an assignment as described in a schedule to the agreement by a specified completion date. Freelance undertook to act in good faith and ensure that each assignment was completed with due care, skill and diligence according to the standards, ethics and codes of conduct acceptable at all times to the client. Typically, a contract provided that subject to Freelance's complying with its obligations under the agreement, it should exercise its independent discretion as to the most appropriate and effective manner of performing the services. Typically, the contract provided: "With the written approval of the Company the Contractor [Freelance] may delegate, substitute or subcontract, all or part of the contractor services in association with the Assignment." 80Many contracts provided for the specification of a Preferred Operator to carry out the tasks that Freelance undertook to perform. In such contracts Freelance typically warranted that it and its Preferred Operator possessed all the necessary resources, skills and training to complete the assignment. If there was no specification of a particular Preferred Operator, the contracts provided that Freelance warranted that it had the necessary resources, skills and training to complete the assignment. 81Some contracts provided that Freelance would use its best endeavours to delegate or subcontract each assignment to the Preferred Operator. Such contracts provided that if the Preferred Operator was unable or unwilling to undertake the assignment, Freelance would notify the company of its inability to provide the Preferred Operator and the company might, at its sole discretion, elect to permit Freelance to delegate or subcontract the assignment in its discretion, or could notify Freelance not to proceed with the assignment. 82In some contracts Freelance expressly undertook to the client to procure the services of the contractor. In around June 2005 Mr Cockram sourced a new three-month contract with Bryte Systems Pty Ltd to provide consultancy services. This was the first assignment obtained by Mr Cockram without any involvement from a recruitment agency. He advised Freelance of a new contract and Freelance then entered into the contract with Bryte Systems which was signed by Mr Cockram as the consultant. Clause 6.4 of that contract provided that Freelance "will at all times use its it's [sic] best endeavours to procure that the services the subject of the contract are provided by the Consultant named in the attached appendix ..." 83In a contract made between Finxl IT Professional Services Pty Ltd and Freelance as the contractor and Mr Cockram as consultant, Freelance agreed to provide the services of Mr Cockram to or at the direction of Finxl IT Professional Services and in particular agreed to procure that Mr Cockram perform the services for the client. 84In an agreement made on 24 November 2003 between Workcare Medical Pty Ltd and Freelance, Freelance agreed to "at all times use its it's [sic] best endeavours to procure that the services the subject of the contractor provided by the Preferred Operator named in item 5 of the attached schedule (viz by a Mr Price)". 85Mr Kelson gave evidence, which I accept, that in all cases assignments were carried out by the nominated Preferred Operator and that Freelance had never substituted another person to perform the work that it had contracted to carry out. Although the contracts typically provided that Freelance was free to delegate, substitute or subcontract all or part of the contract, its universal practice was to delegate to the nominated person. 86From time to time a client would insist that the contractor be a party to the contract. But usually the contracts were made between the client and Freelance even though a Preferred Operator might be specified. It was Freelance's preference in drawing contracts that the contractor not be named as a contractual party.

The promotional brochure 87One of Freelance's promotional brochures described how its business works in the following terms: "Freelance (in its capacity as trustee) enters into contracts with clients to undertake assignments or provide certain services. Each contract is an arm's length arrangement, for which Freelance receives appropriate remuneration. The relationship between Freelance and the client is clearly one of independent contractors, as at any time, Freelance is providing services and undertaking assignments for numerous, unrelated clients. Freelance then either delegates or sub-contracts the assignment or services to one or more appropriate independent contractors or assigns the work to an employee. This decision will depend on the nature of the assignment or services to be provided and is generally undertaken in consultation with the client. Pursuant to the terms of the contract with the client, Freelance at all times has primary contractual responsibility for undertaking the assignment or providing the services, and is also responsible for ensuring that any delegate or sub-contractor complies with the terms of the client contract. In this way, the client only has to deal with Freelance, regardless of the number of delegates or sub-contractors who may be involved in the project. Independent contractors and beneficiaries have the right to accept or reject assignments in their sole discretion. Generally, the client has the right to nominate preferred sub-contractors or delegates if it so wishes and again, this will depend on the nature of the project. If the delegate or sub-contractor is unable or unwilling to accept the project, Freelance will put forward alternatives who may be accepted or rejected by the client. Once work has been undertaken, Freelance invoices the client in accordance with the terms of the contract. This is generally done on a progressive basis, depending on the nature and timeframe of the project. The client has the benefit of receiving and paying a single, all-inclusive invoice, rather than having to deal with numerous invoices from various contractors. A contractor, beneficially engaged in assisting Freelance in deriving its income, will receive advances from the Trust. At the end of each financial year, the Trustee exercises its ultimate discretion as to the distributions of the profit of the Trust." 88Mr Kelson said that parts of this description were wrong. He said that it was wrong to say that having entered into a contract with a client, Freelance then delegated or subcontracted the assignment of services to one or more appropriate independent contractors, or assigned the work to an employee. Rather, the contractor would have identified the assignment and negotiated the essential commercial terms of the assignment prior to Freelance's involvement, and the assignment would always be carried out by the contractor who had sourced the work (whether the work was sourced by him or her or through a recruitment agency). That evidence is corroborated by the evidence of individual contractors, and is in accordance with paras 4(a) and 6 of the Statement of Agreed Facts which provide that Freelance relies on a pre-existing relationship between each contractor and each client, and that information about the arrangement between the contractor and client is generally provided to Freelance by the contractor (and on occasion by the client), including information as to the services to be provided, the agreed rate of payment or fee, the location where the agreed services are to be provided and the duration of the arrangement. 89Mr Kelson also disowned the statement that, "if a delegate or subcontractor is unable or unwilling to accept the project, Freelance will put forward alternatives who may be accepted or rejected by the client." He said this was absolutely inaccurate. He posited as a reason for the inaccurate statement that the draftsman was describing characteristics of an independent contractor who has the right to accept or reject an assignment. 90There was no evidence of any particular case in which Freelance had put forward an alternative to a nominated contractor if the nominated contractor was unable or unwilling to accept the assignment. I accept Mr Kelson's evidence as to the inaccuracy of these parts of Freelance's brochure. I do so, notwithstanding Mr Kelson's admission that, "... [in] anything you publish to prospective clients and prospective contractors ... you do your level best to properly represent the nature and extent of the services that your organisation offers".

Antecedent agreements between contractor and client 91In cross-examination Mr Kelson asserted (quite inadmissibly) that in his opinion, although there was no written contract between a contractor and a client, what he called a verbal (meaning oral) contract was made between them before the formal contract was entered into between the client and Freelance. Mr Kelson had no expertise to express an opinion on this question, which would be a question of law depending upon the circumstances of each case. His opinion appeared to be based on his view that because the client and the contractor had agreed on the essential terms of the engagement, a contract thereupon came into existence. Of course, the question would be whether the client and the contractor had agreed to be immediately bound by the terms on which they had agreed, notwithstanding that those terms included that the relevant contracting parties would be the client and Freelance, and not the client and the contractor. 92Two contractors who were cross-examined also gave evidence (which if objected to would have been inadmissible) about their understanding as to whether a binding contract was entered into before the formal contract was made between the client and Freelance. They expressed different opinions on that question. 93I do not think this question can be decided in the abstract. The terms of the discussions between a client and a contractor might give rise to an agreement that was intended to be immediately binding that the contractor would perform work for the client on the agreed terms, but on the basis that the contract would be novated, that is, that it would be replaced by a new agreement between Freelance and the client for the performance of that work. However, there was no admissible evidence of such arrangements. The more likely scenario is that a contractor and a client intended that a contract would be made between Freelance and the client, and they agreed on the essential terms of the contract without intending to be immediately bound by those terms. 94Different considerations would arise if, as frequently occurred, a contractor commenced the performance of services before the contract was signed between Freelance and the client. It is unnecessary and impossible to decide whether in those circumstances a contractor would have a right to remuneration for work done pursuant to any express or implied contract with the client. The right to reasonable remuneration in such circumstances would not necessarily depend upon a finding of such an express or implied contract. 95The issue of whether there was an antecedent binding contract between the client and the contractor may have arisen due to revenue ruling PTA029 in which the Office of State Revenue said that under an employment agency (or labour hire arrangement), a contract exists between the agency and its client, and the agency and the worker, but there is no contract between the client and the worker. In contrast, a typical contractual arrangement in a recruitment agency situation was described as one where there was a contract between the agency and a client and/or between the agency and the worker, and also a contract or an agreement between the worker and the client. Hence, Freelance sought to establish that there was a contract between a beneficiary contractor and the client. Mr Kelson said: "I think it is a very enforceable contractual arrangement that the individual contractors and the clients enter into and either could, in fact, enforce. They choose to approach Freelance to administer it for them and I don't believe for one moment that invalidates the enforceability of that original undertaking between those two parties." 96Whilst Mr Kelson was invited to speculate on that topic, it was not a topic on which he, or anyone else, could have the expertise to express an opinion. 97It is clear from the contractual documentation that Freelance did not administer a contract between the client and the contractor for the provision of services by the contractor to the client. Freelance entered into its own contract with the client for the provision of those services. 98This is a false issue. The question of whether Freelance procures the services of its contractors to its clients does not depend on whether there is an antecedent legally enforceable contract between the contractor and the client for the provision of those services.

Employment agent - section 3C of the 1971 Act and s 37 of the 2007 Act 99The critical question under s 3C of the 1971 Act is whether there is a contract under which Freelance (the employment agent) by arrangement procures the services of another (its contractor) for a client of Freelance (the company to which Freelance provides the services of its contractors). Under s 37 of the 2007 Act the question is whether there is a contract (which includes an agreement, arrangement and undertaking) which may be formal or informal, express or implied, under which Freelance (the employment agent) procures the services of another (its contractor) for a client of Freelance (the company to which Freelance provides the services of its contractor). 100Freelance accepted that if its arrangements with its beneficiary contractors constituted employment agency contracts within the meaning of s 3C of the 1971 Act or s 37 of the 2007 Act then: "1 Freelance would be taken to be an 'employer': s 3C(2)(a) of the 1971 Act and s 38 of the 2007 Act; 2 the beneficiary contractor would be taken to be an 'employee': s 3C(2)(b) of the 1971 Act and s 39 of the 2007 Act; 3 distributions paid to beneficiary contractors would be paid, relevantly, 'to' (in the case of payments during the first period) and 'to or in relation to' (in the case of payments during the second period) such beneficiary contractors 'in respect of the provision of services in connection with' the said employment agency contracts: s 3C(2)(a) of the 197 Act and s 40 of the 2007 Act; 4 during the first period, distributions paid to secondary beneficiaries would be taken to be wages paid by Freelance to the relevant beneficiary contractor by operation of s 3D(1)(b) of the 1971 Act, because those payments would be 'paid or given ... by [Freelance], for [the beneficiary contractor's] services as the employee of [Freelance], to a person other than the [beneficiary contractor]': see paragraphs 47-50 above; and 5 during the second period, distributions paid to secondary beneficiaries would be taken to be wages paid by Freelance to the beneficiary contractor: (a) by operation of s 40(1)(a) of the 2007 Act, because those payments would be 'paid ... in relation to the [relevant beneficiary contractor] in respect of the provision of services in connection with the employment agency contract'; and (b) by operation of s 46(1)(b) of the 2007 Act, because those payments would be 'paid or given ... by [Freelance], for [the relevant beneficiary contractor's] services as the employee of [Freelance], to a person other than the [beneficiary contractor]': ..." 101Freelance submitted that it did not procure the services of its beneficiary contractors for its clients. No issue was raised that if it did procure the services of its beneficiary contractors for its clients, it did not do so under a contract, whether formal or informal, within the meaning of s 37 of the 2007 Act, or did not do so under a contract by arrangement within the meaning of s 3C of the 1971 Act. 102Freelance submitted that: "(a) none of the entities to whom beneficiary contractors' services is a client of Freelance in respect of the supply of services prior to or at the time of the procurement of those services; (b) the services of the beneficiary contractor are procured by the client itself or by a recruitment agency acting for the contractor independently of and prior to any involvement by Freelance in the facilitation of the provision of those services; (c) the word 'procure' in s 3C of the 1971 Act and s 37 of the 2007 Act means to obtain or get by care or effort, in the sense of causing or bringing about a state of affairs; (d) the purpose of the provisions was to address arrangements involving employment agents and labour hire entities whose business involves recruiting or sourcing and then supplying persons, whether employees or independent contractors, to clients of the employment agent or labour hire entity. 'Procure' should be read accordingly. Freelance did not recruit or source the contractors whose services were provided to its clients; (e) If the verb 'procure' were interpreted so as to apply to the provision by Freelance of the services of its beneficiary contractors, then s 3C of the 1971 Act and s 37 of the 2007 Act would have such a wide-ranging application that the 'relevant contract' provisions in s 3A of the 1971 Act and ss 31-36 of the 2007 Act, including the exceptions to those provisions, would be emasculated. The exceptions to the 'relevant contract' provisions are intended to exclude payments to bona fide independent contractor from payroll tax. If the 'employment agent' provisions have the effect contended for by the Chief Commissioner, bona fide independent contractor arrangements that would be excluded from the operation of s 3A of the 1971 Act or s 32 of the 2007 Act would be caught by s 3C of the 1971 Act or s 37 of the 2007 Act, which was not the legislative intention." 103The Macquarie Dictionary provides the following definitions of the verb 'procure': "1. to obtain or get by care, effort or the use of special means: to procure evidence 2. to effect; cause; bring about, a specially by unscrupulous or indirect means: to procure a person's death 3. to obtain for the gratification of lust or purposes of prostitution." 104Similarly, the Oxford English Dictionary provides the following definitions of the verb "procure" when used as a transitive verb: "2. contrive (an action or proceeding); try to bring about (esp. something harmful) 3. bring about, esp. by care or with effort; cause to be done; arrange that, now rare; manage (to do) 4. obtain especially by care or with effort; gain, acquire, get ... act as a procurer; obtain (women) for prostitution 5. prevail on or persuade (a person) (to do); bribe, suborn ... prevail on (a person) to come; bring, lead 6. try to induce, urge" 105In the R v Castiglione [1963] 63 SR (NSW) 393 Walsh J cited the judgment of Hodgins JA in R v Quinn (1918) 44 DLR 707 as providing useful illustrations of what is meant by procuring an act or event and by procuring someone to do something. Hodgins JA said: "The expressions 'aid, abet, counsel or procure,' 'procure a miscarriage,' and 'procure a libel to be published,' are well known illustrations of the ordinary meaning of the word in criminal enactments. In the Century Dictionary, quoted by the Court in United States v. Somers [(1908) 164 Fed. Rep. 259, 262], the word 'procure' is defined as 'to bring about by care and pains; effect; contrive and effect; induce; cause; as, he procured a law to be passed.' In The People v. Van Bever [(1911) 248 I11. 136, 141], the Supreme Court of that State held that 'Procure' for the purpose of prostitution meant 'begin proceedings to cause a thing to be done'. In Vogal v. The State [(1909) 138 Wis. 315, 332], The Supreme Court of Wisconsin regarded the word as synonymous with 'aid,' 'abet,' 'obtain by any means,' 'to bring about'. The Imperial Dictionary, quoted in Re Gertie Johnson [(1904) 8 Can. Crim. Cas. 243], gives 'Procure' as meaning 'induces to do something;' and in England in Rex v. DeMarny [[1907] 1 K.B. 388], and in Rex v. Mackenzie [(1910) 6 Cr.App.R. 64], it seems to have been treated as having a meaning such as I have indicated." 106In National Australia Bank Limited v Maher [1995] 1 VR 318 one of the questions was whether the registration of a mortgage had been "procured by fraud" within the meaning of s 44 of the Transfer of Land Act 1958 (Vic). The bank manager had altered an instrument of mortgage after it had been signed by the mortgagor to add title particulars to additional lots of land in the description of the land mortgaged without the knowledge of the mortgagor. The bank argued that although the bank manager had been guilty of forgery, its employees or agents who caused the forged instrument to be registered were innocent of any fraud and hence the registration of the mortgage was not procured by a fraud. That argument was rejected. Fullager J, with whom Southwell J agreed and with whom Ormiston J also agreed on this point, said (at 333): "In my opinion, however, the word 'procured' in s 44 means 'brought about' or, even at its narrowest, 'brought about by care or pains' - see the fourth meaning of the word 'procure' in the Oxford Dictionary, 2nd ed, (1989), and see also the discussion in R v Castiglione [1962] 63 SR (NSW) 393, especially in the judgment of Walsh J. I think that the registration was brought about by the care and pains of the bank manager: he caused the registration to take place, first by obtaining upon the instrument the signature of the mortgagor of the Clayton land, and then by fraudulently adding the title particulars of the Buchan lands, and then either by handing the forged instrument to the relevant securities clerk or titles clerk or else by otherwise placing the instrument into that chain of bank operations which would in the ordinary course result (and did result) in its being presented to the registrar for registration. The registration was brought about by these steps or 'pains' of the bank manager. Indeed, the sending on the path to registration of this forged instrument, which was uttering continuously its false representation that the mortgagor signed after the insertion of all the title particulars, was the cause (in the sense of sine qua non) of the registration, and the sending out on that path was done with fraudulent intent. The registration was caused by the fraud of the bank's agent in that the fraud of the agent in creating the forged document and setting it upon the path to lodgment was at least a cause of the registration, if not indeed the cause in the sense above stated. In my opinion, whether 'procured' in the section means caused by or brought about by, or brought about by care or pains, the registration was in the present case procured by the fraud of the bank's employee in the course of carrying on the bank's business." 107In Attorney-General's reference No. 1 of 1975 [1975] 1 QB 773, Lord Widgery CJ, speaking for the Court of Appeal said (at 779): "To procure means to produce by endeavour. You procure a thing by setting out to see that it happens and taking the appropriate steps to produce that happening." 108It was held that an accused who surreptitiously laced his friend's drink knowing that he would shortly drive with an alcohol concentration in excess of the prescribed limit (an offence of strict liability) procured the offence. 109Lord Widgery CJ's statement was cited with approval by the Full Court of the Federal Court in Yorke v Lucas (1983) 49 ALR 672 at 681. 110In In Re Royal Victoria Pavilion, Ramsgate Whelan v FTS (Great Britain) Limited [1961] 1 Ch 581 Pennyquick J said that the word "procure" was defined in the Oxford English Dictionary as meaning "obtained by care or effort" and could be more simply paraphrased as "see to it" (at 587).] 111In R v F; Ex Parte Attorney-General [2003] QCA 70; [2004] 1 QdR 162 the Queensland Court of Appeal construed the word "procure" in a criminal statute dealing with kidnapping. The section provided: "A person kidnaps another person if the person unlawfully and forcibly takes or detains the other person with intent ... to procure anything to be done or omitted to be done by any person." 112The accused assisted in the forcible detention of a woman with the intention that she be sexually assaulted by another male. The Queensland Court of Appeal by majority (Davies and Williams JJA, Cullinane J dissenting) held that in its context the word "procure" meant no more than "enable" or "facilitate" (at [2], [43]). Davies and Williams JJA said that where the section spoke of procuring an act to be done to someone as distinct from procuring a person to do something, it did not matter that the person procured to do the act was already willing to do the act. Davies JA said (at [5]): "... an event may be procured in a number of ways. And where that event is the doing of an act of another person who is already willing to do it, the event may be procured by enabling that willing person to do that act." 113The Chief Commissioner submitted that s 3C and s 37 also referred to the procuring of an event or outcome as distinct from procuring a person. Nonetheless, the Chief Commissioner contended that meaning 2 from the Macquarie Dictionary and meaning 3 from the Oxford English Dictionary most closely reflected Parliament's intended meaning of the word "procure" in those sections. 114Freelance submitted that a construction of s 3C and s 32 that the sections were intended to apply to the activities of employment agents and labour hire entities involving the recruitment, vetting and supply of persons to clients was supported by s 3A(1B) and s 32(3). Those provisions exclude from the relevant contract provisions an employment agency contract under which services are supplied by an employment agent or a service provider (or contract worker) is procured by an employment agent. The sections refer to the procurement of a person, not the procurement of the services of a person. Freelance submitted that this threw a light on what was meant in s 3C and s 37 by procuring the services of a person, in other words, that the sections were intended to have the same meaning and operation. I do not agree. The difference in language rather suggests a different operation. Moreover, s 3A(1B) and s 32(3) also exclude from the operation of s 3A and s 32 a contract under which services are supplied by an employment agent as well as one under which the employment agent procures the contract worker or service provider. This would be otiose if the reference to procuring the services of a person in ss 3C and 37 meant the same as procuring a person. 115I think the better view is that "procure" when used in s 3C and s 37 means more than facilitate or enable and requires that the employment agent cause the services of a contract worker (or service provider) to be provided to the employment agent's client, with the expenditure of care or effort by the employment agent. I do not accept that this can only be done if the employment agent recruits the contract worker or service provider for the client. 116Mr Kelson spoke of Freelance's providing services to facilitate the provision of the services of the beneficiary contractors to their clients. Nonetheless, Freelance did not contend that the contracts with its clients were shams, that is to say, that they were not intended to operate according to their tenor. The structure established by Freelance's contracts with its clients and its engagement of beneficiary contractors is that the relevant services are provided by Freelance to its clients through its admitting the contract workers or service providers as beneficiaries of the Freelance trust and there being an agreement or understanding between them and Freelance that they will perform Freelance's obligation to its clients. 117Freelance submitted that whilst Freelance accepted the obligation to provide services to its clients, it was a common understanding between it and its clients that it did not itself have the capacity to provide those services. When asked what Freelance did to discharge its commitment to undertake and complete an assignment, Mr Kelson said, "absolutely nothing". His reason for saying that was that: "We are not, in the substance sense, we are not part of the arrangement. The arrangement is categorically formed between the contractor and the client. We're never aware that such arrangements are in fact being undertaken until subsequently, after they have been agreed upon, either the contractor or the corporate client gets in touch with us. I think, really, because they're insistent on a corporate structure, and obviously on a commercial agreement, yes, the commercial agreement must be in the name of Freelance because it is Freelance who is the corporate entity. But the reality is that the contractor is the individual, it is the contractor who negotiated the assignment and all its peripheral arrangements, and it is the contractor who executes the assignment." 118This is one passage in which Mr Kelson went close to saying that the contracts between Freelance and its clients were not intended to operate according to their tenor. But that is not Freelance's case. It is true that the contractor and the client will have agreed upon the principal terms of engagement prior to Freelance's being advised of those terms and a contract being drawn up. Often the contractor will have embarked on work prior to contracts being signed. But it is not true to say that Freelance was not part of the arrangement. Both the contractor and the client intended that the contractual arrangement would oblige Freelance to provide the services to the client, albeit that the services would be provided by the individual contractor who would usually be nominated as the preferred operator. Freelance discharged its commitment to undertake and complete the assignment by providing the services of the beneficiary contractor. Freelance effectively secured the contractors' services by admitting them as beneficiaries of the Freelance trust and by being the party with whom the client contracted for the provision of the services. There was an arrangement and understanding between Freelance and its contractors that they would provide the services which it contracted to provide to its clients, even though there was no express contractual term to that effect. In respect of those contractors to whom Freelance paid a fixed income distribution, Freelance also secured their agreement to provide consultancy services as Freelance might reasonably request during the financial year in which the fixed distribution was paid. Freelance caused the services of the "contract workers" or "service providers" to be provided to Freelance's clients and it did so with the provision of care and effort, being the structure within which the contractor services are provided. 119In my view, Freelance procured the services of its contractors to its clients by producing them by endeavour. It set out to see that the services were provided and took the appropriate steps to produce that happening by means of: (a) its arrangements with its contractors for them to be admitted as beneficiaries of the Freelance Trust, and to receive distributions from that trust, which as a matter of practice and expectation, were in the amount of the remuneration received by Freelance by its clients less its management fee; (b) its securing its contractor's agreement to the terms on which they were admitted as beneficiaries; (c) in many cases, by making fixed distributions of income that were paid on terms that the contractors would provide services as reasonably requested by Freelance; (d) by having an understanding and arrangement with its contractors for them to supply the services Freelance agreed to supply to its clients; and (e) by entering into its contracts with its clients for the provision of services by its contractors. 120It is not essential that Freelance's efforts be the sole cause of the provision of services by the beneficiary contractors to its clients. 121This conclusion is consistent with such authority as there is on similar provisions in payroll tax legislation. The judgment of the Full Court of the Supreme Court of Western Australia in Value Engineering (Australasia) Pty Ltd v Commissioner of State Taxation (WA) (1985) 16 ATR 296; 85 ATC 4152 was relied on by the Chief Commissioner, but is not directly in point. The Pay-roll Tax Assessment Act 1971-1982 of Western Australia was payable on payment by an employer of "wages" as defined in s 3(1)(a) of the Act. "Wages" was defined to mean: "(f) any wages ... paid or payable to an employee as such and, without limiting the generality of the foregoing, includes - ... any amount paid or payable by way of remuneration by an employment agent directly or indirectly to a person who is engaged to perform services for a client of the employment agent, or to some other person in respect of those services, as the result of which engagement the employment agent received directly or indirectly payment, ... during or in respect of the period when the services are provided by that person to the client." 122Paragraph (2)(a) provided that for the purposes of para (f) of the definition of 'wages' in subs (1),: "'employment agent' means a person (in this definition referred to as the agent) who by an arrangement procures the services of a person (in this definition referred to as the worker) for another person (in this definition referred to as the client) under which arrangement - (a) the worker does not become the employee of either the agent or the client but carries out duties of a similar nature to those of an employee; and (b) remuneration is paid directly or indirectly by the agent to the worker or to some other person in respect of the services provided by the worker, ..." 123The taxpayer in Value Engineering provided engineering and related services to clients. For that purpose it entered into contracts with the clients to supply the services or work of engineers, draftsmen and similar personnel. It contracted with partnerships, companies or trustees for discretionary or unit trusts (subcontractors) to supply the services or work. The work done was physically performed by personnel on behalf of the subcontractors, some of whom were employees of the subcontractors, but none was an employee of either Value Engineering or its clients. The agreements between Value Engineering and the subcontractors recited that Value Engineering acted as agent in obtaining the temporary services of professional engineering consultants and other professional independent consulting contractors for third parties. Thus Freelance submitted that in Value Engineering the taxpayer carried on a business of an employment agent or labour hire company as that is generally understood because it sourced the subcontractors to perform work for its clients. 124In Value Engineering the taxpayer submitted that it was not an "employment agent" within the definition in subs (2)(a) because it did not procure the individuals who performed the work, but rather procured the provision of their services from the subcontractors, either companies or partnerships, who in turn procured the services of the individuals. There was no direct arrangement between the taxpayer and the individual performing the relevant services. The majority of the Full Court, Burt CJ and Kennedy J, held that the fact that the taxpayer dealt only with the subcontractors, not with the individuals who performed the services, did not mean that the taxpayer did not procure their services to be provided to their clients (at 299, 308). Kennedy J said (at 308): "In my opinion, the contracts tendered by consent [viz. the contracts between the taxpayer and its subcontractors] constituted arrangements whereby the appellant procured the services of workers for the client. Under those contracts ... the subcontractor undertook, for the present purposes, to supply the professional services of another person or persons for the client and in my opinion the appellant relevantly procured those services which were eventually rendered. The use of the term 'procure' does not, in my view, require there to be a direct contractual relationship between the appellant and the person providing the services." 125The issue raised in the present case is quite different. I do not think Value Engineering is of assistance. 126However, the decision of Ginnane J in CXC Consulting Pty Ltd v Commissioner of State Revenue [2013] VSC 492 is in point. In that case, the taxpayer, CXC Consulting, conducted a business in the IT industry. It provided what it called "contractor management services" including "structuring and taxation advice, administration and accounting services in relation to the establishment of a contractor business 'structure'" (at [22]). It administered the payment of a contractor's remuneration. CXC Consulting was approached by a contractor after the contractor had agreed to provide services to the end user. The commercial terms were negotiated between the contractor and the end user. As in the present case, the contract with the end user for the provision of the relevant IT services was made between the end user and CXC Consulting. Sometimes the contractor was also a party to the contract. Sometimes the contract was made only between CXC Consulting and the end user. CXC Consulting agreed to provide the end user with consultancy services and agreed to allocate the nominated consultant to perform such consultancy services on its behalf. 127CXC Consulting also entered into a "Subcontracting Agreement" with the contractor. The agreements provided that the contractor (called the Specialist) was engaged by CXC Consulting in the capacity of a computer specialist and would be paid consultancy fees calculated from the revenue received by CXC Consulting from third parties. The Specialist authorised it to deduct from those fees a management fee, premium for professional indemnity insurance and premiums for workers' compensation. The Specialist agreed to abide by the terms and conditions of the contracts which CXC Consulting would sign with agencies and with clients on the Specialist's behalf and with the Specialist's permission. 128CXC Consulting submitted that there was a prior arrangement between the contractors and the end users who procured the contractor services. It contended that it did not procure the provision of the contractor services to the end users and its contracts were not the means, or the only means, by which the services were procured. 129The Victorian Civil and Administrative Tribunal confirmed the assessment of payroll tax (CXC Consulting Pty Ltd & Ors v Commissioner of State Revenue [2012] VCAT 1992). 130Sections 37-40 of the Pay-roll Tax Act 2007 (Vic) are in materially the same terms as the New South Wales Act. The Tribunal said that s 37(1) used the word "procure" in a sense functionally equivalent to supply, obtain or make available (at [43]). 131An appeal lay to the Supreme Court of Victoria on a question of law by leave. Ginnane J granted leave but dismissed the appeal. His Honour said (at [68]) that in his opinion the Tribunal's conclusions were correct and did not involve any error of law. However, his Honour approached the matter somewhat differently from the Tribunal. After referring to the dictionary definitions of the word "procure", and to R v F; Ex Parte Attorney-General (Qld) and Value Engineering, his Honour noted that CXC Consulting had presented little evidence as to antecedent negotiations between contractors and end users (at [83]). That was not the ground of decision. His Honour assumed that most, if not all, of the CXC Consulting contracts were preceded by discussions and often agreements between the end user and the contractor about the work the contractors would do, the rate they would be paid and the length of their engagement (at [84]). 132His Honour then said: "[85] No party suggested that the CXC Consulting contracts were not intended to have legal force. Nor was there any evidence that the three forms of written contracts and the rights and obligations that they created were not intended by the parties to be given their ordinary meaning. [86] CXC Consulting's contracts provided the legal mechanism for the contractor or worker to provide services to the end-user. The evidence suggested that if the contractor commenced work before the CXC Consulting contract was signed, the contract was expressed to apply from the commencement of that work. [87] CXC Consulting by its contracts engaged the contractors to provide services to its clients. Under the contracts made with each of the contractors, they were engaged by CXC Consulting as computer specialists and paid consultancy fees from the revenue received by CXC Consulting from clients for whom the contractors provided services. Under the three-party contracts, CXC Consulting agreed to provide consultancy skills and services to the client by the contractors. Contracts made between CXC Consulting and the end-users had a similar effect. Clause 3.1 provided that CXC Consulting was engaged by the end-user to provide services to the client through a Key Person - that is, the contractor or service provider. [88] I do not consider that the terms of cl 14 of the three-party contract, whereby the client acknowledged that it had selected the Nominated Consultant ie the contractor, affects the analysis of the contracts that I have attempted in the previous paragraph. As I have stated, the written contract with the contractor provided that CXC Consulting engaged the contractor as a computer specialist. ... [90] I accept CXC Consulting's submission that these cases are to be decided by applying the terms of the statute and not principles of contract law that may restrict the weight that can be given to pre-contract discussions. However, the provisions of the statute are to be applied to the terms of the contract and not just to antecedent negotiations. The contracts are to be taken as meaning what they say and as thereby binding the parties to their legal terms upon which the contractors provided services to the end-users. [91] The three-party contract between CXC Consulting, the end-user and contractor procured the contractor's services on behalf of CXC Consulting for the end-user. [92] The two-party contract between CXC Consulting and the contractor required the contractor to supply services to the end-user and authorised it to receive payments from the end-users on the contractor's behalf. It also provided that contractors were bound by contracts that CXC Consulting signed with clients on their behalf and with their permission. [93] The two-party contract between CXC Consulting and the end-user procured the supply of the contractor's services to the end-user in exchange for payment of the contractors' fees to be made to CXC Consulting. [94] The existence of the written contracts supports the conclusion that CXC Consulting brought about or obtained and, applying the dictionary definitions, procured the provision of the contractors' services to its clients on terms contained in the written contracts. It entered into contracts with the contractors and the end-users which obligated the contractors to provide specified services to end-users for an agreed rate of payment. It, therefore, by its own actions in arranging for the entry into the written contracts, brought about, obtained and procured the provision of services by contractors for its clients. [95] The Tribunal's task was to decide whether the provision of services under the written contracts came within the definition of 'employment agency contract' in ss 4(1) and 37(1). I consider that the Tribunal correctly decided that CXC Consulting procured the services of the contractors for its clients under the contracts. It follows that ss 4(1) and 37(1) applied to the provision of the services under the contracts, so that CXC Consulting was an employment agent and the contracts were employment agency contracts. The fact that there had been previous arrangements between the contractors and end-users for the provision of the services does not prevent that conclusion. [96] There was nothing in the extrinsic materials, ie the Parliamentary debates and Explanatory Memoranda, relating to the 1971 and the 2007 Acts that suggests that effect that I have given to ss 4(1) and 37(1) on the facts presented by these proceedings was not intended by Parliament. [97] It does not alter my conclusion that the contractors' services might still have been provided if they had not entered into the CXC Consulting contracts. The parties to those contracts became bound by their terms upon their execution. Those contracts regulated the provision of the services by the contractors for CXC Consulting's clients. ... [101] For the above reasons I consider the Tribunal applied the correct interpretation of ss 4(1) and 37(1) in concluding that CXC Consulting did procure the service providers' services under the contracts for its clients. The Tribunal was correct to find that the written contracts were the means of procuring the contractors' services for the end-users because they contained the terms upon which the services were provided. The Tribunal did not find that the written contracts were the only steps that brought about the provision of the services, but rather that CXC Consulting had procured the services of the contractors for the clients under those written contracts." 133Freelance sought to distinguish the decision in CXC Consulting on the ground that in that case it was found (at [94]) that the subcontractor agreements between CXC Consulting and its contractors, or the three party contracts, obliged the contractors to provide specified services to the end users. Freelance contended that there was no term in its agreements with its clients, nor in the application for a contractor to become a beneficiary of the Freelance Trust, nor in the "package summary" document provided to contractors, by which the contractors were engaged, required or obliged to provide services to clients. 134Freelance submitted that because of the absence of a term that its contractors were required or obliged to provide services to clients or were engaged to do so, there was no causative link in the sense described by Ginnane J in CXC Consulting between Freelance's entry into the contract with its client and the contractor's provision of his or her services to the client. This was reflected by evidence that frequently contractors commenced to provide services to the client prior to the execution of the client contract. 135Freelance also submitted that there was no contractual obligation whereby Freelance, the client and the contractor agreed to replace what Freelance asserted to be the contractor's prior bilateral agreement with the client to provide the contractor services. I do not accept this submission. Freelance has not established that there were binding agreements between its contractors and the clients prior to the client entering into its agreement with Freelance. In any event, if there were any such agreement it was replaced by Freelance's agreement with its client. 136So far as appears from the reasons in CXC Consulting, the only express term whereby a contractor became obliged to perform work for the client was clause 3.1 of the Subcontracting Agreement whereby the Specialist agreed "to abide by the terms and conditions of the various contracts which the Company will sign with the agencies and Clients on the Specialist's behalf and with the Specialist's permission." 137Clause 6 of the conditions on which a beneficiary contractor was admitted as a beneficiary of the Freelance Trust did not contain an express term requiring the contractor to provide services, although it did contain a term whereby the beneficiary contractor acknowledged that any services provided to Freelance's clients would be provided as an independent contractor of Freelance and would be provided at the contractor's own expense and in accordance with Freelance's duties, representations, contractual obligations to the client. Where a beneficiary contractor of Freelance has received a fixed distribution of income the contractor has agreed to provide services to Freelance's reasonable satisfaction. 138The absence of an express contractual obligation by the contractor to perform the services that Freelance agreed to provide to its clients is not critical to a conclusion whether Freelance procured the services of its contractors for its clients by entering into the contracts that it did. Freelance did not need an express contractual obligation on the part of its contractors in order for it to provide the services that it agreed to provide to its various clients. There was a clear arrangement and understanding that they would provide the services Freelance contracted to provide. 139In my view, the critical reasoning in CXC Consulting was that CXC Consulting's contracts provided the legal mechanism for the contractor or worker to provide the services to the end user and that by entering into the written contract, CXC Consulting brought about, obtained and procured the provision of services by contractors for its clients. The fact that prior arrangements had been made by the contractors with the clients for the contractors to carry out work on terms agreed between those parties did not mean that CXC Consulting did not procure the services of the contractor for its clients. That conclusion is directly applicable to the present case. 140Freelance also submitted that Ginnane J did not have the advantage of detailed submissions dealing with the relevant legislative history that disclose that the legislature used the term "procure" in the sense of "obtained by care or effort", revealing that the legislature intended that the employment agent provisions apply to entities engaged in the business of "procurement" as that term is commonly used to describe the activities of labour hire entities. 141Ginnane J did address the legislative history to s 37 of the Pay-roll Tax Act 2007 (Vic). I deal with that below. In substance Freelance's submission was that I should not adopt the same approach as was taken in CXC Consulting as to the importance of the contractual arrangements to a determination of whether or not Freelance "procured" the provision of its contractor services to its clients. However, it is important that there be a consistent interpretation of uniform State taxation legislation. In my view, I would only be justified in not following a construction adopted by the Supreme Court of Victoria if I were satisfied that the interpretation adopted was clearly wrong. That is not my view. Rather, I agree with the approach adopted by Ginnane J in CXC Consulting to the construction of the legislation. 142I do not accept Freelance's submissions that the legislative history of the provision supports its construction. In CXC Consulting, Ginnane J noted that the 1971 Victorian Pay-roll Tax Act was amended in 1998 to introduce the "employment agency contract" provision following the decision of Balmford J in Drake Personnel Limited v Commissioner of State Revenue (1998) 98 ATC 4915. That case concerned the liability of an employment agent (as that expression is usually understood) to payroll tax. Balmford J found that the temporary workers whom Drake Personnel supplied to its clients were not its employees, but except for individual temporary staff who gave evidence, they were deemed to be employees pursuant to s 3C of the Victorian Act (the equivalent of s 3A of the Payroll Tax Act 1971 (NSW)). Balmford J found that there would be many temporary staff who were registered with other employment agencies and who would ordinarily render services to the public generally, such that moneys paid to those temporary staff would be exempt from the liability to payroll tax, but the evidence did not enable any finding to be made whether or not any individual temporary staff, other than those who gave evidence, in fact met that description (at [46]). The conclusion that the temporary staff were not employees of Drake Personnel was overturned by the Court of Appeal (Drake Personnel Limited v Commissioner of State Revenue [2000] VSCA 122; [2000] 2 VR 635). The amendment to the Victorian legislation was prompted by the first instance decision of Balmford J. 143A predecessor provision to s 3C of the 1971 New South Wales Act was first enacted in New South Wales by the Payroll Tax (Amendment) Act 1985, well before the decision in Drake Personnel. That Act amended the definition of "wages" in s 3(1) to include in "wages": "(f) any amount paid or payable by way of remuneration by an employment agent (as described in subsection (4)) directly or indirectly to a person who is engaged to perform services for a client of the employment agent, or to some other person in respect of those services, as the result of which engagement the employment agent receives directly or indirectly payment, whether by way of a lump sum or an ongoing fee, during or in respect of the period when the services are provided by that person to the client." 144Subsection 3(4) provided that: "A person is an employment agent for the purposes of para (f) of the definition of 'wages' if 'the person procures by an arrangement the services of a person' (in this subsection referred to as the 'worker') for another person (in this subsection referred to as the 'client'), under which arrangement - (a) the worker does not become the employee of either the agent or the client but does carry out duties of a similar nature to those of an employee; and (b) remuneration is paid directly or indirectly by the agent to the worker or to some other person in respect of the services provided by the worker." 145These amendments were introduced at the same time as the introduction of s 3A to the 1971 Act (that is, the "Relevant Contract" provisions). 146In introducing the 1985 amendments, the Minister for Employment and Minister for Finance said: "I turn now to the subject of tax avoidance. It is a most unfortunate fact that in every walk of life there is a small minority of people who, by their unscrupulous behaviour, spoil things for everyone else. Thus it is that there has been a significant increase over the years in the use of artificial schemes and contrived arrangements by taxpayers attempting to avoid their liabilities to taxation. This has occurred in the area of pay-roll tax, just as it has in other more celebrated fields such as income tax. This bill includes a number of measures which will catch schemes designed to avoid liability for pay-roll tax by severing the employer-employee relationship. Such arrangements have included the use of so-called contractors to replace wages staff. Typical of the situations that are known to exist and are the target of the legislation is the employer who, by arrangement with an employee, enters into a contract for service with the employee's family trust, partnership or company for the provision of the employee's services. The employee then performs the services for the employer but his salary is paid to the trust, partnership or company, resulting in the avoidance of pay-roll tax by the employer. Certain contracts will be exempted from liability for pay-roll tax, including contracts in excess of $500,000 where the contractor would need to hire staff and would therefore be liable for pay-roll tax. Bona fide independent contractors will not be caught by the legislation. A second are of avoidance that is dealt with by this bill is the use of employment agents. Such agents are being used increasingly by employers, particularly in the recruitment of professional people and also for temporary staff. In some cases it has been claimed, by virtue of the arrangements entered into, that the person whose services are provided is employed by neither the contract agent nor the client. The arrangements entered into have sometimes also involved the use of trusts, partnerships or companies. The legislation will confirm that payments by an employment agent made in respect of the provision of services to a client of the agent are liable for payroll tax." 147The legislation was amended with effect from 1 January 1988 by the Payroll Tax (Amendment) Act 1987. The effect of the amendment was that a person who was an employment agent for the purposes of para (f) of the definition of "wages" in s 3(1) was omitted from the definition of "employer". The effect was that the liability for payroll tax for workers engaged through an employment agent (as defined) was borne by the client. In explaining the amendments, the Minister said: "The bill also will make an adjustment to the liability to payroll tax of employment agents. Under amendments introduced in 1986, payroll tax on remuneration paid by an employment agent to a worker who performs services for the agent's client was paid by the agent. This move was necessary because a number of employers had found that contracting their workforce from a third party made light work of their payroll tax bill. ... Most employment agents operate with only a small staff and a payroll which would fall within the exemption level. With the addition of the payments to their contract staff, however, they are required to pay tax on the combined payroll. The bill before the House will maintain the liability but switch it from the agent to the client using the worker's services." 148Following the introduction of the employment agent provision in Victoria after the decision in Drake Personnel, the New South Wales Act was again amended. Liability for payroll tax in respect of moneys paid for the services of contractors procured by an employment agent was again put back onto the employment agent rather than the client. In introducing the amendment the Minister said: "The Pay-roll Tax Act currently provides that wages paid to temporary staff provided through employment agents are taxable in the hands of the end user of the labour services. An administrative arrangement allows the agent to take responsibility for the tax but only if the end user agrees. Traditionally, the majority of temporary staff have been accepted as common law employees of the end user. Some are deemed to be employees under the relevant contract provisions. The relevant contract provisions are anti-avoidance provisions designed to bring to tax wages paid to persons who are, for all intents and purposes, performing duties similar to those of employees. Recent judicial pronouncements in other jurisdictions have confused the issue of liability to the point that employers and employment agents are unsure of their obligations. The uncertainty has prompted refund claims by employment agents which are likely to reach some $200 million in New South Wales alone. Those claims represent windfall gains for employment agents as the payroll tax would already have been passed on to the clients. To secure the traditional tax base and make taxpayers obligations and point of liability absolutely clear, the bill introduces specific provisions relating to payments to workers engaged through employment agents. The agent will now be liable for payroll tax, bringing New South Wales into line with Victoria, Western Australia, South Australia and Queensland. The other jurisdictions do not have specific agency provisions." 149Freelance submitted that this legislative history demonstrates that it was Parliament's intention that the employment agents provision should apply only to employment agents or labour hire firms as that expression is commonly understood, meaning, it was said, persons who source, vet and supply persons, whether employees or independent contractors, to clients of the employment agent or labour hire entity. Undoubtedly it was Parliament's intention that the amendments should apply to such persons. It does not follow that that was the only intended application of the provision. 150In my view, the provisions were not intended to apply only to employment agents or labour hire firms as those expressions are said to be generally understood. That appears from the text of s 3C and s 37 and by the language used in other legislation at the relevant times regulating the licensing of employment agents. 151If s 3C (or s 37) were intended to apply only to the activities of the employment agents, as that expression is said to be commonly understood, subs (1) would not have defined an "employment agent" for the purposes of the Act by reference merely to any person who by arrangement procured the services of another for a client of the employment agent etcetera. The section could simply have provided that an employment agency contract was one under which an employment agent procured the services of another for a client of the employment agent etcetera. If Parliament thought that there was not a common understanding of what an employment agent is, then there was a definition readily to hand in s 702 of the Industrial Relations Act 1991 (NSW) (and formerly in s 145B of the Industrial Arbitration Act 1940 (NSW)) which provided that a person carried on the business of a private employment agent if he acted as an agent for the purpose of finding or assisting to find a person to carry out work for a person seeking to have work carried out, or finding or assisting to find employment for a person seeking to be employed, whether pursuant to a contract of employment or otherwise (see later s 60P introduced to the Fair Trading Act 1987 in 2002). 152I do not consider that the fact that the activities of employment agents or labour hire firms was an intended focus of the provisions justifies the conclusion that it was the only intended focus of the provisions such that the word "procure" should be construed as applying only to the activities of employment agents or labour hire entities in sourcing, vetting and supplying persons to clients. Freelance carries on the last activity, that is, supplying persons' services to clients on Freelance's behalf. It procures those services by arranging or causing the performance of work by the contractors for the client to occur through the contracts it enters into with its clients and the business structure provided to its contractors. 153Freelance also submitted that so to construe s 3C and s 37 would give those provisions an operation that was so far reaching that it could not have been intended and would practically render otiose the exceptions to the operation of s 3A and s 32 that were intended to ensure that genuine independent contracting arrangements were not the subject of payroll tax. The exceptions to the relevant contract provisions (s 3A and s 32) are intended to exclude bona fide contracting arrangements from the scope of payroll tax liability. 154In its opening submissions, Freelance contended that if the mere interposition of an entity was sufficient to engage the employment agent provisions, the relevant contract provisions would have no work to do as common situations of an entity that engages in a business of providing the services of its sole shareholder or employee would be caught by the employment agents provisions. 155One could take the hypothetical example of a plumber whose business was carried on through a company of which he was the sole director and shareholder. It could be said that the company would procure the provision of his services to the clients with whom it contracted. 156However, three things can be said about such a case. First, there would be a question whether the proper analysis is that the company procured the services of its director/shareholder or whether the better analysis is that the director/shareholder procured the company to enter into the contract with its client. Secondly, if the proper analysis is that the company procured the services of its director/shareholder for its client, no qualification to the sense of what is involved in procuring services would avoid the application of the provision. If the company did the relevant procuring, then it not only stood as an intermediary between the doing of work by the director/shareholder and its client, but it also sourced, vetted and supplied its director/shareholder. Thirdly, in any event, the wages on which payroll tax would be levied are not the moneys paid by the client to the company, but moneys paid by the company to the director/shareholder in respect of the provision of the director/shareholder's services. In a usual case, such payments would be made by the company to the director/shareholder as wages and would be taxable in any event assuming that the payroll tax threshold was reached. If not paid as wages and the payment could be identified as being paid "in respect of the provision of services in connection with an employment agency contract" then the levying of payroll tax would not clearly be an unintended consequence. 157Other hypothetical examples of the possible reach of s 3C and s 37 were raised during the course of oral submissions. They included the case of a building contractor who arranges the services of subcontractors and receives payment from the principal which includes payment in respect of the services provided by the subcontractors. Would a contractor be required to include in its taxable wages the amounts paid by the contractor to the subcontractors? Would a solicitor who retains counsel for the solicitor's client, and as a result receives from the client payment of counsel's fees which are then paid to counsel, be obliged to include the amount of counsel's fees in the solicitor's taxable wages? Would a supplier of brochures who engaged a printer to print the brochures and was reimbursed for the expense by its customer be obliged to include the payment made to the printer in its taxable wages? 158The Chief Commissioner submitted that because the Act imposes taxes upon "employers" in respect of "wages" payable to an "employee" (or, under the 1971 Act, to "an employee as such") the subject of the tax is remuneration for work done. The effect of the deeming provisions is to extend the scope of the Act to a broader range of contracts and arrangements under which, or whereby, work is performed. The Chief Commissioner submitted that an agreement between a building owner and a builder for the construction of a building could not be characterised as a contract for the performance of work, but rather for the delivery of a result, namely the completed building. Similar reasoning would apply to the example of a customer who engaged a person in the business of providing brochures who procured the service of a printer. The contract to provide brochures would not be a contract whereby the contractor performed work. 159I have some difficulty with this analysis, but for the reasons below it is not necessary to resolve those difficulties. Assuming that to be taxable the remuneration in question must be in respect of the performance of work, it is not clear to me why the focus should be on the contract between the landowner and the builder in one example, and the customer and the supplier of brochures in the other, rather than on the contracts between the builder and its subcontractors, or on the contract between the supplier and the printer. Moreover, it is not clear to me why the building contract would not be characterised as a contract for work, labour and materials and thus include a contract for the performance of work (Hewett v Court (1983) 149 CLR 639). 160There may be other answers to the hypothetical questions raised in argument. But even if there are not, I do not think it legitimate to read down s 3C and s 37 in order to preserve a wider scope for s 3A and s 32 including the exceptions in those sections. That is because s 3A(1B) and s 37(3) expressly exclude from the operation of s 3A and s 32 contracts under which services are supplied by an employment agent under an employment agency contract, or a contract worker or service provider is procured by an employment agent under an employment agency contract. The relevant contract provisions (s 3A and ss 32-36) do not apply where the employment agency contract provisions apply. Accordingly, one cannot read down the operation of the employment agency contract provisions by making assumptions about the intended operation of the relevant contract provisions. The employment agency contract provisions and the relevant contract provisions operate in different fields. The boundary of those fields is marked out by the terms of the employment agency contract provisions, not by assumptions as to the operation of the relevant contract provisions. 161This is so notwithstanding that s 3A(1B) and s 32(3) do not engage the terms of s 3C and s 37 exactly. The sections do not provide simply that an employment agency contract is not a relevant contract. Nonetheless, the separate field of operation of the provisions is established by those provisions. 162In the present case, the effect of s 3A(1B) and s 32(3) is to exclude the potential operation of s 3A and s 32. I do not think that the "contract worker(s)" or the "service providers" were procured by Freelance under the employment agency contracts, as distinct from their services having been procured by Freelance within the meaning of s 3A(1B) and s 32(3). Nonetheless, Freelance supplies services to its clients pursuant to its agreements with its clients and provides services to its contractors pursuant to its arrangements with them so as to exclude the relevant contracts provisions in s 3A and s 32. 163Accordingly, the relevant contract provisions do not apply. However, in case I am wrong in my conclusions concerning the employment agency contract provisions I will deal with the separate questions raised concerning the operation of s 3A and s 32.

Relevant contract provisions 164As noted earlier in these reasons the applicability of the exceptions to the relevant contract provisions set out in s 3A(1)(d)-(f) and (1A) of the 1971 Act and s 32(2) of the 2007 Act has been deferred until after the determination of all other issues in the proceedings. 165Pursuant to s 3A(2) of the 1971 Act a person to whom, under a relevant contract, the services of persons are supplied for or in relation to the performance of work is deemed to be an employer. The person who performs the work for or in relation to which services are supplied to another person under a relevant contract is deemed to be an employee. The amounts paid or payable by an employer for or in relation to the performance of work relating to a relevant contract are deemed to be wages. 166Under s 33 of the 2007 Act either a person who, under a relevant contract, supplies services to another person, or a person to whom, under a relevant contract, the services of persons are supplied for or in relation to the performance of work can be taken to be an employer. However, if a contract is a relevant contract under both s 32(1)(a) and (b) (that is, a contract under which a person, in the course of a business carried on by him or her, supplies to another person services for or in relation to the performance of work, or has supplied to him or her the services of persons for or in relation to the performance of work) then the person to whom, under the contract, services of persons are supplied for or in relation to the performance of work is taken to be an employer, and the person who under the contract supplies the services is taken not to be an employer. 167Section 32(1)(b) is awkwardly expressed. It provides that a relevant contract is one under which a designated person, in the course of a business carried on by the designated person, has supplied to the designated person the services of persons for or in relation to the performance of work. On the face of it, it refers to the supply of the services of persons by the designated person to himself or herself, a concept which is difficult to grasp. It probably is intended to have the same meaning as s 3A(1)(b), that is, of referring to a contract under which the designated person, in the course of a business carried on by the person, is supplied with the services of persons for or in relation to the performance of work. 168Under s 34 a person who performs work for or in relation to which services are supplied to another under a relevant contract is taken to be an employee. Under s 35 amounts paid or payable by an employer for, or in relation to, the performance of work relating to a relevant contract, are taken to be wages. 169In determining the correctness of the assessments of Freelance's liability to payroll tax insofar as that liability might arise under s 3A or ss 32-36, and in determining the right of Freelance to a refund of payroll tax paid, the focus is on identifying a relevant contract under which Freelance is to be taken to be an employer who has paid wages. 170Under both the 1971 Act and the 2007 Act the reference to a contract includes an agreement, arrangement or undertaking, whether formal or informal, and whether express or implied (s 3A(6)(a) and s 31). 171Freelance's contracts with its clients and its arrangements with its contractors can be analysed as relevant contracts under either Act in various ways. First, in the course of a business carried on by it, it supplies to its clients services for or in relation to the performance of work (s 3A(2)(a)(ii) and s 32(1)(a)). Under the 1971 Act, subject to the operation of any exception, its client would be deemed to be an employer. Under the tripartite arrangement between Freelance and its client, and Freelance and its contractor, Freelance was also a person who, in the course of a business carried on by it, was supplied with the service of its contractors for or in relation to the performance of work. Under that analysis it is taken to be the employer under s 3A(2)(a)(ii) of the 1971 Act. 172Under the 2007 Act Freelance is taken to be an employer pursuant to s 33(1)(b) being the person to whom the services of its contractors are supplied for or in relation to the performance of work. Pursuant to s 33(2) both Freelance's client and Freelance are persons to whom under the contract the services of its contractors are supplied for or in relation to the performance of work and both are taken to be an employer. Freelance is not taken to be an employer by reason of its supplying services to the client by reason of s 33(2)(b) but is to be taken to be an employer as a person to whom under the contract the services of contractors are supplied. 173I accept the Chief Commissioner's submissions that the individual workers/contractors supplied services to Freelance by serving the needs of its clients (Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641 at 652). Adapting the language of the High Court in that case, by attending at the site of Freelance's client, a contractor supplies services to Freelance for the purposes of its business, notwithstanding he also at the same time supplies the same services to the client for the purposes of the client's business (Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788; (2005) 222 ALR 599 at [223]-[226]; DSG Pty Ltd v Victorian WorkCover Authority [2008] VSC 42; (2008) 20 VR 514 at [41], [67], [90]-[91], [94]). 174Freelance submitted that it was a person who in the course of a business carried on by it supplied to its contractors services for or in relation to the performance of work (s 3A(1)(a) and s 32(1)(a)). The Chief Commissioner contended that whilst Freelance did supply some services to its contractors, those services were not "for or in relation to the performance of work" and that whilst it conducts a business, it does not perform work for its contractors so as to engage s 32(1)(a). The Chief Commissioner also submitted that the contractors could not be considered to be designated persons for the purpose of the relevant contract provisions who are supplied with work-related services by Freelance because those contractors did not carry on businesses. 175In Odco the High Court held that it was a mistake to read the expression "for or in relation to the performance of work" as doing anything more than qualifying the content or scope of the word "services". The High Court held that all that the expression was saying is that "services" must be work related. It was not stipulating that the services were wholly distinct from the work or that the supplier of services is a person other than the performer of the work (at 650-651). Applying that construction, I consider that only some of the services provided by Freelance to its contractors were work related. The services Freelance provided of assessing the contractors' status, admitting contractors as beneficiaries of the Freelance trust, invoicing its clients and remitting payments made, less its management fee, to the contractors, and admitting contractors to its policy of professional indemnity insurance, did not involve the performance of work. Acting as tax agent and providing financial planning advice would be work-related. The extent to which those services were provided has not been established. 176I do not accept that the individual contractors cannot be said to carry on businesses. No issue was raised in the proceedings that the contractors were not properly characterised as independent contractors. In any event, Freelance's submission that it was a person who supplies to beneficiary contractors' services for or in relation to the performance of work treated it, and not the beneficiary contractor, as the designated person under s 3A(1) and s 32(1). 177If the only relevant analysis were that Freelance supplied to its beneficiary contractors services for or in relation to the performance of work, then it would not be taken to be the employer under s 3A(2)(a) of the 1971 Act. It would be taken to be an employer pursuant to s 33(1)(a) of the 2007 Act. The identification of the employer under s 33 of the 2007 Act is to say the least difficult having regard to the obscurity of s 32(1)(b). In its arrangements with some of its beneficiary contractors Freelance is both a person who supplies services that are for or in relation to the performance of work, and is supplied with the services of its contractors, which services are supplied for or in relation to the performance of work. In my view, to the extent Freelance supplied services for or in relation to the performance of work to its beneficiary contractors, as its beneficiary contractors supplied services to it for or in relation to the performance of work, both Freelance and the beneficiary contractors would be taken to be employers pursuant to s 33(2) because both are supplied with services for or in relation to the performance of work. But the focus under s 35 would be to determine what amounts were paid or payable by the employer for or in relation to the performance of work that constituted wages. Freelance did not pay and was not liable to pay any amount in relation to the work-related services it provided. 178As there was more than one way of identifying relevant contracts under which Freelance would be taken to be the employer, any available exceptions would have to be established in relation to each. 179For these reasons, I conclude that the potential relevant contracts under which Freelance might be taken to be an employer in respect of amounts that might be taken to be wages are the contracts (in the extended sense given by s 3A(6)(a) and s 31) by which its beneficiary contractors provide services to it as well as to its clients for or in relation to the performance of work in performing Freelance's contracts with its clients. I have concluded that in addition some relevant contracts were entered into under which Freelance might be taken to be an employer by which it provided work-related services to some of its beneficiary contractors, but no amounts were payable by it under such relevant contracts that constitute wages.

Conclusion and orders 180The purpose of ordering a separate hearing in relation to the exceptions to the relevant contract provisions was to avoid a lengthy hearing, that would be unnecessary if the employment agency contract provisions apply. I have concluded that those provisions do apply. Accordingly, I make the following orders:

1. The notices of assessment issued to the plaintiff and dated 27 November 2009 be confirmed.
2. The summons be dismissed. 181Prima facie the appropriate costs order is that the plaintiff pay the defendant's costs. I will hear the parties in case any different order is sought. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 28 February 2014