H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue

Relevant provisions of the four representative hotel client contracts

The Westin Hotel contract

1. The contract entered into in August 2012 in relation to the provision of services by HRC (as the Contractor) in respect of the Westin Sydney Hotel (at Tab 7(a) of the exhibit to Ms Kelly's first affidavit) includes, in the Recitals, the statement that: ... the Contractor [HRC] has agreed to service and clean guest rooms in accordance with The Westin Sydney standards, specification and policies and procedures and in accordance with the terms contained Within this Agreement … [my emphasis]
2. Although the contract goes on to refer to the established standards of the hotel, in accordance with which HRC was required to undertake and perform its duties, the only real identification of the "services" to be provided by HRC is to be found in the recitals, where it is recorded that the hotel owner is desirous of having certain services provided to it ("Hotel Accommodation Rooms Cleaning Services") and that the contractor (HRC) has agreed "to service and clean guest rooms". In the course of debate at the hearing, Counsel for the plaintiffs submitted that a contract "to service and clean rooms" was the same thing as a "contract to produce a particular result" (see T 60.5). As I understand it, the distinction drawn by the plaintiffs is between such a contract and a contract to procure the services of housekeeping staff in order to service and clean rooms or to produce that particular result.
3. Pursuant to cl 2, HRC is required to "undertake and perform duties in accordance with established standards at [the Westin]". Pursuant to cl 3, the hotel is to pay HRC (the contractor) in accordance with the agreement, quotation, and invoices to be submitted. Clause 4 contains provision for termination of the agreement for breach.
4. Clause 5 provides that HRC will liaise with a representative of the hotel on a regular basis and that a "representative of The Hotel will carry out regular inspections to complete the ABC's of Housekeeping Audit report and spot checks, twice per week together with the Contractors [sic] Manager and or Supervisor…". The plaintiffs point out that the inspections contemplated by cl 5 are to ensure that HRC is delivering the required result, being "servicing and cleaning accommodation rooms to the set standard" (plaintiffs' outline of submissions at [49(d)]).
5. Clause 8, under the heading "[f]ees for Services", provides that "[t]he Hotel shall pay the Fees for Services per Credit quoted Monday through to Sunday and Public Holidays". Ms Kelly has deposed that a "Credit" is a completed room (i.e., a room cleaned and serviced to a particular standard according to the brand standard of the hotel) (see her first affidavit at [25]).
6. Clause 9 provides that HRC will obtain public liability insurance and workers' compensation insurance (the latter to the extent of the "legislated liability").
7. Clause 15, headed "Quality of Work", sets out a procedure whereby failure by HRC to perform the contract "with reasonable diligence and in a competent manner" entitles the hotel to give HRC written notice of the default (see cl 15(a)); and cl 15(c) provides that "[a]ny service failure of the Contractor that results in a guest complaint and requires the hotel to provide any form of compensation, including a room move, will result in [HRC] forfeiting the charge for the cleaning of the room". Pursuant to cl 15(f), HRC is obliged to adhere to the hotel's Key Performance Indicators based on the standard of an 85% pass-mark and rooms are to be inspected by HRC and the Executive Housekeeper "using the ABCs of Housekeeping Audit Sheets".
8. Clause 16 provides that the hotel is not to approach any of the contractor staff and offer them employment within the hotel. (I read this as being, in effect, a non-solicitation clause.)
9. Clause 17(a) provides that HRC is responsible for the good and proper conduct of persons employed by it in the cleaning and servicing of guest rooms and guest areas within the hotel. Clause 20 provides that HRC remains liable for any injuries or damage caused by the omissions or misconduct of its employees or agents.

Accor Contracts

1. The various contracts entered into between HRC and hotels in the Accor group appear at Tabs 1 to 11 of the exhibit to Ms Pardey's affidavit. It was agreed between the parties that the contract at Tab 2 of that exhibit, being an agreement between HRC and "AAPC Properties Pty Limited Trading as Novotel and Ibis SOP", was representative of the Accor contracts generally (see T 62.4).
2. Recitals B and D of that contract record that HRC (the Supplier) is a "specialist provider of the Services/Deliverables" and that HRC agrees to "supply the Services/Deliverables to the Hotel at the Hotel Premises on the terms set out in this Agreement".
3. Pursuant to cl 5.1, HRC must supply the "services/deliverables" identified in Item 3 of the "Commercial Details" ("Provision of Housekeeping services in accordance with Schedule 2"). By cl 4(a), in consideration of HRC supplying and delivering the "Services/Deliverables", the hotel must pay HRC the fees set out in Schedule 4.
4. HRC is obliged (see cl 6.1) to provide the "Services/Deliverables": in accordance with the requirements in Schedule 2; in accordance with the "Service Levels" set out in Schedule 3 (see also cl 7); using all reasonable care, skill and diligence; using appropriate staff; expeditiously and within time limits; using techniques and standards generally employed in the industry; and in compliance with all applicable laws and regulations.
5. By cl 8.1, HRC warrants that all "Services/Deliverables" are provided substantially free from defects or omissions and are substantially error-free and in compliance with cl 6.1. By cl 8.2, HRC is responsible for the rectification of defective "Services/Deliverables". HRC is responsible under cl 11 for effecting and maintaining the insurances outlined in a separate "Nominated Supplier Agreement".
6. HRC is entitled, with the hotel's consent, to sub-contract the whole or part of the obligations under the agreement (cl 13.3(a)). If HRC does sub-contract the whole or any part of the obligations under the contract it will remain primarily responsible for fulfilling the terms of the agreement and liable in respect of any acts, defaults or negligence of sub-contractors (cl 13.3(b)).
7. The hotel can terminate the contract for breach (cl 14.2). HRC indemnifies the hotel in respect of the death or personal injury of any person or the damage to any real or personal property arising out of or in connection with the "Services/Deliverables" (cl 16).
8. Emphasis was placed in oral submissions by Counsel for the plaintiffs on the contract being one whereby the hotel is "outsourcing" or "contracting out" the provision of housekeeping services (that term not being defined) (see T 62.25ff), pointing also to cl 2.3 of Schedule 2, which refers to the "delivery of rooms".

The Shangri-La contracts

1. Housekeeping Solutions had two written agreements with the Shangri-La Hotel: the first, dated 14 March 2007 (affidavit of Moira Kelly affirmed 15 February 2018 at [15] - Ms Kelly's second affidavit - and Tab 2 of the exhibit thereto) and the second, dated 30 September 2013 (see Tab 3 of the exhibit to Ms Kelly's second affidavit; see also Mr Hapuwida's affidavit (and Tab 2 of the exhibit thereto)). Housekeeping Solutions charged a fee per room cleaned (Mr Hapuwida's affidavit at [12]; [53]ff), referred to in cl 9 of both agreements as "Fees for Services per Credit". Mr Hapuwida deposed that, in practice, Housekeeping Solutions could be penalised (i.e., subject to the deduction of "credits") for rooms not serviced in accordance with the hotel's standards and requirements (see his affidavit at [58]-[63]). The contracts between Housekeeping Solutions and the Shangri-La Hotel were in substance the same as HRC's Westin Hotel contract (see, for example, cl 16 dealing with quality of work, and cl 18 with "control of employees").

Performance of the hotel client contracts

1. Ms Kelly has given evidence (at [72]-[106] of her first affidavit), as has Mr Hapuwida (at [41]-[64] of his affidavit), in relation to the manner in which each of the hotel client contracts was performed on a day-to-day basis.
2. That evidence includes matters such as: the preparation of work rosters based on the hotel's forecast occupancy rate (provided by the hotel client); the rostering of particular levels of staff (such as at least one Senior Supervisor as well as several Floor Supervisors (Housekeeping Supervisors), Training Staff, and Room Attendants); and the role or responsibility of the relevant staff members involved in the work.
3. So, for example, the respective staff members' responsibilities in the case of HRC may be summarised as follows. The Senior Supervisor (a permanent employee of either HOS or HRT) is in charge of the HOS staff, HRT staff, Platinum/Platinum Group staff and SWCA staff working that particular day and oversees "the entire co-ordination, execution and supervision" of HRC's work requirements, including the carrying out of random spot checks on the quality of the work performed by the Room Attendants to ensure that rooms are being delivered in accordance with requirements (Ms Kelly's first affidavit at [80]). The role of the Floor Supervisors is to manage the Room Attendants and the performance by the Room Attendants of their allocated tasks; and to carry out quality assurance supervisory checks on accommodation rooms cleaned and serviced by Room Attendants to ensure that rooms were being delivered by HRC in accordance with requirements of the Room Guideline and HRC policies, procedures and Key Performance Indicators. The role of the Room Attendants is to service and clean accommodation rooms allocated to them in accordance with the brand standards and Room Guideline of the hotel client and in accordance with the standards set by HRC in the training provided to them by HRC.
4. Ms Kelly has deposed that, when working on the premises of the hotel client, staff provided by HRC wear uniforms bearing the hotel client's branding, for reasons including security and ensuring that any persons within the hotel client's premises abide by a particular brand standard (see her first affidavit at [28]-[29]). The plaintiffs maintain that the requirement for staff to wear uniforms is not, however, an indication that the relevant workers are working "in and for" the conduct of the hotel client's business (see T 12.15ff).
5. Evidence is given as to daily meetings between the HRC Senior Supervisor and a representative of the hotel client, which may lead to the rostering of further staff to meet any newly expected occupancy rates; as to the work sheets given by the Floor Supervisors or Senior Supervisors to Room Attendants identifying the rooms allocated to each Room Attendant; as to the process by which, once an accommodation room has been cleaned and serviced and inspected by a HRC Floor Supervisor, a room is "released" by HRC to the hotel client; and as to the completion of a daily invoice, recording the details of each room delivered by HRC, which is signed off by a representative of the hotel client to confirm the completion of the relevant rooms.
6. As noted earlier, the day-to-day business of Housekeeping Solutions was operated in much the same way.
7. Evidence was also given of the process by which fees were charged to the hotel client (based on an agreed "Credit" system) on satisfactory completion of rooms (and with deductions of "Credits" for unsatisfactory performance). Amounts paid per "Credit" (i.e., per completed room) varied depending upon factors such as: the size of the room; the star rating of the individual hotel client; and the day of the week (and time of day) the room was cleaned, serviced, and delivered. Emphasis is placed on this as indicating that the contracts were not contracts for workers to become part of the workforce of the hotels and that the hotels were paying for a result, not paying for labour (see T 65.10ff).

The relevant assessments

1. By re-assessments dated 10 October 2016 (see Annexure D to the affidavit of Ms Judith Sutton affirmed 7 April 2017 at pp 65-79), the Chief Commissioner assessed HRC to payroll tax on amounts paid by HRC between 1 July 2009 and 30 June 2014 to Platinum Group and Platinum ($15,707,432) and to SWCA ($2,496,541). The re-assessments were on the basis, first, that the employment agency provisions apply to the payments from HRC to Platinum Group, Platinum, and SWCA, and under those provisions HRC is the employment agent (s 37(1)) of the Payroll Tax Act) and hence taken to be the employer (s 38 of the Payroll Tax Act). The Chief Commissioner noted that there are three parties to the arrangement - HRC, Platinum (or Platinum Group or SWCA, as the case may be), and the hotels who require housekeeping services, and that under the contracts HRC has 'procured' the services of the housekeepers for the hotels. Second, on the basis that the amounts paid by HRC to Platinum Group, Platinum and SWCA are taken to be wages under s 40(1)(a) of the Payroll Tax Act (and liable to payroll tax under ss 6, 7 and 13(1)(e)), because those amounts are amounts paid "in relation to" the service provider and "in respect of the provision of services in connection with the employment agency contract" (see Annexure B to Ms Sutton's affidavit at pp 11-12; Annexure C at pp 43-47).
2. Pursuant to ss 26 and 27 of the Taxation Administration Act, the Chief Commissioner assessed HRC for the financial years ended 30 June 2010 to 30 June 2013 to penalty tax at the rate of 25% (see Annexure C to Ms Sutton's affidavit at pp 50-51; Annexure D at pp 65-79).
3. By re-assessments dated 10 October 2016 (see Annexure D to Ms Sutton's affidavit at pp 53-64, 89-90), the Chief Commissioner assessed Housekeeping Solutions to payroll tax on total payments of $12,892,462 for the financial years ended 30 June 2010 to 30 June 2014, including $5,439,459 in respect of payments to Platinum Group and Platinum. This was essentially on the same bases as summarised above (at [50]) with respect to HRC.
4. The determination by the Chief Commissioner as to payroll tax liability on the part of Housekeeping Solutions followed the earlier audit of that company in 2010, which had resulted in a determination in January 2011 that it was not liable for payroll tax in respect of payments made to Platinum. Counsel for the plaintiffs confirmed that this was because those payments were treated as exempt contractor payments. HRC places reliance on this audit as, in effect, warranting the remission of the penalty tax on unpaid payroll tax referred to at [51] above. I will come to this in due course in addressing the third of the issues for determination. Suffice it here to note that it was accepted in oral argument that the audit could not, in any event, justify the remission of penalty tax to HRC in respect of the financial year ended 30 June 2010 (see T 73.43).
5. Housekeeping Solutions did not pay the assessed tax (and related interest and penalty tax) (see Annexure E to Ms Sutton's affidavit at p 80), and was placed into liquidation in August 2016 (see Mr Hapuwida's affidavit at [4]). Subsequently, by assessments dated 1 November 2016 (Annexure E to Ms Sutton's affidavit, at pp 80-90), the Chief Commissioner assessed HOS as jointly and severally liable for the payroll tax (and related interest and penalty tax) that Housekeeping Solutions had failed to pay, pursuant to the grouping provisions in s 81 of the Payroll Tax Act and s 45 of the Taxation Administration Act. This was on the basis that HOS was grouped with Housekeeping Solutions (as well as HRC and HRT) for payroll tax purposes. There is no issue between the parties that HOS is liable for payroll tax as assessed for the financial years ending 30 June 2015 and 30 June 2016. The years in dispute by HOS are the financial years ending 30 June 2010 to 30 June 2014.

Proceedings

1. By further amended summons filed 2 August 2017, the plaintiffs apply for a review of the respective assessments pursuant to s 97(1)(a) of the Taxation Administration Act, the Court's jurisdiction having been enlivened as there has been an objection by HRC and HOS to the Chief Commissioner's decision to issue the assessments.
2. There is no dispute between the parties as to the subject of the Court's review being the assessments (as opposed to the decision on the objection - see Chief Commissioner of State Revenue v Paspaley [2008] NSWCA 184 at [28], [53] per Basten JA, Giles and Campbell JJA agreeing). Nor is there any dispute that the proceedings in this Court are an "appeal" for the purposes of the Supreme Court Act 1970 (NSW) (see s 19(2) of the Supreme Court Act; read with s 97(4) of the Taxation Administration Act); that a review under these provisions is a de novo review not limited to the materials before the Chief Commissioner (see Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41 at [12]-[22]; Grain Growers Ltd v Chief Commissioner of State Revenue [2015] NSWSC 925 at [7] per Black J); and that the plaintiffs bear the onus of proving their case on the balance of probabilities (see s 100(3)) of the Taxation Administration Act.

Issues

1. The first two issues raised in the present proceedings are common as between each of HRC and HOS, on the one hand, and the Chief Commissioner. Those common issues (identified in the Chief Commissioner's amended appeal statement at [14]-[15]; [18]-[19], respectively, and accepted by the plaintiffs as being two of the three real issues in dispute), can be summarised as follows: 1. whether the contracts between HRC/Housekeeping Solutions and their hotel clients were contracts "under which" HRC/Housekeeping Solutions procured the services of others (the individual workers) "for" their hotel clients, such that those contracts were "employment agency contracts" for the purposes of s 37(1) of the Payroll Tax Act; and 2. if those contracts were "employment agency contracts", what amounts paid or payable are taken to be wages pursuant to s 40(1)(a) of the Payroll Tax Act.
2. The dispute as to the second issue is as to whether the deemed wages include the payments from HRC/Housekeeping Solutions to their sub-contractors (as the Chief Commissioner contends) or only the wages paid by those sub-contractors to individual workers (i.e., less any profit element retained by the sub-contractors) (as HRC/Housekeeping Solutions contend).
3. The third issue (as identified in the Chief Commissioner's amended appeal statement at [16]), arising only in the case of HRC, is whether the 25% penalty tax imposed by the Chief Commissioner for the financial years ended 30 June 2010 to 30 June 2013 should be confirmed (as the Chief Commissioner contends) or remitted to nil pursuant to s 27(3)(a) of the Taxation Administration Act on the grounds that HRC took reasonable care to comply with the relevant taxation law (as HRC contends). HRC no longer seeks remission of penalty tax under s 29 of the Taxation Administration Act (see plaintiffs' outline of submissions at [6(c)]).

Issue 1: Were the hotel client contracts employment agency contracts?

Section 37(1) of the Payroll Tax Act

1. Section 37(1) of the Payroll Tax Act (which remains in the same form as originally enacted in 2007) provides: (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.
2. Pursuant to ss 38 and 39 of the Payroll Tax Act, the "employment agent" under an "employment agency contract" is taken to be an employer, and a person who performs work for or in relation to which services are supplied to a client under an "employment agency contract" is taken to be an employee of the "employment agent".
3. The legislative background to the employment agency contract provisions of the Payroll Tax Act 1971 (NSW) (the 1971 Act) was set out by White J, as his Honour then was, in Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 (at [143]-[148]) ("Freelance Global") as follows: 143 A 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 [referring to Drake Personnel Ltd v Commissioner of State Revenue [2000] 2 VR 635; [2000] VSCA 122]. 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." 144 Subsection 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." 145 These amendments were introduced at the same time as the introduction of s 3A to the 1971 Act (that is, the "Relevant Contract" provisions). 146 In 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 [sic] 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." 147 The 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." 148 Following 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 [sic] 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."
4. In relation to s 3C of the 1971 Act and s 37 of the Payroll Tax Act, in UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; (2016) 104 ATR 577 ("UNSW Global"), White J accepted the proposition that the Payroll Tax Act did not effect any change, in substance, to the provisions of the 1971 Act (see at [58]). As to the "mischief" to which s 37 of the Payroll Tax Act is directed, in UNSW Global his Honour noted that this was "where a person procured the services of another to perform services in and for the purposes of its client's business where the person's status as employee or independent contractor might be unclear" and that the mischief was "the avoidance of payroll tax through the interposition of an agent to give the appearance of a contractor relationship where one did not exist in substance" (see at [30]; [41]).
5. As the plaintiffs have identified in their submissions, for a contract to fall within the definition of an "employment agency contract" within s 37(1) of the Payroll Tax Act it must be a contract: "under which" the employment agent "procures the services of another person" (the service provider) "for a client" of the employment agent.

"under which"

1. The plaintiffs emphasise that the words "under which" require a connection between the contract asserted to be the "employment agency contract" and the procurement of the service provider, which operates as a limitation on the types of contracts to which the definition of "employment agency contract" applies.
2. The plaintiffs point to the decision of Warren J (as her Honour then was) in BTR Engineering (Australia) Ltd v Dana Corporation [2000] VSC 246 ("BTR Engineering") as to the meaning of "under" in the phrase "a dispute involving their respective rights and obligations under this Purchase Agreement". Her Honour there observed that the word "under" is narrower than phrases such as "related to" and "arising out of" (see at [18]) and concluded that in the phrase there being construed the word "under" meant "governed, controlled, or bound by; in accordance with" (see at [24]). The plaintiffs refer also in this regard to the decision in TCL Airconditioner (Zhongshan) Co Ltd v Castel Electronics Pty Ltd [2009] VSC 553 at [34].
3. The plaintiffs note that in Rinehart v Welker (2012) 95 NSWLR 221; [2012] NSWCA 95, Bathurst CJ referred with approval to the interpretation of "under" given to the word by Warren J in BTR Engineering and said (at [123]) that the phrase "under this deed" had consistently been given a narrower construction than phrases such as "arising out of the deed" or "in connection with the deed".
4. The plaintiffs thus argue that use of the phrase "under which" in s 37(1) of the Payroll Tax Act directs attention to the procurement by the employment agent of the services of the service provider to be "governed, controlled, or bound by; in accordance with" the identified contract.
5. They further submit that, to be "under" the contract asserted to be the employment agency contract, the procurement of the services of the service provider must be expressly required by the said contract (as distinct from the procurement of those services merely "arising out of" or being an incidental consequence of the actual obligations of the contract asserted to be the "employment agency contract"). It is submitted that if the taxpayer performs its obligations (here, it is said, its "result delivery obligations") under a contract by using labour, that does not (of itself) meet the statutory test of there being "a contract under which a person procures the services of another for a client of the employment agent" (plaintiffs' outline of submissions at [109]).
6. The plaintiffs argue that, if it were otherwise, the reach of s 37(1) of the Payroll Tax Act would extend to any commercial contract requiring the provision of a result from one party (A) to the other (B), whereby the fulfilment of that contractual obligation ultimately involved engaging the work services of another party (C), even though the first contract made no mention of the procuring by (A) of any service provider for (B); and they say that this would mean that s 37(1) would apply to almost any commercial agreement for the provision of service from (A) to (B) where the provision of that service required human assistance. It is submitted that this was plainly not the intention of the Parliament in enacting that provision.
7. As to the plaintiffs' argument that, on the Chief Commissioner's construction of s 37(1), every commercial contract could be characterised as a contract for the performance of work and be subject to the employment agency contract provisions, the plaintiffs refer to McDonald's Australia Holdings Ltd v Industrial Relations Commission of NSW [2005] NSWCA 286; (2005) 223 ALR 78 at [90] per Mason P; [97]-[98] per Handley JA. They also note that it has been held that the mere contemplation that work will be performed is not sufficient (referring to Caterpillar of Australia Pty Ltd v Industrial Court of New South Wales (2009) 78 NSWLR 43; [2009] NSWCA 83 at [114]-[142] generally).
8. To illustrate their point, the plaintiffs used various analogies. In written submissions they used the example of an agreement between a building owner and the builder to renovate a room; where the builder has the task of undertaking the renovation work either directly or indirectly and has agreed with the building owner to deliver the result (a renovated room) to the building owner. The plaintiffs say that, on this example, the builder (the principal contractor) will, self-evidently, require workers to perform tasks and thus will need to engage (either directly or indirectly) all the necessary personnel to perform the required building work. The plaintiffs say that this may be done by a combination of contracts of employment entered into with the builder's own employees and principal/contractor contracts entered into by the builder with various contractors (who in turn will either have employees or contractors to do the work) or through the engagement of an intermediary or employment agent to secure the services of the required "workers" (referring to what was done in the circumstances considered in Value Engineering (Australasia) Pty Ltd v State Commissioner of Taxation (WA) (1985) 16 ATR 296 ("Value Engineering")).
9. The plaintiffs argue that in the above scenario, under the employment agency contract provisions, where an intermediary or employment agent was involved: the client would be the builder, the intermediary the employment agent and the persons undertaking the work would be deemed the employees. They submit that in such a case the Chief Commissioner would not say that the builder was deemed the employment agent under s 37 of the Payroll Tax Act and argue, by analogy, that just because HRC/Housekeeping Solutions has retained Platinum (and SWCA) to supply workers for its business in fulfilling the contracts with the hotels, this does not mean as required by s 37 that the workers are "procured" by HRC/Housekeeping Solutions "under" a contract with the hotels "in and for and in the conduct of business of the hotels" (see plaintiffs' outline of submissions at [19]).
10. In oral submissions, the example given (see T 58.10ff) was of a marketing company, the business of which requires the production of marketing material as part of a marketing campaign. It was submitted that if the marketing company outsources the publishing of that material to a third party (say, in this example, a party in the position of HRC), and that third party needs to use labour to produce the marketing material (or, as in the present case, to produce the result of the cleaned room), then the outsourcing of that task does not convert the character of the contract between the marketing company and the third party into a contract for the provision of labour.
11. As I understand it, the marketing company analogy is relied upon for the argument that the relationship between the hotel clients and HRC/Housekeeping Solutions is that the former have outsourced the task of having a room cleaned (the production of a cleaned room) to the latter.
12. Ultimately, the argument was that the contractual arrangements between the hotel clients and HRC (or Housekeeping Solutions for that matter) require the provision of a result (as opposed to being contracts to provide services) (T 84.3) and there must be found in the relevant contractual arrangement "a right or obligation which provides for services of another person to be provided" (see T 84.18). (As put in the course of argument, that last proposition was inextricably linked to - or more precisely, was said to be unable to be divorced from - the requirement that in the agreements with the hotel clients there must be found an express requirement for the procuring of the services of another person in and for the contract of the hotel's business - see T 85.5ff).
13. In this regard, it should be noted that at least some of the relevant contracts appear to have contemplated that HRC/Housekeeping Solutions might perform the obligations under the contract by itself outsourcing the provision of labour to sub-contractors (see, for example, cl 13.3 of the Accor hotel contracts - described at [39] above).
14. The plaintiffs submit that their construction as to the meaning of "under which" is to be preferred because it gives a legal meaning to the words of the provision in the context in which they appear and does not lead to absurd results.
15. As to this argument, the Chief Commissioner maintains that it conflates the meaning ascribed to "under" in BTR Engineering with the question of whether the procurement of services is "expressly required" by the hotel client contracts.
16. The Chief Commissioner points to the recognition by the Full Court of the Federal Court in Hancock Prospecting Pty Ltd v Rinehart [2017] FCAFC 170; (2017) 350 ALR 658 at [200], [205] ("Hancock Prospecting") that the word "under" is "an elastic relational phrase" which is "capable of varied relational reach, depending on the context"; and the Full Court's admonition that it is an error to adopt "an overly narrow, dictionary-based meaning". The Full Court in that case (Allsop CJ, Besanko and O'Callaghan JJ), said (at [196]) that: Warren J [in BTR Engineering] held that the word "under" meant "governed, controlled, or bound by; in accordance with". This expression of the matter came from the Shorter Oxford Dictionary. With respect, it is a limited and confined meaning not dictated by the word itself. … Nor is it a complete reflection of the dictionary meanings. The dictionary meanings of the word "under" as a preposition are many. They include "controlled, restrained or bound by"; "in a state or condition of; having regard to, taking account of"; and "subject to the authority, control, direction or guidance of": Shorter Oxford Dictionary (2007), vol 3. We do not find BTR Engineering persuasive.
17. Insofar as the Full Court in Hancock Prospecting (see at [205]) there declined to follow Rinehart v Welker, I note that on 18 May 2018, the High Court granted special leave to appeal from the Full Court's decision, limited to ground 1 of the proposed grounds of appeal (which raised the issue on which the Full Court had declined to follow the Court of Appeal in the interpretation of the parties' arbitration agreement under the relevant deed) (see Rinehart v Hancock Prospecting Pty Ltd [2018] HCA Trans 90 (18 May 2018)). Thus, to the extent that reliance is placed by the opposing parties in the present case on the conflicting views at intermediate appellate level of the breadth of the meaning of the word "under" in agreements of the kind being considered in the Rinehart litigation, in order to inform the meaning of "under which" in s 37(1) of the Payroll Tax Act, the last judicial word on that issue seems yet to come.
18. That said, the proposition made by the Chief Commissioner may best be understood as being that, contrary to the plaintiffs' submissions, the phrase "under which" in s 37(1) of the Payroll Tax Act does not only mean "governed, controlled, or bound by" or "in accordance with" the identified contract (still less does it mean "expressly required"); rather, its meaning can be broader than that and ultimately will be dependent on the context in which the phrase is to be found.
19. The Chief Commissioner notes that in CXC Consulting Pty Ltd v Commissioner of State Revenue [2013] VSC 492; (2013) 96 ATR 796 ("CXC Consulting"), Ginnane J (at [78]), considering the Victorian equivalent to s 37(1) of the Payroll Tax Act (which is in identical terms), held that the phrase "under which" (or "under a contract") refers to "the source of the obligation under which the services were performed and to the connection between the contract and the performance of the obligation", citing by way of example Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520; [2000] HCA 35 at [42]; and Asciano Services Pty Ltd v Chief Commissioner of State Revenue (NSW) (2008) 235 CLR 602; [2008] HCA 46 at [34] ("Asciano"), where the High Court considered earlier decisions interpreting phrases such as "under a contract" or "under the lease".
20. In Asciano, the High Court said (at [34]): These words ["under the lease"] again draw attention to the agreement, it was submitted, as did the statutory provision considered in Federal Commissioner of Taxation v Sara Lee Household & Body Care (Australia) Pty Ltd. There a provision of the Income Tax Assessment Act 1936 (Cth), concerned with capital gains on assets, provided that where an asset was acquired or disposed of under a contract, the asset should be taken to have been acquired or disposed of at the time of the making of the contract. It was held that the words "under a contract" direct attention to the source of the obligation which was performed by the transfer of assets which constituted the relevant disposal. And in Chan v Cresdon Pty Ltd [(1989) 168 CLR 242] it was said that the word "under" appearing in a covenant to pay rent "under this lease" referred to an obligation created by, in accordance with, pursuant to or under the authority of the lease.
21. The Chief Commissioner submits that, adapting that language, for the purposes of s 37(1) of the Payroll Tax Act a contract is one "under which" an employment agent procures the services of another person if the obligation (or the right) to procure those services is created by, in accordance with, pursuant to, or under the authority of the contract; and that this is broader than the definition propounded by the plaintiffs.

"procure"

1. As to the meaning of "procure" in s 37(1) of the Payroll Tax Act, the plaintiffs rely upon the construction placed on this verb by White J in Freelance Global (at [115]), namely that this "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" (see also at [119]; and CXC Consulting at [67]-[77]).

"the services of another person"

1. As to this aspect of the definition, the plaintiffs argue that the reference in s 37(1) of the Payroll Tax Act to "the services of another person" is a reference to work services (in the sense of the labour being provided); and that the employment agency contract provisions do not extend the meaning of "services" to include "results". In this regard, the plaintiffs distinguish the employment agency contract provisions from the relevant contract provisions in ss 32-35 of the Payroll Tax Act, which do (by s 31) extend the meaning of "services" to include "results".
2. The plaintiffs note that in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCATAP 249 ("Qualweld"), the Appeal Panel of the NCAT regarded a contract "to deliver a result and not just supply the services of welders and boilermakers" as being outside s 37(1) and the employment agency contract provisions in the Payroll Tax Act (see at [45]), remitting the matter for reconsideration on the basis that the evidence was capable of establishing that the taxpayer was required to deliver a result under the asserted "employment agency contract".
3. The plaintiffs argue that, having regard to the text, context and purpose of the employment agency contract provisions, it was not the intention of the Parliament that contracts that require the delivery of a "result" by a contractor to a principal fall within the definition of an "employment agency contract" within s 37(1) of the Payroll Tax Act merely because the performance of those contracts and the delivery of the result by the contractor to the principal involves the contractor obtaining the work assistance of workers to assist the contractor in delivering the contractual result. As noted earlier, they say that if it were otherwise, almost every commercial contract would fall within the ambit of s 37(1).
4. In this regard, the Chief Commissioner argues that the plaintiffs' argument relies on a false dichotomy - namely, that there is an exclusively binary choice between procuring services and procuring results. The Chief Commissioner points to the decision of Kunc J in JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 ("JP Property"), where his Honour (at [67]-[68]) said: The choice [between procuring services and procuring results] is not exclusively binary. In my view, the contracts or arrangements are for the provision of services. To the extent that they can be categorised as contracts for the provision of a result, this does not detract from their character as contracts for the provision of services insofar as those services are procured in order to produce a result... In this case it is clear that all of the contracts in question require services or work to be done - irrespective of whether they can also be categorised as being contracts to produce a result. Most, if not all, contracts for the provision of services could also be described as contracts to achieve a result.
5. As to the reliance by the plaintiffs on Qualweld, the Chief Commissioner notes that no consideration was there given as to the question whether a contract to provide services can also be a contract to provide results, and submits that if there is any inconsistency then this Court's decision in JP Property should be preferred.
6. The Chief Commissioner also notes that, in obiter dicta in Freelance Global, White J gave the example of an agreement between a building owner and a builder for the construction of a building, accepting (at [158]) that this could be characterised as an agreement "for the delivery of a result, namely the completed building" but going on to say (at [159]) that it was not clear to his Honour 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". The Chief Commissioner relies on this as recognition that such a contract could involve both procuring a result and procuring services. The Chief Commissioner accepts that in Freelance Global the reasoning related to relevant contracts, not employment agency contracts, but says the reasoning applies equally to the present case and that Kunc J applied it to employment agency contracts in JP Property.
7. The Chief Commissioner also points to the subsequent decision in UNSW Global, where White J accepted that experts on a university database of expert witnesses, who were retained by law firms to provide expert evidence in legal proceedings, were independent contractors and "were engaged to achieve a particular result" (at [13]) but concluded that this did not determine whether the contracts under which the experts were engaged were "employment agency contracts"; rather, the question was whether there was "a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client" (see at [62]), there concluding that the relevant contracts were not "employment agency contracts" because the experts did not work in and for the clients' businesses (at [65]-[66]).
8. The Chief Commissioner submits that it thus cannot be assumed that if an agreement involves procuring an outcome it cannot also be an "employment agency contract".

"for" the client ("in and for the business of the client")

1. The final element in the definition in s 37(1) is the requirement that the procurement of services be "for" the business of the client.
2. The plaintiffs submit that the word "for" directs attention to purpose; and, in context, to the ends to be achieved by an action or activity (referring in support of this submission to the Macquarie Dictionary definition of "for" as including "1. with the object or purpose of") (see plaintiffs' outline of submissions at [89]).
3. I interpose here to note the caution commonly sounded against employing dictionary definitions as an aid to statutory construction, particularly for words in common usage. In 2 Elizabeth Bay Road Pty Ltd v The Owners - Strata Plan No 73943 (2014) 88 NSWLR 488; [2014] NSWCA 409 at [81], for example, Leeming JA noted that "dictionary definitions specify a range of meanings, rather than the particular meaning of a word in its context". In House of Peace Pty Ltd v Bankstown City Council (2000) 48 NSWLR 498; [2000] NSWCA 44, Mason P had earlier said (at [28]): A dictionary may offer a reasonably authoritative source for describing the range of meanings of a word, including obsolete meanings. Dictionaries recognise that usage varies from time-to-time and place-to-place. However, they do not speak with one voice, even if published relatively concurrently. They can illustrate usage in context, but can never enter the particular interpretative task confronting a person required to construe a particular document for a particular purpose.
4. The plaintiffs point to the acceptance in UNSW Global of a submission that a literal construction of s 37(1) of the Payroll Tax Act (in relation to the expression "for a client") would go far beyond the mischief intended to be addressed by that provision (see at [44] and [49]). At [43], White J said: On a literal construction of the employment agency contract provisions all of the payments to consultants engaged by UNSW Global are taken to be wages paid by it under an employment agency contract … In terms of s 37, in a literal sense, it is clear that UNSW Global entered into agreements and arrangements under which it (being a person) procured the services of another person (the expert consultant) for its client.
5. His Honour considered that, on a literal construction of "for" in s 37(1) of the Payroll Tax Act, services could be regarded as being provided "for the client" merely if they are provided for the client's benefit (see at [44]), but ultimately held (at [62]), applying a purposive construction to the section, that the word "for" in the phrase "for the client" means "in and for the conduct of the business of the employment agent's client", as distinct from merely "for the client's benefit", saying: Applying a purposive construction, as mandated by s 33 of the Interpretation Act, I think that the definition of an employment agency contract as being a contract under which a person (the employment agent) "... procures the services of another ... for a client of the employment agent" can be read as meaning a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent's client. That was the intended scope of the provisions. It does not do too much violence to the text (Taylor v The Owners - Strata Plan 11564 at [40]) to confine the operation of the phrase "for a client" in that way, rather than as meaning for the client's benefit.
6. The plaintiffs submit that s 37(1) of the Payroll Tax Act is intended to apply only to circumstances where an employment agent provides individuals who comprise, or who would be added to, the workforce of the client "for the conduct of the client's business", as distinct from working "in and for the conduct of the business" of the person asserted to be the employment agent. It is submitted that where the relevant services, although provided by the relevant service provider for the client's benefit or in a way that benefits the client, are not provided by the service provider working in the client's business (but, rather, working in some other person's business), the contract does not fall within s 37(1) (referring to UNSW Global at [63]-[65]).
7. The plaintiffs submit that there is a useful analogy to be drawn in this context between the approach of determining whether, for the purposes of s 37(1) of the Payroll Tax Act, the "service provider" is performing services "in and for the conduct of the client's business" or some other business (which work merely has the effect of ultimately benefiting the client) and the approach of the courts in determining whether a person or worker is an employee of an employer or an individual contractor of a principal. In that context, they refer to Marshall v Whittaker's Building Supply Co (1963) 109 CLR 210; [1963] HCA 26, where Windeyer J said (at 217) that the distinction between an employee and an independent contractor is "rooted fundamentally in the difference between a person who serves his employer in his, the employer's, business, and a person who carries on a trade or business of his own".
8. The plaintiffs note that the High Court in Hollis v Vabu Pty Ltd (2001) 207 CLR 21; [2001] HCA 44 endorsed that approach (at [40]), placing emphasis (in the context of the distinction between an employee and an individual contractor) on the notion whether the person was to be characterised as working in the business of another rather than in their own business (and referring at [39] to Colonial Mutual Life Assurance Society Ltd v Producers & Citizens Co-operative Assurance Co of Australia Ltd (1931) 46 CLR 41 at 48 per Dixon J; [1931] HCA 53).
9. The plaintiffs argue that, similarly, the question necessarily arises in the context of s 37(1) of the Payroll Tax Act whether the "service provider" was procured by the asserted employment agent (and hence provided services) "in and for the conduct of the client's business" or whether the "service provider" was procured by the asserted employment agent "in and for the conduct of" the asserted employment agent's business. It is submitted that this question, in part, directs attention to the content of the contract(s) asserted to be the "employment agency contracts" and, in part, directs attention to the actual business activity being carried on by the asserted employment agent.
10. It is submitted that, in circumstances where: the contractual obligation of the asserted employment agent under the asserted "employment agency contract" is to deliver a result to its client, as distinct from merely providing labour; the asserted employment agent routinely carries on a business of delivering that result to its clients; and the asserted employment agent procures a service provider to work in and for its business to assist it in delivering that result, then the asserted employment agent has not procured the service provider to work "in and for the conduct of" the employment agent's client's business but rather has procured the service provider to work in and for the conduct of its business, such that whilst the client benefits from the delivery of the result, the service provider was not procured "for" the client but was procured "for" the asserted employment agent and worked in and for the conduct of its business (and hence s 37(1) of the Payroll Tax Act does not apply).
11. The plaintiffs argue that, having regard to the text, the context, and the purpose of the employment agency provisions, it was not the intention of the Parliament that a contractor who obtained the work assistance of workers to assist the contractor in its business in delivering an agreed contractual result to its principal (the principal thereby benefiting from the delivery of that contractual result), thereby procured those workers "for" the principal within the meaning of s 37(1) of the Payroll Tax Act (referring to Qualweld at [45]); nor is it the case that workers assisting a contractor in delivering an agreed contractual result to that contractor's principal are working "in and for the conduct of the [principal's] business".
12. The Chief Commissioner emphasises that, in UNSW Global, the relevant provision was construed as meaning "a contract under which a person [the employment agent] procures the services of another person in and for the conduct of the business of the employment agent's client" (at [62], the Chief Commissioner emphasising the words "in and for" in this context).
13. The Chief Commissioner notes that in JP Property, Kunc J said (at [72]) that the issue whether individuals are working "in and for the conduct of the business of the employment agent's client": … will be determined by asking whether or not the individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client's business. Adopting White J's language: are the individual's services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee, or are they services which, although provided for the client's benefit, are not provided by the service provider working in the client's business?

Determination

1. There was no dispute between the parties as to the applicable principles of statutory construction, the starting point being the ordinary and grammatical meaning of the words of the provision in question, having regard to their context and legislative purpose (see generally, Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 ("Project Blue Sky")).
2. In this regard, see CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384; [1997] HCA 2 ("CIC Insurance") as to the approach to statutory construction at common law in the judgment of Brennan CJ, Dawson, Toohey, and Gummow JJ at 408; and the importance, emphasised in a number of subsequent decisions, of focus on the text of the provision itself (for example, Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47] per Hayne, Heydon, Crennan, and Kiefel JJ (as Kiefel J then was) ("Alcan"); Saeed v Minister for Immigration and Citizenship (2010) 241 CLR 252; [2010] HCA 23 at [33]-[34]; and Baini v The Queen (2012) 246 CLR 469; [2012] HCA 59 at [14]).
3. Recently, in SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 91 ALJR 936, Kiefel CJ, Nettle and Gordon JJ summarised the position as follows (at [14]): The starting point for the ascertainment of the meaning of a statutory provision is the text of the statute whilst, at the same time, regard is had to its context and purpose [citing Project Blue Sky at [69]-[71]; Alcan at [47]]. Context should be regarded at this first stage and not at some later stage and it should be regarded in its widest sense [citing CIC Insurance at 408]. This is not to deny the importance of the natural and ordinary meaning of a word, namely how it is ordinarily understood in discourse, to the process of construction. Considerations of context and purpose simply recognise that, understood in its statutory, historical or other context, some other meaning of a word may be suggested, and so too, if its ordinary meaning is not consistent with the statutory purpose, that meaning must be rejected.
4. The parties in the present proceedings do not suggest otherwise. Thus, although statutory construction must begin with a consideration of the text, the statutory text must be considered in its context, that context including legislative history and extrinsic materials (see, for example, the approach adopted in Coverdale v West Coast Council (2016) 259 CLR 164; [2016] HCA 15). The plaintiffs also point to ss 33 and 34 of the Interpretation Act 1987 (NSW), which provide respectively that the Court is to prefer, in interpreting a provision of an Act, the construction that would promote the purpose or object underlying the Act (whether or not that purpose or object is expressly stated in the Act) over a construction that would not promote that purpose or object; and that, in the interpretation of a provision of an Act, the Court can have regard to extrinsic material to confirm the ordinary meaning conveyed by the text of the provision (taking into account context and purpose).
5. As noted above, in construing s 37(1) of the Payroll Tax Act in UNSW Global, White J held at [49] that a literal construction of the words of s 37(1) in that case would: … go far beyond the mischief intended to be addressed. To the extent the text of the legislation permits (Federal Commissioner of Taxation v Consolidated Media Holdings Ltd (2012) 250 CLR 503; [2012] HCA 55 at [39]; Taylor v The Owners - Strata Plan 11564 (2014) 253 CLR 531; [2014] HCA 9 at [39]), the provisions should be construed so as to not apply to all arrangements that could fall within their literal terms, but should be construed in accordance with the legislative intent as ascertained from the statutory context, including the juxtaposition of the employment agency contract provisions with the relevant contract provisions, the legislative history and the extrinsic materials. This may mean that the legal meaning to be given to the provisions differs from their literal meaning (Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355; [1998] HCA 28 at [78]; Park Trent Properties Group Pty Ltd v Australian Securities and Investments Commission [2016] NSWCA 298 at [74]-[77], [82]).
6. His Honour noted (at [50]) that the Chief Commissioner had there ultimately accepted that a literal interpretation of s 37(1) of the Payroll Tax Act "would have far-reaching and unintended consequences".
7. As to the proper construction of s 37(1) of the Payroll Tax Act, I accept that the words "under which" require there to be a connection between the contract asserted to be the employment agency contract (here, the hotel client contracts) and the procurement of the services of the other person (the service provider, here the additional staff - or, as suggested at one point in the course of argument by Counsel for the Chief Commissioner, the sub-contractor companies themselves from whom the additional staff were procured - see T 93.38). This requires consideration of whether the services of the service provider are procured in order for the party procuring those services to meet its obligations under the asserted employment agency contract.
8. Whatever the ultimate determination of the breadth of "under" as used in the arbitration clause the subject of the dispute in the Hancock Prospecting/Rinehart litigation, the requirement that the asserted employment agency contract be one "under which" the services of the service provider are procured necessarily focusses attention on the rights and obligations of the parties to that contract.
9. What I do not accept is the plaintiffs' submission that it is necessary to identify an express contractual obligation contained in the asserted employment agency contract for the provision of labour (i.e., here, for the provision of the personnel to clean the rooms). There is nothing in the text of s 37(1) of the Payroll Tax Act to require such a conclusion. Nor do I consider that this is a limitation required by reference to the legislative purpose of the employment agency contract provisions. It is inconsistent with the recognition in JP Property of the artificiality of a distinction between a contract to produce a result and a contract to perform the services necessary to produce that result. It is sufficient, in my opinion, for the procurement of the services of the service provider to be something that is done in order to perform the obligations contained in the asserted employment agency contract.
10. The examples given by the plaintiffs as illustrating the absurdity of such a construction do not in my view dictate a contrary view, because this element of the definition cannot be read in isolation. On neither the building contract example nor the marketing material example, is the labour provided "for" the client's business in the sense of "in and for" the client's business.
11. As to the meaning of "procure", I see no reason not to give it the ordinary meaning of "obtain", which in my view encompasses facilitating or enabling the services of the service provider with the expenditure of care or effort by the employment agent, as per the construction given to in Freelance Global. As to the meaning of "for" the client, I accept the meaning afforded to the expression by White J in UNSW Global; namely, that what is required is that the service provider's services be procured "in and for the conduct of the business of the employment agent's client" as distinct from being merely "for the client's benefit". That disposes of the absurdity argument raised by the plaintiffs as said to flow if "under which" is not given the meaning for which they contend.

Application to the facts of the present case

1. I turn then to arguments concerning the application of the employment agency contract provisions to the facts of the present case, having regard to the construction of s 37(1) of the Payroll Tax Act that I consider to be the proper construction. The Chief Commissioner argues that each of the relevant hotel client contracts is an "employment agency contract" within the definition set out above because: the agreements provided for HRC or Housekeeping Solutions to supply and place housekeeping staff to work on-site at the respective client hotels; HRC/Housekeeping Solutions procured (in the sense of brought about by their care or effort) the supply and placement of staff at those hotels, by causing the staff to provide services to those hotels either directly or by way of sub-contract; and the housekeeping staff so placed by the plaintiffs worked in and for the conduct of the hotels' businesses by carrying out a core business function of the hotels (namely, cleaning hotel rooms).
2. The Chief Commissioner submits that, applying the test in JP Property at [72], the individual housekeepers provided by HRC and Housekeeping Solutions were provided to help the hotels conduct their business in the same way, or much the same way, as they would through employees. The Chief Commissioner argues that the provision by the hotels of cleaning supplies to the outsourced housekeepers; the requirement to wear hotel uniforms; and the connection of HRC (and possibly Housekeeping Solutions) to the hotels' telephone systems, are matters that demonstrate that the workers placed by HRC and Housekeeping Solutions in the hotels were fully integrated into the hotels' day to day businesses and were, from the outside, indistinguishable from actual hotel employees.
3. The plaintiffs maintain that the Chief Commissioner has incorrectly characterised their contracts and arrangements with hotel clients as requiring them "to provide housekeeping staff to work in and for the businesses of client hotels". They say that their contracts and arrangements with the hotels do not require this.

Plaintiffs' submissions

1. In summary, the plaintiffs contend: that the hotel client contracts were not contracts "under which" they procured the services of Platinum and Platinum Group (and also, in the case of HRC, SWCA); that the hotel client contracts required the plaintiffs to deliver the "result" of cleaned and serviced accommodation rooms to a particular required standard (not to provide workers to the hotel clients for those workers to work in and for the business of the hotel clients); and that the workers supplied by them were working in and for the conduct of the plaintiffs' businesses, not in and for the conduct of the hotel clients' businesses.
2. As to the first of those propositions, the plaintiffs point to the contractual obligations provided for under the hotel client contracts (those contracts not expressly requiring the provision of staff procured from Platinum and/or SWCA - the procuring of those subcontractors being instead said to be something that merely "arose out of" or "in connection with" or an incidental consequence of the hotel client contracts). The plaintiffs argue that the procuring of Platinum and Platinum Group (and SWCA by HRC) was an incidental consequence or something that "arose out of" of the hotel contracts; not "under" them - in that HRC and Housekeeping Solutions from time to time needed additional workers to enable them to deliver the result required under the hotel contracts (being the cleaning, service and delivery of hotel accommodation rooms to a required standard).
3. Further, the plaintiffs argue that there is a need to characterise the true business activities of HRC and Housekeeping Solutions. They maintain that the hotel client contracts are not contracts "under which" Platinum and Platinum Group (and SWCA by HRC) were procured by HRC and Housekeeping Solutions for their hotel clients.
4. The plaintiffs place weight on the construction of the hotel client contracts as requiring HRC and Housekeeping Solutions to deliver the result of cleaned and serviced accommodation rooms to a particular required standard (in particular noting the provisions relating to the earning and potential deduction of "Credits" (i.e., a fee per room cleaned and serviced in accordance with the required standard) and the existence of termination clauses in the event that they failed to deliver the results they were contractually bound to deliver).
5. The plaintiffs maintain that the real business activity of HRC and Housekeeping Solutions, in light of the terms of the hotel client contracts and the evidence of Ms Kelly and Mr Hapuwida, was the provision to their hotel clients of hotel accommodation rooms cleaned and serviced in accordance with a set standard.
6. The plaintiffs accept that, self-evidently, HRC and Housekeeping Solutions needed workers to work "in and for the conduct of their businesses" in order to deliver the result they were contractually bound to deliver to their hotel clients but they maintain that the additional staff obtained from Platinum and Platinum Group (and from SWCA in the case of HRC) were obtained and used by HRC and Housekeeping Solutions to work "in and for the conduct of their businesses" not the hotel clients' businesses.
7. It is submitted that the circumstances of the present case are demonstrably different to the facts in Freelance Global, CXC Consulting and Value Engineering, in that (unlike the position in Freelance Global and CXC Consulting) the hotel client contracts did not provide the legal mechanism for the service provider to provide service to the "end-user" client - with the taxpayer being the relevant intermediary (see CXC Consulting at [86] and Freelance Global at [119]). It is argued that, in Freelance Global and CXC Consulting, the very plain object of each "employment agency contract" at issue was the provision of services by a specific person (the "key person") to the "end-user client" in circumstances where the provision of those services had most often already been negotiated directly by the service provider and the end-user client (prior to the interposition of the taxpayer) (referring by way of example to Freelance Global at [80]-[82], [89]-[90], [117]). The plaintiffs argue that Freelance Global and CXC Consulting were cases that arose in a different factual setting to the present case - being primarily concerned with the issue whether the taxpayers in those cases had "procured" the services of individual workers for their clients. They submit that the meaning of the phrases "under which" and "for a client" was not a focal point of the dispute in either Freelance Global or CXC Consulting.
8. In summary, the plaintiffs submit that, during the relevant period, HRC conducted a business providing various accommodation hotels with the outcome of serviced and cleaned hotel accommodation rooms to a required standard (referring to Ms Kelly's first affidavit at [9] (only part of which was read), [14], [25], [72]-[106]). They say that HRC had many clients for which it provided those outcomes (Ms Kelly's first affidavit at [21]); that HRC and Housekeeping Solutions deployed their own capital assets, tools, and equipment in their business of providing hotel rooms cleaned to a particular standard; and that in return, each of HRC's hotel clients paid fees to HRC on the basis of a fee paid for each accommodation room cleaned and delivered by HRC to the hotel client in a required state (Ms Kelly's first affidavit at [9], [14], [25], [92]-[106]).
9. The plaintiffs note that HRC and Housekeeping Solutions bore the commercial risk of unsatisfactory performance (Ms Kelly's first affidavit at [97]-[106]; Mr Hapuwida's affidavit at [58]-[64]); that HOS and HRT played an important role in the function of the HRC group business (Ms Kelly's first affidavit at [36]-[55]) and those workers worked for HRC (Ms Kelly's evidence at T 24.41); and that HRC paid HOS a fee, by way of journal transfer, in respect of the same, reflecting that HRC, HOS and HRT (and similarly Housekeeping Solutions, HOS and HRT) operated similarly to a single group business which offered the result of cleaned hotel accommodation rooms (Ms Kelly's evidence at T 41.38-43).
10. The plaintiffs maintain that the seasonal, fluctuating and volatile nature of the hotel industry meant that HRC and Housekeeping Solutions, from time to time, needed access to additional workers in their businesses (Ms Kelly's first affidavit at [49]-[71]), and Platinum, Platinum Group and SWCA provided those workers to HRC and to Housekeeping Solutions (Ms Kelly's first affidavit at [56]-[66]; Mr Hapuwida's affidavit at [35]-[40]). The plaintiffs note that the workers that Platinum provided to HRC and Housekeeping Solutions were provided to them pursuant to the contracts entered into with Platinum (Ms Kelly's affidavit at [56]-[66] and Tabs 12 and 13 of the exhibit thereto; Mr Hapuwida's affidavit at [35]-[40]); and say that it was under the Platinum contracts that HRC and Housekeeping Solutions obtained the workers provided by Platinum to them. The plaintiffs submit that Platinum and the workers provided by Platinum had no contractual obligation, or other obligation, to provide services to the hotels, and that, at all times, when workers were provided by Platinum to HRC or Housekeeping Solutions, those workers worked at and under the direction and control of HRC staff employed by either HRC, Housekeeping Solutions, HRT and HOS only (Ms Kelly's affidavit at [63(e)]) unlike cases (such as Freelance Global and CXC Consulting) where the workers all worked under the direction and control of "the client".
11. Insofar as any reliance were to be placed on the description in HRC's financial accounts of amounts received as "placement fees", the plaintiffs rely on Ms Kelly's second affidavit (at [8]-[10]) and the affidavit of HRC's accountant, Mr Ian Kellaway (affirmed 12 February 2018), for the proposition that no significance can be attached thereto. In essence, Ms Kelly's evidence is that she did not prepare the accounts and, when she signed the director's declaration in relation to those accounts, she was focussing on the accuracy of the dollar figures and not the label attributed to those amounts. Mr Kellaway, the accountant who did prepare the accounts, deposed, in effect, that the use of the label "placement fees" was a mistake - that opinion being based on his understanding of the business activity of HRC as being that there were contracts to clean accommodation rooms to a particular standard (see [7]; [11]-[12]). Pausing here, I attach no weight to the description in the financial accounts of the amounts received from hotel clients as being "placement fees" (nor did the Chief Commissioner seek to place weight on this) in circumstances where the descriptive term was one adopted by the accountant and in any event is dependent on the correctness of his understanding of the contractual arrangements between HRC and the hotel clients.
12. The plaintiffs submit that an analysis of the facts leads to the conclusion that: HRC and Housekeeping Solutions were conducting genuine businesses, at the core of which was the provision of an outcome to their clients (for which outcome they were then paid); the hotel clients had outsourced that job to HRC and Housekeeping Solutions (Ms Kelly's first affidavit at [9], [14], [25], [72]-[106]; and Tab 7 of the exhibit thereto); the workers provided by the sub-contractor entities to HRC and Housekeeping Solutions were not procured for and did not work "in and for" the conduct of the hotels' businesses and provided no services to the hotels but only to HRC and Housekeeping; the workers provided by the sub-contractor entities to HRC and Housekeeping Solutions were procured for and did work "in and for" the conduct of HRC and Housekeeping Solutions' businesses only and provided services to HRC and Housekeeping Solutions only, adding to HRC and Housekeeping Solutions' workforce alone (Ms Kelly's first affidavit [9], [14], [25], [92]-[106]).
13. In this regard, the plaintiffs submit that the manner in which HRC (and, as I understand it, Housekeeping Solutions) went about producing the result of cleaning, servicing and delivering accommodation rooms to its hotel clients - in terms of the number of cleaning workers, training staff and supervisory staff that HRC deployed to produce that result - was HRC's (or Housekeeping Solutions') sole responsibility. I will refer in due course to some of the evidence given by Ms Kelly in cross-examination on this issue.
14. The plaintiffs' submissions place emphasis on the contention that what the hotel clients wanted (insofar as the hotel clients' subjective intention is relevant) was the "end product" (submitting at T 63.29 that "They [the hotel clients] don't care how it's done but it has to be done"). Pausing there, that broad proposition cannot be accepted. The hotel clients certainly specified in the written contracts the standards to be met in relation to the cleaning of hotel rooms (and Counsel for the plaintiffs conceded as much). The alternative proposition for the plaintiffs was that how those standards were to be achieved (in terms of the labour used, and the training and control of that labour) was solely the responsibility of HRC/Housekeeping Solutions (see T 63.38ff). Even that more limited proposition is, in my view, difficult to accept, in light of the fact that the relevant contracts contemplate that hotel clients would be able to give directions as to certain matters (such as the wearing of uniforms and staff badges, appearance and grooming, or the like - see for example cll 7, 12(a) of the Westin Hotel contract (at Tab 7(a) of the exhibit to Ms Kelly's first affidavit)) and would at least in some areas have a degree of control over housekeeping staff placed in the hotels by HRC/Housekeeping Solutions (see for example cl 17(c) of the Westin Hotel contract).
15. In summary, the plaintiffs argue that s 37(1) of the Payroll Tax Act does not apply on the basis that: the contractual obligation of HRC and Housekeeping Solutions under the "result-based" hotel contracts was to deliver the result of cleaned and serviced accommodation rooms to a set standard; at all material times HRC and Housekeeping Solutions routinely carried on businesses of delivering that result to their hotel clients for reward; HRC and Housekeeping Solutions procured sub-contractors to assist them to deliver the result and Platinum, Platinum Group, and SWCA thereby worked in and for the conduct of the HRC and Housekeeping Solutions businesses; HRC and Housekeeping Solutions did not procure Platinum and SWCA to work in and for the conduct of the hotel clients' businesses and those service providers did not do so in fact; and that, although the hotel clients ultimately benefited from the delivery of the result to them by HRC and Housekeeping Solutions (i.e. benefited from accommodation rooms being cleaned and serviced), the sub-contractors were not procured "for a client" but were procured "for" HRC and Housekeeping Solutions.

Chief Commissioner's submissions

1. The Chief Commissioner argues that the relevant hotel client contracts provided for HRC and Housing Solutions to supply and place housekeeping staff to work on-site at client hotels (which they could do directly or by sub-contracting), and set out requirements for those staff to follow, such as the wearing of hotel uniforms. It is noted that the obligation to procure the services of their workers (or sub-contractors) is created by the hotel contracts and the content of that obligation is governed by those agreements. The Chief Commissioner submits that it follows from this that the relevant hotel contracts are contracts "under which" HRC and Housekeeping Solutions procured the services of individual workers. It is submitted that this satisfies even if a narrower definition of "under which" (based on BTR Engineering) is adopted.
2. The Chief Commissioner argues that the procurement of sub-contractors to provide the services is not simply an incidental consequence of the relevant hotel contracts but is necessary to meet HRC's and Housekeeping Solutions' contractual obligations (pointing to Ms Kelly's evidence to the effect that, due to the volatility in hotel custom, it is not possible for HRC, HOS and Housekeeping Solutions to retain a fully fixed workforce at all times and hence, in order to fulfil the hotel client contracts, HRC must have access to a pool of additional cleaning workers: see Ms Kelly's affidavit at [49]-[55]).
3. As to the submission that the hotel client contracts only required HRC and Housekeeping Solutions to produce a result, namely, the making up of rooms to a particular standard, as adverted to already when considering the submissions as to the proper construction of s 37(1) of the Payroll Tax Act, the Chief Commissioner contends that this rests on a false dichotomy - in that it assumes that if the relevant hotel client contracts required the cleaning of rooms to a particular standard, then those agreements did not also involve HRC and Housekeeping Solutions procuring the services of others to work in and for the businesses of the hotels. The Chief Commissioner argues that the hotel client contracts did both. The Chief Commissioner points to the provisions of the agreements which require HRC and Housekeeping Solutions to provide staff to work on-site at the hotels and provide room cleaning services, with those staff working in and for the hotels' business by being integrated into them (by wearing hotel uniforms, using on-site facilities, being connected to the hotels' telephone systems, and the like).
4. It is submitted that this is sufficient to make the agreements "employment agency contracts" even though the agreements also required the housekeeping services to be performed to a particular standard. Moreover, the Chief Commissioner argues that the fact that the services were required to be performed to the hotels' own standards supports the view that HRC and Housekeeping Solutions' staff (sub-contracted or otherwise) were working in and for the conduct of the hotels' businesses.
5. The Chief Commissioner points to the following in support of the proposition that there is a duality (not opposition) between services and results. First, that most of the HRC hotel agreements refer to HRC's obligation to provide "Services/Deliverables" (the services being housekeeping services, and the deliverables being hotel rooms serviced in accordance with the hotels' standards and requirements), but that, where not described as "Services/Deliverables", those obligations are simply described as "Services"; and that the Housekeeping Solutions' agreements describe the obligations by reference to services. Second, that while HRC and Housekeeping Solutions charged a fee per room cleaned; the sub-contractors (Platinum Group, Platinum and SWCA) generally charged by the hour. In that context it is submitted that it makes little sense to distinguish between a contract to provide services and a contract to achieve a result.
6. I interpose to note that, in reply to the Chief Commissioner's submissions as to their "result-based" characterisation of the contracts (see [39]-[42] of the defendant's written submissions), the plaintiffs reiterate their contention that the contracts, properly construed in their entirety, do not impose an obligation on HRC or Housekeeping Solutions to procure both the services and the person providing the services but, rather, are commercial contracts under which HRC and Housekeeping Solutions may (by any means they choose) perform the obligations under the contracts, namely to clean rooms to an agreed standard.
7. As to the submission that the individual workers supplied by HRC or Housekeeping Solutions or their sub-contractors were working in and for the conduct of the business of HRC or Housekeeping Solutions and not in and for the conduct of the hotels' businesses, again the Chief Commissioner argues that this is a false dichotomy - noting that a person can work in and for the conduct of more than one business at a time. In that context, the Chief Commissioner points to the recognition in the Payroll Tax Act that employees can perform duties for more than one business (which is found in s 71 dealing with common employees). The Chief Commissioner refers to what was said by White J in Freelance Global at [173]: [B]y attending at the site of [the employment agent's] client, a contractor supplies services to [the employment agent] 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 Ptv Ltd v Victorian WorkCover Authority [2008] VSC 42; (2008) 20 VR 514 at [41], [67], [90]-[91], [94]).
8. It is submitted that staff placed by HRC and Housekeeping Solutions with hotel clients worked in and for the conduct of the hotels' businesses even if they were at the same time also working in and for the conduct of HRC and Housekeeping Solutions' businesses.
9. Thus the Chief Commissioner argues that the relevant hotel contracts were "employment agency contracts" for the purposes of s 37 of the Payroll Tax Act and therefore that: HRC or Housekeeping Solutions, as the case may be, is taken to be an employer pursuant to s 38 of the Payroll Tax Act; and the individual workers performing housekeeping work at the hotel clients in connection with the employment agency contracts are taken to be employees of HRC or Housekeeping Solutions pursuant to s 39 of the Payroll Tax Act ; as correctly reflected in the HRC re-assessments dated 10 October 2016 (see Annexure D to Ms Sutton's affidavit at pp 65-79; see also Annexure B at p 11; Annexure C at pp 43-44) and in the HOS assessments dated 1 November 2016 (see Annexure E to Ms Sutton's affidavit at pp 80-90; see also Annexure C at pp 43-47). The Chief Commissioner maintains that there is therefore no basis to revoke those re-assessments and assessments based on the employment agency contracts issue.
10. In reply, responding to the submissions for the Chief Commissioner on the phrase "for a client" in s 37(1) of the Payroll Tax Act, the plaintiffs emphasise what was said by White J in UNSW Global (at [62]) as to the meaning of "for", before his Honour went on to set out his reasons for the conclusion at [66], though noting the caution expressed by the Privy Council in Caltex Oil (Australia) Pty Ltd v Feenan [1981] 1 NSWLR 169 at 173 per Lord Diplock; [1981] 1 WLR 1003: To speak of "construing" the words in which judges have chosen to express the reasons for their judgments involves, in their Lordships' view, a misuse of language that is all too common and reflects a mistaken approach to the use judicial precedent. The only words that require to be "construed" are those of the statute itself. The language used by judges to explain the reasons why they think the statutory words do, or do not, apply to the particular circumstances of the case under consideration, is chosen with those particular circumstances in mind and is not intended as a paraphrase of the statutory words that is necessarily appropriate to all other circumstances.
11. Similarly, the plaintiffs point to the reminder by the High Court in Fish v Solution 6 Holdings Ltd (2006) 225 CLR 180; [2006] HCA 22 at [28] that judicial glosses placed upon a section in an Act "must not be permitted to divert argument away from the words of the statute in an attempt to "construe" the words in which judges express their reasons for reaching a conclusion in a particular case".
12. The plaintiffs maintain that: There is no question that the hotels were not in the business of providing cleaning services to their customers, the business of the hotels is to let rooms to customers with the provision of food and drink services. (plaintiffs' submissions in reply at [15])
13. Further, it is submitted that the workers provided by the sub-contractor entities were not procured for and did not work "in and for" the conduct of the hotels' businesses but were procured for and did work "in and for" the conduct of HRC's/Housekeeping Solutions' businesses only. Reliance is placed on the indicia applied to determine whether a person is an employee or an independent contractor as assisting in answering the question whether the workers were procured in and for the conduct of HRC's/Housekeeping Solutions' businesses only or that of the hotel clients (reference there being made to JP Property at [73]; and see On Call Interpreters and Translators Agency Pty Ltd v Federal Commissioner of Taxation (No 3) (2011) 214 FCR 82; [2011] FCA 366 at [208]-[218]).
14. As to the submission by the Chief Commissioner that the plaintiffs' submissions rely on a "false dichotomy" (defendant's submissions at [43]), the plaintiffs in reply say that Freelance Global at [173] is not authority for the proposition that a person can "clearly" work "in and for the conduct of more than one business" at the same time. The plaintiffs note that White J, in that paragraph, was dealing with the "relevant contract" provision in s 32(1)(b) (in Division 7 of Part 3) of the Payroll Tax Act (which contains different statutory language), not the "employment agency contract" provision in s 37(1) (in Division 8 of Part 3) of the Payroll Tax Act.
15. The plaintiffs emphasise that the question is factual and one of characterisation in each case as to whether a worker and his (or her) services is properly to be characterised as having been procured and working in and for the business of the asserted employment agent or, in contradistinction, procured and working in and for the business of the client of the asserted employment, or both.

Determination - Issue 1

1. It is clear from the evidence of the plaintiffs that in order to perform the obligation of cleaning and servicing hotel rooms to the requisite standard (i.e., to produce the required result under the hotel client contracts) it was necessary from time to time for HRC/Housekeeping Solutions to procure the services of additional housekeeping staff under the sub-contracting arrangements in place with the Platinum group companies and/or SWCA. The fact that those services were procured for the purpose of performance of the obligations under the hotel client contracts (and without which services those obligations could not be fulfilled) means in my opinion that the hotel contracts are ones "under which" the services were procured in the sense of the services being required to be supplied for the purposes of those contracts.
2. In my opinion the evidence also compels the conclusion that the services were procured "for" the hotel clients' businesses in the sense of "in and for the conduct of those businesses". True it is that payment under the hotel client contracts was structured by reference to room "credits". However, in a practical sense the housekeeping staff did form an addition to the hotel's workforce - they not only wore the hotel branded uniform, but they also liaised with guests and other hotel staff in the services provided by way of the servicing and cleaning of hotel rooms and they were entitled to make use of the hotel staff dining rooms during lunch breaks and the like. On the evidence given by Ms Kelly in cross-examination, it is difficult to see how it would be apparent to the ordinary hotel guest that there was any distinction between, say, a hotel employee responsible for the stocking of items in the hotel room, or answering calls placed to the hotel's housekeeping telephone number, and a member of the additional staff sourced from Platinum/SWCA performing services in the cleaning of the guest rooms on the hotel premises.

Issue 2: deemed wages

1. The second issue raised is as to what amount is to be taken to be wages under s 40(1)(a) of the Payroll Tax Act in light of the above conclusion. The Chief Commissioner has taken the entire amount paid by HRC and Housekeeping Solutions to Platinum and SWCA as the deemed wages pursuant to this provision. Section 40(1)(a) of the Payroll Tax Act deems the following as wages (if there is an employment agency contract under s 37(1)): 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

Plaintiffs' submissions

1. The plaintiffs emphasise that only amounts payable "in respect of the provision of services" are to be deemed to be wages pursuant to s 40(1)(a) of the Payroll Tax Act and that, under s 39, only a natural person "who performs the work" is deemed to be an employee. Therefore, it is said, the deemed employee is the natural person employed by Platinum, Platinum Group, or SWCA who performs the work and hence the deemed wages can only be the amount paid by the sub-contractors to their workers for their work services. The plaintiffs submit that this is clear from the statutory language of the relevant provisions, but they also point to what was said by White J in Freelance Global at [156]: 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.
2. The plaintiffs say that this approach is consistent with the purpose of the Payroll Tax Act being to tax amounts paid for personal services, referring to Mutual Acceptance Co Ltd v Federal Commissioner of Taxation (1944) 69 CLR 389; [1944] HCA 34 where Starke J (at 401) said that, despite the generality of the definition of the word "wages", unless the contrary intention appears, the Pay-roll Tax Assessment Act 1941 (Cth) "is a tax upon wages, that is, upon payments made in cash or in kind for services rendered … [a]nd it is not, nor is it meant to be, a tax upon anything else".
3. The parties agree that if the construction advanced by HRC and HOS in this regard is accepted (and only amounts paid by the sub-contractors to the workers are taken as wages under s 40(1)of the Payroll Tax Act), then the matter should be remitted to the Chief Commissioner to determine this issue in accordance with the Court's finding, pursuant to s 101(1)(d) of the Taxation Administration Act (see the Chief Commissioner's amended appeal statement at [11]).

Chief Commissioner's submissions

1. The Chief Commissioner accepts that s 40(1) of the Payroll Tax Act does not specify, in terms, whether the amounts taken to be wages are the amounts paid: by the client to the employment agent; by the employment agent to its subcontractors (if any) or individual workers; or by the subcontractors (if any) to individual workers. However, the Chief Commissioner submits that it follows, from the fact that the scheme of the Payroll Tax Act is that payroll tax is imposed on wages paid by employers (including deemed employers) and employers are those who pay wages (including deemed wages) (see ss 6, 7 of the Payroll Tax Act), that the amounts taken to be wages under s 40(1) must be amounts paid by the deemed employer - that is, by the employment agent (to its subcontractors or individual workers).
2. Thus, it is submitted, when s 40(1)(a) refers to "any amount paid or payable", it does not mean "paid or payable by anyone" but, rather, it means paid or payable by the employment agent. The Chief Commissioner argues that the words "by the employment agent", which appear in the chapeau to s 40(1), should be understood as applying to, or qualifying, each sub-paragraph.
3. The Chief Commissioner notes that s 46 of the Payroll Tax Act provides that certain amounts are taken to be wages even if they are paid by or to third parties (rather than, for example, by the employment agent directly) but says that this is the exception to the rule; and that the ordinary case is that payroll tax is a tax on wages paid by employers (including deemed wages paid by deemed employers); and, in accordance with that ordinary rule, the amounts taken to be wages under s 40(1) must be amounts paid or payable by the employment agent (to sub-contractors or individual workers).
4. Reference is made to Winday International Pty Ltd v Chief Commissioner of State Revenue [2016] NSWCATAD 270; (2016) 104 ATR 125, where Senior Member Isenberg said (at [32]): Having regard to s 40 it is necessary, that for amounts paid or payable to be taken to be wages those amounts must be paid or payable by an employment agent under an employment agency contract.
5. The Chief Commissioner argues that, applying s 40(1) to the present case, the amounts paid by HRC and Housekeeping Solutions to their respective subcontractors (Platinum Group, Platinum and, in the case of HRC, SWCA) are taken to be wages under s 40(1)(a) because those amounts: were paid by HRC and Housekeeping Solutions (the employment agents and deemed employers) to their subcontractors; were "in relation to" the housekeeping staff provided by those subcontractors; and were paid "in respect of the provision of services in connection with the employment agency contract[s]" (namely housekeeping services in connection with the relevant hotel client contracts).
6. The Chief Commissioner submits that the plaintiffs' submission (to the effect that payments from HRC and Housekeeping Solution to Platinum Group, Platinum and/or SWCA are not payments "in respect of the provision of services" is an unduly narrow reading of "in respect of the provision of services". The Chief Commissioner argues that the words "in respect of" have a wide meaning (subject to context) and refer to a connection or relation between two things (referring to Workers' Compensation Board of Queensland v Technical Products Pty Ltd (1988) 165 CLR 642 at 653 per Deane, Dawson, and Toohey JJ; [1988] HCA 28). Hence, the Chief Commissioner contends that Payroll Tax Act s 40(1)(a) is enlivened where there is a sufficient connection between the amount paid by the employment agent and the provision of services by the service provider (the individual worker).
7. The Chief Commissioner argues that payments from HRC or Housekeeping Solutions to Platinum Group, Platinum and SWCA were "in respect of the provision of services", because HRC and Housekeeping Solutions were paying those sub-contractors for cleaning services provided by individual workers. The Chief Commissioner accepts that the amounts paid by HRC and Housekeeping Solutions to their sub-contractors would no doubt have included a profit element (i.e., an amount above the amounts paid by those sub-contractors to individual workers); but submits that those amounts (including the profit element) are still payments "in respect of" (in the sense of sufficiently connected with) the provision of services, and hence are captured as deemed wages by s 40(1)(a) of the Payroll Tax Act.
8. It is submitted that the plaintiffs' construction of s 40(1)(a) (that only the payments made by sub-contractors to individual workers are taken to be wages) suffers from a number of difficulties.
9. First, that since HRC or Housekeeping Solutions is the employment agent (and therefore the deemed employer), payroll tax can only be imposed on payments made by HRC or Housekeeping Solutions because it is only the employer (including deemed employer: s 3(1)) by whom taxable wages are paid or payable who is liable to pay payroll tax (s 7). It is submitted that the plaintiffs' construction is inconsistent with the scheme of the Payroll Tax Act because it would impose payroll tax on payments made by sub-contractors who are not the (deemed) employers.
10. Second, the Chief Commissioner emphasises that s 40(1)(a) refers to any "amount" paid or payable, not to any wages paid or payable. It is submitted that if the intention were only to capture actual wages, the latter form of words would be used.
11. Third, insofar as the plaintiffs argue that, since the service provider (individual worker) is taken to be an employee of the employment agent under s 39 of the Payroll Tax Act, only those amounts paid in respect of work performance to the deemed employee are captured as deemed wages, it is submitted that this ignores the clear words of s 40(1)(a) (namely, that the deemed wages are not simply the wages paid "to" the service provider (as the plaintiffs contend), but can include amounts paid "in relation to" the service provider (in connection with the employment agency contract).
12. Fourth, the Chief Commissioner notes that s 87 of the Payroll Tax Act requires registered employers, including employment agents, to lodge monthly and annual returns calculating their payroll tax liability; and that tax is payable within 7 days after the end of the month, or 21 days after the end of June (s 9(1)). It is submitted that the Payroll Tax Act therefore assumes that taxpayers will be able to calculate (and pay) their payroll tax; whereas, in the ordinary course, an employment agent (such as HRC and Housekeeping Solutions) who engages sub-contractors would know what it pays those sub-contractors but would not know what the sub-contractors themselves pay to their individual workers. Thus it is submitted that it makes sense to deem, as wages, amounts paid by an employment agent to its sub-contractors, as the employment agent knows those amounts and can include them in its returns; whereas it makes no sense for an employment agent's payroll tax liability to depend (as the plaintiffs contend) on information it would not ordinarily have, such as amounts paid by sub-contractors to individual workers. The Chief Commissioner notes that the sub-contractors might themselves sub-contract the work, making it even harder for the employment agent to ascertain what amounts were paid to individual workers. The Chief Commissioner argues that the inconvenience of the plaintiffs' construction points against it being correct (referring to CIC Insurance at 408 per Brennan CJ, Dawson, Toohey and Gummow JJ). (The Chief Commissioner also points to the fact that what it says is its more pragmatic construction is reflected in Revenue Ruling No. PTA 027 (30 June 2008)).
13. The Chief Commissioner's construction of s 40(1)(a) of the Payroll Tax Act is submitted to be consistent with the approach taken by the Victorian revenue authorities to identical legislation - see CXC Consulting Pty Ltd v Commissioner of State Revenue (Taxation) [2012] VCAT 1992. In that case, CXC Consulting provided contract management services for IT contractors and acted as an intermediary between clients and the contractors; payroll tax assessments were issued in respect of the payments made by CXC Consulting to its sub-contractors; those assessments were confirmed by the Tribunal on the basis that CXC Consulting was an employment agent under s 37 of the Payroll Tax Act 2007 (Vic) and the payments to sub-contractors were taken to be wages under s 40(1)(a) of that Act. On appeal, Ginnane J confirmed the assessments (see CXC Consulting at [3], [17], [23], [105]). The Chief Commissioner notes that no question was there raised about the legitimacy of taxing the payments from the employment agent to its sub-contractors (as opposed to taxing the payments made by the sub-contractors to individual workers).
14. Insofar as the plaintiffs rely on obiter dicta of White J in Freelance Global at [155]-[156], the Chief Commissioner notes that his Honour there considered, hypothetically, whether a one-man company performing plumbing services for clients would be an employment agent under s 37 of the Payroll Tax Act, on the basis that it procures the services of the plumber for clients of the company; and, though not being satisfied that that was the correct analysis, said (at [156]) that if it were correct: …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. [emphasis as per the defendant's submissions]
15. It is submitted that the assumption behind these obiter remarks (that the one-man company would be an "employment agent" under s 37 of the Payroll Tax Act ) made in order to test the possible reach of s 37 (see Freelance Global at [157]) is incorrect in light of the subsequent decision in UNSW Global. The Chief Commissioner argues that the correct analysis is now that the plumbing company is not an employment agent, because a plumber does not work in and for the conduct of the clients' businesses. The Chief Commissioner argues that the example given in Freelance Global thus proceeds from a false premise, but maintains that in any event the example does not involve sub-contracting arrangements of the kind employed by HRC and Housekeeping Solutions.
16. Moreover, the Chief Commissioner submits that that example does not assist the plaintiffs, for two reasons. First, because in that example the amounts paid by the client to the employment agent do not attract payroll tax, but the amounts paid by the employment agent to another party in respect of the services do attract payroll tax. Applying that example to the facts of the present case, the Chief Commissioner argues that the amounts paid by the hotel clients to HRC or Housekeeping Solutions (the employment agent) would not attract payroll tax, but the amounts paid by HRC and Housekeeping Solutions to other parties (sub-contractors) in respect of the services would attract payroll tax. This is the conclusion for which the Chief Commissioner contends and which is said to be consistent with the decision in CXC Consulting. The second reason is that the real issue is whether the payments meet the statutory description of payments "in respect of the provision of services in connection with an employment agency contract". The Chief Commissioner argues that the payments from HRC and Housekeeping Solutions to Platinum Group, Platinum and SWCA meet that description.
17. As to the reliance placed by the plaintiffs on the legislative history to the amendments in relation to the entity upon whom payroll tax liability is to fall (and the reference to the Explanatory Note in that regard), the Chief Commissioner points to the change in the relevant legislation (from the wording of the 1971 Act to that in the Payroll Tax Act) from "contract worker" to "service provider".
18. The Chief Commissioner emphasises that in s 3C(1) of the 1971 Act, the person whose services are procured is a contract worker, as opposed to a service provider, and in that in s 3C(2)(b) the contract worker is deemed to be the employee - there being thus the concept of a contract worker who is both the person providing the services and also the person who is deemed to be the employee. The Chief Commissioner points out that the structure of s 37 of the Payroll Tax Act is different in that, in s 37, the person whose services are procured is the "service provider" but, in s 39, the person who in fact performs the work is the deemed employee (s 39 not referring to the "service provider" but rather, to the person performing the work for and in relation to which services are supplied to the client). The Chief Commissioner submits that the absence of a reference to "service provider" in s 39 is deliberate and that the distinction is that the service provider may be a company and the deemed employee may be the worker. It is submitted that this is made clear by the Explanatory Note.
19. The Chief Commissioner also notes that there was an argument in submissions for the plaintiffs that the employment agent was not HRC but was Platinum. It is submitted that again that is a false dichotomy but that it does not matter since the legislation expressly contemplates the possibility that there is more than one employment agent (see s 41 of the Payroll Tax Act). The effect of that section is if one employment agent has already paid payroll tax no other employment agent has to pay such tax - hence the affidavit of Thomas Millett affirmed 27 February 2018, which showed that no other employment agent had provided payroll tax.
20. The Chief Commissioner argues that is there is a distinction between the service provider and the person who performs the work; noting that the service provider may include a company but that the person who performs the work is necessarily a natural person. Thus it is submitted that the service providers under the employment agency contract may be construed to be Platinum, Platinum Group, and SWCA while the deemed employees, the natural persons performing the work, are the housekeeping staff.
21. For the purpose of determining whether there is an employment agency contract, the Chief Commissioner says that whether the service providers are the housekeepers or Platinum, Platinum Group, and SWCA does not make a material difference, because in either case the employment agents were procuring housekeeping services of another person, whether that be sub-contractor entities or the housekeepers, in and for the conduct of the hotels' businesses.
22. As to s 40(1)(a) of the Payroll Tax Act, the Chief Commissioner's contention is that the amounts paid by HRC and Housekeeping Solutions to its sub-contractors are taken to be wages. It is submitted that if Platinum, Platinum Group, and SWCA are the service providers then payments to them are clearly payments to service providers, within the meaning of s 40(1)(a), in respect of the provision of services in connection with the employment agency contracts and it follows that they are taken to be wages (without the need to consider the words "in relation to"). However, if that submission be not accepted, then the Chief Commissioner argues that the amounts paid by HRC and Housekeeping Solutions to its sub-contractors (including the profit element) satisfy s 40(1)(a) because the amounts are paid "in relation to" the service providers (being the housekeepers).

Determination - Issue 2

1. It is not necessary to explore the question whether, for the purposes of s 40(1)(a) the service provider in the present case is the third party sub-contractor (the primary contention advanced by the Chief Commissioner on this issue). That is because even if the service providers procured for the purpose of the employment agency contracts in this case are the housekeepers sourced through the sub-contractors, the same result would in my opinion follow.
2. In this regard, it is significant in my opinion that the construction advanced by the plaintiffs gives no work for the words "in relation to" to do in s 40(1)(a) of the Payroll Tax Act. Those are words recognised to be of considerable breadth (as was accepted in the course of argument as to the narrower ambit of the words "under which" in s 37(1)). In my opinion, those words expand the reach of the deemed wages under s 40(1)(a) beyond the actual amounts paid to the additional housekeeping staff. Were it otherwise, the section could simply have referred to wages or amounts paid to the service provider without the inclusion of the words "in relation to". Accordingly, I consider that the amounts paid to Platinum/SWCA have been correctly identified as the amounts in respect of which payroll tax is payable and the assessments should be confirmed in this regard.

Issue 3: penalty tax imposed on HRC

1. As noted above, this issue is only pressed by HRC. It relates to the imposition by the Chief Commissioner pursuant to ss 26 and 27 of the Taxation Administration Act of 25% penalty tax in respect of HRC's failure to pay payroll tax on all of its wages, including payments from HRC to Platinum Group, Platinum and SWCA, during the financial years ended 30 June 2010 to 30 June 2013 (see Annexure C to Ms Sutton's affidavit at pp 50-51; and Annexure D thereto at pp 65-79).
2. HRC contends that penalty tax should be reduced to nil (on the basis that HRC took reasonable care to comply with the taxation law). This is based on the fact that in 2010 the Office of State Revenue conducted an audit of Housekeeping Solutions and determined that the payments made by Housekeeping Solutions to Platinum Group were not liable to payroll tax. Ms Kelly has deposed (at [113]-[115]) that she was aware of an Office of State Revenue audit of Housekeeping in 2010 or 2011 which found that payments from Housekeeping Solutions to its sub-contractor Platinum Group were not liable to payroll tax; and that she believed, on that basis, that payments from HRC to Platinum Group, Platinum and SWCA were also not liable to payroll tax, since the arrangements between Housekeeping Solutions, Platinum Group and Platinum "were conducted on the same basis" as those between HRC, Platinum Group and Platinum (see at [64]).
3. The Chief Commissioner notes that the concept of taking "reasonable care to comply with the taxation law" was explained in Qualweld Australia Pty Ltd v Chief Commissioner of State Revenue [2014] NSWCATAD 227; (2014) 100 ATR 339 at [95], quoting RVO Enterprises Pty Ltd v Chief Commissioner of State Revenue [2004] NSWADT 64; (2004) 55 ATR 445 at [23] as follows: In each case, it is essentially a question of fact whether the taxpayer has taken reasonable care in attending to its tax obligations. Factors that would indicate that a taxpayer took reasonable care include reasonable attempts to comply with the tax law, reasonable professional and other inquiries to ensure compliance, reliance on professional advice or on official published views of the tax law. Factors which indicate that a taxpayer failed to take reasonable care include oversight or forgetfulness to meet with obligations, failure to maintain adequate records and procedures to prevent errors from occurring, not seeking professional advice and errors in complying with the law.
4. The Chief Commissioner contends that, applying those principles, Ms Kelly's reliance on the audit of Housekeeping Solutions is insufficient to show that HRC "took reasonable care to comply with the taxation law".
5. The Chief Commissioner notes that in Sydney Flooring Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 96; (2017) 105 ATR 546, a taxpayer's compliance with previous audit findings in relation to that very taxpayer was held insufficient to engage s 27(3) of the Taxation Administration Act. It is argued that this applies a fortiori in the present case, because the previous audit was in relation to Housekeeping Solutions, not HRC. The Chief Commissioner contends that penalty tax was therefore correctly imposed.

Determination - Issue 3

1. I am not persuaded that HRC has discharged its onus in relation to this issue. There is a distinction between the reasonableness of an assumption as to whether tax was payable (based on the outcome of the previous audit in relation to Housekeeping Solutions and the similarity of their respective business operations) and the taking of reasonable care to comply with one's taxation obligations.
2. Ms Kelly's evidence makes it clear that she obtained no legal advice in relation to the issue (see T 35.5, T 36.37, T 39.44-46) and that her belief was based solely on what was conveyed to her by HRC's accountant as to the outcome of the audit. Ms Kelly was not provided with a copy of the letter confirming the outcome of that audit and appears to have had no accounting advice on the issue (see T 37.20ff, T 38.38ff).
3. In those circumstances, however reasonable or otherwise it was to proceed on the basis of the audit outcome, I am not persuaded that "reasonable care" was taken by HRC and hence there is no basis for the penalty tax to be remitted. Had I reached a different view there would, in any event, have been no remission of the penalty tax imposed for the financial year ended 30 June 2010 (on the basis that the outcome of the audit was not conveyed until January 2011 and could not have formed the basis for any reasonable care submission for the previous financial year).

Conclusion

1. I have thus concluded in favour of the Chief Commissioner on each of the issues before me. The proceedings should be dismissed with costs.

Orders

1. For the above reasons I make the following orders: 1. Dismiss the plaintiffs' further amended summons filed 2 August 2017. 2. Order that the plaintiffs pay the defendant's costs of the proceedings on the ordinary basis.

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: 05 June 2018