JP Property Services Pty Limited v Chief Commissioner of State Revenue

Supreme Court of NSW|2016-12-06|Before: Kunc J

Summary

These proceedings concern the employment agency contract ("EAC") provisions found in Part 3 Div 8 of the Payroll Tax Act 2007 (NSW) (the "PTA").
The plaintiff, JP Property Services Pty Ltd ("JP"), provides cleaning and property maintenance services to commercial and industrial clients, including supermarkets operated by Franklins Pty Ltd ("Franklins"). To provide those services, JP either uses its own employees or third parties (both either natural persons or corporations) referred to in the proceedings, and these reasons, as the "Subcontractors".
In these proceedings it is necessary to distinguish between three types of contract: 1. The consecutive contracts over several years between JP and Franklins (which were in materially the same terms and so are referred to in these reasons as the "Franklins Contract"). 2. The various contracts between JP and its clients other than Franklins. Those clients (the "Other Clients") are identified in paragraph [34] below. The contracts between JP and the Other Clients are referred to in these reasons as the "Other Client Contracts". 3. The contracts between JP and the Subcontractors (the "Subcontractor Contracts") whereby the Subcontractors enabled JP to fulfil its obligations under the Franklins Contract and the Other Client Contracts.
The defendant, the Department of Finance Services and Innovation trading as Chief Commissioner of State Revenue (the "Commissioner") conducted an audit of JP. The Commissioner formed the view that the Subcontractor Contracts were EACs and so payroll tax was payable by JP on the payments JP made to the Subcontractors. By five assessment notices dated 10 April 2015 (the "Assessments"), the Commissioner decided that JP was liable to pay approximately $340,000 in payroll tax and penalty tax for the five years between 1 July 2008 and 30 June 2013.

Procedural history

In May 2013, the Office of State Revenue ("OSR") notified JP that it would be the subject of a payroll tax audit.
The audit included the provision of information and submissions by JP and correspondence between JP and the Commissioner and took a considerable period of time. The Court was not taken to any of the detail of that process.
On 10 April 2015, the OSR provided the assessments to JP under cover of a letter of that date which included: "We have now completed the investigation and found a payroll tax liability for JP Property Services Pty Ltd. These liabilities have predominantly risen as a result of: 1. a failure to identify payments being made under employment agency contracts and include these payments in the calculation of taxable wages for payroll tax purposes. … In the investigation, it was evident that JP Property Services Pty Ltd procures the services of its service providers to satisfy contractual obligations with their own clients. In this way, JP Property Services Pty Ltd has entered into employment agency contracts with their clients. Herin (sic), there are two contracts with the agency (ie. JP Property Services Pty Ltd) and the service provider; and another between the agency (ie. JP Property Services Pty Ltd) and the client or end-user of the labour. Under Section 37 of the Payroll Tax Act 2007, employment agency provisions primarily cover the situation where an employment agent provides the services of a service provider to a client for a fee relating to the period of service of the worker. The amounts that the employment agent subsequently pays to the service provider are liable to payroll tax. The investigation identified that under contracts with their clients, JP Property Services Pty Ltd must provide employees or 'procure' the services of the service provider to fulfil the contract. It is important to note that without procuring the services of outside labour, it would not be possible for JP Property Services Pty Ltd to fulfil the expectations and conditions set out in the contract with their clients (in particular the agreement with Franklins Pty Ltd). … Under the Employment Agency Provisions, the employment agent (ie. JP Property Services Pty Ltd) is taken to be the employer (section 38 of the Act) and the on-hired worker is taken to be the employee (section 39 of the PTA). Amounts paid or payable under the employment agency contract are taken to be wages (section 40(1) of the PTA). Consequently under section 41 of the PTA, the employment agent is liable to pay payroll tax on the amounts taken to be wages. The evidence gathered in the investigation supports that the contractual arrangement between JP Property Services Pty Ltd, its service providers and its clients are employment agency contracts under the employment agency provisions whereby they procure external labour services to their company to satisfy their own contractual arrangements with their clients (end users). For this reason, all the payments made by JP Property Services Pty Ltd to its service providers that have been reported as sub-contractor payments will be regarded as taxable wages as a result of this investigation."
On 5 June 2015, JP filed an objection to the Assessments.
On 7 July 2015, the OSR wrote to JP's solicitors informing them that the objection had been disallowed. The Commissioner did not dispute JP's evidence that the OSR's letter of 7 July 2015 was not received by JP's solicitors until enquiries were made by them in September 2015. This meant that these proceedings, commenced by summons filed on 23 October 2015, were commenced out of time (see s 99(1) of the TAA). At the hearing before me the Commissioner agreed that the Court should exercise its undoubted power to grant leave to cure that deficiency.
The hearing proceeded on 6 December 2016. Mr N Gangemi of Counsel appeared for JP. Mr A H Rider of Counsel appeared for the Commissioner. The Court reserved its judgment.
Just over two weeks later, on 21 December 2016, White J delivered his judgment in UNSW Global. On the same day the parties to these proceedings drew my attention to his Honour's decision by email to my chambers, without further comment. Neither party made any further application based on UNSW Global.
In the course of preparing these reasons, it became apparent to me that the decision in UNSW Global marked a significant development in the Court's exposition of the provisions of the PTA concerning EACs and had the potential to affect significantly the outcome of these proceedings. Accordingly, I relisted the proceedings on 10 May 2017 and made directions for further written submissions from the parties.
Although the Court's directions only provided for submissions, the question of further evidence being adduced by either party was not expressly foreclosed. In its further submissions in reply, filed on 19 July 2017, JP foreshadowed that it was considering seeking leave to file further evidence. By letter to my Associate dated 30 August 2017, JP indicated that it did not propose to seek such leave and was content to rely on its further submissions.

Nature of these proceedings

These proceedings claim a review of the Assessments under s 97 of the TAA. The relevant provisions of the TAA are: "97 Review by Supreme Court (1) A taxpayer may apply to the Supreme Court for a review of a decision of the Chief Commissioner that has been the subject of an objection under Division 1 if: (a) the taxpayer is dissatisfied with the Chief Commissioner's determination of the taxpayer's objection, or (b) 90 days (not including any period of suspension under section 92) have passed since the taxpayer's objection was served on the Chief Commissioner and the Chief Commissioner has not determined the objection. … (4) A review by the Supreme Court is taken to be an appeal for the purposes of the Supreme Court Act 1970 and the regulations and rules made under that Act, except as otherwise provided by that Act or those regulations or rules. … 99 Time for Making Application for Review (1) An application for review following a determination by the Chief Commissioner of an objection must be made not later than 60 days after the date of issue of the notice of the Chief Commissioner's determination of the objection. The court or tribunal to which the application is to be made may allow a person to apply for a review after that 60-day period. … 100 Provisions Relating to Applications for Review … (2) The applicant's and respondent's cases on an application for review are not limited to the grounds of the objection. (3) The applicant has the onus of proving the applicant's case in an application for review. … 101 Powers of Court or Tribunal on Review (1) The court or tribunal dealing with the application for review may do any one or more of the following: (a) confirm or revoke the assessment or other decision to which the application relates, (b) make an assessment or other decision in place of the assessment or other decision to which the application relates, (c) make an order for payment to the Chief Commissioner of any amount of tax that is assessed as being payable but has not been paid, (d) remit the matter to the Chief Commissioner for determination in accordance with its finding or decision, (e) make any further order as to costs or otherwise as it thinks fit."
It was common ground that on a review of this kind, the Court proceeded by way of a rehearing and that is was unnecessary for JP to establish that the Commissioner had erred on the materials that were before him: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue of the State of NSW (2011) 245 CLR 446; [2011] HCA 41.

EAC - a preliminary observation

Before turning to the specific findings of fact, it is necessary to say something about the evidence generally. These comments are especially relevant to the Court's conclusions set out in paragraphs [56] to [59] and [78]. [89] and [92] below.
JP's evidence consisted of an affidavit from a director, Mr Frank Gallo and an affidavit from his wife, Mrs Anna Gallo, a shareholder in JP. Their evidence occupied nearly two lever arch folders. It was read without objection and they were not cross-examined. Mr Gallo gave some brief, supplementary oral evidence, which was also unchallenged.
The Commissioner's evidence comprised one, very full, lever arch folder sworn by a solicitor in the Crown Solicitor's office attaching the OSR's file in relation to its audit of JP and the Assessments. The Court was not referred to any specific part of the Commissioner's evidence.
The evidence in this case was at a high level of generality. Mr and Mrs Gallo's affidavits described how JP's business worked. They attached the three consecutive versions of the Franklins Contract. They included what Mr Gangemi submitted was the totality of relevant invoices between JP and the Subcontractors. Other than in the case of Franklins, JP's evidence was that its contracts with the Other Clients and the Subcontractors were not in writing.
It was common ground that the payments from JP to the Subcontractors which were the subject of the Assessments were largely, but not completely, concerned with services provided to Franklins. However, in response to my inquiry, Mr Gangemi was unable to tell me the amount of the Assessments referable to work done for Franklins as opposed to work done for the Other Clients. Furthermore, other than for Franklins (because the work was specified in the Franklins Contract), precise evidence about the work that was done by JP or the Subcontractors for the Other Clients was scant.
Insofar as it might be relevant, Mr Gangemi submitted the evidence permitted the Court to infer that three terms were included in the contracts between JP and the Other Clients: 1. JP would clean the Other Client's premises. 2. The price for cleaning the premises was fixed, irrespective of how long the job took. 3. While it was JP that was contracted to perform the cleaning and was responsible for the quality of the work undertaken, JP could perform the work either by its own employees or through the Subcontractors.
Again, with the exception of Franklins, the evidence was also quite general in relation to the business of the Other Clients. As will become apparent, the nature of those businesses assumed more importance after the decision in UNSW Global. Nevertheless, as I have recorded, JP ultimately did not make its foreshadowed application to file further evidence.
Mr Gangemi submitted that, while broadly expressed, Mr and Mrs Gallo's evidence was clearly intended to describe all of the arrangements which gave rise to the payments that were the subject of the Assessments.
For the Commissioner, Mr Rider referred several times to s 100(2) of the TAA to the effect that JP bore the onus of proving its case on its application for review. However, the Commissioner did not expressly challenge JP's various submissions to the effect that JP's evidence encompassed all of the arrangements that had given rise to payments that were the subject of the Assessments and that JP's business was, either by itself or by the Subcontractors, to provide out of hours cleaning services to Franklins and the Other Clients referred to in Mr and Mrs Gallo's evidence. By "out of hours" I mean (as I understood the parties to mean) out of business hours or hours when, in the ordinary course, the particular premises were open to the public. I infer that the Commissioner did not challenge these matters because he was properly mindful both of his obligations as a litigant under s 56 of the Civil Procedure Act 2005 (NSW) and as a model litigant pursuant to the Model Litigant Policy released on 1 July 2016 under New South Wales Premier's Memorandum 2016/03, because these matters were not seriously in issue.

EAC - the facts

The following is derived from the uncontested evidence of Mr and Mrs Gallo.
JP was incorporated on 22 October 2001.
The primary business of JP was to provide cleaning services to its clients.
Since the incorporation of the company, Mrs Gallo's role has been to oversee the preparation of the payroll, reconcile bank accounts, pay outstanding accounts, review accounts receivable and prepare business activity statements. Mr Gallo's role was to tender for and source clients when he saw advertisements or was contacted by them to tender for jobs or provide quotations for cleaning contracts.
By 2003, JP had been engaged to provide cleaning services in Jewel grocery stores. In 2003, the Jewel chain was purchased by Franklins. Since that time, JP has had three service agreements with Franklins, all in essentially similar terms (as to which, see further paragraphs [42] to [43] below).
In 2003 JP was providing cleaning services to Franklins in relation to 18 stores. By 2009, this had grown from 18 to 75 Franklins supermarkets throughout New South Wales.
During the period the subject of the Assessments, JP had what Mr and Mrs Gallo described as contracts to undertake cleaning services with these Other Clients: 1. the Picton Hotel; 2. the Ingleburn Hotel; 3. Macarthur Tavern; 4. Ceva Logistics, Villawood; 5. Miller Childcare; 6. Rose Hill Childcare; 7. Catholic Care, Miller; 8. Mirvac, Orange City Centre; 9. Moorebank Hotel; and 10. New Commercial Hotel.
Mr and Mrs Gallo's evidence in relation to the arrangements with the Other Clients was, on its face, not entirely consistent. Mrs Gallo's evidence was that apart from the Franklins Contract, JP "did not enter into written contracts with customers". Mr Gallo's affidavit, on the other hand, stated that "Some of the contracts with the other clients were by written agreement. Others were by the provision of a written quotation, oral agreement or through exchange of emails". Looking at the evidence as a whole, I am satisfied that what their evidence means and was the case, was that other than the Franklins Contracts, JP did not have formal, written agreements settled by solicitors with the Other Clients. In the strict legal sense, the Other Client Contracts between JP and the Other Clients were a mixture of wholly oral, or partly oral and partly in writing (e.g. oral acceptance of a quotation), or partly in writing and partly to be implied from conduct. The same conclusion applies to the contracts between JP and the Subcontractors.
It seems the practice was that Mr Gallo would provide the quotations and costs estimates for the cleaning services required by the Other Clients. He would do this by estimating the hours and product that he thought would be required to comply with the cleaning specifications sought by the Other Client. In doing so, one of the factors that he would take into account would be the hours in which the client's premises would be accessible, being night hours, early morning or after store closure. All of the work was out of ordinary business hours. There are references in the evidence to some jobs having 4.30am or 6.30am starts. It is also clear in the case of Franklins that large commercial scrubbers were used which, as a matter of common sense, would not be used when stores were open to members of the public.
Both Franklins and most of the Other Clients wanted to know the identity of the cleaners who would be undertaking the work. This was for security purposes as the cleaners worked outside trading hours and the Franklins or Other Client's employees needed to be notified so that they would give access to the premises to JP's staff or the Subcontractors.
JP's prices to the Other Clients were fixed based on the estimated hours required to do the specified work. Even when the Subcontractors were used, JP remained ultimately responsible to its client for the quality of the work that was done.
Particularly in the case of the Franklins stores, many of those stores were in non-metropolitan New South Wales. When this was combined with the fact that the cleaning in some of the stores was only two to four hours per clean, it was uneconomical and impractical for JP to send an employee from the Sydney metropolitan area to clean stores at, for example, Dubbo, Katoomba or Orange. In order to fulfil its obligation to clients in such situations, JP would advertise for local Subcontractors in the vicinity of the store to be cleaned.
Some of the Subcontractors were sole traders, others were companies. The Subcontractors engaged by JP would from time to time provide tax invoices for payment for the work that they had undertaken.
Due to the size of the areas to be cleaned and the cost of equipment, JP would provide the expensive machinery and cleaning products required for the sites. That large machinery included scrubbers and sweepers. The machinery was purchased by a subsidiary company of JP. JP employed area managers, who would train JP's employees and the Subcontractors (or the Subcontractor's employees) in the use of that large machinery. The area managers were also responsible for taking JP's employees or the Subcontractor's cleaners to an induction program and were the first port of call for client complaints.
The three Franklins Contracts were dated 28 July 2003, 1 August 2005 and 15 July 2009. They were in substantially the same terms. For present purposes it is sufficient to set out the relevant parts of the contract dated 15 July 2009 because that relates to most of the period covered by the Assessments. That contract was preceded by a letter from Franklins to Mr Gallo dated 16 March 2009 which stated: "This letter is to confirm that Franklins offer to JP Property Services Pty Limited is for a three (3) year contract with a two (2) year option to provide floor cleaning services to Franklins' 75 Supermarkets in NSW to commence on 6th April 2009."
The Franklins Agreement, prepared by Blake Dawson Waldron on behalf of Franklins, included: "PARTIES JP Property Services Pty Ltd CAN (sic) 074 776 962 (the "Contractor") Franklins Pty Limited ACN 096 722 904 ("Franklins") RECITALS A. Franklins wishes to engage the Contractor to perform the Services. B. The Contractor agrees to perform the Services on the terms set out in the agreement. OPERATIVE PROVISIONS 1. INTERPRETATION 1.1 Definitions The following definitions apply in this agreement: … "Personnel" means the officers, employees, agents and sub-contractors of the Contractor or any of its Affiliates. "Services" means the services described in schedule 1 and any additional services provided under clause 2.2. … 2. SERVICES AND TERM 2.1 Contractor to provide the Services The Contractor must provide or procure the provision of the Services continuously during the Term. … 2.3 Performance by Contractor group The Contractor must ensure that any of its employees, agents and contractors and any of its related bodies corporate and their employees, agents and contractors (whether or not they are Personnel) which perform obligations imposed on the Contractor by this agreement, do so strictly in accordance with this agreement. 3. HOW SERVICES ARE TO BE PROVIDED 3.1 Additional services Franklins may request the Contractor to provide additional services. Any additional services provided by the Contractor in response to such a request are taken to be part of the Services, and Franklins must pay for those additional services in accordance with schedule 2, unless otherwise agreed in writing. … 3.4 Personnel The Contractor may not engage sub-contractors, agents or other persons provide (sic) to the services and to perform it (sic) obligations under this agreement without the prior written consent of InterFranklins. 3.5 Standard of performance The Contractor must provide the Services: … (c) without limiting sub-paragraph (b), in compliance with the key performance indicators set out in schedule 4. 4. MANAGER'S STATUS 4.1 Independent contractor The Contractor is engaged as an independent contractor. Nothing in this agreement constitutes the Contractor as an employee, agent, partner or joint-venturer of Franklins or any of its related bodies corporate. … 4.3 Responsibility for employee and other benefits The Contractor is responsible for the following outgoings payable to or in respect of the Personnel: (a) remuneration and benefits, including superannuation contributions, annual leave, sick leave, long service leave, overtime and penalty rates and provision of accommodation and sustenance; (b) imposts or levies imposed by law, such as work care levies, group tax, payroll tax, fringe benefits tax, superannuation guarantee charges; (c) payments upon termination of service (including on redundancy); and (d) any other rights, Claims or entitlements to which the Personnel is or may become entitled. … SCHEDULE 1 (Clause 1.1 - "Services") SERVICES The Services comprise: The Contractor will provide to Franklins cleaning services, together with any other services agreed from time to time between Franklins and the Contractor ("Services") The contractor must clean the site in a thorough and professional manner to the reasonable satisfaction of Franklins and in accordance with the reasonable directions of Franklins and in accordance with the Cleaning Specifications attached hereto. Franklins may amend the cleaning specification from time to time by providing the Contractor written notice. The Contractor must provide the Services during the hours (if any) prescribed by Franklins and notwithstanding the incidence of any Public Holiday. … SCHEDULE 4 (Clause 3.5(c)) KEY PERFORMANCE INDICATORS 1. Standards of Work 1. Provide Franklins with electronic copies and paper copies of all Material Safety Data Sheets (MSDS) or similar government endorsements indicating that chemicals & appliances are safe and appropriate for use where food and groceries are stored, prepared, transported and retailed. 2. Proof of current Public Liability Insurance for ten million dollars ($10,000,000). 3. Proof of OH&S training / system to be used by Cleaners. 4. Where the contractor engages sub-contractors, they shall a) inform Franklins of the existence of the subcontracting before provision of services; b) ensure the qualification, insurance and standard of work by the subcontractor is the same as that specified in the contract with Franklins. 5. Cleaning service is to be performed in accordance with the specifications listed on the following pages."
The 2009 Franklins Contract listed 78 Franklins' stores. While most of these were in metropolitan Sydney, there were a number in country locations such as Muswellbrook, Orange, Dubbo, Yass and Wagga Wagga. Because they are relevant to certain factual conclusions which I have reached in these reasons, the cleaning specifications under the 2009 Franklins Contract are reproduced as Schedule A to these reasons.

EAC - the law

Division 8 of the PTA includes (emphasis added): "Division 8 Employment agents 36A Division not applicable to wages paid to common law employees This Division does not apply in relation to wages that are exempt wages under section 66B and clause 13B of Schedule 2. 37 Definitions (1) For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an "employment agent") procures the services of another person (a "service provider") for a client of the employment agent. (2) However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client. (3) In this section: "contract" includes agreement, arrangement and undertaking. 38 Persons taken to be employers For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer. 39 Persons taken to be employees For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent. 40 Amounts taken to be wages (1) For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract: (a) any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract, (b) the value of any benefit provided for or in relation to the provision of services in connection with the employment agency contract that would be a fringe benefit if provided to a person in the capacity of an employee, (c) any payment made in relation to the service provider that would be a superannuation contribution if made in relation to a person in the capacity of an employee. (2) Subsection (1) does not apply to an employment agency contract to the extent that an amount, benefit or payment referred to in that subsection would be exempt from payroll tax under Part 4 (other than under section 50 or Division 4 or 5 of that Part), or Part 3 of Schedule 2 (other than clause 5 or 13A), had the service provider performed the services as an employee of the client, if the client has given a declaration to that effect, in the form approved by the Chief Commissioner, to the employment agent. 41 Liability provisions Subject to section 42, if an employment agent under an employment agency contract: (a) by arrangement procures the services of a service provider for a client of the employment agent, and (b) pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract, no other person (including any other person engaged to procure the services of the service provider for the employment agent's client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client…."
The definition of an EAC in s 37(1) of the PTA has been considered in detail by White J in UNSW Global and in his Honour's earlier decision in Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 ("Freelance Global"). I respectfully agree with, and gratefully adopt, his Honour's analysis in those two cases.
In Freelance Global after considering various definitions of "procure", White J concluded: "115 I think the better view is that "procure" when used in s 3C and s 37 means more than facilitate or enable and requires that the employment agent cause the services of a contract worker (or service provider) to be provided to the employment agent's client, with the expenditure of care or effort by the employment agent. I do not accept that this can only be done if the employment agent recruits the contract worker or service provider for the client. … 120 It is not essential that Freelance's efforts be the sole cause of the provision of services by the beneficiary contractors to its clients."
In the case before me, JP sought to call in aid the legislative history which led to s 37 in its current form. That history was also considered by White J in Freelance Global, and his Honour concluded: "149 Freelance submitted that this legislative history demonstrates that it was Parliament's intention that the employment agents provision should apply only to employment agents or labour hire firms as that expression is commonly understood, meaning, it was said, persons who source, vet and supply persons, whether employees or independent contractors, to clients of the employment agent or labour hire entity. Undoubtedly it was Parliament's intention that the amendments should apply to such persons. It does not follow that that was the only intended application of the provision. 150 In my view, the provisions were not intended to apply only to employment agents or labour hire firms as those expressions are said to be generally understood. That appears from the text of s 3C and s 37 and by the language used in other legislation at the relevant times regulating the licensing of employment agents. 151 If s 3C (or s 37) were intended to apply only to the activities of the employment agents, as that expression is said to be commonly understood, subs (1) would not have defined an "employment agent" for the purposes of the Act by reference merely to any person who by arrangement procured the services of another for a client of the employment agent etcetera. The section could simply have provided that an employment agency contract was one under which an employment agent procured the services of another for a client of the employment agent etcetera. If Parliament thought that there was not a common understanding of what an employment agent is, then there was a definition readily to hand in s 702 of the Industrial Relations Act 1991 (NSW) (and formerly in s 145B of the Industrial Arbitration Act 1940 (NSW)) which provided that a person carried on the business of a private employment agent if he acted as an agent for the purpose of finding or assisting to find a person to carry out work for a person seeking to have work carried out, or finding or assisting to find employment for a person seeking to be employed, whether pursuant to a contract of employment or otherwise (see later s 60P introduced to the Fair Trading Act 1987 in 2002). 152 I do not consider that the fact that the activities of employment agents or labour hire firms was an intended focus of the provisions justifies the conclusion that it was the only intended focus of the provisions such that the word "procure" should be construed as applying only to the activities of employment agents or labour hire entities in sourcing, vetting and supplying persons to clients. Freelance carries on the last activity, that is, supplying persons' services to clients on Freelance's behalf. It procures those services by arranging or causing the performance of work by the contractors for the client to occur through the contracts it enters into with its clients and the business structure provided to its contractors."
One submission - which White J did not have to resolve in Freelance Global - was to the effect that the construction of s 37 which his Honour had favoured would give the provisions an operation that was so far reaching that it could not possibly have been intended by the legislature. A number of hypothetical examples were put to his Honour, including: "157 Other hypothetical examples of the possible reach of s 3C and s 37 were raised during the course of oral submissions. They included the case of a building contractor who arranges the services of subcontractors and receives payment from the principal which includes payment in respect of the services provided by the subcontractors. Would a contractor be required to include in its taxable wages the amounts paid by the contractor to the subcontractors? Would a solicitor who retains counsel for the solicitor's client, and as a result receives from the client payment of counsel's fees which are then paid to counsel, be obliged to include the amount of counsel's fees in the solicitor's taxable wages? Would a supplier of brochures who engaged a printer to print the brochures and was reimbursed for the expense by its customer be obliged to include the payment made to the printer in its taxable wages?"
In UNSW Global, his Honour returned to and resolved the scope of s 37. His Honour began by identifying the mischief against which the EAC provisions were directed and the consequences of a literal construction: "41 I accept the plaintiff's submission that the mischief against which the employment agency contract provisions was directed 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. The mischief to which the provisions were directed was not where the service provider was a genuine independent contractor whose services were provided to a client through an intermediary. Although the legislation did not use the language of the Pay-roll Tax (Amendment) Act 1985 which defined an employment agent as one who procured the services of a person for another under an arrangement where the worker, although not becoming an employee of either the agent or the client, carried out duties of a similar nature to those of an employee, that was the very mischief to which the 1998 provisions were directed, namely to address the consequences of the first instance decision in Drake Personnel. That this was the mischief sought to be remedied is apparent from the events that led to the amendments and the Second Reading speeches. … 49 This is not a case in which a literal construction fails to address the mischief that Parliament was concerned to address, but rather a case in which the literal words used to address that mischief 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 not to 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])."
His Honour ultimately concluded (emphasis added): "62 That is not to say that the scope of the employment agency contract provisions should not be confined by a purposive construction if the text of the provisions so permits. The argument advanced by UNSW Global was not advanced in Freelance nor CXC Consulting. 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. 63 Whether the worker is to be characterised as an employee or a contractor, the employment agency contract provisions were intended to apply to cases where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client's business. The mischief apprehended by the legislature following the first instance decision in Drake Personnel was that the supply of temporary personnel by a labour hire company resulted in the avoidance of payroll tax because it muddied the waters as to whether the individuals concerned might be classified as independent contractors, although they would be serving the same function for the client as its employees. 64 One of the hallmarks of an independent contractor is that he or she carries on his or her own business. But sometimes that is done, or is said to be done, by the individual, in substance, working for the client in the same way as would an employee of the client. Where the services of the individual are provided through the intermediary, that is, the employment agent, to help the client conduct its business in the same way, or much the same way, as it would do through an employee, then the arrangement is within the intended scope of the section. 65 But where the services, although provided for the client's benefit, are not provided by the service provider working in the client's business, the arrangement does not fall within the intended scope of the provision. In substance, when the Chief Commissioner's oral submissions are read with his contentions referred to at [26] above, this was conceded by the Chief Commissioner."

EAC - the parties' submissions

Both parties' submissions primarily focused on JP's arrangements with Franklins - although I understood the arguments were also intended to apply to the Other Clients.
JP's arguments in chief may be summarised as: 1. It was not an "employment agent" and its arrangements with Franklins, the Other Clients and Subcontractors were not EACs. 2. The legislative history supported the conclusion that the EAC provisions were "anti-avoidance" provisions which should be read as such. It was not the intention of the EAC provisions to capture bona fide subcontracting arrangements. Rather, it was the intention of those provisions to tax payments made by an employment agent or labour hire firm to temporary staff or workers (who perform work of the kind normally undertaken by an employee). 3. The present case did not turn on the meaning of "procure". 4. In the present case it was what JP procured that mattered. JP did not procure services, JP procured results: see World Book (Australia) Pty Ltd v Commission of Taxation (1992) 27 NSWLR 377 ("World Book"). 5. Even if it did procure services, they were for JP itself (to enable it to fulfil its obligations to its clients) and not for the clients. This submission was put before White J's decision in UNSW Global. 6. Accepting that UNSW Global should be applied in the current case, it was clear from the terms of the relevant agreements that the Subcontractors were not working in the business of Franklins or the Other Clients but were conducting their own business of cleaning. 7. Franklins and the Other Clients were not in the cleaning business. Their businesses were: 1. retail supermarket chain; 2. various hotels and taverns; 3. childcare providers; 4. trucking services (freight management and logistics); 5. disability employment services; and 6. property ownership and management. 1. None of the businesses referred to in the preceding sub-paragraph appeared, on their face, to be of the kind that provided cleaning services to their customers. The cleaning was conducted at night, outside the ordinary hours of business, and the cleaners were not integrated within the business of Franklins or the Other Clients nor provided services that would ordinarily be provided by the clients themselves to their customers. 2. JP was a bona fide independent contractor towards its clients and the Subcontractors were bona fide independent contractors of JP.
The Commissioner's arguments may be summarised as: 1. The EAC provisions were to be construed according to their terms and not to be constrained by their legislative history: see Freelance Global at [149]-[152]. 2. Section 37 of the PTA requires there to be a contract, widely defined as "whether formal or informal and whether express or implied" and including an "agreement, arrangement and undertaking". The Franklins Contract in its terms permitted and required JP to procure the provision of services to Franklins and was, therefore, clearly an EAC. 3. In relation to the Other Clients and Subcontractors, JP had failed to prove the terms of the relevant agreements and had therefore failed to discharge its onus that those agreements were not EACs. 4. To the extent the Court could identify the terms of the arrangements between JP and the Subcontractors, they were for the provision of services to enable JP to fulfil its obligation to provide services to its clients. Therefore, those contracts and arrangements were also EACs. JP procured the services of the Subcontractors for its clients by producing them by endeavour. That included providing the supervision of the regional managers, providing a training induction program, monitoring the Subcontractors' performance and generally having ultimate responsibility for the satisfactory performance by the Subcontractors of their work. 5. Insofar as the Subcontractors may have been providing their services to JP, they nonetheless also provided services to JP's clients. This was identical to the circumstance considered by White J in Freelance Global: "173 I accept the Chief Commissioner's submissions that the individual workers/contractors supplied services to Freelance by serving the needs of its clients (Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641 at 652). Adapting the language of the High Court in that case, by attending at the site of Freelance's client, a contractor supplies services to Freelance for the purposes of its business, notwithstanding he also at the same time supplies the same services to the client for the purposes of the client's business (Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788; (2005) 222 ALR 599 at [223]-[226]; DSG Pty Ltd v Victorian WorkCover Authority [2008] VSC 42; (2008) 20 VR 514 at [41], [67], [90]-[91], [94])." 1. The evidence, such as it was, demonstrated that JP procured services and not results. It is clear from the terms of the Franklins Contract. In relation to the Other Clients, the cleaned premises resulted from the services of the Subcontractors procured for its clients by JP. 2. The decision in UNSW Global required the Court to undertake a factual examination to determine what was the ordinary conduct of each client's business and whether the services procured by JP were carried out in the ordinary conduct of each client's business. The Commissioner maintained his submission that JP had failed to discharge its onus because JP had not proved facts which demonstrated that the cleaning services it procured for its clients were not carried out "for" the clients as that term was to be understood in the light of UNSW Global. 3. It was to be expected that part of Franklins' business was to sell both fresh and packaged food. Pursuant to the Food Act 2003 (NSW) (the "Food Act"), Franklins had a statutory obligation to keep its supermarkets clean. Therefore, the ordinary conduct of its business implicitly included the cleaning of its supermarkets and the cleaning services JP procured for Franklins were therefore carried out in the ordinary conduct of Franklins' business. The same point could be made in relation to hotels and taverns and childcare centres which provided food (noting the broad definitions of "food business" and "sell" in the Food Act). 4. In UNSW Global, factors which persuaded the Court that the experts whose work was at issue were not working in and for the conduct of the client's business included that the experts provided one off reports, did their work at a time and place of their choosing and were not directed or controlled by the client. By contrast, the cleaners in these proceedings were engaged to provide regular, ongoing services, the services were to be provided at the client's premises at days and times dictated by the client and, at least in relation to Franklins, were subject to a degree of control by reason of the detailed specifications set out in the Franklins Contract. It did not matter that the Subcontractors were conducting their own businesses and were not part of the workforce of the client: see UNSW Global at [64]. It was therefore not determinative whether the services were provided by an independent contractor. What was relevant was whether the clients used a third party to provide personnel to conduct or perform a function for their business in the same way as would an employee of that business. All of JP's clients (other than perhaps "offices"), ordinarily required a cleaning function because their premises had to be kept clean. The services procured by JP enabled its clients to conduct their businesses functionally as they would if they used an employee cleaner. 5. The analysis in the preceding sub-paragraph also answers JP's contention that its clients were not in the cleaning business. 6. Just because the cleaners worked outside the ordinary hours of JP's clients' businesses, it did not mean that they did not work "in" the clients' businesses. It could be inferred that Franklins' business operated outside the hours that supermarkets were open to the public for the purposes of taking deliveries and the like. Therefore, the cleaners worked in Franklins' business during ordinary hours - even if that was before or after its supermarkets were open to the public. The same could be inferred in relation to JP's other clients.
JP's submissions in reply in relation to the application of UNSW Global may be summarised as: 1. JP accepted the Commissioner's analysis of UNSW Global insofar as it suggested that the relevant services, to satisfy the EAC provisions, had to involve work that would otherwise have been done by the client's employees and carried out in the client's business, as distinct from for the client's benefit. However, JP took issue with the third matter identified by the Commissioner: that the services were provided in the "ordinary" conduct of the client's business. JP drew attention to the fact that White J's language in UNSW Global, at [62], referred to the services being "in and for the conduct of the business", which JP submitted was different from being provided "in the ordinary conduct of the client's business". JP submitted that the Commissioner's formulation led to a broader application of the EAC provisions than UNSW Global, properly understood, warranted. 2. JP took issue with the Commissioner's reliance on the Food Act. JP complained that it was not admitted that its clients were in the "food business" as defined by the Food Act and invited the Court to take judicial notice of the fact that, even if they were, they were not only in that business. The Court was invited to take judicial notice of the fact that supermarket chains, hotels and taverns provide more than merely food. It was in this context that JP complained that it had not adduced evidence to demonstrate the fact that the plaintiff and its subcontractors were not engaged or contracted to clean any of the food handling areas such as the delicatessen, cool rooms, seafood, and bakery areas. It was said that evidence had not been adduced because the Commissioner had not raised the submission in any of its previous filings or submissions. However, as I have already noted, despite foreshadowing the possibility of seeking leave to file additional evidence on this point, JP ultimately did not do so. 3. Even if Franklins and some of the Other Clients were in the "food business" (which was not admitted), the cleaning of their premises was not for the "conduct" of those businesses. The conduct of their businesses was the sale of various goods, services or other products and the cleaning of their premises was not "for the conduct" of those businesses. The cleaning was akin to an activity that was ancillary or incidental to the conduct of the business. 4. If the Commissioner's interpretation was correct - that the EAC provisions covered a service that was provided in the ordinary course of the conduct of a client's business - then UNSW Global would have been decided differently. The hiring of experts by law firms for the purposes of trials could be categorised as something that happens within the course of the lawyers' ordinary business. However as UNSW Global found, such experts were not hired "in and for the conduct" of the business of the lawyers. 5. Even if a law required that an entity conducting a business did various acts for the purposes of the business, this did not mean that the doing of those acts was "in and for the conduct" of that business. Such activities would instead be ancillary or incidental to the conduct of the business. The cleaning of JP's clients' premises was not "for the conduct" of those clients' businesses. 6. Insofar as it was suggested that JP had not discharged its onus as to the facts about the cleaning services, the Court could infer, from the names and descriptions of the Other Clients (see paragraphs [34] and [53(7)] above) as to what those businesses entailed. This would be sufficient for the Court to conclude that the cleaning of their premises was not "for the conduct" of those businesses. 7. The circumstances of the experts in UNSW Global did not constitute indicia for all purposes. Rather, they were findings of fact that supported White J's conclusion in that case that the experts were not working "in and for the conduct of the business" of the lawyers who retained them. In the present case it was the type of cleaning services offered in the context of the particular businesses serviced by JP or its Subcontractors that demonstrated that the cleaning services were not "in and for the conduct" of those businesses. 8. It did not logically follow that just because JP's clients used JP or its Subcontractors to provide cleaning services, then those were services that could have been provided by an employee of the clients. 9. The evidence demonstrated that the cleaning activities were undertaken outside the hours in which the various clients were open to the public. Given that the clients' businesses where the various courses of conduct involving the supply of goods, services or other products, the cleaning services provided outside of hours when the businesses were open to the public were not "in" the clients' businesses.

EAC - resolution - what has JP proven?

It is convenient to begin the resolution of the issues in this case by considering the Commissioner's submission - made at several points of the argument - that JP had failed to discharge its onus to prove a number of matters essential to demonstrating that the relevant agreements or arrangements were not EACs. The Court has made the findings of fact set out in paragraphs [27] and [29] to [44] above. Taking those into account, the two key areas identified were the terms of the various agreements (other than the Franklins Contract) and the nature of Franklins' and the Other Clients' businesses. This submission can most easily be dealt with by asking this question: what has JP proven about those matters?
In relation to Franklins, there is no doubt that JP has proven the terms of the Franklins Contract.
In relation to the Other Clients, I do not accept the Commissioner's argument that JP's case must fail because JP has failed to prove with precision the terms of the Other Client Contracts. JP chose to present its evidence in a global way. Fairly read, that evidence was that its agreements with its Other Clients shared a number of common features. The Commissioner did not object to the admissibility of that evidence, as far as it went. I am satisfied that JP has proven the terms or features of the Other Client Contracts sufficiently for the Court to apply s 37 of the PTA to those arrangements or agreements. This approach is also supported by the very wide definition of "contract" in s 37 itself (see paragraph [45] above). I find that each of those contracts was for the provision of out of hours cleaning services to the specifications of the Other Client and that each of those contracts were to the effect that: 1. JP would clean the Other Client's premises to the Other Client's specifications. 2. The price for cleaning the premises was fixed, irrespective of how long the job took. 3. While it was JP that was contracted to perform the cleaning and was responsible for the quality of the work undertaken, JP could perform the work either by its own employees or through the Subcontractors.
The point made in the preceding paragraph also applies to the proof by JP of the terms of the Subcontractor Contracts. I am satisfied that each of those contracts included a term to the effect that the Subcontractor would provide those out of hours cleaning services which JP was bound to provide under the Franklins Contract or the relevant Other Client Contract.
The other critical evidentiary area which emerged from the decision in UNSW Global concerns evidence of the nature and operation of Franklins and the Other Clients businesses. I will deal with what the Court finds in relation to those matters in paragraphs [78], [89] and [92] below.

EAC - resolution - all matters other than those raised by UNSW Global

In relation to each of: 1. the Franklins Contract; 2. JP's Other Client Contracts, being those with: 1. the Picton Hotel; 2. the Ingleburn Hotel; 3. Macarthur Tavern; 4. Ceva Logistics, Villawood; 5. Miller Childcare; 6. Rose Hill Childcare; 7. Catholic Care, Miller; 8. Mirvac, Orange City Centre; 9. Moorebank Hotel; 10. New Commercial Hotel; and 1. the Subcontractor Contracts, the Court is satisfied that each of those contracts is, for the purposes of s 37 of the PTA, a contract, whether formal or informal and whether express or implied, under which JP procures the services of another person, being the Subcontractor.
In the case of the Franklins' Contract (see paragraph [43] above), that conclusion is plain from the terms of the contract itself. The contract identifies what is being provided as services and expressly permits JP to procure those services to be provided through subcontractors (see, for example, clause 2.1).
In the case of the Other Client Contracts and the Subcontractor Contracts, that result follows from the findings in paragraphs [58] and [59] above.
Having expressed those general conclusions, I will next consider some of the specific arguments raised by the parties.
For the reasons given by the Commissioner (see paragraph [54(1)] above), I accept that Division 8 of the PTA is to be construed in accordance with its terms and not by reference to historical analysis of preceding legislation.
I do not accept JP's arguments that the various contracts or arrangements are not to procure services but to procure results. Quite apart from the express language of the Franklins Contract, in relation to the other agreements it would, in my opinion, be completely unreal to categorise those contracts or arrangements as being for the provision of results rather than services. In this regard I again accept the arguments put by the Commissioner (see paragraph [54(6)] above).
The choice 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. What is important for present purposes is that I am not satisfied that either the Franklins Contract or any of the other contracts or arrangements are properly to be characterised solely as contracts or arrangements to procure a result as opposed to services.
Beyond recognising the different types of contract, the Court of Appeal's decision in World Book does not assist JP. In that case a contract under which an encyclopaedia salesman was paid a commission on sales was held not to be a contract for the "labour of the person to whom the payments are made" because it was a contract to achieve a result. The contract in question did not require the salesman to do anything at all. 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.
A similar approach disposes of JP's submission that the services that are procured are provided for or to JP (in order to enable it to fulfil its obligations) rather than to the clients. Again, the choice is not exclusively binary. I accept the Commissioner's argument on this point (see paragraph [54(5)] above) and respectfully adopt the same approach taken by White J in UNSW Global at [173].

EAC - resolution - UNSW Global

Given the conclusions which I have reached in paragraphs [61]-[69] above, if I was deciding this case on the basis of the law as it stood before White J's decision in UNSW Global, then JP may well have failed. However, in my respectful opinion, that decision puts a substantially different complexion on the present proceedings.
In applying his Honour's decision, I begin by reminding myself that it is the words "for a client" in s 37 of the PTA that I am applying. White J's exposition of the proper interpretation of those words - their legal meaning - is exactly that and is not to be treated as a statutory formulation which replaces the words of s 37 itself.
Applying UNSW Global, I conclude that a contract which otherwise meets the description in s 37(1) will be an EAC for the purposes of that section if the services are procured "for a client of the employment agent" in the sense that they are procured in and for the conduct of the business of the employment agent's client. That 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?
Furthermore, while some of the indicia usually applied to determine whether a person is an employee or independent contractor may assist in answering the question that I have just posed, I accept the Commissioner's submission (see paragraph [54(9)] above) that the EAC provisions may apply to either employees or independent contractors (see UNSW Global at [63] quoted in paragraph [51] above). Whether a service provider is an employee or independent contractor of the employment agent is not determinative of whether the EAC provisions apply.
I do not propose to gloss s 37 or White J's exposition of it with any further formulations of my own. To do so would only give more scope for yielding to the temptation to give statutory effect to judicial exegesis. That admonition leads me to accept JP's criticism of the Commissioner's submission that the EAC provisions will be satisfied if, inter alia, the services are provided "in the ordinary conduct of the client's business". In my view, that goes beyond the legal meaning of "for a client" in s 37 as construed by White J. This is because "in the ordinary conduct of the client's business" eradicates the distinction carefully drawn by White J between services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee as opposed to services which, although provided for the client's benefit, are not provided by the service provider working in the client's business. The latter could nonetheless include services provided "in the ordinary course of the client's business".
I do accept the Commissioner's submission that the application of UNSW Global does require careful attention to both the service and the business of the client to whom it is being provided. It involves fact sensitive analysis of each of the service and the business and of the connection between the two. For example, circumstances may arise where services provided to Business A will meet the description of being services provided to help it conduct its business in the same way, or much the same way, as it would through an employee. The same services provided to Business B may not meet that description, even though in broad terms Businesses A and B are the same types of business.
It follows from the preceding paragraph that I also accept the potential force of the Commissioner's submission about the adequacy of what JP has proven about the businesses of Franklins and the Other Clients. However, it will become apparent below that the fundamental factual reason for the conclusion I have reached is that the services provided by JP and its Subcontractors are out of hours cleaning services.
I will first deal with the Franklins Contract. There was no dispute that the services provided by the Subcontractors were those required to be provided by JP under the Franklins Contract. Those services are set out with some precision in Schedule A. In my view, they are not services provided "for" Franklins in or for the conduct of its business.
It is sufficient for present purposes that JP has proven that Franklins operated supermarkets. I consider that it is common knowledge and not reasonably open to question in NSW (see s 144 of the Evidence Act 1995 (NSW)), and I find, that Franklins supermarkets are businesses which sell mixed goods including food and produce to the general public from premises which generally include aisles between shelves or islands on which the items for sale are displayed. On the same basis I also find that they do not themselves offer or sell cleaning services to the public, to the extent that may be relevant.
The cleaning services provided by JP or the Subcontractors to Franklins are those set out in Schedule A. The services are provided outside the hours when the stores are open to the public. As such, I accept JP's submission that while they are incidental to Franklins' business, they are not in or for the conduct of Franklins' business as I have described it in the preceding paragraph. In providing the services I am not satisfied that the Subcontractors are working in Franklins' business.
I am fortified in this conclusion by what I consider to be a useful contrast derived from the long line of slip and fall cases in supermarkets: see, for example, the decision in Harris v Woolworths Ltd [2010] NSWSC 25 (affirmed on appeal in Harris v Woolworths Ltd [2010] NSWCA 312) and the authorities discussed in that case. It is well known that an important means whereby a supermarket meets its duty of care to shoppers and others is to have an effective system for detecting and cleaning spills during shopping hours. It is a common experience when shopping in a supermarket to hear an announcement calling a cleaner to a spill in a particular aisle of the supermarket. In my respectful view, such a cleaner is working in the supermarket's business because the cleaner is doing so during the hours the supermarket is open to sell goods to the public and discharges a function integral to the safe and lawful operation of the supermarket during that time. If JP had contracts to supply such a cleaning service during the hours the supermarket was open to the public, then such contracts would be EACs.
In reaching the conclusion which I have just expressed, I reject two specific arguments put by the Commissioner.
The first is the Commissioner's submission based on the Food Act. Because I consider it to be common knowledge in NSW and not reasonably open to question, the Court finds that the business of Franklins included selling both fresh and packaged food such that they were "food businesses" as defined in s 6 of the Food Act: "6 Meaning of "food business" In this Act, food business means a business, enterprise or activity that involves: (a) the handling of food intended for sale, or (b) the sale of food, regardless of whether the business, enterprise or activity concerned is of a commercial, charitable or community nature or whether it involves the handling or sale of food on one occasion only."
Section 21(1) of the Food Act provides that "a person must comply with any requirement imposed on the person by a provision of the Food Standards Code in relation to the conduct of a food business or to food intended for sale or food for sale". Section 4 defines the Food Standards Code as "the Australia New Zealand Food Standards Code as defined in the Food Standards Australia New Zealand Act 1991 of the Commonwealth, as modified in accordance with regulations referred to in section 140 or 141". Standard 3.2.2 of that Code ("Food Safety Practices and General Requirements") as it applied during the time covered by the Assessments included: "19 Cleanliness (1) A food business must maintain food premises to a standard of cleanliness where there is no accumulation of - (a) garbage, except in garbage containers; (b) recycled matter, except in containers; (c) food waste; (d) dirt; (e) grease; or (f) other visible matter. (2) A food business must maintain all fixtures, fittings and equipment, having regard to its use, and those parts of vehicles that are used to transport food, and other items provided by the business to purchasers to transport food, to a standard of cleanliness where there is no accumulation of - (a) food waste; (b) dirt; (c) grease; or (d) other visible matter. 20 Cleaning and sanitising of specific equipment (1) A food business must ensure the following equipment is in a clean and sanitary condition in the circumstances set out below - (a) eating and drinking utensils - immediately before each use; and (b) the food contact surfaces of equipment - whenever food that will come into contact with the surface is likely to be contaminated. (2) In subclause (1), a 'clean and sanitary condition' means, in relation to a surface or utensil, the condition of a surface or utensil where it - (a) is clean; and (b) has had applied to it heat or chemicals, heat and chemicals, or other processes, so that the number of microorganisms on the surface or utensil has been reduced to a level that - (i) does not compromise the safety of the food with which it may come into contact; and (ii) does not permit the transmission of infectious disease."
Standard 3.1.1 defines "food premises" as: "food premises means any premises including land, vehicles, parts of structures, tents, stalls and other temporary structures, boats, pontoons and any other place declared by the relevant authority to be premises under the Food Act kept or used for the handling of food for sale, regardless of whether those premises are owned by the proprietor, including premises used principally as a private dwelling, but does not mean food vending machines or vehicles used only to transport food."
The Commissioner did not develop this submission in any detail, but in my view it does not assist the Commissioner for at least two reasons.
First, assuming in the Commissioner's favour that the entire premises of a Franklins supermarket were "food premises" (even those not obviously connected with storing or selling food such as the offices in the premises), I accept JP's submission that a service performed to enable a client business to comply with its legal obligations need not be provided by someone working in the client's business. It remains a factual rather than legal question. Putting it another way, it does not necessarily follow as a matter of abstract principle that in every case a person providing a service which enables a business to comply with a legal obligation must be working in the client's business as opposed to providing a service for its benefit. In this case the fact that JP's or the Subcontractors' services allowed Franklins to comply with its legal obligations under the Food Act does not detract from the Court's factual characterisation of such out of hours services as ancillary or incidental to Franklins' business.
Second, the work to be performed is set out in Schedule A. As a practical matter, with one minor exception, no area specifically dedicated to the storage and service of food is referred to. In saying this I do not overlook the likelihood that the "general trading area" will include the aisles around, for example, display islands of fruit and vegetables. However, the tasks in Schedule A clearly do not include cleaning the floor or food preparation surfaces in somewhere like a delicatessen area. I infer from the entirety of Schedule A that such areas would have been separately mentioned. Such specification would also be obviously required to alert someone like JP that different cleaning chemicals may be required that were safe to be used in food preparation areas. Looking at the tasks in Schedule A in their totality (and having regard to their frequency), I am satisfied that insofar as JP's services to Franklins' enabled it to comply with its obligations under the Food Act, it was incidental to Franklins' business and incidental to what was a general cleaning task. While the Commissioner does not bear the onus, the Commissioner has not pointed to any evidence that JP's services were directed in any specific way to food storage or service areas.
The one possible exception, which I mention for completeness, is the fortnightly cleaning of the bollards and metal bump rails along dairy and freezer cabinets. Compared to most of the tasks in Schedule A, fortnightly is relatively infrequent. Furthermore, the areas to be cleaned (bollards and bump rails) are physically incidental to, rather than directly involved in, the storage or service of food.
The second argument deployed by the Commissioner was that one would infer (and the Court does find, because it is common knowledge and not reasonably open to question) that Franklins' premises would have been open for the purposes of receiving deliveries, stacking shelves and the like out of the hours that the premises were open to the public. The Commissioner submitted that these were Franklins' ordinary hours and the cleaners who worked at those times were working "in" Franklins' business.
I do not accept that argument. The conclusion I have reached is based upon a combination of the nature of the services provided and the hours at which they are provided when considered in the context of Franklins' business as I have described it in paragraph [78] above. That conclusion does not change when it is recognised that Franklins' premises are open (but not to the public) at other hours for other purposes such as receiving goods and stacking shelves. Those things are, the Court infers, tasks done by Franklins' employees and are integrally part of Franklins' business of selling goods to the public. But does that not mean that because the cleaning is happening at that time, then the cleaners are working in Franklins' business ("for Franklins" in the requisite sense) in the same way as the loading dock personnel or shelf stackers.
In relation to the Other Client Contracts, the Court is satisfied that JP has established that their businesses were: 1. Various hotels and taverns (see paragraph [34(1) - (3), (9), (10)] above); 2. Childcare providers (see paragraph [34(5) and (6)] above); 3. Trucking services (freight management and logistics) (see paragraph [34(4)] above); 4. Disability employment services (see paragraph [34(7)] above); and 5. Property ownership and management (see paragraph [34(8)] above).
The Court infers, to the extent it may be relevant, that as a matter of common knowledge and not reasonably open to question, that businesses of those types do not provide cleaning services to their customers or clients. As I have already said, the Court is also satisfied that the services JP or its Subcontractors provided were out of business or office hours general cleaning services. Accepting the nature of those businesses at the high level of generality proven by JP as recorded in the previous paragraph, the Court is satisfied that JP's cleaning services were not services provided in or for the conduct of those businesses both because they were cleaning services (i.e. not something provided by them or expected to be provided by them as part of their businesses) and they were provided out of hours. The Subcontractors were not working in those businesses in providing the cleaning services.
The Commissioner repeated (albeit perhaps not with the same vigour) its submissions in relation to the Food Act in relation to the hotels and taverns and, more speculatively, in relation to the childcare providers insofar as they might provide meals to the children in their care. The Commissioner accepted it was unlikely the argument would run for the businesses which were essentially offices (which the Court concludes describes the businesses referred to in paragraphs [91(3)-(5)] above).
For the same reasons given in relation to Franklins (see paragraphs [86] and [87] above), I do not accept that the argument based on the Food Act applies to the hotels, taverns and childcare providers. There was evidence of the services provided to the Picton Hotel: this is set out in Schedule B. Significantly, no kitchen area is specified in the areas required to be cleaned, nor any other area that would appear in the ordinary course to involve food storage, preparation or service. Although the Commissioner does not bear the onus, nor has the Commissioner pointed to anywhere in the evidence in relation to the Other Client Contracts that suggests in terms that areas that would be subject to the Food Act were cleaned by the Subcontractors.

Remission of penalty tax

Because of the conclusion I have reached that none of JP's contracts or arrangements with either its clients or the Subcontractors is an employment agency contract for the purposes of s 37(1) of the PTA, it follows that the Assessments will be set aside. JP will thereby also be relieved from the obligation to pay the penalty tax included in the Assessments. It is therefore unnecessary for the Court to consider JP's case that, assuming the Assessments were allowed to stand, penalty tax should in any event not have been levied.

Conclusion

The orders of the Court are: 1. Allow the plaintiff to make the application for review constituted by these proceedings by filing the summons on 23 October 2015. 2. Pursuant to s 101(1)(a) of the Taxation Administration Act 1996 (NSW), payroll tax assessments number 8196097, 8196104, 8195108, 8196110 and 8196112, all dated 10 April 2015 and addressed to JP Property Services Pty Ltd are revoked.
The Court will hear the parties on the question of costs. JP PROPERTY SERVICES SCHEDULE A (127 KB, pdf) JP PROPERTY SERVICES SCHEDULE B (135 KB, pdf)

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: 12 October 2017

Australia and New Zealand Food Standards Code Civil Procedure Act 2005(NSW)

Industrial Relations Act 1991(NSW)

Industrial Arbitration Act 1940(NSW)

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