Loan Market Group Pty Ltd v Chief Commissioner of State Revenue; Loan Market Pty Ltd v Chief Commissioner of State Revenue

The legislative scheme

1. Payroll tax is imposed on all taxable wages (s 6 of the Act).
2. "Taxable wages" is defined in s 10 of the Act to mean "wages that are taxable in this jurisdiction". Under s 11 of the Act, wages are taxable in NSW if, among other things, the "wages are paid or payable by an employer for or in relation to services performed by an employee wholly [NSW]". The expressions "paid" and "payable" have an extended meaning, so that they include amounts paid or payable in the ordinary meaning of those terms and also amounts provided, conferred or assigned (s 3 of the Act).
3. "Wages" are defined to mean wages, remuneration, salary, commission, bonuses or allowance paid or payable to an employee and to include certain other specified additional amounts (s 13(1) of the Act). One of those additional amounts is an amount that is included or taken to be wages by another provision of the Act (s 13(1)(e) of the Act).
4. Relevantly for present purposes, the contractor provisions in Div 7 of Part 3 of the Act deem amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a "relevant contract" to be wages paid or payable during that financial year.
5. The deeming provision is contained in s 35 of the Act which provides: (1) For the purposes of this Act, amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are taken to be wages paid or payable during that financial year. (2) If an amount referred to in subsection (1) is included in a larger amount paid or payable by an employer under a relevant contract during a financial year, that part of the larger amount which is not attributable to the performance of work relating to the relevant contract or the re‑supply of goods by an employee under the relevant contract is as determined by the Commissioner.
6. What constitutes a "relevant contract" is set out in s 32(1) which provides relevantly as follows: (1) In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person - (a) supplies to another person services for or in relation to the performance of work; or (b) has supplied to the designated person the services of persons for or in relation to the performance of work; or (c) ... (2) However, a "relevant contract" does not include … a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person - (a) … (b) is supplied with services for or in relation to the performance of work where - (i) those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally, or (ii) those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year, or (iii) those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services - (A) provided by a person by whom similar services are provided to the designated person, or (B) for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person, for periods that, in the aggregate, exceed 90 days in that financial year, or (iv) those services are supplied under a contract to which subparagraphs (i)-(iii) do not apply and the Chief Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year, or (c) is supplied by a person (the contractor) with services for or in relation to the performance of work under a contract to which paragraphs (a) and (b) do not apply where the work to which the services relate is performed - (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (ii) where the contractor is a partnership of two or more natural persons, by one or more of the members of the partnership and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor, or (iii) where the contractor is a natural person, by the contractor and one or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor…
7. The relevant provision relied on by the Commissioner in the present case is s 32(1)(b) on the basis that the Broker Agreements between LML and each broker are contracts under which LML (the designated person) is provided with the services of persons for or in relation to the performance of work. If the Broker Agreements are caught by s 32(1)(b), the relevant exclusions relied on by LML are those in s 32(2)(b) and (c).
8. For the purposes of the contractor provisions the following definitions are found in s 31 of the Act: (1) a "contract" is defined to include an agreement, arrangement or undertaking, whether formal or informal and whether express or implied; (2) "services" includes the results (whether goods or services) of work performed; and (3) a reference to a "supply", in relation to services, is defined to include the providing, granting or conferring of services.
9. Subsection 32(2A) contains an anti-avoidance rule that s 32(2) does not apply if the Commissioner determines that the contract under which the services are supplied was entered into with an intention either directly or indirectly of avoiding or evading the payment of tax by any person. The Commissioner has made no such determination in this case.
10. Where a "relevant contract" exists, ss 33 and 34 identify the parties that are taken to be the "employer" and "employee" respectively. In the case of a relevant contract under s 32(1)(b): 1. the designated person is deemed to be the employer by s 33(1)(b) which provides: For the purposes of this Act, a person (a) … (b) to whom during a financial year, under a relevant contract, the services of persons are supplied for or in relation to the performance of work, or (c) … is taken to be an employer in respect of that financial year. 1. the person who performs work for or in relation to which services are supplied to the designated person is deemed to be the employee by s 34(a) which provides: For the purposes of this Act, a person who during a financial year (a) performs work for or in relation to which services are supplied to another person under a relevant contract, or (b) … is taken to be an employee in respect of that financial year.
11. In the present case, if the Broker Agreements are relevant contracts, the employer and the employee are LML and the Assessed Broker respectively.

Regulatory Regime - the Credit Protection Act

1. On and from 1 July 2010, the National Consumer Credit Protection Act 2009 (Cth) (Credit Protection Act) applied to regulate the provision of certain credit activities.
2. Part 2-1 of the Credit Protection Act requires a person to hold an ACL if they are to engage in credit activities. Section 6 of the Credit Protection Act provides that a credit activity includes a credit service. Section 7 provides that a person provides a credit service if the person: (a) provides credit assistance to a consumer; or (b) acts as an intermediary. Section 8 provides that: A person provides credit assistance to a consumer if, by dealing directly with the consumer or the consumer's agent in the course of, as part of, or incidentally to, a business carried on in this jurisdiction by the person or another person, the person: (a) suggests that the consumer apply for a particular credit contract with a particular credit provider; or (b) suggests that the consumer apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or (c) suggests that the consumer remain in a particular credit contract with a particular credit provider; or (d) assists the consumer to apply for a particular credit contract with a particular credit provider; or (e) assists the consumer to apply for an increase to the credit limit of a particular credit contract with a particular credit provider; or …
3. The provision of mortgage broking services constitutes the provision of credit assistance which constitutes the provision of credit services. An Assessed Broker would therefore ordinarily need to obtain a licence to provide mortgage broking services.
4. Section 35(1) of the Credit Protection Act explains that an "Australian credit licence" is a licence that authorises the licensee to engage in particular credit activities. Section 35(2) explains that the credit activities that the licensee is authorised to engage in are those credit activities specified in a condition of the licence as the credit activities that the licensee is authorised to engage in.
5. Section 29(1) provides the central prohibition: a person must not engage in a credit activity if the person does not hold a licence authorising the person to engage in the credit activity.
6. Part 2-3 of the Credit Protection Act sets out details regarding the authorisation of credit representatives by an ACL holder, including the ASIC notification requirements and obligations associated with that authorisation. Section 64 allows for written authorisation for a person to engage in specified credit activities on behalf of the licensee as a "credit representative". Section 64 provides: (1) A licensee may give a person a written notice authorising the person to engage in specified credit activities on behalf of the licensee. (2) A person who is authorised under subsection (1) is a credit representative of the relevant licensee. (3) The credit activities specified may be some or all of the credit activities authorised by the licensee's licence.
7. Section 65 provides for the sub-authorisation of natural persons by a credit representative that is a body corporate, as follows: (1) A body corporate that is a credit representative of a licensee may, in that capacity, give a natural person a written notice authorising that natural person to engage in specified credit activities on behalf of the licensee. (2) A natural person who is authorised under subsection (1) is a credit representative of the relevant licensee. (3) The credit activities specified may be some or all of the credit activities authorised by the licensee's licence.
8. As an ACL holder, LML may authorise persons to engage in credit activities as an authorised credit representative under its ACL. The majority of the Assessed Brokers are authorised credit representatives of LML. Nomination as an authorised credit representative of LML is one of the services that LML provides to Assessed Brokers.
9. By section 67(1), a person must not authorise another person to engage in a credit activity as a credit representative under s 64(1) or s 65(1) if the other person holds an ACL. An Assessed Broker that holds their own ACL is not authorised as a credit representative of LML.
10. The core provisions in Division 4 are s 75, s 77, and s 78.
11. Section 75 provides: If the representative is the representative of only one licensee, the licensee is responsible, as between the licensee and the client, for the conduct of the representative, whether or not the representative's conduct is within the authority of the licensee.
12. Section 77 provides: The responsibility of a licensee under this Division extends so as to make the licensee liable to the client in relation to any loss or damage suffered by the client as a result of the representative's conduct.
13. Section 78 provides: (1) If a licensee is responsible for the conduct of its representative under this Division, the client has the same remedies against the licensee that the client has against the representative.

Witnesses

1. There were 9 witnesses who gave affidavit evidence in these proceedings. 1. Two witnesses, Sam Raymond White and Nicole Jayne Glen are employed by the Group Administration and the LM Group, respectively, and give evidence in relation to the conduct of the LM Group's business. 2. Additionally, seven of the Assessed Brokers (or a representative of an Assessed Broker) gave evidence in relation to how they conduct their mortgage broking businesses and their relationship with the LM Group. These were Katharina Fifer, Nicholas Gray, Gregory Michael Cook, Marco Cappetta, Elizabeth Tacon, Anastasia Theodoropoulos and Fetuanimoekie Kula.
2. The witnesses who were cross-examined were Mr White, Ms Glen, Ms Tacon, Mr Gray, Ms Theodoropoulos and Mr Cappetta. I considered each of them to be a truthful and reliable witness, and accept their evidence.
3. The Broker Categories to which each of the witnesses referred to at [31(2)] relate are as follows: 1. Category 1B (being an Authorised Broker who had an entitlement to trail commissions only in a given year and who worked less than 90 days in a given year (or for Authorised Brokers who are corporations, whose employees worked less than 90 days in a given year)): Ms Tacon and Mr Kula. 2. Category 2A (being an Authorised Broker who provided loan origination services to loan applicants/borrowers in a given year): Ms Theodoropoulos, Ms Tacon, Mr Kula, Mr Cook, Ms Fifer, Mr Cappetta and Mr Gray. 3. Category 3A (being an Authorised Broker who obtained services from the LML or LMG under or arising from the Broker Agreement in any given year): Ms Theodoropoulos, Ms Tacon, Mr Kula, Mr Cook, Ms Fifer, Mr Cappetta and Mr Gray. 4. Category 3B (being an Authorised Broker who obtained services from Galilee Business Support Services Pty Ltd (GBSS) in a given year): Mr Gray. 5. Category 3E (being an Authorised Broker who employed or utilised the services or administrative staff in a given year): Ms Fifer, Ms Theodoropoulos and Mr Cappetta. 6. Category 4A (being an Authorised Broker who utilised their own Australian Credit Licence (ACL) , in any given year, in the course of conducting their mortgage broking business): Ms Theodoropoulos.

Issues

1. As noted above, during the course of the hearing the issues in dispute narrowed and accordingly, the questions which the parties seek the Court to address have reduced.
2. The remaining issues in dispute are as follows: 1. Whether the Broker Agreements constitute a contract under which LML, in the course of a business carried on by LML, has supplied to LML the services of Assessed Brokers for or in relation to the performance of work, and to which s 32(1) applies. 2. Whether trail commissions paid by LML to Assessed Brokers are wages within the meaning of s 35(1). This issue concerns Category 1B and Common Question 1B-1. 3. Whether the services of the kind provided by the Assessed Brokers are provided to the public generally such that s 32(2)(b)(iv) applies. This issue concerns Category 2A and Common Question 2A. 4. Whether the provision of one or more of the Generic Services by LMG to the Assessed Brokers satisfied section 32(2)(c)(i)? This issue concerns Category 3A and Common Question 3A-1. 5. Whether the provision of one or more of the Generic Services by LML to the Assessed Brokers satisfied section 32(2)(c)(i)? This issue concerns Category 3A and Common Question 3A-2. 6. Whether Flintfox's engagement of GBSS engaged section 32(2)(c)(i)? This issue concerns Category 3B and Common Question 3B-1 and Common Question 3B-2. 7. Whether Anastasia Theodoropoulos' engagement of Maria Damjanic engaged section 32(2)(c)(iii)? This issue concerns Category 3E and Common Question 3E-2. 8. Whether MR & VL Cappetta's engagement of Peter Carbone engaged section 32(2)(c)(ii)? This issue concerns Common Question 3E-4. 9. Whether the Broker Agreement between LML and Anastasia Theodoropoulos is a relevant contract by reason of Anastasia Theodoropoulos having her own ACL? This issue concerns Common Question 4A. 10. Whether the payments made to the Assessed Brokers were "for or in relation to the performance of work relating to a relevant contract" with the meaning of s 35.
3. The Common Questions are set out at the end of this judgment and the answers provided by the Court.

LM Group

1. LML and eMOCA are wholly owned subsidiaries of LMG, and may be referred to collectively as Mr White did in his evidence as the "LM Group". Group Administration Pty Ltd (Group Administration) is the ultimate holding company for the LM Group, as well as a number of direct and indirect wholly owned subsidiaries which together make up the Ray White real estate business. In general terms, the LM Group provides mortgage aggregation services within the mortgage broking industry.
2. LMG is the entity that employs staff working in the business, except for senior executives who are employed by Group Administration. The tasks performed by LMG's employees include recruiting new brokers, ensuring brokers comply with regulatory requirements, marketing the Loan Market brand, financial management and providing and maintaining software used by the brokers.
3. LML is a party to agreements with mortgage brokers under which it agrees to provide services to mortgage brokers in return for the payment of fees by mortgage brokers. LML was previously called Reva Broking Pty Limited.
4. LML held a transitional Australian Credit Licence (ACL) between 13 May 2010 to 27 May 2011. From 27 May 2011, LML has held an ACL which provides relevantly: 1. This licence authorises the licensee to: (a) Engage in credit activities other than as a credit provider by: (i) providing a credit service where the licensee is not or will not be: (A) where the service relates to a credit contract or proposed credit contract - the credit provider under the contract; or …
5. Most of the Assessed Brokers during the Relevant Period were nominated as an authorised representative of LML under LML's ACL for the purpose of the Credit Protection Act, but some of the Assessed Brokers had their own ACL, (including Ms Theodoropoulos who gave evidence) in which case they did not act as an authorised representative of LML. The Commissioner contends that the nomination of Assessed Brokers as credit representatives had the effect that the Assessed Brokers acted "on behalf of" LML for all relevant purposes. LML submits that this overstates the position and the regulatory regime which attributes statutory liability for conduct of credit representatives of credit licensees does not determine, for the purposes of Division 7 of Part 3 of the Act, the factual question of whether a credit representative is under a broker agreement providing services to LML in relation to the performance of work.
6. eMOCA (previously known as Elkbay Pty Ltd) was the entity within the LM Group which entered into agreements with various lenders for the payment of commission by the lender if the borrower referred to the lender by eMOCA or one of its associates obtained a loan from the lender. eMOCA has held an ACL since 27 May 2011 in the same form as that held by LML. During the Relevant Period, eMOCA did not have any individual employees, and did not authorise mortgage brokers as credit representatives under its ACL.
7. Of LM Group's intellectual property, both LMG and eMOCA were the registered owner of certain trademarks during the Relevant Period. All intellectual property rights to LM Group's internally generated customer relationship management software, MyCRM, were held by MyCRM Pty Ltd.
8. Across the Relevant Period, the number of active mortgage brokers in New South Wales varied each year between 111 and 142.
9. At the date of swearing his affidavit on 15 October 2021, Mr White estimated that there were 2,700 mortgage broker businesses, who engage 6,000 mortgage brokers, aggregated under the LM Group across Australia and New Zealand. Half of these have their own ACL, whilst the others are appointed as authorised credit representatives under LML's ACL.

The role of mortgage aggregators

1. Mr White gave evidence that lenders do not normally have a direct commercial relationship with mortgage brokers. Brokers must be accredited by each lender whose products they wish to consider (and offer to consumers). Lenders normally have a commercial relationship with the aggregator which in turn has a relationship with brokers because, based on Mr White's experience and understanding, lenders are not willing to deal with hundreds or thousands of mortgage brokers. Most lenders have volume and compliance requirements that individual mortgage brokers could not maintain without an aggregator. Therefore, aggregators connect lenders to mortgage brokers.
2. Mr White's evidence was that mortgage brokers using aggregators generally gain access to services including a panel of lenders, technology, training and professional development programs, business planning and business development, software, marketing collateral, administrative and compliance services, and licencing. The broker is charged a fee to access those services. Aggregators sit between the mortgage broker and lender, and do not deal directly with the public, but they do hold an ACL.
3. Mortgage brokers deal with and take instructions from customers directly. Mortgage brokers typically aggregate under an aggregator and, additionally, are accredited or engaged by individual lenders. Mortgage brokers operate differently depending on their business structure and role (eg. sole trader or corporate structure; owner, employee or contractor). The business models of mortgage brokers aggregating under LM Group include (but are not limited to) sole traders, private companies, trusts and partnerships.
4. Customers of the mortgage brokers are consumers of residential home lending products and services, which are provided by the lenders. During the Relevant Period, LM Group's practice was to contact customers only rarely, unless there was a compliance issue, a complaint or (from 2015) for surveys.

Background to the LM Group

1. The Ray White brand was first established in 1902. Ray White Group is now the largest real estate franchise group in Australasia.
2. Ray White Group began offering financial services in about 1994 by establishing Elkbay Pty Ltd (Elkbay), an entity which traded as 'Elkbay Finance' and carried on a mortgage broking business. Elkbay entered into a number of agreements with lenders for the purpose of being able to offer the products of lenders to the Ray White Group's real estate clients.
3. In 1994, Mr White commenced as a mortgage broker of Elkbay Finance. He became NSW State Manager in 1996 and by 1997 was in practice running the business as National Manager for Elkbay. Elkbay's name was changed to Ray White Financial Services in late 1995. The business provided its mortgage broking services directly through its employees.
4. In the late 1990s lenders began to impose conditions on mortgage brokers to receive accreditation, including minimum value of loans required to be written in a month. Mr White observed that around this time smaller brokers shared accreditations to meet the conditions. In or around 2000, Mr White observed that this sharing of accreditations developed into the emergence of aggregators in the industry. Ray White Financial Services lost a number of their top brokers to these new aggregators in or around 2000.
5. Elkbay, trading as Ray White Financial Services, was transformed into an aggregator in or around July 2002. Elkbay's name was changed to eMOCA which stood for Electronic Mortgage Origination Channel Australasia. In June 2003, Ray White Financial Services established Reva Broking Pty Limited, trading as REVA, which stood for Real Estate Value Add.
6. In 2007, LM Group acquired Xinc Financial Services Pty (Xinc), a competitor within the aggregator industry, which involved 150 brokers being migrated over to the LM Group and henceforth aggregated under the LM Group. LM Group did not require those mortgage brokers to sign or enter into a new agreement but rather honoured pre-existing agreements. Mr White said this was done to ensure they retained the brokers. Following the acquisition, the name of the business was changed to Loan Market.
7. By 2010, approximately 80 mortgage brokers were aggregating under REVA with approximately 1-2 brokers within each business. eMOCA had approximately 25 agreements with various lenders including the "Big Four" Banks, being CBA, ANZ, Westpac and NAB.
8. On 1 July 2014, LM Group moved to a formal franchise model for its mortgage brokers. From that date, mortgage brokers were requested to enter new agreements with LML entitled Loan Market Mortgage Broker Agreement (being the Franchise Agreement referred to at [75] below), including those who operated under original agreements with Xinc. Some brokers from Xinc had terms or fees within their original agreements grandfathered as special conditions in their Franchise Agreement, where there was a real or likely detriment to the mortgage brokers by not respecting the original terms or fees.

EMOCA's Contractual arrangements with lenders

1. LM Group provided the Assessed Brokers with access to a panel of lenders (Lenders).
2. The Lenders were "credit providers" within the meaning of the Credit Protection Act. The entity within the LM Group which entered into Lender Agreements with each of the Lenders was eMOCA. Each of the agreements with the Lenders is in a different form. Their nature is indicated by having regard to those which eMOCA entered into with the "Big Four" Banks.
3. The Lender Agreement between eMOCA and Westpac Banking Corporation (Westpac) commenced on 30 August 2013, and is entitled "Broker Agreement". Key terms of this agreement are as follows: 1. The recitals state that eMOCA (referred to as "the Broker") is engaged in the business of finance or mortgage broking/facilitation and Westpac is willing pay, on the terms set out in the agreement, certain fees to the eMOCA for each applicant referred by eMOCA to Westpac, if the Applicant obtains finance from Westpac. The expression "Applicant" is defined to mean "a person who has been referred to Westpac by the Broker and has completed an Application for Finance". 2. Clause 3.1(a) provided that "the Broker may refer Applicants to Westpac as provided for in this Agreement". As the plaintiffs pointed out, cl 3.1(a) does not impose an obligation on eMOCA to provide services to Westpac and is in facilitative terms only. By cl 3.2, if eMOCA referred an Applicant to Westpac, eMOCA was required to comply with the application process contained in cl 7.4 (which required eMOCA to submit applications in accordance with the "Introducer Kit" which was defined as a document described as such which Westpac issued to eMOCA for the purposes of the agreement) and Westpac was given the sole responsibility for and sole discretion in approving or declining any application made. 3. Under cl 21.1, eMOCA was permitted to enter into "Introducer Agreements", defined to mean "an agreement with [eMOCA] relating to the referral to [eMOCA] of Applicants for [eMOCA], in turn, to refer those Applicants to Westpac …" and "Introducer" was defined to mean "a person or entity which has an Introducer Agreement with [eMOCA]". eMOCA was liable for all acts or omissions of the Introducers as if those acts or omissions were acts or omissions of eMOCA. 4. Under cl 7.3, Westpac was entitled to require that "[eMOCA], any Introducer and their respective Associates … be accredited before they are permitted to recommend or continue to recommend Westpac's products to Applicants". The expression "Associate" is defined to include in the case of eMOCA, any Introducer. One of the requirements for accreditation was that the Introducer comply with the Code of Conduct set out in Schedule D to the agreement. 5. Clause 4 provided that Westpac must pay to eMOCA commission for each approved application in accordance with Schedule B to the agreement. Schedule B set out the rates method of calculation and payment of commissions (both upfront and trailing). Under cl 5, the parties agreed that Westpac can issue a recipient created tax invoice in respect of any taxable supplies for GST purposes made by eMOCA under the agreement, and eMOCA will not issue any tax invoices in respect of those taxable supplies. 6. Under cl 6.1, Westpac reserved the right to vary any commissions by giving eMOCA 30 days' notice. 7. Clause 6.2 contains an acknowledgement by eMOCA that part of Westpac's aim in contracting with eMOCA to refer applicants under the agreement was to achieve a specified conversion rate, (ie. a particular percentage of applications which are settled) and volume target (being a particular amount of residential or business finance over a specified period). 8. Under cl 7.1, eMOCA gave undertakings that it and its "Introducers" would comply with all relevant laws, including the National Credit Code and that eMOCA will hold an ACL and that each of its introducers will hold an ACL or be appointed as a credit representative of an entity which holds an ACL. 9. Under cl 7.5, Westpac agree to make its internet service known as "Introducer Net" available to the Broker.
4. The agreement between eMOCA (named as the Originator) and Commonwealth Bank of Australia (CBA) is dated 8 September 2014 and entitled "Originator Agreement (Retail)". This provides relevantly as follows: 1. Clause 2.1 provided that the Bank appointed eMOCA, to perform the "Services", defined to mean "the provision to the Bank of Applications from Clients introduced by the Originator and any Originator Associate". The expression "Originator Associate" was defined to mean "(a) any employee, agent, sub-aggregator, broker, franchisee or contractor of the Originator, and (b) any third party who refers clients to the Originator or any of its employees, agents, sub-aggregators, or contractors …". 2. Under cl 2.2, eMOCA accepted that appointment and agreed to provide the Services on the terms of the agreement. 3. Clause 2.3 permitted eMOCA to delegate the performance of its obligations under the agreement to "an Originator Associate", who is accredited by the Bank to perform the relevant Services. 4. Clause 4 required each application submitted to the Bank to be submitted using the Bank's standard document process for submitting applications and under cl 4.2 eMOCA gave undertakings in relation to how applications would be submitted to CBA. 5. Under cl 6.1, CBA agreed to pay a commission to eMOCA in relation to banking products which CBA actually provided to, accepted from or arranged for a client following the provision of the Services. The rates of commission (both upfront and trailing) method of calculation and payment were set out in a schedule to the agreement. 6. Clause 7.4 stated that CBA was permitted to issue a recipient created tax invoice in respect of the supply of services under the agreement for GST purposes and that eMOCA would not issue tax invoices in respect of those supplies. 7. Clause 8.1 contained undertakings by eMOCA to the Bank that in performing the Services it would at all times comply with all relevant laws and monitor the activities of the Originator Associates to ensure compliance by eMOCA with its obligations under the agreement. 8. Clause 11.4 required eMOCA to comply with the procedures prescribed by CBA for eMOCA and the Originator Associates to become accredited and to maintain their accreditation to provide the Services. Under cl 11.5, the Bank had an absolute discretion to refuse accreditation to an Originator Associate.
5. The agreement between eMOCA (named as the Approved Originator) and Australia and New Zealand Banking Group Limited (ANZ) is dated 14 May 2003, and entitled "Originator Agreement". This provided relevantly as follows: 1. Clause 2.1 provided that the Bank appointed eMOCA to market the loan products in accordance with the terms and conditions contained in the approved Originator Operations Manual. Under cl 6.2, "Authorised Officers" of eMOCA who have been approved by the Bank from time to time could act on behalf of eMOCA in performing its obligations under the agreement. The expression "Authorised Officers" was defined to mean "employees, contractors or agents of the Approved Originator which are approved by the Bank". 2. Clause 2.3 imposed certain obligations on eMOCA, including that it meet the agreed minimum performance target set out in Schedule 1, ensure that all applications from its clients to the Bank for loan products are in a form approved by the Bank and observe all applicable laws. Under cl 2.6, the Bank was under no obligation to give approval to any particular loan application submitted to the Bank by eMOCA, and could decline or approve any application in its absolute discretion. 3. Under cl 4.1, the Bank agreed to pay eMOCA fees in respect of loan products business written by the Bank and applied for by applications submitted through the Approved Originator at the rates and on the terms set out in Schedule 2 of the agreement. Schedule 2 included the rate of and method of calculation of commissions (both upfront and, a "trailer fee" (being an ongoing fee for the term of the loan) and manner of payment. 4. Under cl 5, the Bank was entitled to create Recipient Created Tax Invoices (RCTI) in accordance with the requirements of the GST Act in relation to all supplies made under the Agreement and eMOCA agreed not to issue tax invoices in respect of those supplies.
6. There were two agreements between eMOCA and National Australia Bank Limited (NAB) during the relevant period. The first applied from 1 August 2008 and was entitled "Broker Agreement". The second applied from 1 September 2016 and was also entitled "Broker Agreement".
7. In relation to each of these agreements the following points may be noted: 1. Under cl 3.1 of the first NAB Agreement, NAB appointed eMOCA on a non-exclusive basis, acting alone or through eMOCA's Representatives, to assist NAB in originating Loans. The term "Representatives" was defined to mean "any employee, servant, agent, sub-agent, contractor, sub-contractor, delegate or franchisee appointed and authorised by you to act on your behalf in carrying out, or otherwise in connection with, your obligations under this agreement". The expression "Loan" was defined to mean a NAB product or a Homeside product issued or varied as a result of an application or variation application introduced by eMOCA. The relevant products were loan products issued by NAB. Clause 3.1 of the second NAB Agreement is in similar terms. 2. Clause 4 of the first NAB Agreement required eMOCA to comply with the procedures and standards set out in what is referred to as the "NAB Broker Guide" and to comply with the requirements of all relevant laws, and to ensure that its Representatives did so. eMOCA was also required to meet, and ensure that each of its Representatives met, NAB's requirements for a person to be accredited as a broker by NAB as set out in the NAB Broker Guide. Clause 4 of the second NAB Agreement is in similar terms. 3. Under cll 5 and 8, eMOCA and its Representatives who were accredited were entitled to submit an application for approval for the purposes of obtaining an offer to fund the loan to which the application relates. Such application needed to meet the requirements set out in Schedule 3 to the Agreement. Clauses 5 and 8 of the second NAB Agreement were to similar effect. 4. Clause 6 of the first NAB Agreement provided that NAB would pay commissions to eMOCA as set out in Schedule 2, which included detailed provisions regarding the manner of calculation and payment of both upfront commission in respect of each loan and trail commission. Under cl 6.2, NAB was entitled to issue RCTIs in respect of supplies by eMOCA under the Agreement and eMOCA was not to issue any tax invoices in respect of those supplies. Clause 6 of the second NAB Agreement is to similar effect.
8. As the parties submitted, the Court should not be diverted by the label used to describe eMOCA in these agreements: e.g. Hollis v Vabu Pty Ltd (2001) 207 CLR 21 at [58]. The same is true of the labels used to describe LML and the Assessed Brokers in the Broker Agreements. Whether styled or labelled in the Lender Agreements as a "Broker", "Originator", "Referrer", "Aggregator", "Independent Contractor" or otherwise, the substance of the relationship created by the Lender Agreements was: 1. the Lenders marketed and provided various finance, mortgage, loan and credit products to customers; 2. eMOCA was entitled to refer the Lender to applicants for credit products although it was entitled to appoint third parties to make those referrals; 3. eMOCA, was entitled to appoint authorised officers, associates, intermediaries etc, to act on eMOCA's behalf in referring applicants for credit products to the Lenders and while strictly this may not have extended to the appointment of the Assessed Brokers as they had entered into broker agreements with LML rather than eMOCA, the parties proceeded on the basis that this did not matter; 4. the Lenders were contractually bound to pay eMOCA agreed commission for credit applications of a customer, introduced by eMOCA and approved by the Lender; 5. the Assessed Brokers were not a party to any of the Lender Agreements and the Assessed Brokers obtained no rights and incurred no obligations pursuant to the Lender Agreements; 6. the Lenders were not contractually bound to pay any credit representative of eMOCA or LML, including Assessed Brokers, any fees, commissions or rewards; 7. the Lenders issued Recipient Created Tax Invoices to eMOCA for supplies made by eMOCA under the Lender Agreements;
9. It was necessary for the Assessed Brokers invariably to be accredited with a Lender before brokering that Lender's products, although LML did not require the Assessed Brokers to be credited with all Lenders on the panel. The lenders prescribed criteria for accreditation and had sole discretion regarding whether a mortgage broker would receive accreditation. When an Assessed Broker applied for accreditation by a Lender, it applied directly to the Lender (with the assistance of LML) and signed a form issued to it by the Lender, the purpose of which appears to have been to identify the individual creditor representative which the Lender would be dealing with (Ex C).

Broker Agreements Prior to July 2014

1. Prior to about July 2014, LML had three alternative agreements in place with LML's Assessed Brokers. Those three alternatives were: 1. In relation to Assessed Brokers who switched to the LM Group after the Xinc Acquisition, LML adhered to the terms of the Xinc Agreements. In substance, LML and those Assessed Brokers entered a contract in the terms of the Xinc Agreement (either by express agreement or conduct) (Xinc Agreement). 2. In relation to Assessed Brokers who became an LML Assessed Broker prior to July 2010, those Assessed Brokers signed a "Independent Sub-Originators Agreement" or "Ray White Sub-Originators Agreement" (Sub-Originators Agreement). 3. In relation to Assessed Brokers who became an LML Assessed Broker after July 2010, those Assessed Brokers signed a "Introducer Agreement - Lead/Referral Scheme" or an "Introducer Agreement - Associate Scheme" (Introducer Agreement).
2. There is no direct evidence as to which of the above three agreements each individual Assessed Broker the subject of the Assessments in the 2012 to 2014 financial years was a party.

Xinc Agreement

1. The Xinc Agreement provided relevantly as follows: 1. Recital A stated that the Assessed Broker, described as an "Introducer", intended to introduce "Applications" to Xinc. Clause 2.1 then provided that the Assessed Broker was authorised to refer "Applications" to Xinc. The term "Applications" was defined to mean "an application to Xinc for one or more of Xinc's Products" and "Products" was defined to mean "loans and other products Xinc from time to time informs the Introducer are available for marketing by the Introducer". 2. The Assessed Broker must at its own cost introduce Applicants in an efficient and businesslike manner and comply with applicable laws (cl 3.1); and in accordance with policies and procedures specified by Xinc and "Funders" from time to time (cl 3.5). The term "Funders" was defined to mean each company providing the Loans and other Products (being loans and other products Xinc from time to time informs the Assessed Brokers are available for marketing by the Assessed Broker). 3. Xinc was required to pay to the Assessed Broker the fees set out in Sch B to the Xinc Agreement which set out percentage entitlement to upfront and trail commissions payable by Xinc to the Assessed Brokers (cl 4.1). 4. Xinc was entitled to issue RCTIs to the Assessed Broker "in respect of supplies" to Xinc by the Assessed Broker and the Assessed Broker agreed not to issue tax invoices in respect of those supplies (cll 6(a) and 6(b)).
2. The evidence was that although the agreement is with Xinc, following the acquisition of Xinc in 2007 LML honoured the terms of the agreement and the Court infers that there was a novation by conduct of the agreement to LML.

Sub-Originators Agreement

1. The recitals to the Sub-Originators Agreement record that eMOCA has been engaged to originate Financial Products and Services on behalf of "Third Parties" and has engaged LML to assist eMOCA in originating such products and LML in turn, wishes to engage the services of the Assessed Broker (referred to as a Sub-Originator) to assist LML originate Financial Products and Services to be provided by "Third Parties".
2. The Sub-Originator Agreement provided relevantly as follows: 1. LML engaged the Assessed Broker on the terms of the agreement to assist LML to originate Financial Products or Services on behalf of Third Parties (cl 2.1). "Third Parties" is defined to mean "any entity with whom eMOCA enters into an agreement under which eMOCA agrees to originate and/or manage financial products or services for and on behalf of that entity and advised by eMOCA or LML to the [Assessed Broker]". 2. The Assessed Broker agreed to perform obligations and functions under the Sub- Originator Agreement in accordance with the requirements and procedures for the origination of financial products and services delivered or notified by LML to the Assessed Broker from time to time (cll 2.2(a) and 5.1). 3. LML agreed to pay the Assessed Broker the Net Commission (cl 4.1). 4. LML agreed to issue RCTIs "in respect of supplies of assistance to LML to originate Financial Products and Services made by the [Assessed Broker] under this Agreement" and the Assessed Broker agreed not to issue any tax invoices for those taxable supplies (cl 19.3(f)).

Introducer Agreement

1. The recitals to the Introducer Agreement recorded that the Assessed Broker (described as 'Introducer') intends to introduce 'Applications to or through [LML]' and that LML is an originator for various programs.
2. The Introducer Agreement provided relevantly as follows: 1. The Assessed Broker must at its own cost introduce Applicants in an efficient and businesslike manner (cl 3.1). "Applicants" was defined to mean "an applicant for a Product introduced by the [Assessed Broker] to LML" and "Product" was defined to mean "loans and other products LML from time to time informs the [Assessed Broker] are available for marketing by the [Assessed Broker]". 2. The Assessed Broker must introduce applicants for loans and other products to LML in accordance with LML's policies and reasonable directions (cl 3.5). 3. The Assessed Broker must undertake any ongoing services with respect to the loans specified by LML (cl 3.13). 4. LML must pay to the Assessed Broker the fees in Schedule A (cl 4.1). 5. LML was entitled to issue RCTIs in respect of taxable supplies [to LML] (cll 6(a) and 6(b)).

Broker Agreements Post July 2014

1. From about 1 July 2014, the LM Group decided to adopt a "franchise model" for its agreements with brokers. In 2014, two versions of the Franchise Agreements were implemented for this franchise model which replaced the earlier Broker Agreements. The differences between the two versions are relatively minor and not relevant for present purposes. This new agreement (Franchise Agreement) remained in place until the end of the Relevant Period. For convenience I will also refer to each Franchise Agreement entered into with an Assessed Broker as a "Broker Agreement". This Agreement provided relevantly as follows: 1. LML granted to the Assessed Broker a non-exclusive licence to use LML's intellectual property to operate a mortgage broking business on the terms set out in the Broker Agreement (cl 2.1). 2. LML appointed the Assessed Broker, in accordance with Schedule 4 of the Broker Agreement, as a credit representative of LML (cl 2.4). This occurred in most cases unless the Assessed Broker held an Australian credit licence. 3. LML authorised the Assessed Broker, as its credit representative pursuant to the Credit Protection Act, to engage in "credit activities" on LML's behalf in relation to approved products (Schedule 4, cll 1.1 and 10.1(3)). The "credit activities" that the Assessed Broker is authorised to perform on LML's behalf are the provision of "credit services" as defined in s 7 of the Credit Protection Act. 4. The Assessed Broker was prohibited from being a credit representative of any other ACL holder (Schedule 4, cl 1.2). 5. The Assessed Broker was required to respond to all leads in the manner specified in the Operations Manual (cl 3.1). 6. The Assessed Broker was responsible for seeking new customers (cl 3.2(1)). 7. The Assessed Broker was required to only work as a broker with LML (cll 4.2, 7.2 and 17). 8. The Assessed Broker was required to only offer loan products approved by LML (cll 4.3, 4.4). 9. The Assessed Broker was required to pay to LML: (1) an establishment fee; (2) a system fee; (3) a facilitation fee; and (4) where applicable, a lead generation fee (cl 5). 10. The Assessed Broker was required to operate their business strictly in accordance with the LM Group Operations Manual and any written direction given by LML (cll 6.2, 7.1(4)). 11. The Assessed Broker was required to conduct their activities in compliance with the requirements of cl 7, including "protect and enhance the good name and reputation of the Loan Market Group and the Intellectual Property" (cl 7.1(5)). 12. LML was required to notify to the Assessed Broker, and pay, the "Broker Payment" (ie. commission) after deducting the amounts set out in cl 5.10(2)(a)-(c) (cl 5.10). 13. The Assessed Broker was required to ensure that the business conducted by it under the agreement was under the direct supervision of the individual named in the agreement as the principal, who must devote his or her time and effort exclusively to the business (cl 8.1) 14. The Assessed Broker was required to train its staff to the satisfaction of LML (cll 8.4, 8.5) 15. The Assessed Broker's commercial premises were required to be fitted out with a Loan Market identity (cl 10.2) 16. The Assessed Broker was required to participate in Loan Market marketing and only use the LML Group websites to market its business (cl 12). 17. LML was entitled to issue RCTIs on behalf of the Assessed Broker in respect of supplies made by the Assessed Broker to LML and, where LML did so, the Assessed Broker must not do so (cl 23.5).
2. As mentioned at (i) above, cl 5 dealt with the obligation of the Assessed Broker to pay certain fees to LML, including the Facilitation Fee. Clause 5.1 required the Assessed Broker to pay those fees, but this was subject to cll 5.9 and 5.10 which provide (emphasis added): 5.9 Subject to: (1) any Clawed Back Commissions and fees payable to loan Market; (2) the Broker Parties have complied with this Deed, including by complying with the Operations Manual when submitting an Application; and (3) an Approved Financier having entered into a Finance Agreement with a Customer as a consequence of an Application submitted by the Broker (or an Authorised Loan Writer) on behalf of that Customer, Loan Market will pay the Broker Payment to the Broker in accordance with clause 5.10. 5.10 On or about the 12th, 21st and last Business Day of each month during the Term, Loan Market must: (1) notify the Broker of the total of: (a) the Gross Commissions received by Loan Market in respect of Finance Agreements with a Customer as a consequence of an Application submitted by the Broker; (b) all payments due by the Broker Parties to Loan Market Group pursuant to this Deed or an Related Agreement (Loan Market Payments); (c) the Clawed Back Commissions; and (d) the Referral Fees, for the previous period; (2) pay to the Broker the Broker Payments payable in respect of the previous period after deducting an amount equal to: (a) the Clawed Back Commissions to the relevant Approved Financier on behalf of the Broker; (b) in Loan Market's discretion, the Referral Fees payable to the relevant referrers by the Broker on the Broker's behalf; and (c) the Loan Market Payments.
3. Under cl 5.9 read with cl 5.10(2), LML was required to pay the Broker Payment to the Assessed Broker after deducting the amounts payable by the Assessed Broker to LML under the Agreement.
4. The expression "Broker Payment" is defined to mean: "Subject to cl 5.9, an amount equal to the Gross Commissions paid by Approved Financiers [the Lender] to the Loan Market Group in respect of a Finance Agreement".
5. Through the operation of these provisions, LML paid to the Assessed Broker an amount equal to a proportion of the commissions received from Lenders by eMOCA for a loan originated by the Assessed Broker with that Lender. It was not suggested that the position was materially different under the pre-2014 Broker Agreements.
6. As mentioned in (j) above, Assessed Brokers were required to comply with an Operations Manual which was made available to each Assessed Broker during the Relevant Period. It sets out "the policies, specifications, standards and procedures you must comply with to operate a Loan Market mortgage broker business" (page 2). It dealt with such matters as requirements to pursue leads generated by the LM Group; use of Loan Market branding; the approved products; approved lenders; training; IT and software usage; compliance and legal; dispute resolution; sub-contracting and assignments; and other policies, procedures and services offered by the LM Group to mortgage brokers. There were five iterations of the Operations Manual throughout the relevant period. Pursuant to cl 6.4 of the Franchise Agreement, changes to the Operations Manual come into effect 14 days after mortgage brokers receive notice of the changes.

Financial arrangements between Lenders, LML and Assessed Brokers

1. During the Relevant Period, Assessed Brokers earned commissions through introducing customers to Lenders, comprising both upfront and trail commissions. There were also claw-back provisions for the repayment of commissions if the borrower defaulted or refinanced with another lender within a certain period of time. LM Group occasionally assisted mortgage brokers with disputing claw backs from lenders.
2. LM Group receives the commissions and pays them to the mortgage broker. The software used by the LM Group issues an RCTI to a mortgage broker each time they are paid.
3. Mr White gave evidence that LM Group's customers are mortgage brokers, not loan applicants or borrowers. The LM Group generates revenue through fees charged to mortgage brokers in respect of the services provided by the LM Group to the mortgage brokers under the Broker Agreements and the Franchise Agreement including an establishment fee, a system fee and a facilitation fee.
4. The establishment was a one-off fee upon execution of the Franchise Agreement, varying between $1,400 to $2,000 plus GST between 1 July 2014 and 1 July 2018, for those joining LM Group after 1 July 2014 (although was occasionally waived).
5. The system fee varied in the Relevant Period before and after 1 July 2014. Before 1 July 2014, the system fee was approximately $100-$110 including GST per month for mortgage brokers party to an Introducer Agreement. There was no system fee under the Sub-Originator Agreements. Between 1 July 2014 and 30 June 2018, the system fee was $230 to $300 plus GST per user per month for access to the LM Group's systems and $110 to $150 plus GST per user per month for administration services. It is directly debited from a mortgage broker's nominated bank account on the last business day of each month.
6. The facilitation fee was charged during the Relevant Period generally as a set percentage of the mortgage broker's commissions, determined by the applicable agreement. Generally, the facilitation fee would be charged on a tiered basis, determined by the commissions earned by the mortgage broker in each year - depending on the applicable agreement. The facilitation fee covered the services provided by the LM Group and was deducted from gross commissions paid by the lenders to LM Group on behalf of mortgage brokers.

Structure of the LM Group

1. The personnel of LM Group, all employed by LMG, relevantly included the: 1. NSW State Team of up to 6 people during the Relevant Period (the structure of the equivalent team in other States was similar but may vary in numbers). 2. National Compliance team which comprised up to 6 people during the Relevant Period; 3. National Marketing team which comprised between 5-8 people during the Relevant Period; 4. National Finance team which comprised between 6-10 people during the Relevant Period; 5. National Technology team which comprised between 2-50 people during the Relevant Period; 6. Agreements and Onboarding team which comprised between 2-6 people during the Relevant Period; and 7. Commissions team which comprised up to 5 people during the Relevant Period.
2. During the Relevant Period, LM Group employed some brokers, but these did not materially form a part of the business carried on by the LM Group.
3. The NSW State team included the NSW State Director who reports to Mr White, 2-3 Business Development Managers/Executives and a State Administrator. The Business Development Managers report to the State Director and are each responsible for a group of mortgage brokers' productivity and satisfaction. Their role includes coaching, business planning, small group sessions, staff recruitment for the broker, identifying referral partners and online training. They also make arrangements with other LM Group teams if brokers request additional marketing or compliance support. The State Administrator provided support generally to the mortgage brokers and State team including being the point of contract for new mortgage brokers during the onboarding process, assisting with changes to their agreements (such as variation, termination or cassation), being the first point of contact for queries regarding systems and software provided by LM Group, and supporting mortgage brokers in recruiting and onboarding new staff.
4. The Compliance team was led by the Chief Operating Officer and was split between an onshore and an offshore team. The onshore team, in Sydney and Adelaide included up to 6 people during the Relevant Period, being the: 1. Chief Operating Officer, who oversaw the risk and compliance function within the LM Group. 2. National Risk and Compliance Manager, who was primarily responsible for drafting and implementing policies to align with LM Group's obligations, particularly the obligations of LML and eMOCA as ACL holders. 3. National Risk and Compliance Manager, whose role was to support mortgage brokers in relation to their risk and compliance enquiries, as well as organise, update and provide optional risk and compliance education to the mortgage brokers. 4. National Risk and Compliance Manager (Audit), who was responsible for leading the offshore audit team that conducts file reviews of loan applications settled by the mortgage brokers to ensure these meet regulatory requirements. This role is also responsible for providing insights and coaching to the offshore team where applicable. 5. Compliance Support Officer, who was responsible for managing risk and compliance enquiries from mortgage brokers, as well as other administrative responsibilities relating to lender enquiries.
5. The offshore audit team based in Manila consisted of up to 10 individuals during the Relevant Period who reported to the National Risk and Compliance Manager (Audit). This team included an Internal Audit Team Manager and Internal Audit Officers.
6. The LM Group's Marketing team was based in Sydney and led by the Chief Marketing Officer. The Marketing team consisted of 5 to 8 individuals over the Relevant Period, who held the following roles: Chief Marketing Officer, Head of PR & Communications, Marketing Manager, Digital Marketing Manager, Communications Manager, Communications Coordinator, Marketing Coordinator(s), and Graphic Designer(s).
7. The National Finance team was based in Brisbane and was led by the Chief Financial Officer. The Finance team comprised between 6-10 people during the Relevant Period, including: 1. the Chief Financial Officer - Ms Nicole Glen who gave evidence in these proceedings, summarised below; 2. Finance Manager(s) responsible for coaching the team, financial reporting, cash flow management and managing external relationships; 3. Business Analyst(s) responsible for implementing and managing the database for the commission system; 4. a Finance Officer responsible for data entry of creditor invoices and expense claims for business units, preparing and processing twice monthly creditors payment runs and raising customer invoices on a weekly basis, processing payments by direct debit and credit card systems. 5. Senior Accountant(s), responsible for month end reporting requirements, bank account reconciliation, cash flow forecasting, preparation of journals and monthly GST and income tax reporting obligations; 6. Finance Accountant(s), responsible for the completion of month-end reporting requirements, daily bank account reconciliation and cash flow forecasting, monthly balance sheet reconciliations and preparation of month-end journal entries and monthly income tax and GST reporting obligations; and 7. Assistant Accountant(s), responsible for assisting the Finance Manager with the completion of month-end reporting requirements.
8. The National Technology team was led by Chief Information Officer (Eric Plumpton) and comprised between 2-50 people during the Relevant Period. The roles included software engineers, technical lead, product specialists, support analysts and customer experience officers. This team's role was to continually improve the LM Group's software (provided to mortgage brokers) and to provide support to mortgage brokers using LM Group's software.
9. The Agreements and Onboarding team was based in Brisbane and was led by the National Onboarding & Agreements Manager, who reports to the Chief Financial Offer. The team was responsible for matters relating to the Franchise Agreement, referral agreements, lender accreditations, gathering documentation to support appointment under credit licence and accreditation with lenders, maintaining data. This team comprised between 2-6 people during the Relevant Period, with roles including: 1. National Onboarding & Agreements Manager, responsible for the day-to-day management of this team, as well as onboarding activities such as coaching Onboarding Officers, facilitating learning, assisting with the setup of broker data and managing the lender accreditation process; 2. National Agreements Administrator, who was responsible for the accurate preparation and execution of franchise related documentation, such as new Franchise Agreements, Deeds of Variation, Deeds of Termination & Release, among other documents. This role was also responsible for the preparation and execution of documentation relating to Loan Market's referral partner agreements; 3. National Onboarding Administrator, who was responsible for supporting new mortgage brokers through the onboarding process; 4. National Accreditations Administrator, who was responsible for managing the process required to get mortgage brokers accredited with lenders on Loan Market's lender panel. 5. Business support officer, who was responsible for preparing and executing franchise documentation, data creation, working with the state team and maintaining broker and referral relationships within the LM Group's CRM system.
10. The Commissions team consisted of approximately 4 to 5 people throughout the Relevant Period and was led by the National Commissions Manager who reported to the Chief Financial Officer. The Commissions team forms part of the broader Finance team within the LM Group. The National Commissions Manager was primarily responsible for the day-to-day management and control of all commission-related activities of the company. ln particular, this includes commission cash reconciliation, approval of payments prior to it being processed, updates to any changes to facilitation fees within the commission payments system.
11. This team included Commission Officers (also known as Payment Administrators) who were responsible for assisting with the accurate processing of payment data from a number of lenders to ensure that the mortgage brokers and referral partners receive income accurately and on time, including: 1. Entering data for the operating platforms and the payment system; 2. Reconciliating lender deposits to commission files; 3. Supporting mortgage broker and referrers by responding to inquiries and liaising with lender partners in relation to their policies; and 4. Maintaining records of all lender payment policy changes.

Support and services provided by the LM Group to Assessed Brokers

1. The support and services provided by the LM Group to mortgage brokers may be summarised as follows: 1. Onboarding of mortgage brokers - The onboarding process is for all new mortgage brokers joining the LM Group which now takes about six weeks but took longer during the Relevant Period. It involves issuing relevant agreements and forms, assisting with accreditation with lenders and, if they do not have their own ACL, appointing them as an authorised credit representative. 2. Access to the LM Group's technology and software, including IT support - Technology services were provided as follows: 1. Mortgage Brokers were provided access to One View and/or, from December 2017, Springboard during the Relevant Period. These were both intranet websites containing learning and development tools and articles, employment/contractor agreement templates, reporting tools for running mortgage broker businesses and (in Springboard) formal online training courses. 2. Mortgage brokers were also provided access to Symmetry CRM and/or MyCRM. Prior to MyCRM, brokers used Symmetry CRM, a third party system designed to determine the best product for a customer, which was also used by brokers to submit loan applications through Apply Online. The provider of Symmetry provided mortgage brokers with assistance in relation to Symmetry. MyCRM was launched by LM Group in 2017 and provided a broader suite of customer relationship services, access to training and courses, a range of calculations, help and support, access to Apply Online, as well as a product finder, to find the ideal product finder for the customer's circumstances and preferences. The product finder was never used by LM Group to direct mortgage brokers to particular products. LM Group's Technology teams provided assistance to mortgage brokers for MyCRM on request throughout the Relevant Period. 3. Apply Online is a direct electronic interface between the lender and mortgage brokers, enabling efficient loan application lodgements and providing updates as to the progress of an applications through MyCRM. Apply Online is used industry‑wide, and increasingly lenders only accept loan applications through this portal. LM Group subscribes to Apply Online, owned by a third party, and made it available to mortgage brokers during the Relevant Period. Both the LM Group's Technology team and the Apply On Line's provider's team provide technology support to mortgage brokers in relation to Apply Online. 4. eBroker was made available by LM Group to mortgage brokers from 2016 to 2019 and was used by mortgage brokers and referrers to mortgage brokers to track referrals. LM Group had purchased eBroker, but subsequently developed a referral feature within myCRM, which was launched in 2019. 5. LM Group operates an in-house IT support desk for mortgage brokers using the software, systems or tools provided by LM Group including One View/Springboard, Symmetry/MyCRM and Apply Online. 1. Use of LM Group's Branding - Mortgage brokers were permitted but not required to use LM Group's branding, including in their email signatures, newsletters, personal mortgage broker profiles on the LM Group's website and their social media sites. There is guidance on Springboard about the use of those materials, including a Loan Market Style Guide. The LM Group Marketing Team is responsible for the provision and use of branding materials. 2. Access to a panel of lenders and accreditation assistance - LM Group provided mortgage brokers with access to a panel of lenders and accreditation assistance. The Compliance team is responsible for updating and managing the lender panel. Each lender has different requirements for accreditation, but each individual mortgage broker must receive accreditation from a lender if they wish to offer that lender's products to their customers. All new mortgage brokers receive an accreditation pack during their onboarding containing declarations and forms for various lenders, regardless of whether they have existing accreditations (as all must be transferred). Mortgage brokers do not have to apply for accreditation with all lenders. 3. Compliance - The Compliance team monitors the loan writing activities of mortgage brokers to ensure compliance with requirements of legislation, lenders, regulators and LM Group itself. It does so through an audit process which involves three files (individual loans) being randomly selected and audited by an offshore compliance team. If the file fails the broker will be given two days rectify issues, a second audit will be conducted and, if it fails again, the mortgage broker will be sent an email stating there are still outstanding items. The Sydney Audit team will then contact the broker and conduct further investigations to see whether there are systemic issues with that broker's files. The relevant state Broker Success Manager will be notified 4. Authorisation under LML's ACL - Most (but not all) mortgage brokers did not have their own ACL. LM Group provided assistance by making them (and their employees) an authorised credit representative of LML. 5. Aggregation of the receipt and payment of commissions on behalf of mortgage brokers - Throughout the Relevant Period, LM Group aggregated commissions owed to mortgage brokers and remitted them to brokers, subtracting any fees owed to LM Group pursuant to the Broker or Franchise Agreements. The Commissions team managed this process. 6. Training and development - During the Relevant Period, all mortgage brokers undertook training during the onboarding process and on at least an annual basis, to maintain membership of a professional industry body such as Mortgage & Finance Association of Australia (MFAA) or Finance Brokers Association of Australia (FBAA) which required between 20 and 30 hours of training per year. LM Group made training resources available through MyCRM, Springboard, conducting professional development days and conferences and tailored training sessions. 7. Lender escalation and complaints handling - The NSW State team provided lender escalation assistance to mortgage brokers seeking to resolve delays with lenders reviewing and settling loans during the Relevant Period. The State team also assisted, with the Compliance team, when mortgage brokers receive complaints from clients or lenders. 8. Recruitment of loan writers/admin staff/brokers - The Broker Success Manager or State Administrator within the NSW State team assisted mortgage brokers with the recruitment, interview and selection process, as well as with the necessary documentations. Brokers ultimately decided who to employ. 9. Use of GBSS by mortgage brokers - ln or around March 2015, LMG entered into an agreement with GBSS, which undertakes an offshore processing business in Manila. From mid-2015, mortgage brokers could enter into an agreement with GBSS to conduct data entry with an attached fee, including to process entire applications on MyCRM and Apply Online from a scanned physical form from a client. LM Group paid GBSS and charged brokers a fee for their use of the services. The LM Group has used a different offshore processing service since 30 September 2020. 10. Payments to third parties on behalf of mortgage brokers - The LM Group also assisted mortgage brokers to streamline their referral arrangements through MyCRM. Template agreements are available (but not compulsory, as long as there is an agreement). Mortgage brokers can also arrange for LM Group to pay their referrers or 'loan writers' directly. 11. Additional marketing support - Throughout the Relevant Period, it was open to mortgage brokers to make custom marketing requests to the LM Group's marketing department by email or through Springboard for no additional fee. 12. Development and execution of business plans - During the relevant period, mortgage brokers could request business planning assistance for no additional fee, which would be provided by LM Group's State teams and Finance teams. 13. Lead generation services - During the Relevant Period, mortgage brokers could opt-in for an additional fee for lead generation services, either qualified (higher fee where LM Group had already contacted/vetted the lead) or unqualified (lower fee where LM Group had contact details but it was left to the mortgage broker to make contact). The Operations Manual set out the fee but, as at May 2014, the fee was 30% of the total commissions paid by a lender for a settled loan. LM Group stopped offering qualified leads around 2017. If mortgage brokers did not opt-in, LM Group allocated leads to brokers who were located geographically proximate to the prospective client.

Third-party services

1. Mortgage brokers would sometimes engage third-party services in carrying on their mortgage broking business during the Relevant Period including: credit history and credit check services, market and product comparison tools, and analytics and data transfer services.
2. ln April 2013, the LM Group commenced offering the services of certain third-party service providers to mortgage brokers (on an opt-in basis). This was referred to as 'One System', which consolidated existing technology components of the LM Group's offering to mortgage brokers, including additional offering such as: 1. Professional indemnity insurance; 2. Stay-ln-Touch email marketing through CampaignBreeze; and 3. Property and sales data through Pricefinder.
3. The LM Group approached these third-party service providers with an offer to pay a flat fee on a monthly or yearly basis for the purpose of packaging up these services and providing them to its mortgage brokers on an opt-in basis - with the goal of obtaining a volume discount to pass on to brokers.

Going off-panel

1. Where a mortgage broker identifies that the needs of a client cannot be met by any of the products offered by the lenders on LM Group's panel, the mortgage broker must obtain LML's written consent to go "off-panel" prior to offering an off-panel product to the Borrower (see eg. cl 4.5 of the Franchise Agreement and chapter 4 of the Operations Manual). The Compliance team will review the broker's 'Off-Panel Lender Request' which would explain why it is necessary to go off-panel, and will advise the broker whether the request has been granted. This use of off-panel lenders was relatively rare.

Termination of the Broker Agreements

1. Either LML or the mortgage broker were entitled, during the Relevant Period, to terminate the Broker Agreements without cause by giving the other party not less than the minimum prescribed notice. Generally, the LM Group only terminated if there was a breach by the broker. However, many brokers terminated during the Relevant Period to move to a different aggregator.
2. Upon termination of the Broker Agreements by a mortgage broker, the LM Group's practice throughout the Relevant Period was to provide the mortgage broker with a cessation letter, a Deed of Release and Termination for the mortgage broker to execute, and an exit letter setting out any compliance challenges in relation to that mortgage broker. A qualified exit letter would be sent where the mortgage broker ceased using LM Group as an aggregator with adverse circumstances present at the time of exist.
3. The practice of the LM Group has always been to allow the mortgage broker to take their customer information stored in MyCRM (processed by LM Group at no additional fee) and have it uploaded to their new aggregator's system. Under the old Symmetry system, a mortgage broker was entitled to request a copy of their database of customer details on Symmetry from Stargate, which Stargate would provide at a cost to the mortgage broker.
4. Following termination, LM Group's practice is to continue to pay trail commissions owed to the former mortgage broker, but they were required to pay a processing fee between $92 and $200 in relation to LM Group's ongoing obligation to aggregate and process their commissions.
5. If a mortgage broker leaves another aggregator to use LM Group as its new aggregator, then the new mortgage broker may continue to receive trail commissions from its prior aggregator, so long as that aggregator does not prevent a broker from being entitled to trail commissions post-termination.
6. The Franchise Agreement also entitles a mortgage broker to sell their 'Loan Book', being the mortgage broker's right to receive payments in the form of trail commissions, as long as they provide LM Group with a payment direction to ensure payments are directed to the new owner.

Payments to Assessed Brokers

1. Lenders paid commissions into three bank accounts with ANZ, held under LMG's, eMOCA's and Elkbay's names respectively (together, the Commission Bank Accounts). Between September 2010 and 2013, there were efforts to consolidate those accounts into one central account, being the account in LMG's name (LMG Trust Account). Some lenders were slow or reluctant to change the direction of their payments, so LMG's practice was to pay amounts received by eMOCA's or Elkbay's account into the LMG Trust Account. Payments to mortgage brokers were made out of a different ANZ account in LMG's name (LMG Operating Account). Monies were transferred from the LMG Trust Account to the LMG Operating Account to be paid out to brokers.
2. Ms Glen gave evidence that the following steps were taken by the Finance and Commissions teams to process commissions and generate reports during the Relevant Period: 1. Step 1 - Lender made payments comprising commissions payable under the relevant lender agreements into the LMG Trust Account, eMOCA's Account or Elkbay's Account (Lender Payment). 2. Step 2 - On a monthly basis, the Commissions team performed a monthly bank reconciliation in which they downloaded and copied the transaction history for the Commission Bank Accounts, which recorded all Lender Payments, into an excel spreadsheet (Bank Rec Sheet). 3. Step 3 - The Commissions team would then obtain or receive information about the Lender Payments, consisting of a "Bank File" and lender-generated RCTI (together, Lender Data). The information provided (and the method of providing the information) varied across lenders but, generally, specified the loan and mortgage broker that the payments related to. 4. Step 4 - The Commissions team would compare the Bank Rec Sheet and Lender Data for the purpose of identifying upfront and trail commissions owed to mortgage brokers. 5. Step 5 - Data that the Commissions team was able to match was then prepared into two Excel spreadsheets which was uploaded to the 'Commissions System'; one for trail commissions and one for upfront commissions, (the Preliminary Commission Information). The Commissions System stored information about the rules for payment of commissions to the mortgage brokers, such as the percentage of their commission that they were entitled to receive (the "Broker Rate" in the RCTIs issued to mortgage brokers). 6. Step 6 - The Commissions System pulled information from the LM Group's CRM system (Symmetry, then MyCRM) to generate "Expectation Data" about the commissions that the LM Group's system expected a broker would be entitled. 7. Step 7 - The Commissions System matched the Preliminary Commission Information with the Expectation Data. This would identify the commissions where the two data sources matched (Matched Commissions) and where the two data sources did not match (Unmatched Commissions), known as the Trust Clearing Concept. 8. Step 8 - The Commissions System would then generate an "Extract" and a LM Group RCTI for the mortgage brokers. The Extracts will identify the amount that has been cleared. That amount will be transferred to the LMG Operating Account to be paid out. The Unmatched Commissions remain in the LMG Trust Account until they can be matched. 9. Step 9 - The Extract was then uploaded into TechnologyOne (the ERP system), for the preparation of LM Group's consolidated accounts. Gross commissions from lenders were recorded as revenue and net commissions paid to brokers and to their referrers were recorded as expenses. 10. Step 10 - TechnologyOne would then generate an 'ABA File' which was then uploaded into a portal with the ANZ Bank. That ABA File specified the payments to be made from the LMG Operating Account to the various payees. LM Group could then authorise bulk payments of the Matched Commissions to the relevant broker. Three payment runs occur per month, on the 12th, 21st and final day of each month.
3. Aside from the facilitation fee, LM Group charges an establishment fee (paid on entering the Broker Agreement), a system fee for access to systems and support, and third-party provider fees (if the broker subscribes to those third-party services). When a Broker Agreement was signed or terminated, the Agreements team was responsible for recording them as active or inactive in the Commissions System and MyCRM. At the end of each month, the Finance team would conduct a monthly fee reconciliation to charge the fees other than the facilitation fee as they applied to the active brokers. Before 2014, fees were set-off against commissions owed to mortgage brokers. After 2014, they were directly debited from a bank account nominated by the mortgage brokers. For the GBSS offshore processing, brokers paid a set fee per application to LML.
4. RCTIs were issued to mortgage brokers at each payment interval including for upfront commissions, trail commissions, both upfront and trail commissions together, and payments or deductions (such as to referrers). The RCTIs specify the broker, settled date (for the particular loan), customer name, lender, loan amount, lender rate, lender payment to LMG, broker rate (the percentage of the lender payment owing to the broker after subtracting the facilitation fee), commission payable to the broker, and payments or deductions such as to referrers (which will be identified).
5. During the Relevant Period, payroll tax was paid on wages paid to LMG employees in several states including to some who were historically (but no longer) employed as mortgage brokers at some point during the Relevant Period. The commissions generated by those directly employed brokers generated 0.2 to 1.5% of revenue. The payroll tax investigation commenced on 7 October 2015 and the Commissioner issued reassessments to LMG, and subsequently formed the view that LML was liable for payroll tax for the Relevant Period.

Elizabeth Tacon

1. Ms Elizabeth Tacon is a mortgage broker, currently trading as an individual sole trader using the business name "TATS Group". She used Loan Market as her aggregator from 2007 to 20 August 2012.
2. Ms Tacon worked at a number of banks, including as a Lending Manager writing loans before starting her own mortgage broking business in 2006. In that year she left CBA and started as a mortgage broker using Xinc as her aggregator.
3. Based on her experience in the industry up until 2006, she was aware that in order for a mortgage broker to be able to submit loan applications on behalf of their clients to a bank, the mortgage broker had to be accredited with the bank and that in order for a sole trader to have accreditations with a large number of banks they need to obtain their accreditation through an aggregator, who would be able to satisfy the annual minimum volume or value requirement imposed by each bank.
4. On 4 December 2006, she entered into an Introducer Agreement with Xinc and registered an Australian business number as a sole trader.
5. In 2007, when Xinc was acquired by the LML Group, Ms Tacon was informed by LM Group that her Introducer Agreement would continue to apply to her relationship with Loan Market. Ms Tacon was an authorised credit representative of LML for the period from 1 July 2010 to 20 August 2012.
6. On 20 August 2012, Ms Tacon's Introducer Agreement with LML came to an end and she shortly afterwards became an authorised credit representative of Finsure Finance & Insurance Pty Ltd, another aggregator. She has used that company as her aggregator since August 2012.
7. Ms Tacon gave evidence that the process of transitioning from LML to Finsure involved essentially three steps. First, she obtained an "exit letter" from LML to confirm that her compliance history with LML was satisfactory. Second, she arranged for the LML IT team to download all of the data kept on LML's systems relating to her client information so that she could provide it to the Finsure IT team to upload into all their systems. Third, she had to transfer her bank accreditations from LML to Finsure, which the Finsure accreditations team assisted her with. Fourth, she contacted her clients to give them her new contact details, including a rebranding of her business as "Tacs Group" with a registered business name. Her only contact with LML after her move to Finsure was that LML continued to administer her trail commissions prior to 20 August 2012.
8. Ms Tacon gave evidence as to how she conducted her business while she was with LML. She obtained clients through four main sources: word of mouth, LML's lead generation service, referral arrangements which she had with two Ray White Real Estate Agents, and new work through her past and existing customers. The last of these is the most significant source of her business currently, and for that reason she sought to maintain close relationships with her clients.
9. Ms Tacon gave evidence as to the procedure she adopted when originating a loan for a client. Once a client made contact with her, the first step was to have a meeting face to face with the client. At this meeting she would ask them questions about their goals, a general understanding of their income and expenses and run through calculations with them to allow her to advise them what their borrowing capacity was likely to be. If the client wished to proceed further, she would obtain copies of their identification documents and ask them to sign various consent forms, including a consent for her to provide their personal information to a bank in the course of submitting their loan application.
10. Having obtained an idea about the customer's borrowing needs and any specific goals they had, the next step was for her to compare the loan products with the banks that she was accredited with to identify those that were suitable for the customer, and then to provide them with information about the key features of that product. The products that she short listed for a client were selected by her, and not LML.
11. The next step was to arrange further meetings with the client to obtain further information about their income and expenses, and collect from the customer the documents that will be needed for the purposes of the loan application, including payslips bank statements and other financial documents. While she was with LML, she would input the data into LML's CRM system (using the Symmetry software), which stored the customer information until it was needed for the purpose of submitting a loan application for the client.
12. Finally, once the client had provided all the relevant financial information and had given instructions about what loan product they wished to apply for, she would then prepare the loan application on behalf of the client. While with LML, the system she used to submit these loan applications was Apply On Line.
13. Ms Tacon gave evidence that if the loan was approved and the customer drew down on the loan, then she would receive upfront commission as a percentage of the loan and also a trail commission each month for the life of the loan as long as the client was not in default on the loan. She received RCTIs from LML in respect of these commissions and, following her move to Finsure, she still receives RCTIs from LML in respect of trail commissions for the loans that she brokered during the time that she was with Zinc and LML. She lodged tax returns in respect of her mortgage broking business in which she returned the commissions as income and claimed deductions for various expenses that related to the carrying on of her mortgage broking business.
14. Ms Tacon gave evidence as to the services she received from LML during the time LML was her aggregator. These were: she operated as an Authorised Credit Representative of LML; LML informed all of the banks that she was previously accredited with through Zinc that her aggregator was LML and her accreditations with those lenders were transferred over to LML; LML provided her with a suite of software services that she used to conduct her mortgage broking activities (including the Symmetry program) and also access to Apply On Line which was the portal that allowed mortgage brokers to submit loan applications to bank. Apply On Line streamlined the loan submission process because it could be integrated with the Symmetry software program; LML made training available through in person training sessions at LML's offices and/or through LML's intranet site, OneView (including as to regulatory and compliance issues). LML provided compliance services, including random sampling audits of client files to ensure compliance with best practices. LML provided marketing templates for brokers in its network, including template emails, an email address and a Loan Market domain name, which were personalised to her. She took advantage of this branding.

Anastasia Theodoropoulos

1. Ms Theodoropoulos is a sole trader running a mortgage broking business in her own name. She gave evidence by affidavit and was cross-examined.
2. Ms Theodoropoulos started her mortgage broking business in 2010, having previously worked for another mortgage broking business called Sydney Home Loans as a Business Development Manager.
3. On 1 October 2010, she was granted an Australian Credit Licence by ASIC and then entered into an agreement with Sydney Homes Loans for it to be her aggregator. She regarded an aggregator as an essential part of a mortgage broking business because a mortgage broker had to be accredited with lenders to submit loan applications to the lender and earn commissions, and her experience was that lenders did not usually deal with a sole trader or small business mortgage broker.
4. In June 2011 Ms Theodoropoulos changed her aggregator from Plan Australian to LML and entered into an Introducer Agreement with LML on 8 June 2011. This was replaced by a Loan Market Mortgage Broker Agreement with LML on 27 June 2014. At the time she entered into the Introducer Agreement with LML, she was already accredited with about 15 lenders through Plan Australia and LML assisted her to transfer all of those accreditations over to her new role with LML.
5. Ms Theodoropoulos gave evidence that she conducted her business from 2011 from offices of Ray White Real Estate Agents, for which she paid a fee for the use of the office, and office services (such as the receptionist, photocopier, internet and so on). Her evidence was that the main capital assets in her business were her computer and her car (the latter used to visit clients at their home or work).
6. Ms Theodoropoulos gave evidence as to what she regarded as the most important services she received from Loan Market. The first was the provision of software services which she used in her mortgage broking business (in particular, access to the CRM system, being Symmetry and MyCRM which replaced it, as well as access to Apply On Line). In addition, she received from time-to-time support from LML's software technical support team if she had any issues using these software program. Second, LML Group provided her with assistance in obtaining accreditation with its panel of lenders, and she is now accredited with 30 lenders. Third, LML Group provided her with assistance in remaining compliant with her licences and accreditations, which included complying with a mandatory 30 hours of continuing professional development each year for her membership of the Mortgage & Finance Association of Australia. LML Group provides her with training modules and professional networking conferences that she needs to reach that target. Fourth, she relied on LML Group to help her monitor her compliance with relevant regulations that apply to mortgage brokers, including periodic training to make sure that she stayed up to date with regulatory requirements.
7. Ms Theodoropoulos gave evidence that she paid a monthly facilitation fee to LML which was deducted from the gross commissions which were remitted to her, as reflected in the RCTIs issued by LML to her. She also paid an administration fee or system fee to LML. She gave evidence that the income she received from her mortgage broking was upfront commission on settlement of each loan and trail commission for the life of the loan. She put into evidence sample copies of RCTIs provided to her by LML when remitting commission to her.
8. Ms Theodoropoulos gave evidence that her revenue was generated from three types of clients: new clients for whom she submitted loan applications (generating upfront commissions when the loans settled and trail commissions for the life of the loans); second, existing clients when she submitted applications to refinance their loans (thereby generating upfront commissions if the loan is with a different lender and new trail commission for the life of the loan in place of the previous trail commission); and third, existing clients who maintain their loans (thereby enabling her to receive trail commissions for the life of the loan).
9. Ms Theodoropoulos gave evidence that she obtained new clients through referrals, including her own personal referral networks and through the Ray White network (including the real estate agents at the Ray White office in which she worked), as well as through LML's lead generation service. Her participation in LML's lead generation service was optional and she was not directed to service particular clients by LML. Her evidence was that she regards the clients with whom she deals as her personal clients and not the clients of LML.
10. Her evidence was that she used the Loan Market branding, including being advertised on the Loan Market website as a LML affiliated broker, but also sought to build her own personal brand through her marketing activities. She also used an email address and an email signature which included the name "Loan Market" and an email signature which included the Loan Market trademark. She accepted in cross-examination that she conducted her business during the relevant period as a Loan Market affiliated broker.
11. Ms Theodoropoulos gave evidence as to the process she undertook when writing a loan for a client, which was broadly the same as the evidence of Ms Tacon. Her evidence was that her focus was on finding for her clients the right loan product for their particular goals and circumstances. Her evidence was that she did not contact Loan Market and seek their advice or assistance in completing loan applications on her clients' behalf and considered that, as a mortgage broker, she was responsible for staying up to date with the latest information from Lenders and advising her clients.
12. Her evidence was that it was the general practice as a mortgage broker that the broker would contact any referral or lead within 24 hours.
13. She agreed in cross-examination that a general summary of the work of a mortgage broker is to interview the client to obtain information about their personal circumstances, their property ownership goals and also their financial goals in order to find the right loan product for them and then deal with the banks on their behalf, including helping them fill out and submit their loan application. She agreed in cross-examination that core service of the work that a mortgage broker provides is finding the client the right loan product.
14. Her evidence was that as part of the process of selecting a number of products to including on the short list provided to the client (which was normally between three and five) she used the calculator function within MyCRM, which allowed her to enter the loan amount, term, security details and type of product to work out the rates and fees that might be offered to the client by the lender. The system licence fee she paid covered the use of the CRM system.
15. Ms Theodoropoulos said that part of her role as a mortgage broker was to develop relationships with the business development managers within each of the lenders she was accredited with, which would assist particularly where the lender offers an uncommon product, and she can contact the business development manager to understand whether the product would be suitable for her client.
16. Ms Theodoropoulos also gave evidence that in around March or April 2017, after she suffered a serious illness, she employed her sister, Maria Damjanic, as an administrative assistant to assist with entering information about a customer into the MyCRM system, ensuring that client information stayed up to date, setting calendar reminders for her to contact clients and arranging those meetings with clients and filing in her hardcopy files. Of this Ms Damjanic's main task that she assisted with was the first being data entry. She also assisted with preparing the loan applications, including compiling the supporting information provided to the bank with the loan application, following up with the lenders to query the status of the application, and finding out if the client still needed to provide any information. Ms Theodoropoulos paid her $100 per week for this work.

K&K Financial Services Pty Ltd

1. K&K Financial Services Pty Ltd (K&K Co) entered into a Broker Agreement with LML on 17 March 2015, and operated as a credited representative of LML between 17 March 2015 and 6 July 2016. Mr Fetuanimoekie Kula, who was a director of K&K Co at all relevant times, gave evidence by affidavit but was not cross-examined.
2. Mr Kula was employed by ANZ and also Citibank in their mortgage lending activities until setting up K&K Co in July 2013. From that time, K&K Co and he had been credit representatives authorised by six different aggregators, and K&K Co's current aggregator is now LML, the relationship having recommenced in September 2021.
3. Mr Kula gave evidence about the process whereby he (and K&K Co) transferred from their previous aggregator to LML in March 2015. This involved training sessions, including training in how to use LML's CRM system, assistance with becoming an authorised credit representative of LML and assistance with transferring existing accreditations with lenders and acquiring new accreditations with lenders on eMOCA's panel. When he first joined LML he and K&K Co had about 15 existing accreditations with a number of lenders, which had been obtained whilst he was with his prior aggregators. Some of the new lenders he became accredited with required that he attend further training and this was organised by LML's training team.
4. Mr Kula gave evidence about how K&K Co's mortgage broking business operated, including during the period that he and K&K Co were credit representatives of LML from March 2015 to June 2016 (Loan Market period). In this period, the business operated from Mr Kula's home office, and his wife provided assistance for approximately 2-3 hours per day in various administrative tasks.
5. Mr Kula gave evidence that the main source of leads for new clients was the Pacific Islander community in Sydney. He gave evidence as to the procedures he took during Loan Market period, when settling a loan for a client, from initial contact to lodging the loan application. This was broadly the same as the procedure adopted by Ms Tacon. He indicated that once he had put the relevant information obtained from the customer into LML's CRM system the Symmetry software would provide him with three recommended products for the client based on their information and circumstances, which was called the "Product Comparison Tool" in Symmetry. He would then speak to the clients about the recommended products and provide them with a document setting out the products and his practice was to recommend one of the three recommended products to the client. If the products recommended were not suitable to the customer, he would look for similar products to the ones recommended. Once a product had been selected by the customer, he would then go ahead and prepare the loan application and submit this to the lender, which involved collecting the information from the customer required by the lender's loan application process.
6. Mr Kula gave evidence that once a loan was settled and the loan amount was drawn down, K&K Co would receive commission in the form of an upfront commission at the time the loan was settled and then monthly trail commission as long as the loan remained on foot.
7. Mr Kula received RCTIs from LML whenever it remitted commission to K&K Co. His evidence was that he paid an establishment fee of $1,400, as a one-off charge, when K&K Co entered into the Franchise Agreement in March 2015 and also paid during the term of that Franchise Agreement a system fee of $260.70 per month and a facilitation fee. Following the termination of the Franchise Agreement, K&K Co was no longer charged the system fee or the facilitation fee, and continued to receive trail commissions from LML from which LML deducted a processing fee of $95 (plus GST) per month.
8. Mr Kula gave evidence that each time he changed the aggregator K&K Co used, he took his customer lists with him, and continued to maintain a relationship with those clients. This included assisting them if they wished to refinance their loans, and undertaking reviews of their loans, including to see whether the customer may be entitled to a better rate.
9. Mr Kula's evidence was that he considered that an essential service that an aggregator provides to a mortgage broker is access to their panel of lenders, because without access to the aggregator's panel of lenders and without being accredited with a lender, he could not submit a loan to a lender and earn commission.
10. Mr Kula gave evidence of other services which he and K&K Co received during the Loan Market period, which was similar to that of Ms Tacon set out at [127] above.

Flintfox Australia Pty Ltd

1. One of the Assessed Brokers during the relevant period was Flintfox Australia Pty Ltd (Flintfox). Mr Nicholas Gray, the sole director of Flintfox gave evidence and was cross-examined.
2. Flintfox commenced acting as a broker with LML under an Introducer Agreement entered into on 11 March 2011. This was replaced by a Broker Agreement when the franchise model was introduced, entered into on 2 July 2014.
3. Under both agreements, Flintfox acted as an authorised credit representative of LML under LML ACL.
4. Mr Gray gave evidence about the process by which Flintfox provided its mortgage broking service to its customers, which was broadly the same as the process adopted by the other broker witnesses.
5. Mr Gray's evidence was that Flintfox earned two types of commissions on the successful settlement of a loan that it had brokered, being an upfront commission and a trail commission. The upfront commission is paid as a one-off payment on the settlement of the loan and the trail commission is paid each month for the life of the loan. His evidence was that commissions were received generally by three payment runs each month, the first in the second week of the month, the second in the third week and a third at the end of the month. The three commission runs included upfront commissions paid by the lender in that period and the trail commission was usually only paid on the final run on the last day of the month.
6. Mr Gray gave evidence that Flintfox obtained most of its clients by word-of-mouth referrals, including from real estate agents, and also LML lead generation service. During the relevant period he had a referral arrangement with Ray White Real Estate Agents and the fees payable by Flintfox for loan transactions resulting from referrals from Ray White offices was deducted from the commission paid to him by LML.
7. Mr Gray gave evidence that Flintfox paid an establishment fee when it first started as a broker with LML and during the relevant period also paid a system fee of approximately $297 per month (ex GST) and a facilitation fee worked out as a percentage of the commissions paid to him by LML. Flintfox's only income during the relevant period was commissioned from its mortgage broking business.
8. Mr Gray gave evidence as to the services provided to him by LML during the relevant period, which included access to LML's branding and marketing tools. Although Flintfox's business operated under its own business name, "Perview Financial Services", he still considered there to be value in being co-branded with LML, which included being advertised on the Loan Market website and using a Loan Market email address.
9. Second, LML provided Flintfox with access to its lender panel and the ability to become accredited with lenders which was necessary in order for Flintfox to be able to broker lender products. Flintfox was credited with 28 lenders on the LML panel.
10. Third, LML provided access to resources to enable him to comply with the various legal and regulatory requirements applicable to Flintfox as a mortgage broker, including training.
11. Fourth, Flintfox was provided with access to technology and software without which it could not run its mortgage broking business, including access to MyCRM and Apply On Line in order to upload client data, package loan applications and submit them to lenders. MyCRM was the primary software that Flintfox used to keep track of client engagements. Apply On Line is the portal through which Flintfox submitted loan applications once they had been finalised with the client.
12. Mr Gray gave evidence as to the use made by Flintfox of the business support services provided by GBSS. Prior to that time, Flintfox obtained services from a service company and a number of individuals to assist with the uploading of client data to MyCRM and other administrative tasks in completing loan applications with lenders.
13. On 30 May 2016, Flintfox entered into an agreement with LML entitled "Business Broker Support Services Agreement". Under this Agreement, LML agreed to provide Flintfox with the "services" on the terms set out in the Agreement. The term "services" was defined to mean "data entry for loan applications". Clause 5.1 of the Agreement provided that LML may at its discretion, engage a third party to provide the services on its behalf or to assist with provision of the services. The fee payable by Flintfox under the Agreement was $30 (plus GST) per loan application completed.
14. Mr Gray gave evidence as to how this arrangement operated in practice. His primary contact was a person located in Manila, Jenny Juband. Mr Gray interviewed the client and obtained their financial information and relevant documents. He prepared client notes about their borrowing goals, any preferences they have for their loans and what products he would recommend for them, he then bundled those materials together and sent them to GBSS in Manila and requesting them to upload the information into MyCRM. The GBSS team in Manilla then uploaded that information into my MyCRM and then emailed Mr Gray once that had been done.
15. Mr Gray then reviewed the information on MyCRM to make sure that it had been correctly entered and then conduct a further interview with the client to discuss the loan product which the client wanted to apply for. Once he had the client's instructions he would instruct the GBSS team in Manila to start preparing the loan applications for submission to the lender. Once the application had been prepared in a state ready for lodgement, Mr Gray reviewed it and then sought confirmation from the client that the application should be lodged.
16. Mr Gray's evidence was that Flintfox used the services of GBSS for up to 80 or 90 percent of the loan applications which he completed, after commencing to use GBSS in late 2015 through to the end of the relevant period. His evidence is that in the 2016 financial year, GBSS assisted Mr Gray with 10 loan applications over a five-month period, which approximates to two loan applications per month. For the remainder of the relevant period, Flintfox sought the assistance from GBSS on over 70 loan applications. Flintfox was charged $30 (plus GST) for each of these loan applications.

Marco R and Vicki L Cappetta Partnership

1. One of the mortgage brokers with LML during the relevant period was Marco Cappetta and his wife, Vicki, operating through a partnership trading under the name "MR and VL Cappetta" (Cappetta Partnership). Mr Cappetta gave evidence by affidavit and was cross-examined.
2. The Cappetta Partnership entered into an Introducer Agreement with Xinc on 1 March 2005, which was taken over by LML in 2007, when LML acquired Xinc. Mr Cappetta gave evidence that he did not sign any agreement with LML at the time of the Xinc transaction and LML simply operated on the basis that it respected the terms of the Cappetta Partnership's original agreement with Xinc. In the Loan Market franchise models introduced in 2014, the Cappetta Partnership entered into a Broker Agreement with Loan Market on 14 July 2014.
3. Mr Cappetta's evidence was that he was the sole decision-maker in relation to the mortgage broking business of the Cappetta Partnership and that his wife's role was to assist with data entry for loan applications. He conducted the business during 2010 and 2017 at the offices of various Ray White Real Estate Agents and then from late 2017 from an office leased by the Cappetta Partnership. In addition, he also worked from home.
4. Mr Cappetta's evidence was that having been a mortgage broker for over 18 years, he generates the majority of his leads through word-of-mouth referrals as well as his referral arrangements with a number of Ray White Real Estate Agents and other property advisers. He also said that some leads were generated through the Loan Market website.
5. Mr Cappetta gave evidence about the process by which he engaged with clients to assist them with a loan application, which was in general terms the same as the evidence of the other brokers. In addition to originating new loans, his existing customers also approach him if they are seeking a refinance or if they want assistance with negotiating a better rate with their existing lender.
6. Mr Cappetta gave evidence that the income for the Cappetta Partnership from his mortgage broking business comprised upfront commission and trail commissions, paid to him usually through three payment runs each month, with upfront commissions being included in each run and trail runs generally only included in the final payment run at the end of the month.
7. From the total commission paid to the Cappetta Partnership there would be deducted amounts payable to Ray White Real Estate Agents for referrals. He also gave evidence that the fees payable by the Cappetta Partnership to LML comprised a facilitation fee and a system fee. He also gave evidence as to the various expenses incurred by the partnership in the conduct of his business.
8. Mr Cappetta gave evidence regarding the services provided to the Cappetta Partnership by LML which included access to software and systems (including MyCRM and Apply On Line), accreditations with lenders (the Cappetta Partnership was accredited with approximately 25 lenders during the relevant period), compliance and training, and marketing and branding under the Loan Market Brand.
9. Mr Cappetta gave evidence about an arrangement he entered into in around February 2012 with a friend, Mr Peter Carbone, who had previously been a relationship manager at CA and is now a broker with another aggregator (Plan Australia). Under this arrangement with Mr Carbone, which was an informal verbal arrangement which lasted for a period of eight months from February 2012, Mr Cappetta agreed to pay Mr Carbone around $150-$200 per loan transaction where Mr Carbone prepared and assisted with the lodgement of loan applications with lenders and following up the status of loan applications and updating relevant information in the CRM system. His evidence was that there were about half a dozen such loan transactions for which Mr Cappetta paid a fee to Mr Carbone during the period that this arrangement lasted.
10. After the arrangement with Mr Carbone ended, he had assistance from his wife, the other partner, in this role and then after August 2016, he engaged another person in this role.

Gregory Michael Cook

1. Mr Gregory Cook gave evidence by affidavit regarding two mortgage broking businesses which were operated under a Loan Market franchise during the relevant period, one by 99 Degrees Pty Ltd and the other by Mortgage Planners Network Pty Ltd. Mr Cook was not cross-examined.
2. The evidence in his affidavit regarding the operations of each of the franchises was consistent with the evidence given by the other mortgage broker witnesses.

Katharina Fifer

1. Ms Katharina Fifer gave evidence by affidavit regarding the mortgage broking business she operated during the relevant period under a number of different Broker Agreements with LML, including an Introducer Agreement entered into on 28 July 2011, a Broker Agreement entered into on 4 August 2014 when the franchise model was introduced which was in turn replaced by a Broker Agreement dated 21 December 2015 between Alex & Kat Pty Ltd (a company of which she is a director) and LML. Ms Fifer was not cross-examined. Her evidence regarding the operations of the mortgage broking business she conducted under these various agreements is consistent with the evidence of the other mortgage broker witnesses.

Preliminary issue: Character of the businesses operated by Assessed Brokers and LML

1. Before addressing the issues identified at [35] above, it is necessary to make findings about the nature of the businesses conducted by the Assessed Brokers and LML during the Relevant Period.

Business of Assessed Brokers

1. Throughout the Relevant Period each of the Assessed Brokers conducted a business, which is properly described as mortgage broking or loan origination under the terms of one of the Broker Agreements identified at [67] or [75] above. The core of the work of an Assessed Broker in that business was the identification for a prospective loan customer of the appropriate loan product available on the LM Group Approved Products list having regard to that customer's particular circumstances and assisting the prospective loan customer with making a loan application to a Lender.
2. The Assessed Brokers (including those with their own ACL) conducted this business using the Loan Market branding and related intellectual property and in accordance with the requirements of the LM Group Operations Manual and the Broker Agreements. In particular, Assessed Brokers: 1. associated themselves with, and utilised, the Loan Market brand; 2. maintained personal profiles on the LM Group operated website; 3. used an email address which utilised "Loan Market" (ie. @loanmarket.com); 4. utilised Loan Market provided, and branded, template documentation (such as Credit Guides, Privacy Disclosure Consent Forms, Preliminary Assessment Documents and Credit Quote and Proposal documents); and 5. recommended to prospective loan customers loan products offered by Lenders with which the LM Group (through eMOCA) had Lender Agreements.
3. Brokers obtained new customer leads by three main methods: 1. Assessed Brokers obtained new customer leads was by referral of potential customers from the LM Group. There were three methods by which those LM Group generated leads were generated by the LM Group and referred to Assessed Brokers: first, by customers calling the LM Group call centre; second, by customers filling in an enquiry sent to a generic LM Group email address; and third, by the "360 Referral Program" the LM Group had in place with Ray White Group. The LM Group invested in activities designed to generate customer leads. The Operations Manual set out strict requirements in relation to how Assessed Brokers were to deal with customers referred to them by the LM Group. Allocation of leads by the LM Group to Assessed Brokers was discretionary, one factor taken into account by the LM Group being geographic proximity to the potential client and another factor being the previous performance of the Assessed Broker in successfully converting leads (namely, the conversion of a lead into a settled loan application thereby entitling eMOCA to commission paid from the relevant Lender under the relevant Lender Agreement). 2. Another method by which Assessed Brokers obtained new customer leads was by referral arrangements with entities that operated Ray White real estate offices (Ray White Referral Agreement). In the case of Ray White Referral Agreements, LML entered the Ray White Referral Agreement with the entity conducting the relevant Ray White office. The Assessed Broker thereafter signs a Broker Undertaking in the form of a Deed agreeing, in effect, to adhere to certain terms of the Ray White Referral Agreement. 3. Throughout the Relevant Period Assessed Brokers also obtained new customers from a combination of word-of-mouth referrals and other referral networks of the Assessed Brokers.
4. Once an Assessed Broker commenced dealing with a prospective loan customer and it was apparent that the customer might be provided with credit assistance the customer was provided with a "Credit Guide". The LM Group provided Assessed Brokers with a template Credit Guide to use in the Relevant Period which bore Loan Market branding. The Assessed Brokers used the template Credit Guide provided by the LM Group to them.
5. The practice of the Assessed Brokers in the Relevant Period when originating a loan was generally to: 1. liaise with the prospective loan customer (both on the phone and in person) and obtain information from the loan customer in relation to such matters as their personal and financial circumstances, financial needs and goals regarding loan products; 2. record that customer information in a "fact find" document used by the Assessed Broker and/or a "Client Preliminary Assessment" document used and cause that information to be entered in the LM Group "MyCRM" system or "Symmetry" 3. assess that customer information in respect of loan products potentially appropriate to the customer, having regard to the customers needs and goals, in order to identify a "short list" of potential loan products for the customer to consider; 4. further assess the results provided via tools available to the Assessed Broker on the LM Group "MyCRM" system, such as "loan calculators" and "product finder" searches; then, 5. liaise further with the loan customer regarding potential loan products the customer may wish to consider applying for; 6. prepare the loan application in the event the customer chose to proceed with an application to a Lender in respect of a particular loan product offered by a Lender on the LM Group Panel.
6. In the event a customer proceeded with a loan application, the Assessed Broker was required to obtain from the customer, and enter on the LM Group "MyCRM" system, various documents signed by the customer including a "Client Preliminary Assessment". Contained within the "Client Preliminary Assessment" was a "Privacy Disclosure Statement and Consent" form which included a statement that LML may use the information provided by the customer.

Business of LML

1. The members of the LM Group in the Relevant Period were LMG, eMOCA and LML and the nature of the activities which they engaged in is set out at [37]-[45] above. For the purposes of the application of s 32 of the Act, it is necessary to identify the nature of the business carried on by LML as it is the entity which contracted with the Assessed Brokers.
2. The plaintiffs submitted that the only business carried on by LML in the relevant period was the business of providing the "Loan Market services" to the Assessed Brokers for fees paid by the Assessed Brokers to LML. For this purpose "Loan Market services" were defined to mean: (a) access to the panel of Lenders offered to the Assessed Brokers during the Relevant Period; (b) assistance with obtaining accreditation with those Lenders; (c) regulatory and compliance services; (d) arranging the receipt of commissions from Lenders on behalf of the Assessed Brokers and facilitation of these commissions to the relevant Assessed Brokers; (e) authorisation as a credit representative under LML's ACL if the Assessed Brokers did not have their own ACL; (f) use of the LM Group software platform, and a provision of infrastructure and administrative support; (g) training and development services; and (h) access to the LM Group's branding. This description is the same, in substance, as the "Generic Services" to which Issues 4 and 5 relate.
3. In my view, the business of LML cannot be characterised as simply the provision of these services to the Assessed Brokers. While LML did provide various services to the Assessed Brokers under the Broker Agreements, it did so for the purpose of enabling eMOCA to earn commissions under the Lender Agreements to which eMOCA was a party. It was through the generation of those commissions that LML would receive the facilitation fee (which was a proportion of the commission received from a Lender when an Assessed Broker arranged for a loan to be made by that Lender to a client of the Assessed Broker).
4. The business of LML is properly characterised as entering into and performing the Broker Agreements with the Assessed Brokers in order to facilitate the generation of commissions payable to eMOCA under the Lender Agreements. This is consistent with the recitals to the Sub-Originators Agreement (see [71] above) and with the annual reports for the LM Group which are prepared on a consolidated basis and throughout the Relevant Period describe the business of the LM Group as "mortgage broking" or "mortgage broking services". They also identify the main source of revenue as being commissions paid by Lenders, with the payments made to Assessed Brokers being recognised as expenses of the LM Group.

Issue 1: Whether the Broker Agreements constitute a contract under which LML, in the course of a business carried on by LML, has supplied to LML the services of Assessed Brokers for or in relation to the performance of work, to which s 32(1) applies.

1. Section 32(1)(b) provides: In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person - (a) … (b) has supplied to the designated person, the services of persons for or in relation to the performance of work…
2. A Broker Agreement will be a relevant contract within the meaning of s 32(1)(b) for a financial year in the Relevant Period if it is a contract under which LML (being the designated person) during that financial year and in the course of a business carried on by it, has supplied to it the services of persons for or in relation to the performance of work.
3. It may be noted that s 32(1)(b) requires the identification of a contract as a relevant contract in respect of a particular financial year, and whether the contract is a relevant contract must be addressed having regard to whether during that financial year, the designated person has supplied to it the services of person for or in relation to the performance of work. This is relevant to issue 2 below.
4. The words "under which" mean "in accordance with", "pursuant to" or "required by" the terms of the Broker Agreement. This is consistent with the approach to the words "under which" in the chapeau to s 32(2) in Smith's Snackfood Co Ltd v Chief Commissioner of State Revenue [2013] NSWCA 470; (2013) 97 ATR 904 at [79] per Gleeson JA (Beazley P and Sackville AJA agreeing). There is no reason why these words should have a different meaning in the chapeau to s 32(1).
5. In Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126; (2020) 111 ATR 812 at [123] Bathurst CJ (Macfarlan and Meagher JJA agreeing) referred to these observations in Smith's Snackfood and went on to say that an appropriate approach to the question posed by words "under which" in the chapeau to s 32(2) in the circumstances of that case was to draw on the approach taken in FCT v Sara Lee Household & Body Care (Australia) Pty Ltd (2000) 201 CLR 520, in the context of the capital gains tax provisions in the income tax legislation, which require a judgment as to whether the contract relating to the disposal of an asset could properly be seen as the source of the obligation to effect the disposal of the asset. The Chief Justice then said at [124] in relation to the contract before the Court in that case that the supply of services referred to in s 32(2)(a) was "under" the contract because "the supply occurred in fulfilment of that contractual obligation to Downer and thus occurred 'under the contract'". In my respectful view, this approach did not indicate a limitation on the meaning of "under" or suggest that what was said in Smith's Snackfood at [79] was wrong. Rather, it was seen as a way of approaching the question posed by the word "under" on the facts of Downer EDI.
6. The requirement that the services supplied under the contract are "services of persons for or in relation to the performance of work" is merely that the services supplied under the agreement are work-related: Accident Compensation Commission v Odco Pty Ltd (1990) 95 ALR 641 at 651; Bridges Financial Services Pty Ltd v Chief Commissioner of State Revenue [2005] NSWSC 788; (2005) 60 ATR 237 at [225]; Smith's Snackfood at [56].
7. The activities which the individuals who are Assessed Brokers (or where the Assessed Broker is a company, act on the Assessed Brokers' behalf) perform are identified from [184] above. This work is done in accordance with the Relevant Broker agreement because it was required to be done in the way it was by the terms of that Broker Agreement. The performance of that work involved the provision of services to LML. As noted in IW v The City of Perth (1997) 191 CLR 1 at 11, the term "services" has a wide meaning. In the Macquarie Dictionary, the first two meanings given to "service" are "an act of helpful activity" and "the supplying or supplier of any articles, commodities, activities etc required or demanded". In the Oxford Dictionary, the first two meanings of "service" are "the action of helping or doing work for someone" and "an act of assistance".
8. The Assessed Brokers gave a suite of promises to LML under the Broker Agreements as to the manner in which they would conduct their business, including the manner in which they would deal with clients for whom a loan was originated with a Lender. The key promise throughout the Relevant Period was to conduct that business under the Loan Market brand adopting practices and procedures mandated by LML. These were valuable promises to LML. First, performance of the work in accordance with the requirements of the Broker Agreement would generate commissions from which LML was expected to benefit. Second, where the Assessed Broker was acting as a credit representative on behalf of LML, it was important that the procedures mandated by LML were followed because LML would be responsible to the client for the conduct of the Assessed Broker as LML's credit representative: see ss 75, 77, and 78 of the Credit Protection Act.
9. The performance by the Assessed Broker of the promises to undertake the work in a particular way is properly characterised as the performance of a service to LML and this is so notwithstanding that it is also the performance of a service to the client for whom the loan is arranged: Thomas and Naaz Pty Ltd v Chief Commissioner of State Revenue [2023] NSWCA 40 at [41]-[45]. See also Bridges Financial Services at [226].
10. The proposition that the provision of services to a designated person under a relevant contract can arise notwithstanding that this involves, at the same time, the provision of services to a third party is illustrated by Odco. That case concerned s 9 of the Accident Compensation Act 1985 (Vic) which was in very similar terms to s 32 of the Act. In that case, the respondent carried on business under the name "Troubleshooters Available" (TSA) as a labour-hire agency providing the services of tradesmen to builders in circumstances where the tradesmen only had a contractual relationship with TSA. The contract between the tradesmen and TSA arose each time the tradesmen accepted an offer to work for a particular builder. A question arose as to whether the contracts between TSA and the tradesmen were "relevant contracts" under s 9 with the result that TSA was liable to pay a levy. The Court said (at 652, emphasis added): The language of s 9(1) in its application to these contracts raises several problems for consideration. First, there is the question whether the tradesman supplies services to TSA. There is no definition of "services" except in so far as s 9(6)(d) provides that a reference to services includes a reference to "results (whether goods or services) of work performed". Once it is accepted that there was (1) an agreement between TSA and the builder for the supply of a tradesman to the builder to do certain work on terms that the builder was to remunerate TSA for supplying the tradesman and for the work which he did, and (2) an agreement between TSA and the tradesman whereby the tradesman agreed to perform work at the site at the builder's direction for remuneration to be paid by TSA, it follows as a matter of plain language that the tradesman supplies services to TSA by attending at the site and doing work there. By attending there and doing work, he supplies services to TSA for the purposes of its business, notwithstanding he also at the same time supplies the same services to the builder for the purposes of its business.
11. This is a recognition that there can be a provision of services by A to B under a contract between them which, at the same time, is the performance of a service by A to C, a third party who benefits from the provision of the services by A to B, even where there is no contract between A and C; see also Thomas and Naaz at [45]. However, whether the services provided by A to B are the same as those provided to C will depend on the facts of the particular case.
12. It may be noted that the obligation imposed on the Assessed Brokers to conduct their businesses in the way mandated by LML was not limited to the situation where the Assessed Broker was acting as a credit representative of LML. This can be explained on the basis that it was important to LML, and its Loan Market brand, that the same procedures be followed by Assessed Brokers whether or not they were acting under LML's credit licence. For this reason, the Broker Agreement with Ms Theodoropoulos was a relevant contract notwithstanding that she acted under her own ACL.
13. The parties made extensive submissions about the relevance of the fact that LML issues RCTIs to the Assessed Broker reflecting that for GST purposes there was a taxable supply of services by the Assessed Broker to LML under the Broker Agreements. Ultimately it is not necessary to address the relevance of the GST treatment of the Broker Agreements as it relates to a different taxing statute and has the potential to distract from the Court's task which is to focus on the provisions of s 32 of the Act and how those provisions apply to the Broker Agreements.
14. The conclusion that the Broker Agreements constitute a relevant contract under s 32 may be seen as a harsh outcome for LML because the contractor provisions now found in s 32 were originally introduced as an anti-avoidance measure which was not intended to catch "bona fide independent contractors": see Bridges Financial Services at [218]-[219]; Downer EDI Engineering Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 743 at [101]-[110]. But the way the legislature approached the implementation of that purpose was to cast the net of 'relevant contract' very widely and then to give exclusions which were intended to catch the bona fide independent contractor relationships. As Gzell J said in Bridges Financial Services at [221] (with reference to s 3A(1)(b) of the 1971 Act which was the precursor to 32(1)(b) of the Act): The structure of s 3A of the Pay-roll Tax Act is to define, in broad terms, a relevant contract. If an arrangement answers that description, the second step is to determine whether any of the exceptions apply. It is because of the exceptions, that the legislation does not catch bona fide independent contractors. It is because of the non-application of an exception that the object of taxing the putative subcontractor who works exclusively, or primarily, for one person under a contract whose object is to obtain the labour of that person, is achieved. If s 3A(1)(b) were confined in the manner submitted on behalf of Bridges, there would be little scope for the operation of the exceptions.
15. The potential difficulty for a taxpayer is that the exclusions are very specific and may leave a subset of relationships such as those in the present case where the contractor is a genuine independent contractor but may not come within any of the exclusions.

Issue 2: Whether trail commissions paid by LML to Assessed Brokers are wages within the meaning of s 35(1).

1. This issue concerns Category 1B and Common Question 1B-1 which is: Question 1B-1: Does an Authorised Broker in the Category 1B cohort, who according to records held by ASIC was a credit representative under LML's credit licence for 90 days or less in a given financial year, and who received only trail commissions and no upfront commissions during that given financial year, fall within the exception in s 32(2)(b)(iii)?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is: For that given financial year, the Assessed Broker falls within the exception. However, any trail commissions received by the Assessed Broker in that given financial year for work done relating to a relevant a contract in a previous financial year will be taken to be wages paid or payable during the given financial year because of s 35(1) of the Act.
3. The representative broker witnesses whose evidence is relevant to this issue are Ms Tacon and Mr Kula. Both Ms Tacon and Mr Kula continued to receive trail commissions from LML following the termination of the Broker Agreements they (or in Mr Kula's case K&K Co) had with LML during the Relevant Period.
4. This issue concerns s 35(1) which provides: (1) For the purposes of this Act, amounts paid or payable by an employer during a financial year for or in relation to the performance of work relating to a relevant contract or the re-supply of goods by an employee under a relevant contract are taken to be wages paid or payable during that financial year.
5. The plaintiffs contend that in a financial year in which there is no relevant contract, there is no deemed employer and, it follows, that s 35(1) does not make any amounts paid or payable by a person who is not in that financial year a deemed employer to be wages for the purposes of the Act.
6. The Commissioner contends that the words "employer" and "employee" in s 35(1) are a reference to the persons who are the employer and employee under the "relevant contract" in question and that is so irrespective of when the employer pays for that work under the relevant contract. This is because the text of s 35(1) does not specify when the person making the payment needs to be deemed to be an "employer" or an "employee". The expression "during a financial year" describes the time at which the amount is paid or payable, not when that person is an employer. This is said to be confirmed by the other parts of s 35(1): 1. The phrase "employee under a relevant contract" is not concerned with whether the person is an employee during the financial year in which the payment is made but rather with whether the person is an employee under the "relevant contract" in question. The word "employer" in s 35(1) should be read consistently with "employee". 2. The concluding phrase of subs (1), namely that the amount is taken to be "wages paid or payable during that financial year" picks up on the earlier reference to a financial year, and is concerned with the timing of the payment. The earlier reference to a financial year ("during a financial year") should also be understood as being concerned with the time at which the payment was made.
7. In my view, the plaintiffs' construction of s 35(1) is correct.
8. It is necessary to construe s 35(1) in the context of the legislative scheme of which it forms part. It is a deeming provision which identifies an amount of "wages" which falls to be taxed to the relevant employer (the designated person) pursuant to Part 2 of the Act. The legislative scheme for the payment of payroll tax under the Act was summarised by Sackville AJA in Chief Commissioner of State Revenue (NSW) v Smeaton Grange Holdings Pty Ltd [2017] NSWCA 184; (2017) ATR 151 as follows: [123] Part 2 of the Payroll Tax Act imposes payroll tax. An employer by whom taxable wages are paid or payable is liable to pay payroll tax on such wages (ss 6, 7). The amount of payroll tax to be paid is to be ascertained in accordance with Schedules 1 and 2 (s 8). [124] The person liable to pay payroll tax on taxable wages must pay the tax within seven days after the end of the month in which those wages were paid or payable (other than the month of June, in which case the period is 21 days) (s 9). Tri-City Trucks was therefore obliged to pay payroll tax on wages paid by it during a particular month within seven days after the end of the month, except for the month of June when it had to pay within 21 days. [125] The Payroll Tax Act contemplates that an employer who is liable to pay payroll tax will become registered as an employer and lodge returns calculating the amount of taxable wages paid or payable. An employer who is not already registered must apply for registration as an employer within seven days of the end of any month in which the employer pays or is liable to pay wages of more than the "weekly threshold amount" per week (s 86(1), (2)). An employer who is registered or required to be registered must lodge a return within seven days of the end of each month (except June, when the period is 21 days) (s 87(1)). The amount of payroll tax an employer is required to pay in respect of a particular month (or other period) is based on the return of wages in accordance with the formula in Schedule 2, Part 2, cll 2 and 3. [126] The key grouping provision is s 72(1) of the Payroll Tax Act which provides that if a person has a (deemed) controlling interest in two or more businesses, the persons who carry on those businesses constitute a group. One consequence of grouping is that the members of the group cannot each take advantage of the tax threshold. Another - of crucial importance in this case - is that if any member of a group fails to pay an amount that the member is required to pay under the Payroll Tax Act in respect of any period, every member of the group is liable jointly and severally to pay that amount to the Chief Commissioner (subject to the Chief Commissioner's power under s 79 to exclude persons from groups). Thus if Tri-City Trucks and Smeaton were part of the same group, Smeaton was jointly and severally liable with Tri-City Trucks to pay any amount the latter was required to pay but failed to do so. [127] Part 6 of the Payroll Tax Act provides for the adjustment of payroll tax to ensure that the employer pays the "correct amount of payroll tax" in respect of each financial year calculated in accordance with Schedule 1 (s 82(1)). Part 6 applies in respect of payroll tax paid or payable whether as a group employer or an individual employer (s 82(2)). If the amount of payroll tax paid or payable by an employer when the employer made the returns relating to a financial year is less than the correct amount of payroll tax payable by the employer in respect of that year, the employer must pay the Chief Commissioner the difference (s 83(2)). That amount must be paid within the period during which the employer is required to lodge a return - that is, within 21 days after the end of the financial year (s 83(3)). However, Part 6 appears to apply only where an employer has actually lodged returns relating to a financial year. [128] The amount of payroll tax payable by an employer is to be calculated in accordance with Schedules 1 and 2 of the Payroll Tax Act. In the case of a group with no designated employer, each member of the group is liable to pay as payroll tax for the financial year the amount of dollars calculated in accordance with the formula TW x R (Schedule 1, Part 4, cl 12). In this formula, TW represents total taxable wages paid or payable and R represents the percentage rate of payroll tax. There is no dispute that if the grouping provision applied to the respondents, the group had no designated employer. [129] The Taxation Administration Act empowers the Chief Commissioner to make an assessment of the liability of a taxpayer (s 8(1)). An assessment constitutes conclusive evidence that the amount and all particulars of the assessment are correct, except in objection or review proceedings when it is prima facie evidence only (s 119). However, Mr Young accepted that the liability of an employer or group member to pay payroll tax arises by virtue of the legislation itself and is not dependent upon the Chief Commissioner issuing an assessment.
9. This summary of the legislative scheme applies to the Act in its form during the Relevant Period. It may be noted that s 11(4) to (7) of the Act contain a regime for dealing with the situation where wages are paid to an employee in a month when no services are performed in that month. Two points may be made about s 11(4) to (7). First, they do not apply to payments for or in relation to work relating to a relevant contract to which Division 7 of Part 3 applies unless the gateway or deeming under s 35(1) is satisfied. Second, they do not adjust the taxable wages for a prior financial year, consistently with the scheme as described in Smeaton Grange in the above passage.
10. What s 35(1) does is deem amounts paid or payable by LML during a financial year for or in relation to the performance of work relating to a relevant contract to be wages paid or payable during that financial year. This amount then becomes part of the taxable wages on which LML is liable to pay payroll tax under s 9 of the Act. The expression "relevant contract" is, as noted above, also defined in terms which require the particular contract to be characterised as a relevant contract in respect of the relevant financial year. Similarly, s 33 and s 34 are also tied to the same financial year.
11. In the case of trail commissions paid to a broker in a financial year after that broker's Broker Agreement has terminated, there will not be a relevant contract between LML and the broker in respect of that financial year. Accordingly, LML and the Assessed Broker will not be deemed to be the employer and the employee, respectively, under s 33(1)(b) and s 34(a) in respect of that financial year. Nor can it be said that the payment of the trail commission is wages paid or payable in respect of a prior financial year when a relevant contract was in existence. Prior to the financial year in which the Assessed Broker is paid the trail commission, it cannot be said that the trail commission is an amount payable to that Assessed Broker as the payment of trail commission is contingent on the loan with the Lender still being in existence in the relevant financial year in which the commission arises. As noted above, there is no provision of the Act which allows the adjustment of the taxable wages for a financial year by reference to amounts paid or payable in a subsequent financial year.
12. The Commissioner submitted that the plaintiffs' construction would lead to a capricious result in that where a person provides work under a relevant contract which commenced in January and completed by 30 June of a particular year, but the final payment to the deemed employee was not made until 1 July, that payment would not be subject to tax as wages. In my view, this situation is accommodated by the plaintiffs' construction because in the ordinary case an amount paid shortly after the termination of the relevant contract in respect of work performed prior to termination would be an amount payable at the date of termination and hence would fall into the taxable wages of the deemed employer for the financial year ending on 30 June.

Issue 3: Whether the services of the kind provided by the Assessed Brokers are provided to the public generally such that s 32(2)(b)(iv) applies.

1. This issue concerns Category 2A and Common Question 2A which is: Question 2A: Does an Authorised Broker in the Category 2A cohort engage the exception within s 32(2)(b)(iv) in a given year, by the Authorised Broker providing assistance in the arranging and originating of loan applications by loan applicants with lenders in that year?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is "no".
3. The evidence of each of the representative broker witnesses is relevant to this issue.
4. Section 32(2)(b)(iv) will exclude a Broker Agreement from being a relevant contract if: 1. The Broker Agreement is not excluded from being a relevant contract by any of subparas (b)(i) to (iii); and 2. The Commissioner is satisfied that the work-related services supplied to the designated person (LML) under the Broker Agreement are performed by a person who ordinarily performs services of that kind to the public generally in that financial year.
5. In relation to the first requirement, it was not in dispute that the Court should address this question on the basis that the answer will only apply to Assessed Brokers who do not fall within any of subparas (b)(i) to (iii).
6. In relation to the second requirement, it was not in dispute that the Court can on this review form the state of satisfaction required by subpara (iv): Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2011) 245 CLR 446; [2011] HCA 41.
7. The second requirement has been considered in the context of the equivalent provisions in the payroll tax legislation of Victoria in two decisions: Drake Personnel Ltd v Commissioner of State Revenue (2000) 2 VR 635 and Nationwide Towing & Transport Pty Ltd v Commissioner of State of Revenue (No 2) [2018] VSC 609; (2018) 108 ATR 842.
8. In Drake Personnel, the Court of Appeal of Victoria was concerned with s 3C(1)(e)(v) of the Payroll Tax Act 1971 (Vic) which was a precursor to s 32(2)(b)(iv) of the Act and applied to deny the character of "relevant contract" on the same terms as s 32(2)(b)(iv). The taxpayer in that case had agreements with individual "temporaries", and with clients to whom it could provide the services of those temporaries. The temporary worked for the client under an agreement with Drake, the client paid Drake and Drake paid the temporary. The Court of Appeal held that the temporaries were employees of Drake under a common law contract of employment, but also addressed, in obiter, whether the temporaries were deemed employees under s 3C in the event that that conclusion was wrong.
9. Phillips JA dealt with a submission made by Drake that where a temporary worked only for Drake it could be said that the temporary satisfied the requirements of s 3C(1)(e)(v) because Drake itself was servicing members of the public (being its clients). His Honour rejected that submission, and said at [46]-[48]: It is implicit in this that I reject Mr Shaw's primary submission, that working for Drake was sufficient without more to attract the exception in para (e)(v) because Drake itself was servicing members of the public (to wit its clients). Were that submission correct, para (e)(v) would be taken to apply on the ground that each temporary, by supplying services to Drake under the contract between them, was ordinarily rendering services of that kind to the public generally because Drake, under the contracts which it had with its clients, was ordinarily supplying services to the public generally. That is not the inquiry posed by the paragraph. That paragraph does not inquire after the performance of the work; it refers only to the supplying of services (and "services" are defined in s 3C(6)(d) to include "the results of work performed", not its performance as such). Paragraph (e)(v) inquires of the services supplied by the temporary to Drake under the contract between them (which is a "relevant contract" unless the exception applies), asking whether those services are of a kind which the temporary ordinarily renders to members of the public - thereby distinguishing between the public and Drake and asking, it seems, after the rendering of services otherwise than under the contract between the temporary and Drake. On my reading of the Act, the temporary who generally arranges his or her own work engagements directly with members of the public (that is, without the intervention of an employment agency) but on occasion obtains an engagement through Drake, may well be one who attracts the operation of para (e)(v). In contrast para (e)(v) will not be called into play where the temporary is regularly working only through Drake. Such a temporary cannot be said to be supplying to Drake services of such a kind as are ordinarily supplied by that temporary to the public generally; that temporary is ordinarily supplying such services only to Drake. … However it is approached, the temporary is working under contract with Drake, is supplying services to Drake by working at its direction and is not working or supplying services to the public at large, even if Drake is. Mr Shaw's argument depends, I think, upon wrongly converting the inquiry under para (e)(v) into one about the work being performed instead of the services being supplied. … The purpose of para (e)(v) is then seen as denying the character of "relevant contract" where the temporary is ordinarily working for the public but from time to time finds an engagement through an employment agency. Of course if those occasional interventions by the agency do not yield employment in excess of 90 days in a financial year, para (e)(iii) may be called into play; but if such engagements through Drake do exceed 90 days, then para (e)(v) may be the relevant exception. That is how I read the exceptions and on that footing those differences which the judge perceived in the evidence became material to the application of para (e)(v) and, with respect, I agree in her Honour's treatment of them.
10. Nationwide Towing concerned the relationship between Eastern Van Services Pty Ltd (EVS) and contractors engaged by EVS to perform work under a contract entered into by EVS with RACV Road Services Pty Ltd (RACV) to provide emergency road assistance services to eligible RACV members. EVS contracted with and paid the contractors to provide the emergency roadside assistance services to eligible RACV members. At issue was whether, in relation to s 32(2)(b)(iv) of the Payroll Tax Act 2007 (Vic), which is in the same form as s 32(2)(b)(iv) of the Act, the Commissioner should be satisfied that the services supplied by the contractors to EVS during each financial year were performed by persons "who ordinarily performed services of that kind to the public generally in the relevant financial year". The Commissioner had determined in the decision disallowing the taxpayer's obligation that the exclusion did not apply because the contractors had not been shown to operate a genuinely independent business.
11. The difference between the facts in Nationwide Towing and in Drake Personnel is that the contractors engaged by EVS also supplied additional services to the RACV members of various kinds for which they charged separately (see [19]). Croft J rejected the proposition that s 32(2)(b)(iv) included a requirement that the contractor operate a genuine independent business and said at [48]: In my view, the words of s 32(2)(b)(iv) are quite clear and are not cast in language which is difficult to understand, either in abstract or more practical terms. The requirements for this exemption as enacted by Parliament are that the relevant services are performed by a person "who ordinarily performs services of that kind to the public generally …". It is a factual question whether or not the services to which these provisions apply are relevant to the application of its provisions and whether the provider of those services provides them to the public and "ordinarily" does so. The basis upon which the "ordinary" requirement is satisfied depends on the facts in the particular instance and not on whether or not the person providing those services to the public generally conducts some business. It may be, speaking generally, that the fact that such a person does conduct a business suggests that such services are "ordinarily" provided. There may, however, be other circumstances in which this requirement is satisfied. Moreover, this approach is also, in my view, to mistake the inquiry which the provisions of s 32(2)(b)(iv) of the Payroll Tax Act requires, as explained by Phillips JA in Drake. Thus, as set out previously, Phillips JA said: Paragraph (e)(v) inquires of the services supplied by the temporary to Drake under the contract between them (which is a 'relevant contract' unless the exception applies), asking whether those services are of a kind which the temporary ordinarily renders to members of the public - thereby distinguishing between the public and Drake and asking, it seems, after the rendering of services otherwise than under the contract between the temporary and Drake. [emphasis in original]
12. Later, having noted that the facts of the present case were different from those in Drake Personnel, Croft J said at [54] (emphasis added): The different question of construction raised by the circumstances of this case is whether s 32(2)(b)(iv) of the Payroll Tax Act is available where a contractor regularly provides independent services to members of the public - under a contract between the member of the public and the contractor - in addition to the services provided to those members of the public under the contractor's contract with the taxpayer. This is a question which the Delegate failed to address. Rather, she addressed the question of whether the Contractor provided the same kind of services it supplied to EVS to the public in the course of carrying on a genuinely independent business of providing those services to the public...
13. In Drake Personnel and Nationwide Towing, the exemption has been treated as directed to a case where the contractor performs services to members of the public in addition to the services it performs to the other party to the relevant contract. However, in neither case was the Court concerned with the situation which arises in the present case, which is where the work performed by the contractor constitutes a provision of service to the other party to the relevant contract (here LML) and, at the same time, a provision of services to members of the public (here, clients of the Assessed Brokers). In my view, the observations in Drake Personnel and Nationwide Towing do not determine the question whether, in those circumstances, s 32(2)(b)(iv) can apply. There was a recognition in Odco in the passage quoted at [203] above that the provision of services by the contractor under the relevant contract to the designated person for the benefit of a third party may also constitute the provision of the same service by the contractor to the third party. There seems to be no reason why, having regard to the text of subpara (b)(iv), that a provision of services in such a case should not be capable of satisfying subpara (b)(iv).
14. Section 32(2)(b)(iv) requires, first, the identification of the services performed by the Assessed Broker for LML under the Broker Agreements, and second, the determination of whether the Assessed Broker ordinarily performs services "of that kind" to the public generally in the relevant financial year. As noted by Croft J in Nationwide Towing, whether the services are of "that kind" (i.e. the same kind) depends on the facts of the case.
15. The services performed by the Assessed Broker for LML under the Broker Agreement comprises the performance of all the obligations imposed on the Assessed Broker under the Broker Agreement. This includes the following: (a) The Assessed Broker is responsible for seeking new Customers, and must respond to all Leads within specified time periods: cl 3. (b) The Assessed Broker shall offer and market to customers the "Approved Products" for which it is accredited: cl 4.4. (c) The Assessed Broker must operate "strictly in accordance with the Operations Manual": cl 6.2. (d) The Assessed Broker must devote its time exclusively to the business with LML, unless permission is otherwise provided: cl 8.1. (e) The Assessed Broker must fit out and maintain its commercial premises (if any) in the image prescribed by Loan Market: cl 10.2. (f) The Assessed Broker must participate in promotional activities and market research programs as specified in the Operations Manual: cl 12.3.
16. The services performed by Assessed Brokers for their clients comprise essentially the following: (a) Responding to customer inquiries (defined as "Leads"): cl 3.1. (b) Offering to customers the range of Approved Products for which the broker was accredited to provide: cl 4.4. (c) Submit loan applications for a prospective borrower: cl 4.8(1). (d) The Operation Manual provides further direction as to the services which the Assessed Broker provides to customers. These include meeting customers in person or over the phone (cl 3.1); providing referrals to the Ray White Network (a real estate agency) (cl 3.2); and where necessary and appropriate identifying solutions where a customer's lending scenario cannot be serviced by an approved financier (cl 4.3).
17. In my view, when the two kinds of services are compared, it cannot be concluded that the services provided to the clients of the Assessed Brokers are of the same kind as those provided to LML. In particular, the obligations imposed on the Assessed Brokers under the Broker Agreements to originate loans by the Lenders in accordance with the practices and procedures mandated by LML as a Loan Market affiliated broker (including advertising in a particular way, complying with training requirements, and using certain documentation and software) and only recommend LML's approved products were designed to build and protect the LM Group's mortgage broking business. Those promises are directed to ensuring that each broker conducts a business which is successful, enhances the Loan Market brand and generates revenue for LML and the LM Group. The performance of these promises was a provision of a bundle of services different to, and more extensive in nature than, the services provided to the Assessed Brokers' customers.

Issue 4: Whether the provision of one or more of the Generic Services by LMG to the Assessed Brokers satisfied section 32(2)(c)(i)?

1. This issue concerns Category 3A and Common Question 3A-1 which is: Question 3A-1: Did the provision by LMG of one or more of the Generic Services used by an Authorised Broker engage any of the exceptions in s 32(2)(c)?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is "no".
3. The evidence of each of the representative broker witnesses is relevant to this issue.
4. For the purposes of Common Questions 3A-1 and 3A-2 the expression "Generic Services" is defined to mean: (a) use of the plaintiff's branding; (b) access to the plaintiffs' lender panel by way of the lender agreements; (c) compliance services; (d) aggregation services, including arranging the receipt and payment of commissions on behalf of Authorised Brokers; (e) lender accreditation assistance; (f) authorisation under LML's ACL where the Assessed Broker does not have their own ACL; (g) training and development; and (h) access to the plaintiffs' technology and software, including IT support.
5. Some of these Generic Services are provided by employees of LMG and some by LML. Issue 4 concerns those supplied by employees of LMG and issue 5 concerns those supplied by LML.
6. On the argument put by the plaintiffs, this issue, and issue 5, both turn on the proper construction of the words "a contract under which a person (the designated person)" in the chapeau to s 32(2)(c)(i). It is helpful to set out s 32(2)(c)(i) in full: However, a relevant contract does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person-- … (c) is supplied by a person (the contractor) with services for or in relation to the performance of work under a contract which paragraphs (a) and (b) do not apply where the work to which the services relate is performed-- (i) by two or more persons employed by, or who provide services for, the contractor in the course of a business carried on by the contractor…
7. The plaintiffs contend that s 32(2)(c)(i) applies to all the Broker Agreements because a person, being the Assessed Broker (the designated person), is supplied with the services of a person, being LMG (the contractor), in the course of a business carried on by the Assessed Broker (the designated person) where the work to which the services supplied by LMG (the contractor) relate is performed by two or more persons employed by, or who provides services for, LMG (the contractor) in the course of a business carried on by LMG (the contractor). In other words, although the Assessed Broker is not the designated person in respect of the Broker Agreement which is treated as a relevant contract under s 32(1), the Assessed Broker can be regarded as the designated person for the purposes of the application of the exclusion in s 32(2)(c)(i) which would prevent, if it applied, the Broker Agreement from having the character of a relevant contract.
8. The Commissioner contends that the plaintiffs' approach is not correct for two reasons. First, the proper construction of s 32 is that the "designated person" identified for the purpose of s 32(1) must be the same "designated person" when considering the exemption in s 32(2). The Commissioner's case is that the 'designated person' under s 32(1) is LML and hence s 32(2) cannot be applied on the basis that the designated person is the Assessed Broker. If that approach to the identification of the "designated person" under s 32(2)(c)(i) is wrong, s 32(2)(c) is only capable of applying to contract where the designated person and the contractor are parties. Insofar as any services may be provided by employees of LMG to the brokers they cannot be "under" the Broker Agreement because LMG is not a party to that agreement and it is LML which contracts to provide all relevant services to the broker. The Commissioner relies on the legislative history of s 32(2)(c). The predecessor to Part 3, Division 7 of the Act was s 3A of the 1971 Act. That section was inserted by Payroll Tax (Amendment) Act 1985 (NSW). The explanatory note to that Bill explained that the definition of a term "relevant contract", and the corresponding exemptions (which included what is now s 32(2)(c)) were (emphasis added): Directed to capture several means of disguising the employer-employee relationship by contractual arrangements which have been increasingly resorted to in recent years by persons seeking to defeat the objects of the Principal Act. The definition contains appropriate exclusions so that the parties to genuine service contracts will not be prejudiced.
9. In my view, the Commissioner's construction of "designated person" in s 32(2) is correct for the following reasons.
10. First, while it is true that the chapeau to s 32(2) appears to contain its own definition of "designated person" and does not expressly identify the designated person as being the same as the one under the relevant contract arising from s 32(1), this can be explained by the structure of s 32(1). There can be circumstances (and the present case is one) where a contract is a relevant contract under each of s 32(1)(a) and (b), so that each party is a designated person in which case the tie breaker in s 33(2) applies; (2) If a contract is a relevant contract under both s 32(1)(a) and (b)-- (a) the person to whom, under the contract, the services of persons are supplied for or in relation to the performance of work is taken to be an employer, (b) despite subsection (1)(a), the person who under the contract supplies the services is taken not to be an employer.
11. It may be noted that s 33(2) does not deny the character of "designated person" to each party, but rather it ignores the consequences that would otherwise arise from there being a relevant contract under s 32(1)(a) if there is also a relevant contract under s 32(1)(b).
12. Consistently with the co-existence of two designated persons under the same contract, s 32(2) operates by focusing on the relationships which otherwise make a contract a relevant contract under s32(1) rather than by expressly specifying that the designated person in s 32(2) is the designated person under s32(1). In the case of s 32(2)(c) this is done by the words "a contract under which a person…during a financial year in the course of a business carried on by [the person]…is supplied by a person…with services for or in relation to the performance of work" which track closely the words of s 32(1)(b).
13. Second, the purpose of s 32(2) is to exclude from s 32(1) a contract which would otherwise fall within s 32(1). It is apparent that each of the subparagraphs of s 32(2) is identifying some feature of the services supplied to the "designated person" under the relevant contract arising under s 32(1) which qualifies that relevant contract for exclusion. For example, subparagraph (b) looks to the nature of the services supplied to the designated person and can only sensibly operate if the designated person is the same as the designated person under the relevant contract. Subparagraph (c), which only operates where subparagraph (b) does not apply, then focuses on how the other party to the relevant contract (referred to as 'the contractor') performs the work to which the services relate (i.e. by two or more persons). Each of the subparagraphs of s 32(2) only operate in a manner coherent with the contract which has been identified as the relevant contract under s 32(1) if the designated person under each is the same.
14. For these reasons, in my view the basis on which the plaintiffs contend that s 32(2)(c) applies to Generic Services provided by employees of LMG is not correct.

Issue 5: Whether the provision of one or more of the Generic Services by LML to the Assessed Brokers satisfied section 32(2)(c)(i)?

1. This issue concerns Category 3A and Common Question 3A-2 which is: Question 3A-2: Did the provision by LML of one or more of the Generic Services used by an Authorised Broker engage any of the exceptions in s 32(2)(c)?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is "no".
3. The evidence of each of the representative broker witnesses is relevant to this issue.
4. The reasons already given in relation to Issue 4, the provision of one or more of the Generic Services by LML to the Assessed Brokers did not satisfy s 32(2)(c)(i).

Issue 6: Whether Flintfox's engagement of GBSS engaged section 32(2)(c)(i)?

1. This issue concerns Category 3B and Common Question 3B-1 and Common Question 3B-2 which are: Question 3B-1: Did Flintfox Australia Pty Ltd (Flintfox) engage the exception to a relevant contract in s 32(2)(c)(i) in the 2016 financial year, in that Flintfox supplied services to LML or LMG and the word to which the services of Flintfox related was performed by GBSS and the principal of Flintfox (Nicholas Gray) in the 2016 financial year? Question 3B-2: If the answer to 3B-1 is "Yes", did the 3B-2 Brokers (who received the same type of services from GBSS as Flintfox did) engage the exception to a relevant contract in s 32(2)(c), in that the 3B-2 Brokers supplied services to LML or LMG and the work to which the services of the 3B-2 Brokers related was performed by GBSS and the principal of the 3B-2 Broker?
2. The plaintiffs contend the answer to each question is "yes", but the defendant contends the answer to each question is "no".
3. Mr Gray is the representative broker witness relevant to this issue. The Court will address this issue by reference to his evidence, so that the answer to Common Question 3B-1 and 3B-2 will be the same. The Court does not understand parties to contend otherwise.
4. The factual background to this issue can be summarised as follows. In around March 2015, LMG and GBSS entered into an agreement by which LMG engaged GBSS to provide LMG with business support services "on its behalf", which were to be provided by GBSS via its branch office in the Philippines (cl 2.1 and 2.2). Flintfox was not a party to this agreement.
5. On 30 May 2016, Flintfox entered into the "Business Broker Support Services Agreement" (BBSSA) with LML under which LML agreed to provide Flintfox with the "services" (defined to mean data entry for loan applications). Clause 5.1 provided that "[LML] may, at its discretion, engage a third party to provide the Services on its behalf or to assist with provision of the services (Service Provider). [LML] does not require your consent to appoint a Service Provider". Under cl 3.1, the fee payable by Flintfox was $30 (plus GST) per loan application completed.
6. LML informed the Assessed Brokers of the availability of this service in the Operations Manual which (in its form in the 2016 financial year) stated as follows: Loan Market has engaged a business processing offshore company in Manila called Galilee Business Support Services (GBSS). Through GBSS we have employed a number of staff who are based in Manila with the primary intention to assist Loan Market Brokers with a number of services including data entry for loan processing. The loan processing or 'remote PA' solution we have implemented is available to all Brokers as an opt in service that you are free to take up wen and as it suits your business. The service will incur a $30 (plus GST) fee for each fille that is sent to Manila which is payable by the Broker through direct debit. This will form part of the agreement if and when the Broker decides to take up the service. All transactions are processed on a monthly basis. The loan processing team or (otherwise known as Broker Support Officers) have a direct relationship with the Broker and are made aware on sign up that they will be contacted via phone or email if clarification or request for information is needed. The Brokers send information across to Manila via Loan Market systems i.e. G5 Mail and Google Drive. No information is allowed to be taken offsite or printed out in hard copy for security and data integrity purposes. The data entry process currently being provided is viewed as the beginning of this offering and we anticipate the Broker Support Officers to be able to extend the breadth of their offering through support around valuation ordering, lender follow-up and co-ordinating settlement activities. Brokers will have the option to choose the extent of support they wish to receive and pricing will be made available once the program is extended. For further information and to see how Manila can help you, please go to: …
7. Flintfox engaged the services of GBSS for 10 loan transactions in the 2016 financial year and paid a total of $330 (incl GST) for those services. Mr Gray said in his evidence that this was considerably cheaper than the amounts he had previously paid to outsource this service ($300 per file) and he took up the service because he considered it to be "a bargain".
8. The plaintiffs submit that Flintfox's engagement of GBSS and the services performed by GBSS satisfy the conditions of the exception in s 32(2)(c)(i) because the work to which the services which Flintfox provided to LML were performed by Mr Gray and GBSS in the 2016 year.
9. The Commissioner submits that it was LML rather than GBSS which provided the services to Flintfox and the exception in s 32(2)(c)(i) is not engaged where the person supplying the services through the contractor is also the recipient of the same services (as the designated person under s 32(2)), or put in another way, a person cannot supply services to itself.
10. Section 32(2)(c)(i) will apply to Flintfox in the 2016 year if the exclusions in subparas (a) and (b) do not apply (which is either not in dispute or is the outcome of this judgment) and "the work to which the services relate is performed by two or more persons employed by, or who provide services for, [Flintfox] in the course of a business carried on by [Flintfox]".
11. The focus of the exclusion is on the person or persons who perform the work to which the services provided by Flintfox to LML relates. It asks whether that work was performed by two or more persons, in the course of Flintfox's business, who are either employed by Flintfox or who provide services for Flintfox. The second alternative is quite general and is not limited so as to require a contract between Flintfox and the person who provides services for Flintfox.
12. In the present case the work to which the services supplied by Flintfox under the Broker Agreement to LML in the 2016 year relate was performed by Mr Gray (an employee) and GBSS which provided services for Flintfox (pursuant to the BBSSA). The fact that there was no contract between Flintfox and GBSS is irrelevant because it is not a requirement of subpara (c)(i) that GBSS carries out the work under a contract with the contractor. It is clear from Odco in the passage set out at [203] above that a person (GBSS) may properly be said to perform a service for Flintfox notwithstanding that it does so on behalf of LML under BBSSA. In other words, GBSS provides services to LML at the same time that it provides services to or for Flintfox in respect of the data entry for the 10 loans in the 2016 year.
13. The Commissioner submitted in the alternative that the work performed by GBSS for Flintfox in the 2016 year is so minor that it should be ignored under the de minimis principle. In Farnell Electronic Components Pty Ltd v Collector of Customs (1996) 72 FCR 125 at 128, Hill J explained the de minimis principle in this way: Unless the contrary intention appears, an enactment by implication imports the principle of legal policy expressed in the maxim de minimis non curat lex (the law does not concern itself with trifling matters); so if an enactment is expressed to apply to matters of a certain description it will not apply where the description is satisfied only to a very small extent.
14. The de minimis principle has been applied to s 32(2); see Bridges Financial Services at [235] and Smith's Snackfood at [81].
15. The Commissioner drew attention to the relatively small amount paid for the services of GBSS ($330) and the fact that the evidence does not clearly establish the relative proportion of loan transactions for which Flintfox utilised the services of GBSS in the 2016 year.
16. While the amount charged by GBSS in the 2016 year is relatively small ($330) the work related to the data entry for 10 loan transactions over a five-month period. The use of GBSS was not isolated to the 2016 year, but rather should be seen as the commencement of a new outsourcing arrangement for data entry undertaken by Flintfox, as it continued to use GBSS in subsequent years: in the 2017 and 2018 years it did so for 70 loan transactions. In my view, obtaining assistance on 10 loan transactions in the 2016 year is not trifling, because the work of data entry is a key element of the process whereby the Assessed Broker originates a loan as described at [188] above, and the number of transactions (10) is not so small that it should be regarded as trifling.

Issue 7: Whether Anastasia Theodoropoulos's engagement of Maria Damjanic engaged section 32(2)(c)(iii)?

1. This issue concerns Category 3E and Common Question 3E-2 which is: Question 3E-2: Did Anastasia Theodoropoulos engage the exception to a relevant contract in s 32(2)(c)(i) in the 2018 financial year in that Anastasia Theodoropoulos supplied services to LML or LMG, and the work to which the services of Anastasia Theodoropoulos related was performed by Maria Damjanic and Anastasia Theodoropoulos in that year?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is "no".
3. Ms Theodoropoulos is the representative broker witness relevant to this issue.
4. The evidence of Ms Theodoropoulos on her engagement Ms Damjanic is set out at [143]. The Commissioner contends that the plaintiffs failed to discharge their onus of proof on this issue because there is no evidence of the volume or scope of work performed by Ms Damjanic for the Court to make this an assessment that her work was more than de minimis.
5. I have accepted Ms Theodoropoulos' evidence that she employed Ms Damjanic for approximately nine months from March/April 2017 at $100 per week which would include approximately six months in the 2018 financial year. Ms Damjanic was employed to assist with administrative tasks, but the main work she performed was data entry for clients for whom Ms Theodoropoulos was working in her mortgage broking business including the entry of customer information into the CRM system. Ms Damjanic had relevant experience for this role and there is an adequate explanation for why the arrangement was informal, being the serious illness which Ms Theodoropoulos was diagnosed with in 2017.
6. In my view, the plaintiffs have discharged their onus of proof that the work was done and that s 32(2)(c)(i) is satisfied for Ms Theodoropoulos for the 2018 year on the basis that two persons performed work-related services for that year, being Ms Theodoropoulos and Ms Damjanic. As indicated earlier, in my view the data entry activity is an integral part of the work-related services performed by a mortgage broker.

Issue 8: Whether MR & VL Cappetta's engagement of Peter Carbone engaged section 32(2)(c)(ii)?

1. This issue concerns Common Question 3E-4 which is: Question 3E:4: Did MR & VL Cappetta engage the exception to a relevant contract in s 32(2)(c)(ii) in the 2012 financial year in that MR & VL Cappetta supplied services to LML or LMG, and the work to which the services of MR & VL Cappetta related was performed by Cheryl Hudson and Marco Cappetta (the principal of MR & VL Cappetta) in that year?
2. The plaintiffs contend the answer is "yes", but the defendant contends the answer is "no".
3. Mr Cappetta is the representative broker witness relevant to this issue.
4. The Court notes that this question was put forward by the plaintiffs at the conclusion of the hearing, and the Commissioner does not accept that the answer to it will apply more broadly than to the position of the MR & VL Cappetta partnership as an Assessed Broker for the 2012 financial year.
5. The Commissioner submits that the plaintiffs have not discharged their onus of proof that Mr Carbone performed the relevant services or, alternatively, that the work was not de minimis (and therefore to be ignored). I have accepted Mr Cappetta's evidence that he did engage Mr Carbone under an informal arrangement which started in February 2012 and lasted for a period of six to eight months. However, when Mr Cappetta was asked how many transactions Mr Carbone assisted Mr Cappetta with during that six to eight month period, his answer was "half a dozen possibly". He was not able to identify whether the amount of $1,590 appearing as an expense in the partnership tax return for the 2012 year described as "contractor, subcontractor and commission expenses" related to the payments he made to Mr Carbone and merely said that it "could".
6. The difficulty for the Court is that the evidence does not clearly establish the number of loan transactions for which Mr Carbone performed work for the partnership in the 2012 financial year, or the amount paid in respect of that financial year. It could not have been more than six but it may have been considerably less. In all the circumstances, the Court is not satisfied that the plaintiffs have discharged their onus of proof that the work performed by Mr Carbone was more than trivial.

Issue 9: Whether the Broker Agreement between LML and Anastasia Theodoropoulos is a relevant contract by reason of Anastasia Theodoropoulos having her own ACL?

1. This issue concerns Common Question 4A which is: Question 4A: Did the Broker Agreement between Anastasia Theodoropoulos and LML constitute a relevant contract for the purpose of s 32(1) in the 2018 financial year given that Anastasia Theodoropoulos conducted credit activities under her own Australian Credit Licence in the conduct of a business of arranging and origination of loan application(s) made by loan applicants?
2. The plaintiffs contend the answer is "no" but the defendant contends the answer is "yes".
3. Ms Theodoropoulos is the representative broker witness relevant to this issue. For the reason given at [205] above, in my view the fact that Ms Theodoropulous acted under her own ACL does not affect the conclusion reached for Issue 1.

Issue 10: Whether the payments made to the Assessed Brokers were "for or in relation to the performance of work relating to a relevant contract" with the meaning of s 35(1).

1. The plaintiffs submit that if the Broker Agreements are relevant contracts, to the extent that any services were provided by the Assessed Brokers to LML under the Broker Agreement they were nominal and de minimis and should be disregarded, in particular any such services were not sufficiently connected to the commissions paid to the Assessed Brokers so that the commissions were not for work "relating to a relevant contract" within the meaning of s 35(1). Rather, the Plaintiffs say that the work performed by the Assessed Brokers was only connected to the services they supplied to their customer. The plaintiffs drew attention to the observations made in Bridges Financial Services at [237] (where Gzell J said that s 3A(2)(c) of the 1971 Act, which is the precursor to s 35(1), was limited to the labour content of the commissions and brokerage received on behalf of the representatives from Bridges in that case) and Smith's Snackfood at [174] and [184]-[187].
2. In my view the plaintiffs' submission should be rejected. The work performed by the Assessed Brokers was central to the operation of LML's business, which included assisting eMOCA earn commissions. LML employed no staff to assist it achieve that outcome. Instead, LML relied upon the work performed by the Assessed Brokers that it engaged under the Broker Agreements. The phrase "relating to" or "in relation to" requires no more than a relationship, whether direct or indirect, between two subject matters: Smith's Snackfood at [59]. There was a direct relationship between the commissions, the performance of work by the Assessed Brokers and the Broker Agreements: the work was authorised by the Broker Agreements and the commissions were paid to the Assessed Brokers under the Broker Agreements.

Conclusion

1. For the above reasons the Court answers the Common Questions as set out below.
2. The Court will stand the matter over for directions to deal with any outstanding issues, including penalty tax and costs, and the finalisation of orders.

Common Questions and Answers 1. Question 1B-1: Does an Authorised Broker in the Category 1B cohort, who according to records held by ASIC was a credit representative under LML's credit licence for 90 days or less in a given financial year, and who received only trail commissions and no upfront commissions during that given financial year, fall within the exception in s 32(2)(b)(iii)? Answer: Yes. 1. Question 2A: Does an Authorised Broker in the Category 2A cohort engage the exception within s 32(2)(b)(iv) in a given year, by the Authorised Broker providing assistance in the arranging and originating of loan applications by loan applicants with lenders in that year? Answer: No. 1. Question 3A-1: Did the provision by LMG of one or more of the Generic Services used by an Authorised Broker engage any of the exceptions in s 32(2)(c)? Answer: No. 1. Question 3A-2: Did the provision by LML of one or more of the Generic Services used by an Authorised Broker engage any of the exceptions in s 32(2)(c)? Answer: No. 1. Question 3B-1: Did Flintfox Australia Pty Ltd (Flintfox) engage the exception to a relevant contract in s 32(2)(c)(i) in the 2016 financial year, in that Flintfox supplied services to LML or LMG and the work to which the services of Flintfox related was performed by GBSS and the principal of Flintfox (Nicholas Gray) in the 2016 financial year? Answer: Yes. 1. Question 3B-2: If the answer to 3B-1 is "Yes", did the 3B-2 Brokers (who received the same type of services from GBSS as Flintfox did) engage the exception to a relevant contract in s 32(2)(c), in that the 3B-2 Brokers supplied services to LML or LMG and the work to which the services of the 3B-2 Brokers related was performed by GBSS and the principal of the 3B-2 Broker? Answer: Yes. 1. Question 3E-2: Did Anastasia Theodoropoulos engage the exception to a relevant contract in s 32(2)(c)(i) in the 2018 financial year in that Anastasia Theodoropoulos supplied services to LML or LMG, and the work to which the services of Anastasia Theodoropoulos related was performed by Maria Damjanic and Anastasia Theodoropoulos in that year? Answer: Yes. 1. Question 3E:4: Did MR & VL Cappetta engage the exception to a relevant contract in s 32(2)(c)(ii) in the 2012 financial year in that MR & VL Cappetta supplied services to LML or LMG, and the work to which the services of MR & VL Cappetta related was performed by Cheryl Hudson and Marco Cappetta (the principal of MR & VL Cappetta) in that year? Answer: No. 1. Question 4A: Did the Broker Agreement between Anastasia Theodoropoulos and LML constitute a relevant contract for the purpose of s 32(1) in the 2018 financial year given that Anastasia Theodoropoulos conducted credit activities under her own Australian Credit Licence in the conduct of a business of arranging and origination of loan application(s) made by loan applicants? Answer: Yes.

Amendments 17 April 2024 - Update to defendant's representation in coversheet. 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: 17 April 2024