Namoi Tyreright Pty Ltd v Chief Commissioner of State Revenue

Powers of Tribunal on review

1. Section 96 of the Taxation Administration Act 1996 (TA Act) provides that a taxpayer may apply to the Tribunal for an administrative review of a decision that has been the subject of an objection under certain circumstances including if the taxpayer is dissatisfied with the Respondent's determination of the objection. The Tribunal may confirm, vary or reverse a reviewable decision of an administrator and make orders as to costs or otherwise as it thinks fit, s 101(1) of the TA Act.
2. In accordance with s 38 (2) of the Civil and Administrative Tribunal Act 2013 the Tribunal is not bound by the rules of evidence and may inquire into and inform itself on any matter in such manner as it thinks fit, subject to the rules of natural justice. Further, at s 38 (4) and (5) the Tribunal is to act according to equity and good conscience and the substantial merits of the case without regard to technicalities and shall take such measures as are reasonably practicable to ensure that the parties have a reasonable opportunity to be heard or otherwise have their submissions considered in the proceedings.
3. In accordance with s 63 of the Administrative Decisions Review Act 1997 (the ADR Act) the Tribunal is to decide what the correct and preferable decision is, having regard to the material then before it, including any relevant factual material, and any applicable written or unwritten law.

Issue before the Tribunal

1. It is common ground that the decision of the Chief Commissioner that the Applicant should not be excluded from membership of a payroll tax group with Tyres4U pursuant to s 79 of the Act in each financial year during the Relevant Period is the reviewable decision (the Decision) the subject of review by the Tribunal rather than the Disallowance Decision.

Payroll tax law

1. Payroll tax is a tax on employers in respect of New South Wales wages paid to employees during each financial year. If total wages paid by an employer during a financial year are below the statutory payroll tax threshold for that year, then no payroll tax is payable by that employer.
2. Part 5 of the Act provides that if employers are part of a group for payroll tax purposes, then only a single threshold deduction applies to the whole group rather than each member of the group benefiting from a separate threshold deduction. Section 79, which is found within Part 5, provides a conditional discretion to the Chief Commissioner to exclude an employer from a group. The relevant provisions are: 79 Exclusion of persons from groups (1) The Chief Commissioner may, by order in writing, determine that a person who would, but for the determination, be a member of a group is not a member of the group. (2) The Chief Commissioner may only make such a determination if satisfied, having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and any other matters the Chief Commissioner considers relevant, that a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group. … (5) A determination can be expressed to take effect on a date that is earlier than the date of the determination. …
3. Certain of the Applicant's written submissions, at [3] to [5], were adopted by the Respondent. They are: 3…, the focus of the statute is on the "carrying on" of the business; the connections between the businesses "must affect the business in some real or practical sense": Lombard Farms PtyLtd v Chief Commissioner [2013] NSWADTAP 42 at [50]; CCSR v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 94 at [30]-[32]; CCSR v Tasty Chicks PtyLtd [2012] NSWCA181 at [56]. 4 Moreover as the Appeal Panel held in Lombard Farms at [50]: "it is not the case that any connection between the businesses will disentitle an applicant from de-grouping. The connection must be material and not insignificant or inconsequential". 5. A person is entitled to be de-grouped if there is a substantial absence of connection and substantial independence (i.e. not complete independence) between the businesses, to warrant the exercise of the discretion: Lombard Farms at [51]; Seovic at [32].

Material before the Tribunal

1. The Respondent relied on: 1. A bundle of documents filed pursuant to s 58 of the ADR Act (Exhibit R1) (the s 58 documents). 2. Volumes 1 and 2 of additional documents filed pursuant to s 58 of the ADR Act (Exhibit R2). 3. Volumes 1 and 2 of the Respondent's Tender Bundle (Exhibit R3). 4. An affidavit by Christina Rebecca Ray affirmed 25 September 2015 (Exhibit R4). 5. A 2 page document headed "Job Description - Store Manager" downloaded from the Internet (Exhibit R5). 6. A 3 page document headed "POSITION DESCRIPTION" in respect of a position titled "Store Manager" (Exhibit R6). 7. The Respondent's written submissions filed 6 October 2015 (RS), and oral submissions by Mr Gerard.
2. All references to paragraph numbers of submissions on behalf of the Respondent are to paragraphs of RS unless stated to the contrary.
3. The Applicant relied on: 1. The grounds attached to the Application. 2. An affidavit by David Nott sworn 12 June 2015 (Exhibit A1). 3. An affidavit by Richard Alexander Eatock sworn 12 June 2015 (Exhibit A2). 4. An affidavit by Shane Roxby sworn 12 June 2015 (Exhibit A3). 5. A volume named Applicant's Tender Bundle containing unpaginated documents with tabs marked A and B and 36 numbered tabs (Exhibit A4). 6. A bundle containing a stamped deed dated 26 April 2012 named "Deed Establishing the Tyreright Namoi Unit Trust" (TNU Trust) and a bundle of unpaginated documents (Exhibit A5). 7. Written submissions provided to the Tribunal on the second hearing day (3 March 2016) (AS) and oral submissions by Mr Jones.
4. All references to paragraph numbers of submissions on behalf of the Applicant are to paragraphs of AS unless stated to the contrary.

Onus of proof

1. The onus of proof in this matter was dealt with by the Respondent at [82] to [87] in RS. The Applicant accepted the accuracy of the contents of [82] to [86].
2. In summary, the position agreed between the parties, and adopted by the Tribunal, is that by s 100(3) of the TA Act the Applicant bears the onus of proving its case to the ordinary civil standard, that is, on the balance of probabilities: B &L Linings Pty Ltd v Chief Commissioner of State Revenue (2008) 74 NSWLR 481 per Allsop P (Giles and Basten JJA agreeing).
3. Accordingly, the onus rests with the Applicant to establish, by way of admissible and probative evidence, that it carried on its Tyreright Narrabri business independently of and not connected with the carrying on of the business carried on by Tyres4U.
4. There is no onus on the Chief Commissioner to show that the Assessments were correctly made. Unless the Applicant shows by evidence that the Assessments are incorrect, the Chief Commissioner will prevail.
5. The Applicant must prove all matters necessary to enable the Tribunal to answer the statutory question in its favour.

Consideration

1. The thrust of the Applicant's argument is that the Commissioner should have determined, and in relation to these proceedings the Tribunal should determine, pursuant to s 79 (1) that the Applicant is not, together with Tyres4U, a member of a payroll tax group. In relation to the provisions of s 79 (2) the Applicant argued that its business was carried on independently of and was not relevantly connected with the business carried on by Tyres4U.
2. In Boston Sales and Marketing Pty Limited v Chief Commissioner of State Revenue [2014] NSWCATAD 139 the late Block SM said: 18 Whether a "determination" can be made under s.79(l) is largely determined, subject to the exercise of discretion, by reference to the criteria outlined in s.79(2) of the PTA 2007… 20 It is important to note that the only statutory question which requires an answer is as to whether a business carried on by the person, is carried on independently of, and is not connected with the carrying on of, a business carried on by any other member of that group, the Chief Commissioner (or, Tribunal in this instance) is to have regard to: (1) to the nature and degree of ownership and control; (2) the nature of the businesses; and (3) any other matter considered relevant. 21 The matters identified as matters that regard is to be had to are "relevant considerations", as that concept is understood, and identified in Minister for Aboriginal Affairs & Anor v Peko-Wallsend Ltd & Ors (1986) 162 CLR 24. In this connection, those matters rise no higher than relevant considerations that the decision maker must turn its mind to when applying the statutory test. Those matters are not themselves statutory questions.
3. Mr Jones submitted that the approach adopted by the Appeal Panel at [50] in Lombard Farms Pty Ltd v Chief Commissioner of State Revenue [2013] NSWADTAP 42 should be followed. Below are excerpts from [50] and [51] in that decision: 50 Section 79(2) requires the trier of fact to determine whether, having regard to the nature of the connections between group businesses, it can nevertheless be said that the businesses are independent and not connected. Ultimately, this will be a question of judgment based on facts objectively determined. It is not the case that any connection between businesses will disentitle an applicant from de­grouping. The connection must be material and not insignificant or inconsequential. This is the approach that was adopted in the Victorian authorities referred to above: see Triline at [19], [22] and [30] and GTS Industries at [38]. We agree with this approach because it directs the focus to the "carrying on" of the business: to be relevant, the connection must affect the business in some real or practical sense. 51 To say that there can be absolutely no connection between the businesses sets the bar too high. The question is one of fact and degree: Network Clothing Company v Commissioner of State Revenue [2007] VCAT 2492 at [34]. To disentitle an applicant to de­grouping, the connection must be meaningful in a commercial sense and not immaterial or inconsequential to the carrying on of the businesses. Adopting the words of GT Pagone, Presiding Member (as his Honour then was) in Triline at [25] there must be a finding of substantial absence of connection and substantial independence between the businesses, to warrant the exercise of the discretion.
4. In his closing submissions Mr Jones emphasized the phrases "is carried on" and "the carrying on of" from [50] in the Lombard appeal panel's decision and that to be relevant the connection between the businesses must be material and not insignificant or inconsequential and that the connection must affect the business in some real or practical sense.
5. Mr Gerard referred to [50] and [51] in Lombard Farms and at [132] in RS noted that the Appeal Panel in Chief Commissioner of State Revenue v Seovic Civil Engineering Pty Ltd [2014] NSWCATAP 94 said at [32]: "Section 79 focuses attention on the nature of interconnections between group businesses, the nature of the businesses and other relevant matters. The Chief Commissioner must turn his mind to the "carrying on" of the businesses. In order to be relevant to s 79 of the Act, the interconnection must affect group members' businesses in some real or practical sense. Read in context, the expressions "independently of and "not connected with " are somewhat elastic and depend on the nature and degree of the connections and the type of businesses. To be disentitled from exclusion from a group, there must be a real or meaningful connection, in a commercial sense and not an immaterial, inconsequential or passing connection between the carrying on of the businesses. The reference to a substantial connection in Lombard Farms at [51] is to be read in that context: meaning material and not necessarily large or weighty." (my emphasis)

The businesses of the Applicant and Tyres4U

1. Mr Nott said the Applicant carried on a retail business of selling tyres and related tyre products and services in Narrabri, in the north west of NSW. The Applicant trades as "Tyreright Narrabri". There is no dispute concerning these matters.
2. Annexure A to the Application contains certain information which the Applicant states should have been taken into account by the Chief Commissioner in relation to the exercise of his discretion under s 79. That information includes, on the sixth unnumbered page: Tyres4U is an Australian owned and operated business specialising in the import and distribution of tyres and tubes and conducted by the TWA Trust (all references to Tyres4U are references to TWA Trust trading as t4u). Tyres4U holds exclusive and non-exclusive agencies for multiple tyre brands manufactured in many overseas countries. Tyres4U is a principal, but non-exclusive, provided (sic) to Tyreright. Tyreright is a national network of independent tyre dealers. The independent dealers are supplied tyres and related items from Tyres4U under licensing arrangements. In addition to the independent dealers, Tyres4U is establishing a network of tyre dealers under the "Tyreright" logo. Tyres4U grants licences under a Dealership Agreement to operate individual Tyreright dealerships.
3. There is no dispute that: 1. for several years before the Applicant purchased its business from a company associated with the Ford family Mr Nott was the employed manager of the business which then traded as Namoi Valley Tyre Service (NVTS); 2. at all relevant times Mr Nott and Mr Eatock were the only directors of the Applicant; 3. throughout the Relevant Period Mr Nott was employed as the General Manager of the Applicant's business; and 4. Mr Eatock was at all times the Group General Manager Finance of Tyres4U.
4. Mr Jones submitted that the only time the business was discussed between the two directors was at the end of the financial year when they met to discuss statutory accounts, financial accounts and solvency of the business. There were never any other discussions between them nor any discussions concerning operational management of the business with Mr Nott by employees or principals of T4U.

Nature and degree of ownership and control

1. The Applicant submitted at [8]: … because ownership or control are the factors by which businesses are grouped in the first place, they are not of themselves sufficient to prevent exclusion from the group under s.79: John French Pty Ltd v Commissioner of Pay-roll Tax [1984] 1 Qd R125 at 141.
2. The Respondent agreed at [144] with the above submission to the extent that ownership and control of the respective businesses cannot be the sole criterion by which the s 79 (2) test is asked and answered.
3. Mr Jones submitted that the parties were entitled to be de-grouped if there was a substantial absence of connection and substantial independence. It is not necessary that there be a complete independence and lack of connection between the businesses.
4. The Applicant conceded at [6] that Tyres4U was deemed to control the TNU Trust, and at [7] that Tyres4U through its majority ownership of the shares in the trustee company could exercise control of the Applicant's business.
5. However, Mr Jones also submitted that it was incontrovertible that control was never exercised. He said this was supported by written statements by both Mr Nott and Mr Eatock that Mr Nott was solely responsible for the management of the Applicant's business and there was no intervention or control from Tyres4U. AS submits: 10 The uncontroverted evidence of both directors of the Applicant is that all decisions concerning the management and operation of the Applicant's business were made by Mr Nott independently of either Mr Eatock or other Tyres4U employees or principals (i.e. Mr Curtis and Mr Ross).
6. I observe that the substance of [10] above is contrary to the oral evidence of both Mr Eatock and Mr Nott as to the restrictions placed on Mr Nott's freedom to control the business in that the business is substantially operated in accordance with policy documents produced by Tyres4U and is part of Tyres4U's apparently successful overall business development strategy.
7. The Applicant also submitted, at [9]: The evidence establishes that neither Tyres4U nor its ultimate controllers had any control in fact over the carrying on of the Applicant's business.
8. These submissions concerning the level of actual control by Tyres4U in respect of carrying on the Applicant's business are central to the issue before the Tribunal and are disputed by the Respondent. In particular, the Respondent raises at [139] to [142] what he regards as mandatory considerations. In summary they are: 1. there is a substantial commonality of ownership and degree of ownership in that Tyres4U owns 75% of both the Applicant and the business conducted by the Applicant in the sense contemplated by s 79 (2). 2. The question as to the nature and degree of control is to be considered at directorial level. One of the two directors of the Applicant is Mr Eatock, a nominee of Tyres4U. In considering the level of day-to-day control exercised by the other director, Mr Nott, it is relevant to consider his position as the employed store manager of the Applicant. 3. Substantial similarities in respect of the nature of the businesses of Tyres4U and the Applicant (the Businesses), and the connections between the Businesses.
9. AS submitted: 11 Mr Nott's decisions did not have to be submitted to Tyres4U for approval. A sales manager visits the Applicant's business approximately each month but has no involvement in the decision making of the business.3 The Applicant, through its accountant, merely provides monthly financial reports to Mr Eatock and annual financial statements/tax returns.4 The Tribunal should therefore find that, despite its entitlement as majority owner, Tyres4U has "no involvement" in the day-to-day decision making of the Applicant's business.5 12 The substantial degree of independence of the Applicant's business is best illustrated by the fact that it was entirely free to decide how much stock it acquired from Tyres4U and that Tyres4U never attempted to ensure that more stock was acquired. 17 … the evidence of Mr Eatock and Mr Nott is that the dealer arrangements between the businesses (of Tyres4U and the Applicant) is no different to the arrangements with wholly unrelated businesses.
10. Mr Nott's oral evidence included: 1. Prior to the purchase of NVTS' business in April 2012 it was a customer of Tyres4U, purchasing tyres from and utilizing services provided by Tyres4U, but it was not a Tyreright business; 2. He knew that the owner of NVTS business wanted to sell it. No price was mentioned early on. 3. Early in 2012 he became aware that Tyres4U wanted to buy the business, initially from talking with Brett Ormond of the Newcastle branch of Tyres4U and later in discussions, mainly with Perry Scarfe and Les De Celis, respectively the National Manager Business Development and the Chief Executive Officer of Tyres4U. Mr Nott said he was interested in buying into the purchased business. In discussions with Tyres4U officers he was told the business, when purchased, would be a Tyreright dealership. 4. Mr Nott had no involvement in the purchase negotiations with the vendor. They were conducted by Tyres4U officers. 5. On 26 April 2012 he accepted and signed an employment offer as store manager of the Applicant's business. The offer was on Tyreright letterhead and made by Mr De Celis as CEO of Tyres4U. 6. He was bound by the terms of the Tyreright position description in exhibit R6 and the store manager job description, exhibit R5. Both of these form part of the Tyreright operations manual provided by Tyres4U.

Connections between the carrying on of the Applicant's business and that of Tyres4U

1. The Applicant's written submission as to the details of the connections between the Businesses is set out at [18] to [21]. In summary, the connections were stated to be: 1. the Applicant's use of the Tyreright trademark owned by Tyres4U and the dealership arrangements between the Businesses being on the same terms as those dealerships in which Tyres4U had no financial interest. 2. A loan from Tyres4U to the applicant (the Facility) to assist with the Applicant's business' cash flow. On 30 June 2012, 2013 and 2014 the Facility was in debit (to the nearest $1,000) in the respective amounts of $122,000, $19,000 and $36,000. At [18] the Applicant submitted that these amounts respectively represented 18%, 5% and 6% of the Applicant's total liabilities. 3. The proportion of total purchases acquired by the Applicant from Tyres4U during each financial year was 29%, 25% and 30%. 4. The Applicant's dealership arrangement with Tyres4U is substantially the same as it has with its other two unrelated suppliers, Tyremax and Michelin, and it uses the trademarks of those suppliers equally as it uses the Tyreright trademark. 5. The only assistance provided by Tyres4U staff to the Applicant related to the establishment of phone and bank accounts which assistance ceased by 30 June 2012.
2. The Applicant submitted that the financial connection between the Businesses was inconsequential.
3. AS also referred to the Applicant operating billing systems used by each of Tyreright's dealers, participated in 24-hour assistance programs operated by each of its dealers and stated that the Businesses did not share employees, resources or premises.
4. I deal with each of the conceded connections below, together with other connections between the Businesses.

Tyreright trademark

1. The parties agree that the Tyreright trademark and brand comprise intellectual property owned by Tyres4U. The evidence is that Tyres4U has permitted the Applicant to use the Tyreright brand as part of its company name and business name. There is no evidence that this is contrary to the usage of that brand by other Tyreright dealers in respect of which Tyres4U has no ownership interest and who form part of the Tyreright dealer network.

Comparison of the Applicant's dealership arrangement with Tyres4U with supplier agreements between the Applicant and each of Tyremax and Michelin

1. At [20(a)] the Applicant submitted that it receives discounts and rebates from all three" (suppliers), and "equally uses the trademarks of its other suppliers".
2. A consideration of the unsigned Dealership Agreement between the Applicant and Tyres4U and the agreements in evidence with each of Tyremax and Michelin shows some similarities but also discloses major differences.
3. Paragraph [16] of Mr Nott's affidavit referred to the Dealership Agreement. Paragraph [17] then relevantly stated: (The Applicant) also has other agreements with Tyremax and Michelin. Exhibited to me at the time of swearing this affidavit and marked Exhibit DN-4 is an agreement with Tyremax and at Exhibit DN-5 is an agreement with Michelin.
4. Those parts of the 22 page Tyremax Independent Contractor Agreement in evidence at exhibit DN-4 (pages 2 and 8 were not included in the documents filed with the Tribunal) contain provisions commonly found in agreements of this nature including express obligations on the Applicant to perform Services as defined in accordance with the agreement, exercise due skill and care, comply with reasonable directions and requirements, comply with health and safety rules and comply with relevant laws.
5. The "Michelin Truck, AG and M1 Retail Partner Agreement 2015" at annexure DN-5, consists of one unsigned and undated page. Presumably there are other parts of the agreement as the page provided refers to attached documents forming part of the agreement including Conditions of Michelin Retail Partner Agreement; Conditions of Sale; Credit Terms; Michelin Chargeback Program; Electronic Communication Consent; Delivery Charges & Returns Policy and Michelin Rapid Response Program. Regrettably no such documents were attached to Mr Nott's affidavit.
6. Any comparison of the Dealership Agreement with the Tyremax and Michelin agreements produced to the Tribunal is of limited benefit to the Applicant's case as there is no evidence that the Tyremax and Michelin agreements relate to the Relevant Period. The Tyremax agreement was signed by Tyremax Pty Ltd on 7 December 2014 and by the Applicant on 10 December 2014. Schedule One states that the term commences 1 January 2015 and expires 30 December 2017. The Michelin agreement is unsigned and from a schedule on the only page provided appears to apply for the 2015 calendar year. The Relevant Period ended on 30 June 2014.
7. The onus lies on the Applicant to prove its case. I am not satisfied that the dealership arrangement between the Applicant and Tyres4U was "on the same terms" as the documented relationship in evidence between the Applicant and the two other named suppliers.
8. In any event, having regard to the remainder of the evidence before me to which I refer in these reasons, the mere fact that some part of the relationship between the Applicant and Tyres4U is on commercial terms and may have been similar to the relationship between the Applicant and other suppliers is not sufficient by itself to satisfy me that the Businesses were carried on independently of each other and were not relevantly connected.

Signing the Tyreright Dealership Agmt

1. Mr Eatock said that every Tyreright dealer must sign what is described as the Tyreright Dealership Agreement.
2. He said that in each of the other three dealership arrangements referred to in his evidence, where Tyres4U had been a majority owner and was bought out by the minority owner, Dealership Agreements were signed. He was not aware for some years that a Dealership Agreement had not been signed between Tyres4U and the Applicant. As a director of the Applicant and as a senior financial officer of Tyres4U he believed it was important that the Dealership Agreement be signed.
3. At some time during 2014 he informed, Mr De Celis, that a Dealership Agreement had not been signed with the Applicant and the CEO expressed surprise.
4. Notwithstanding the fact that Mr Eatock was one of the two directors of the Applicant and was the Group General Manager Finance of Tyres4U and his belief that it was important that the Dealership Agreement to be signed by the Applicant, his evidence was that he had no knowledge as to why the Applicant had not signed that agreement.
5. Mr Nott's oral evidence was that the failure to sign the Dealership Agreement was because it had "slipped past" him because he was so busy when the Applicant's business started.
6. The affidavits of both Mr Eatock and Mr Nott stated that the Dealership Agreement had not been "formalised" by the Applicant. They both said that meant that the agreement had not been signed.
7. In cross-examination, Mr Eatock said that, because it was not signed, there was no enforceable Dealership Agreement between Tyres4U and the Applicant.

Loan facility from Tyres4U

1. Mr Nott said that after buying the business, the Applicant needed working capital. The Facility for up to $150,000 was obtained from Tyres4U because he did not have time to obtain funds from the bank for the business' initial cash flow requirements, in particular in relation to its payroll obligations.
2. Mr Eatock said that there were benefits to the Applicant in obtaining finance from Tyres4U instead of a bank. It was easier for the Applicant, the business was new, it did not have to prove its credit worthiness or profitability, it saved time and there were no ongoing charges.
3. I observe that there is no dispute that the amount of the Facility as a proportion of Tyres4U's total assets was minuscule. However, I also observe that the amounts owing as at 30 June 2012 and 2013 represented the whole of the non-current borrowings of the Applicant as at those dates and nearly 90% of the non-current borrowings on 30 June 2014. I also observe that the loan statements of the Applicant produced by Tyres4U (at page 835 of exhibit R3) showed that the Facility debt as at 31 December 2012 exceeded $180,000, more than $30,000 above the original agreed loan. No explanation was provided to the Tribunal as to how the debt owing under $150,000 Facility exceeded $180,000 some 8 months into the Relevant Period.
4. The amount owing as at 30 June 2013 may well have been approximately $18,600 as stated at [18(c)] in AS. However, the Tyres4U statement at page 839 of exhibit R3 showed that one month earlier the debt exceeded $128,000.
5. The Tribunal was not provided with all monthly movements in balances in respect of the Facility for the whole Relevant Period nor was evidence brought to the Tribunal's attention as to the importance or otherwise of that funding to the Applicant's business after the business started in April 2012.
6. No evidence was put to the Tribunal as to whether or not at any time during the Relevant Period the Applicant attempted to replace the Facility with a facility from a commercial lender such as a bank.
7. Having regard to the above matters I am not satisfied that the provision of the Facility by Tyres4U to the Applicant and its use by the Applicant was not a relevant connection to the carrying on of the Applicant's business during the 2012 and 2013 financial years. Also, I am not satisfied that the provision of the Facility by Tyres4U to the Applicant did not significantly assist the carrying on of its business by the Applicant during those financial years.
8. Having regard to the movements in the amount of the Facility debt during the 2012 and 2013 financial years, the lack of information provided to the Tribunal as to the movements in that debt during the 2014 financial year and the Applicant's onus of proof, I am not satisfied that, from the perspective of the Applicant's business, the financial connections between the Businesses for the whole of the Relevant Period were not substantial nor that they could be accurately described as "inconsequential" as submitted by the Applicant at [19].
9. At [24] the Applicant submitted that the Facility was "on arm's-length terms". That may well be the case. However, it does not follow that the existence of a loan facility, even if negotiated on a commercial basis, between two parties is not a relevant connection, for the purpose of s 79 (2) of the Act, in relation to the carrying on of the businesses of those parties, nor did the Applicant produce any authority to that effect.

Purchases from Tyres4U

1. Mr Nott's affidavit includes a statement at [25] to the effect that he prepared a sales report covering the Applicant's major suppliers since it started trading in 2012. That sales report, which covers the period 26 April 2012 to 9 June 2015 (extending to nearly 1 year after the end of the Relevant Period) indicates that the Applicant's purchases from Tyres4U during that period comprised only 16% of the Applicant's total purchases. This is substantially different from the Applicant's submissions at [18(c)] which stated, without further explanation, that the Applicant's purchases from Tyres4U varied from 25% to 30% during the Relevant Period. I am not satisfied as to the accuracy of the Applicant's evidence as to the percentage of its purchases from Tyres4U during any year of the Relevant Period.
2. The percentages in the preceding paragraph should be contrasted with the 80% figure in the undated unsigned draft deed attached to the Objection and referred to by both Mr Nott and Mr Eatock as an MOU. That deed, a copy of which is at pages 169 to 177 of the s 58 documents, provides that so long as Tyres4U is a unit holder in the Trust which is the beneficial owner of the business operated by the Applicant, the minority owner (Mr Nott's nominee) must ensure that not less than 80% of the products sold through the Business shall be products purchased by it from Tyres4U during any financial year ending 30th June. If that provision is breached, Mr Nott's nominee must, if requested by Tyres4U, request the redemption of the nominee's interest in the trust which owns the Applicant's business.
3. The MOU provides a conditional option for Mr Nott's nominee to acquire the interest held by Tyres4U in the unit trust which owns the business.
4. Mr Nott's evidence is that he did not "formalise" the MOU because the 80% obligation was unattainable.
5. Mr Eatock said that the 80% requirement was not enforced by Tyres4U because Mr Nott was a good operator and it was better to leave him alone.
6. This evidence indicates a commercial relationship between the Businesses by which products were sold by Tyres4U to the Applicant, an attempt by Tyres4U to require the Applicant to enter into a particular contractual relationship, an effective refusal by the Applicant to enter into that relationship and a decision by Tyres4U that the Applicant, or Mr Nott, was important enough to the business of Tyres4U that it was willing to disregard the failure by the Applicant or Mr Nott to enter into the contractual relationship. This factual matrix does not assist the Applicant in satisfying me that there was no relevant connection between the Businesses during the Relevant Period.

Assistance with the establishment of telephone and Internet accounts

1. Mr Nott conceded that when the Applicant commenced trading, employees of Tyres4U assisted the Applicant to set up mobile phone accounts and its Internet account. No charge was made by Tyres4U for this service.
2. I am satisfied that the evidence of this assistance by Tyres4U to the business of the Applicant does not by itself indicate any material dependence of the Applicant's business on that of Tyres4U nor any relevant connection between the Businesses.

The Applicant's banking arrangements

1. The Applicant conducts its banking at the ANZ in Narrabri using a corporate account at the ANZ in Melbourne. There is no dispute that Mr Jim Lidis, National Administration Manager of Tyres4U, assisted in setting up the Applicant's account(s) with the ANZ and adding the Applicant to the Tyres4U banking platform. Mr Nott's evidence was that he was uncertain as to the meaning of a corporate account and banking platform and did not know whether the banking operations of the Applicant were separate from the banking platform operated by Tyres4U.
2. The Applicant's initial contact person with the ANZ bank was Mr Lidis. Mr Nott's evidence was that Mr Lidis was no longer the bank contact for the Applicant.
3. No charge was made by Tyres4U for its assistance to the Applicant to set up its bank account.
4. In his affidavit Mr Nott said at [21] I maintain the Taxpayer's (Applicant's) own bank account and I am the only signatory…
5. Bank documents in evidence (at pages 804 and 805 of exhibit R3) show that Mr Nott was not and apparently has never been the sole signatory to the Applicant's account with the ANZ bank. The authorised persons and security device holders for the account were, from the opening of the account, Mr Nott, his wife Leanne and Mr Eatock.
6. At page 766 of exhibit R3 is an email from Mr Nott to Mr Eatock, which Mr Nott conceded was a request by him, seeking Mr Eatock's approval for three payments by the Applicant from its bank account. Mr Nott conceded that two signatories were needed to operate the account and at the time of his email to Mr Eatock, Mrs Nott was not available. Mr Nott further conceded that, at the date of the hearing, nearly 4 years after the account was opened, Mr Eatock remained a signatory to the Applicant's bank account.
7. I accept that a one-off involvement by an officer of Tyres4U in assisting the Applicant to set up its bank account does not by itself indicate any material dependence of the Applicant's business on that of Tyres4U nor any relevant connection between the Businesses.
8. However, I am not satisfied that any adequate explanation was provided to the Tribunal regarding the relationship, or lack of relationship, between the banking arrangements of the Businesses.
9. It may well be a reasonable commercial decision for Mr Eatock, as a director of the Applicant, to be a signatory and security device holder for the Applicant's bank account. However, Mr Eatock is also a senior officer of Tyres4U and its nominee on the board of the Applicant.
10. The apparent connection between the bank accounts of the Businesses and the retention for the whole of the Relevant Period and beyond, of Mr Eatock as a signatory and security device holder for the Applicant's bank account does not assist the Applicant to satisfy me as to the independence of the Businesses nor as to any relevant lack of connection.

Other connections between the carrying on of the businesses of the Applicant and Tyres4U

The Dealership Agreement and the MOU

1. In his affidavit Mr Nott said at [18] and [20]: 18 I am, as the Owner/Manager, solely responsible for the management of the Dealership, and there is no intervention or control from Tyres4U. 20 There is no involvement in the day-to-day decision making by Tyres4U in the (Applicant's) business. I manage the day-to-day decisions and I am free to make business decisions as I see fit. I am free to make my own management decisions as appropriate for the business and these decisions are not required to be submitted to the principals of Tyres4U for approval.
2. At [38] in his affidavit Mr Eatock says, in respect of the Applicant's business which he described as "the Dealership conducted by the Taxpayer": 1. the Owner/Manager, Mr Nott is solely responsible for the management of the Dealership, with no intervention or control from Tyres4U, 2. Mr Nott is regarded by Tyres4U to be the individual responsible for ensuring that the Taxpayer met all of its obligations under the Dealership Agreement,
3. At page 737 of Exhibit R3 is a copy of an email from Mr Nott to Perry Scarfe, the National Manager Business Development, of Tyres4U, dated 28 June 2012.
4. In that email Mr Nott seeks guidance in relation to both invoicing for the hire of a truck owned by the Applicant and payment of a late toll notice for that vehicle. Mr Scarfe's email response provides some details regarding the use of the vehicle and ends "Email me the toll notice." In cross-examination Mr Nott conceded that he had sought guidance at that time.
5. Notwithstanding his statements at [18] and [20] Mr Nott says at [23]: In the event of the Dealership operating outside any of the parameters and benchmarks set by Tyres4U, Tyres4U would ask me for an explanation and expect that I would resolve the situation.
6. Mr Eatock similarly states at [38(ix)]: In the event of the Dealership operating outside any of the parameters and benchmarks set by Tyres4U, Tyres4U would ask David Nott for an explanation and expect that David Nott would resolve the situation
7. It is appropriate to consider the contractual relationship between the Applicant and Tyres4U.
8. Mr Eatock states at [34] in his affidavit that in respect of each Tyreright dealership there is a dealership agreement under which Tyres4U supplies tyres to the respective dealership and an informal memorandum of understanding under which Tyres4U agrees to sell to the Owner/Manager some or all of the unit capital in the relevant dealer entity.
9. Mr Eatock states at [35] that there is no formalised MOU with the Applicant. Mr Nott's affidavit uses almost identical wording at [15].
10. Mr Eatock states at [36] that there is no formalised Dealership Agreement in respect of the Applicant. Mr Nott's affidavit uses almost identical wording at [16]. A draft copy of what is described as a generic Dealership Agreement is at pages 178 to 218 of the s 58 documents.
11. Mr Eatock's affidavit sets out at [37] certain terms from the Dealership Agreement and MOU including: 1. Tyres4U will not grant any other business a right to operate a dealership in a defined exclusive area. 2. The Applicant will, in operating the dealership, uphold the minimum standards set by Tyres4U, including that not less than 80% of the products sold shall be products purchased by it from Tyres4U. 3. The dealership will at all times be under the direct supervision of Mr Nott who will be employed to manage the dealership. 4. The dealership will be managed in accordance with certain protocols determined by Tyres4U. 5. If required, the Applicant will provide Tyres4U profit and loss statements and balance sheets.
12. In respect of the dealership operated by the Applicant, Mr Eatock states at [38] that: 1. Mr Nott is approved by Tyres4U. 2. Mr Nott is regarded by Tyres4U to be the individual responsible for ensuring that the Applicant meets all of its obligations under the Dealership Agreement. 3. Tyres4U has no involvement in the day-to-day decision making by Tyres4U in the Applicant's business. 4. The business is managed by Mr Nott who is free to make business decisions as he sees fit. Mr Nott is free to make his own management decisions as appropriate for the business and these decisions are not required to be submitted to the principals of Tyres4U for approval.
13. Notwithstanding his affidavit, Mr Eatock informed the Tribunal that the terms of the generic Dealership Agreement and the MOU in evidence apply to the relationship between Tyres4U and the Applicant. He said that this was his understanding of the relationship and he obtained that understanding from discussions with the Tyres4U Chief Executive Officer in about April or May 2012 and he had regard to the options available to other dealers. Matters which were required to be complied with by the Applicant included brandings, uniforms and the manner in which and the script with which the Applicant's telephone was answered. He said that these are not opt in or opt out alternatives as there are some things that the manager cannot change. It was important for Tyres4U to have uniformity throughout the Tyreright dealership network.
14. These restrictions on the independence of the Applicant to carry on its business in the manner in which it sees fit are exacerbated by provisions of the generic Dealership Agreement which includes the following: 1. Territory - Tyres4U appoints the Retailer to a defined territory outside which the Retailer must not solicit orders for the supply of Products without the prior consent of Tyres4U. 2. Clause 8.2 provides for a minimum annual dollar value of Products (as defined) to be purchased by the Retailer from Tyres4U. 3. clause 9 named 'Retailer's Functions and Responsibilities' provides several obligations of the Retailer which are not dissimilar to those found in the Tyremax Independent Contractor Agreement. However, it also requires the Retailer: 1. to ensure that all its staff wear clothing and uniforms as approved in the Tyreright Operations Manual which clothing and uniforms will initially be provided by Tyres4U and thereafter paid for by the Retailer; 2. to comply with the procedures and policies set out in the Tyreright Operations Manual; 3. to use only stationery approved by Tyres4U; 4. to participate in any credit and credit card schemes specified in writing by Tyres4U; 5. to remove at the Retailer's cost any competitor's sign at relevant premises; 6. to participate in in any business systems, techniques, initiatives, programs, computer facilities and other facilities ("Facilities") which Tyres4U thinks necessary or appropriate for the modern and efficient operation of the retail outlet; 7. to acquire (at its own cost) any equipment necessary to participate in the Facilities; 8. to comply with the directions of Tyres4U for the use and maintenance of the Facilities; 9. to observe and perform the instructions contained in any manual issued by Tyres4U from time to time (including, without limitation, the Tyreright Operations Manual) relating to the exploitation of Tyreright know-how; 10. to pay a contribution, in such amount as is determined by Tyres4U, towards the advertising or promotional activities with which it is involved under clause 11 (Advertising and products promotion (excluding large-scale Tyreright marketing activities)) and the Retailer acknowledges and agrees that the final decision with respect to all matters including cost relating to advertising or promotional activities will always remain with Tyres4U; 11. to comply with any amendments, variations or additions to the operations manual, not inconsistent with any of the terms of the Dealership Agreement, made by Tyres4U from time to time. 12. to cause any employees of the Retailer nominated by Tyres4U to participate in training programs that Tyres4U may from time to time require to enable them to conduct the retail outlet efficiently at such locations and for such duration as Tyres4U may direct and at the expense of the Retailer. 1. The Retailer must not without the prior consent of Tyres4U enter into any agreement with any other supplier of tyres, tubes, flaps and associated products in the nature of a franchise agreement, retail development program, joint venture distribution agreement, agency or other arrangement in relation to the retail sale of tyres, tubes, flaps and associated products. 2. Tyres4U must amongst other matters provide and maintain a Tyreright website and provide marketing services for the Products through the website and must not appoint any other person as a Tyreright retailer in the Territory. 3. Tyres4U may provide instructions from time to time to the Retailer relevant to the obligations of the Retailer under the Dealership Agreement.
15. Mr Eatock said in re-examination that the obligations of Tyreright dealers to Tyres4U are the same as those dealers' obligations with other suppliers. To the extent that there is evidence before me as to the Applicant's obligations to suppliers other than Tyres4U, and having regard to the express obligations in the Dealership Agreement and Sales and Service Policy and Procedure document, Mr Eatock's statement is not supported by the evidence and I reject it.
16. Mr Eatock informed the Tribunal that the benefits to the Applicant of its Tyreright dealership include turnover, access to particular products, buying at competitive prices, access to the Tyreright website with the opportunity to access additional work and obtain marketing benefits, some local area protection in relation to exclusivity of territorial Tyreright product sales, and additional referral work from their membership of the thank you very much Tyreright network. He said the Tyreright dealers are required to comply with the Tyreright operations manual and brand guidelines, however Tyreright's HR policies do not bind dealerships which are not wholly owned by Tyres4U. He also said that all dealerships universally must comply with Sales and Service Standards. I observe that these Standards are referred to separately in these reasons.
17. In cross-examination, Mr Eatock's evidence was that because they were not signed there was no enforceable Dealership Agreement or MOU between Tyres4U and the Applicant. However, Mr Eatock also said that Tyres4U and the Applicant have throughout the Relevant Period and since it ended, conducted themselves in accordance with the provisions of the Dealership Agreement and the MOU other than in respect of rebates for sales, the external appearance of the Applicant's store and the loan requirements. He said that the loan requirements were dealt with under a separate loan agreement. He also said that the Applicant complies with its obligations in respect of branding and IT matters.
18. Mr Eatock said that Tyres4U does not necessarily treat the Applicant differently to other dealers in respect of enforcing the minimum purchase requirements although if the Applicant does not comply with those minimum requirements then it misses out on rebates. Mr Eatock also said that Tyres4U is enforcing those minimum purchasing requirements in respect of one dealership although it is not enforced in respect of other dealerships.

Mr Nott's employment as store manager of the Applicant's business

1. There is no dispute that on about 26 April 2012 Mr Nott accepted an employment offer as store manager of the Applicant's business. The offer dated 17 April 2012 was contained on a Tyreright letterhead signed by Mr Les De Celis, as Chief Executive Officer of Tyres4U Pty Ltd. The offer included general provisions for employment under the Clerks-Private Sector Award 2010, and more specifically provided for a remuneration package, a bonus (the details of which would be advised later), superannuation, annual leave, sick leave and termination arrangements.
2. Clause 7 of the terms and conditions of the offer stated: Tyreright observes various human resource and administration policies and procedures. These policies are varied from time to time by the management of Tyreright and all employees are expected to comply with these policies and procedures.
3. This provision is not consistent with Mr Eatock's evidence referred to at [104] above.
4. Mr Nott informed the Tribunal that he read the employment agreement before signing it and was aware of clause 7. He was also aware of various Tyreright policies and procedures including an online operations manual which applied to dealerships and he was aware that Tyres4U expected compliance with the various Tyreright policies. Mr Nott said that the policies included branding, trademark, HR policies and uniforms for staff.
5. Mr Nott was shown exhibit R6, a 3 page document on Tyreright letterhead headed POSITION DESCRIPTION which relates to the position of Store Manager. Mr Nott said that the provisions of that document apply to him as do the provisions of an online version of that document which is exhibit R5. Mr Nott said he had seen the documents previously and they are in the Tyreright HR manual. Duties which apply to him include managing the staff on a day-to-day basis, spending up to $1,000 without a signed capital expenditure form, having an ability to accept direction and having sound time management skills to ensure that deadlines and targets are met.
6. In cross examination Mr Eatock informed the Tribunal that [38(i)] of his affidavit which stated the Owner/Manager, David Nott is solely responsible for the management of the Dealership, with no intervention or control from Tyres4U was intended to refer to Mr Nott's initial decision to become a Tyreright dealer.
7. In re-examination, Mr Eatock was asked what was meant by "management" apart from the standard rules in the operations manual. His answer was that management means running the business profitably. He also said that management included day-to-day decisions, strategic decisions as to which tyres were purchased and who the customers were.
8. I accept that management may well include certain day-to-day decisions as well as strategic decisions.
9. The statutory test in this matter relates to whether the Businesses were carried on independently and whether there were relevant connections between the carrying on of the two businesses. It is not necessary to consider every decision made in relation to the Applicant's business in order to answer the statutory question.
10. Mr Jones conceded that the evidence is not that Mr Nott had power to disregard the operations manual.
11. Several documents were produced under summons by the Applicant. They included Tyreright Sales and Service Policy & Procedure, and the Tyreright Dealership Agreement previously referred to.
12. The Tyreright Sales and Service Policy & Procedure document at Tab 63 in exhibit R3 includes the following requirements which are stated to be "non-negotiable": Before we open for business each day every floor must be swept and cleaned of any debris…. In the workshop all tools and equipment must be stored correctly and properly maintained at all times. Desks, counters and other work surfaces must be clear and clean at all times. Computers, telephones, televisions, the display kiosk and the like must be clean and presentable. Batteries for portable telephones charged, pens and other stationary (sic) appropriately stored. Waste bins must be emptied every day and all rubbish disposed of legally. Toilets and other facilities are to be clean and properly stocked with soap, towels, toilet paper and so on. Check these areas at least once a day before we open for business. A check during each afternoon is also required…. No cups or plates in the sink or on the bench. Cups, plates and other utensils must be washed and dried and put away. Coffee machines must be cleaned and restocked every day…. Light bulbs need to be replaced as soon as they fail using energy efficient products. Before leaving for the day ensure lights that are to be kept on are on and those that can be switched off are switched off. Answering machines must be turned on as well as attending to security alarms and the like.
13. Under the heading STAFF PRESENTATION are included: All staff must wear the correct uniform for both winter and summer. Name badges are a compulsory part of this uniform and must be worn at all times. Name badges are to be worn on the right-hand side of the shirt as shown. Every day managers must ensure that staff uniforms are clean and pressed and worn with pride…. If you wear earrings and visible body piercings leave these at home and express your personal preferences for these things in your own time. The sales and service standards outlined here are also non-negotiable. What follows next is the broad sales and service methodology we want you to use every time….
14. Under the heading GREETING THE CUSTOMER appears the following: Our customers need to be met outside the showroom by a salesperson as soon as you possibly can and ideally within 60 seconds of them entering the driveway whenever this can be done. Our job begins by greeting the customer promptly and really making them feel like a welcome guest. People are busy they don't want to hang around waiting for someone to serve them. As they alight from their vehicle say hello using your name - "Welcome to Tyreright , I'm…". Great, you've opened the door to your sales conversation so keep control of that conversation with another open-ended question like - "How can we help you today?"

Business development strategy of Tyres4U

1. Mr Eatock's evidence was that the core purpose of Tyres4U'S development of the Tyreright network was in order to have a group of retailers selling Tyres4U tyres. The benefit to Tyres4U is turnover.
2. In his affidavit he described Tyreright as a national network of independent tyre dealers. He also said that 30 to 35 members of that network are wholly owned byTyres4U. I am not satisfied that the wholly-owned retailers are in any way independent of Tyres4U.
3. The evidence is that most of the non-wholly-owned members of the network are or were at least partly owned by Tyres4U and all Tyreright branded dealers other than the Applicant have signed the Dealership Agreement.
4. At [24] Mr Eatock stated that "Tyres4U has devised a strategy for expanding Tyreright Dealership network as follows" and then goes on to provide a multistep process for that expansion. In summary the strategy is that: 1. Tyres4U identifies either a suitable site for the establishment of a dealership or an existing Tyreright customer available for sale and prepared to convert to a Tyreright dealership and identifies an individual suitable to become the owner and operator of a Tyreright dealership but with insufficient funds. 2. Tyres4U provides some or all of the capital required to establish the new dealership or purchase the existing business. 3. Tyres4U assists in selecting an appropriate business structure and with the establishment or acquisition of the new business. 4. At [24(g)] "once the dealership is opened, the conduct of the dealership business is left entirely the responsibility of the Owner/Manager". 5. The new entity provides Tyres4U with regular financial reports and normally has its representative on the Board of Directors of the new entity to protect its investment. 6. Over time the Owner/Manager increases their equity in the dealership entity and eventually takes full ownership of the entity.
5. Mr Eatock provided examples of the above strategy in operation in several ventures by Tyres4U both within and outside New South Wales.
6. Mr Jones submitted that the connections between the Businesses were inconsequential to Tyres4U. It may well be that the dollar value of the products and services acquired by the Applicant from Tyres4U were relatively inconsequential to Tyres4U during the Relevant Period. However, in so far as the relationship between the Businesses occurred and developed as part of a considered strategy of Tyres4U in developing its business I am not satisfied that the connection in the context of that strategy is inconsequential to Tyres4U.
7. Mr Jones submitted that business activities from the Tyreright network of $55 million as part of an aggregate $200 million activity for Tyres4U was irrelevant because it was not relevant to look at the dealings of third parties with Tyres4U only dealings with group members. Mr Jones was unable to provide any authority in support of his submission. Given the importance to Tyres4U's overall business of developing the relevant retail network and that the business of the Applicant and its development as part of the Tyreright dealership network was an integral part of an express Tyres4U business development strategy I reject Mr Jones' submission.
8. Mr Eatock said Tyres4U has a large investment in the Tyreright network and its internet facility. It does not approach $1 million but it is a significant investment. The website describes it as a revolutionary online ordering system. Mr Eatock said Tyres4U has competitors who are attempting to emulate the online ordering system which is new for the Australian market.
9. I observe that there may well be good commercial reasons for each of the obligations of the Applicant to Tyres4U referred to under the above headings "The Dealership Agreement and the MOU", "Mr Nott's employment as store manager of the Applicant's business" and "Business development strategy of Tyres4U". However, to the extent that both Tyres4U and the Applicant expect that the Applicant will, in the course of carrying on its business, comply with these requirements I find that they substantially impinge on the manner in which the Applicant's business is carried on and the actual powers exercised by Mr Nott notwithstanding statements by Mr Nott and Mr Eatock to the contrary.
10. Accordingly, in respect of the matters referred to under those headings, I am not satisfied that the Businesses are independent nor that there is no relevant connection between the Businesses and how they are carried on.
11. Mr Eatock said that Tyres4U did not want to own stores in the Tyreright network. It was not Tyres4U's philosophy because there was better use of its capital and that was not its core business. However, I observe that Mr Eatock's evidence was also that the Tyreright network includes between 30 and 35 retail stores wholly owned by Tyres4U which between them produce approximately one quarter of Tyres4U's gross revenue. The fact that the fraction of Tyres4U's gross revenue derived from the Tyreright network was lower during the Relevant Period than currently seems to evidence the success of the strategy of which the Applicant's business is part.
12. At [26 (v)] Mister Nott said the Applicant does not "engage in any trade with any other Tyreright Dealership". In cross-examination, after being led to various documents in evidence including invoices from the Applicant to other Tyreright Dealers Mr Nott conceded that the invoices disclosed trade between the Applicant and those other Dealers which contravened his affidavit at [26 (v)]. Mr Nott also said that such trade was rare.
13. Mr Jones submitted at [23] that the existence of the Applicant's business was not dependent on the supply of products from the other member of the group and contrasted that lack of dependence with the decision of the Court of Appeal in Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181 at [59]. It may well be that the lack of independence shown in Tasty Chicks could be described as an extreme example. I also observe that Mr Jones submitted that the approach adopted by the Appeal Panel in Lombard Farms at [50] should be followed and that paragraph included: The connection must be material and not insignificant or inconsequential.
14. No authority was provided to the Tribunal to the effect that it was necessary for the statutory discretion to be exercised in favour of the Applicant unless the lack of independence reached the extreme level shown in Tasty Chicks.
15. Mr Eatock said he spoke with Mr Nott about the Applicant's business once a year, meeting over the telephone. They have never discussed how the business would be conducted as between the two of them.
16. Mr Jones submitted that the business relationship between Tyres4U and the Applicant was no different to the way business was conducted by Tyres4U with other independent dealers, in other words it was conducted on a commercial basis. This may well be the case.
17. In Seovic Engineering Pty Ltd v Chief Commissioner of State Revenue [2015] NSWCA 242 (Seovic CA) the appellants argued that the appeal panel was required to take into account that "dealings between the group members were on commercial arm's-length terms". The Court's response at [25] and [26] includes: 25 That the dealings between the three companies were on commercial arm's-length terms describes a characteristic of the business activities between them. For that reason it may fall within "the nature of the businesses", a subject the Chief Commissioner is required to take into account. In Commissioner of Stamps v Garrett F Hunter Pty Ltd (1997) 69 SASR 275 at 285, Doyle CJ considered that subject to include the activities comprising the relevant businesses… the fact of those commercial terms being arm's-length was taken into account by the Appeal Panel…The facts as determined by the Tribunal are set out in [43] of its reasons, which in turn is extracted by the Appeal Panel at [26]. Those facts, as the Appeal Panel notes at [33], included that "the business arrangements between group members were commercial". 26 … the Commissioner is able, but not bound, to have regard to "any other matters the Chief Commissioner considers relevant". As was observed in Chief Commissioner of State Revenue v Tasty Chicks Pty Ltd [2012] NSWCA 181; 87 ATR 880 at [55], this provision confers a discretion to look beyond the specifically mentioned matters to other factors bearing on the existence or absence of independence and connection between the carrying on of the relevant businesses.
18. I am not satisfied that merely because it is said that the relationship between the Businesses is the same as or similar to a commercial franchise relationship means there is no dependence and a lack of connection.
19. The Applicant concluded its submissions at [26] by relying on on an extract from Seovic CA which at [22] said "the broad purpose of the power to exclude is to enable the Chief Commissioner to relieve against the unreasonable operation of the grouping provisions."
20. That extract is misleading without considering the context. In the same paragraph the Court of Appeal said: Whilst that description should be construed having regard to that purpose, it nevertheless remains the position that the Commissioner must in terms be satisfied that the business sought to be excluded is not connected with the carrying on of a relevant business.
21. The Court of Appeal also said at [19] and [20]: The High Court has repeatedly stated that the task of statutory construction begins and ends with a consideration of the text, which is to be considered in its context (including its legislative history and any extrinsic materials): FCT v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 at [39]; Thiess v Collector of Customs [2014] HCA 12; 250 CLR 664 at [22] The applicants' submission that the power conferred by section 79 (one) is enlivened whenever it is just and reasonable to exclude members from a group to alleviate any harsh consequences of the grouping provisions finds no support in the statutory language. The precondition for the exercise of that power is described in section 79 (2)…
22. Mr Jones submitted that the only material changes to the Applicant's business after it was purchased from its predecessors in April 2012, were the uniforms and the branding of the business, and the loan Facility was inconsequential in terms of connection and lack of independence.
23. I have dealt above with the loan Facility. Other changes which in my opinion are not "inconsequential" include the contractual degree of control over the supposedly independent management by Mr Nott. Both Mr Nott and Mr Eatock accepted that if Mr Nott did not manage the business in accordance with Tyres4U's parameters and benchmarks Tyres4U would seek an explanation and Mr Nott would be expected to resolve the situation, presumably in accordance with those parameters and benchmarks.
24. Mr Jones also relied on the decision in Commissioner of State Revenue [WA] v Artistic Pty Ltd [2008] WASCA 24. In that matter certain businesses were 100% owned and the Western Australian Supreme - Court of Appeal held the absence of the threshold where businesses were carried on independently was to put similar businesses at a competitive disadvantage. This issue was held to be relevant to the exercise of the discretion in that matter.
25. However, I observe that at [5] in Artistic the extracted excerpt from the relevant legislation states: "section 16D(9) provides that where a member of a group is included by reason of a person or persons having a controlling interest as beneficiaries under a discretionary trust, the Commissioner may exclude that member of the group: : … If after considering- (a) the nature and degree of ownership and control of the businesses; (b) the nature of the businesses; and (c) any other matter that the Commissioner considers relevant; the Commissioner is satisfied that the business is carried on by him or them substantially independently of the business carried on by any other member of the group and that it is just and reasonable for him or them to be excluded from the group.
26. There is no reference in the above excerpt to the New South Wales requirement that the business carried on by the person "… is not connected with the carrying on of a business carried on by any other member of that group" as is found in s 79 (2) of the Act.
27. I also observe that at paragraph 23 in Artistic the court stated "Counsel for the Commissioner properly conceded, in the course of argument, that the range of considerations embraced by the expression "just and reasonable" included considerations personal to the prospective taxpayer." No "just and reasonable" provision is found in s 79 of the Act and that issue was dealt with and rejected for New South Wales at [20] in Seovic CA.
28. I have considered the evidence put before me in relation to the obligations imposed by Tyres4U on both Mr Nott as "Owner/Manager" and the Applicant in carrying on its business including the terms of the Dealership Agreement, the MOU, the legal control able to be exercised by Tyres4U over both the Owner/Manager and the dealer in relation to the manner in which the Applicant's business was carried on both at a management and day-to day level, the expectations of both parties and that a nominee of Tyres4U sits on the board of directors of the Applicant and is a signatory to its bank account. I have considered the areas of business management which remained in Mr Nott's actual control and in which he was not subject to overriding control by Tyres4U.
29. I have considered the evidence that the ongoing relationship between Tyres4U and the Applicant and their respective businesses arises from a deliberate strategy of Tyres4U engaged in in order to expand the Tyreright network of dealers who purchase products and services from Tyres4U for its benefit. I also have regard to Mr Eatock's evidence concerning the importance of the Tyreright network and its development and expansion, throughout the Relevant Period and subsequently, to the business of Tyres4U.

Decision

1. Having regard to my above findings on the material before me, and having regard to the nature and degree of ownership and control of the businesses, the nature of the businesses and the other matters which I referred to above as being relevant, I am not satisfied that the business carried on by the Applicant is carried on independently of the business carried on by Tyres4U, nor am I satisfied that there is no relevant connection between the carrying on of those businesses throughout each year of the Relevant Period.
2. Accordingly, the correct and preferable decision of this Tribunal is that the decision of the Chief Commissioner under review is affirmed. I hereby certify that this is a true and accurate record of the reasons for decision of the Civil and Administrative Tribunal of New South Wales. Registrar 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: 13 May 2016