Victorian Civil and Administrative Tribunal|2015-11-30

The applicant submitted that its business was operated on a day-to-day basis differently from that of the other businesses. Mr Driscoll pointed out that he was the manager of the applicant's business, while the other businesses had different managers. In my view, in a situation like the present, while the day-to-day management may be a factor for me to take into account, the more important factor is the overall control of the businesses. It is clear, that the applicant and the other businesses have the same directors, namely Mr Driscoll and Mr Sexton, and they have the overall oversight of all the businesses including the applicant. Member Pagone, as he then was, in Camelot Constructions Pty Ltd, Dryline Homes Pty Ltd v Commissioner of State Revenue (unreported) AAT (Vic) 3 March 1995 at paragraph [29] stated as follows:

"It is not surprising to find degrees and measures of relative independence in the day-to-day operation of many small, medium and large businesses operating through managers and individual workers. The relative independence, however is less important than the broad supervisory role of the person ultimately interested in the business and their performance."

The applicant also relied on the fact that the businesses were in different industries. This to some extent is correct, although as Mr Kotros has pointed out, each business is complementary to the other. This is shown by Mr Driscoll's statement in his final submission on behalf of the applicant when he was referring to the fact that the applicant hired personnel and equipment to the other businesses and he said: "why wouldn't we use our own?"
It is very clear from what I have outlined above, that a very large proportion of the applicant's business, depends upon it being able to hire out its equipment and staff to the other three businesses. It was pointed out, that such hiring, accounted for over 50% of the business of the applicant. While I am unable to say whether the applicant's business could or would not exist without the ability to hire the equipment and the staff of the other businesses, it is clear that from such a high percentage, that the applicant is extremely dependent upon the other businesses for its operation.
It is also relevant in relation to the question of both connection and dependence that approximately 50% of the applicant's assets are invested in loans to the other businesses. Clearly if something were to go wrong with one of these other businesses, it would necessarily have a serious detrimental effect upon the applicant.
As an example of the relationship of all the businesses to each other, I take into account the following which I have already discussed:

Each business has the same external accountant. 2. There are common signatories to the cheque account between the businesses.

The businesses are complementary to each other although their industries are not identical.

There are cross-guarantees between the businesses and the directors. 2. There is a lack of formality in documentation between the businesses particularly in relation to inter-company loans. 3. The businesses share the same premises.
Taking all these matters into account, I have come to the conclusion that the degree of control and dependence of the other businesses is sufficient to mean that the applicant does not come within the meaning of s.79 of the Act. To put it another way, the applicant has failed to discharge the onus that it is independent and not connected with any of the other businesses.
In summary, Mr Kotros has correctly quoted from the respondent's delegate in the respondent's decision where the delegate stated, "not only do they (Mr Sexton and Mr Driscoll) have the capacity to control the businesses of the group but they have been exercising that control through their enabling of the group members to rely financially and resource-wise on each other."
Thus if follows, the applicant has failed to discharge the onus to allow it to be de-grouped from the other businesses pursuant to s.79.

As I have already mentioned, estoppel is not applicable in this type of situation. That is, there can be no estoppel against the operation of the statute. See Wade's case (supra). I sympathise with the applicant in the sense that Mr Driscoll pointed out that it has created a financial difficulty for the applicant on the basis that the applicant believed that it would not be grouped in payroll tax and thus it now has a burden to meet that it would not have to meet otherwise. Had this been pointed out to the applicant during the years in question, from a financial management point-of-view it would have been a lot easier for it. However, that is not something I can take into account.

In making the decision that has been reviewed in this proceeding, the respondent decided that it would revoke the penalty that it had previously charged the applicant. The reasons for this revocation were, I believe, that the respondent's delegate incorrectly took into account that the applicant had acted in a correct manner and relied upon the respondent's earlier decision not to group it with the other businesses. In my view this was a proper matter to take into account.

The question of interest was not argued before me. I note that the respondent has only charged the applicant normal commercial rate of interest and not penalty interest. The interest is to make up for the respondent being 'out of its money' and the applicant having the use of the money during the relevant time. Therefore that is a proper matter to take into account.

For the above reasons, I will confirm the decision of the respondent delegate of 13 August 2014. That decision, refused to de-group the applicant from the other businesses pursuant to s.79, does not charge a penalty on the applicant, but charges commercial rate of interest. As I have stated above, these are all proper matters.

Ricki Driscoll and Terence Sexton, since 1998 - before then, Robyn Driscoll and Bernadette Sexton

Ricki and Robyn Driscoll, and Terence and Bernadette Sexton, in equal shares, since 1998 - before then, Robyn Driscoll and Bernadette Sexton

Ballarat Concrete Products Pty Ltd (ACN 096 153 454)

Rickbern Holdings Pty Ltd and Terry Pty Ltd,[1] in equal shares, since 2006 - before then, Ricki Driscoll and Terence Sexton

Australian Road Barriers Pty Ltd (ACN 121 470 102)

Rickbern Holdings Pty Ltd and Terry Pty Ltd, in equal shares

[1] Rickbern Holdings Pty Ltd (ACN 103 820 739) and Terry Pty Ltd (ACN 103 820 702) were each incorporated on 21 February 2003. As to the first company, Ricki Driscoll has at all times been the sole director, and, since 16 April 2009, the sole shareholder - before then, Ricki and Bernadette Driscoll (T-doc 70). As to the second company, Terence Sexton has at all times been the sole director, and, also since 16 April 2009, the sole shareholder - before then, Terence and Robyn Sexton (T-docs 68, 69).

Administration Act 1997

Terick Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2015] VCAT 1901 (30 November 2015)

I note that, in the applicant's book of documents, in advertising material relating to the group, Mr Driscoll and Mr Sexton are described as partners. Further, when Mr Driscoll made his opening at the hearing, he described Mr Sexton as his 'partner'. Mr Driscoll alleges in his witness statement that the businesses are operating in different industries. However, as Mr Kotros has said, the activities of each business appear to be complimentary to the others.
There appears to be considerable inter-company loans. The loan between the applicant and Ballarat is documented in a document dated 1 July 2013, which reveals that the applicant is lending money to Ballarat; however, it does appear that there are other company loans which are not documented. In the years ending 30 June, in 2008, the applicant was owed $1,112,814; in the year 2009, the applicant was owed $1,198,010; in the year 2010, the applicant was owed $1,299,357; and in the year 2011, the applicant was owed $882,894 by the other companies. Mr Kotros correctly pointed out that these loans represent approximately 50% of the applicant's assets.
Even though Mr Driscoll submitted that the staff and hiring arrangements between the applicant and the rest of the group were at 'arm's length', it does appear from the accounts, that approximately half of the applicant income comes from hiring staff and equipment to the other members of the group.
The applicant, and ARB operate from an office in Old Creswick Road, Ballarat and, there is apparently some documentation between ARB and Driscoll Superannuation Fund which owns those premises. I understand that there is rental paid by ARB to Driscoll Superannuation Fund, however, there does not appear to be any form of arrangement in relation to the applicant' use of those premises. That is, there is no sub-lease or the like.
All members of the group use the same external accountant, or accountants.
Both Mr Driscoll and Mr Sexton are signatories to the bank account of each of the businesses and the applicant. I understand that the relevant manager to each of the businesses is also a signatory to the account of that particular business to which he is manager. There are cross-guarantees between each of the businesses and the directors given in respect of the businesses. Further, the directors have guaranteed trade accounts, in particular that the applicant will buy concrete from Ballarat.
While there are some documents, such as the loan agreement to which I have referred, by and large there is informality in the transactions that take place between the various businesses.
Each business has a different manager with differing responsibilities, however there is a common control exercised by Mr Driscoll and Mr Sexton over each of the businesses. The major decisions are made by those people. Mr Driscoll said that Mr Sexton rarely attends the board meetings. However, it seems clear from the documentation that any major decisions in relation to each of the entities must be made by either Mr Sexton or Mr Driscoll or both.
Each of the businesses has a separate WorkCover policy.
Each business has its own bank account with its own banking arrangements and facilities, however, each business banks at the same bank and there are inter-company loans and common signatories as I have previously stated.
At Paragraph [8] of Mr Driscoll's witness statement, he stated that the applicant's employees are not common employees with other entities. However, it is clear from the documentation that management fees for staff provided by the applicant to ARB and ARBN constituted between 56% and 116% of the applicant's wages and between 12% and 77% of the applicant's income for the relevant years.
The applicant was investigated by the respondent in relation to payroll tax for the years ending 30 June 2003 - 2007 inclusive. As a result of this investigation, the relevant companies other than the applicant were grouped pursuant to s.72 of the Act and not de-grouped pursuant to s.79 of the Act. The applicant was de-grouped pursuant to s.79 of the Act. The applicant says that nothing has changed between the earlier investigation and the investigation leading to the present proceedings.
I made it clear to the applicant during the hearing, that estoppel did not apply in administrative law. I explained to Mr Driscoll that, while it may seem unfair that on the same material the respondent is taking a different view in relation to this investigation to what it took in the previous investigation, that is not to the point. What I must do is find the facts and apply those facts to where the law takes me. It is well established, there can be no estoppel against the operation of a statute. See Commissioner of Taxation v Wade [1951] HCA 66; (1951) 84 CLR 105 at [117].

(b) As to the two matters in (a) all or any of the three members of the group see Port Augusta Medical Centre Pty Ltd v Commissioner of State Taxation (SA) [2011] SASC 31 at [33].

Terick Pty Ltd v Commissioner of State Revenue

At a glance

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Decision date

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Judgment (17 paragraphs)

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Legislation Cited (2)

Cases Cited (4)

Terick Pty Ltd v Commissioner of State Revenue (Review and Regulation) [2015] VCAT 1901 (30 November 2015)