Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd - [2023] NSWCA 302

Court of Appeal

Supreme Court

New South Wales

Medium Neutral Citation: Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302
Hearing dates: 24 October 2023
Date of orders: 13 December 2023
Decision date: 13 December 2023
Before: Ward P at [1];
Payne JA at [6];
Basten AJA at [17]
Decision:
(1)   Allow the appeal and set aside orders (1) and (2) made in the Equity Division on 25 May 2023 and the order as to the costs made on 26 June 2023.
(2)   In lieu thereof order that the proceedings in the Equity Division be dismissed with costs.
(3)   Order that the respondent pay the appellant’s costs of the appeal.

Catchwords:
TAXES AND DUTIES – payroll tax liability – employment agency contract – contract for trolley collection and cleaning services – identifying the employment agency contract – contract between agent and client – separate contracts between agent and service providers – onus of proof on tax payer
STATUTORY INTERRETATION – payroll tax liability – employment agency contract – procuring services for client – when service provider works “in and for” the business of the client of the agent – use of “indicia” – reliance on factors considered in other cases

Legislation Cited:
Interpretation Act 1987 (NSW), s 33
Payroll Tax Act 2007 (NSW), ss 6, 7, 10, 11, Pt 3, Divs 7, 8, ss 35, 37, 38, 39, 40, 41

Cases Cited:
Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058
Bayton Cleaning Co Pty Ltd v Chief Commissioner ofState Revenue [2019] NSWSC 657; 109 ATR 879
Broome v Cassell & Co Ltd [1972] AC 1027
Chief Commissioner of State Revenue v Downer EDIEngineering Pty Ltd [2020] NSWCA 126
Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259; 115 ATR 448
Damjanovic & Sons Pty Ltd v Commonwealth (1968) 117 CLR 390; [1968] HCA 42
HRC Hotel Services Pty Limited v ChiefCommissioner of State Revenue [2018] NSWSC 820; 108 ATR 84
JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391; 106 ATR 639
Ogden Industries Pty Ltd v Lucas [1970] AC 113
Scott v Davis (2000) 204 CLR 333; [2000] HCA 52
Securecorp(NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744
Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470
UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577

Texts Cited:
P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters)

Category: Principal judgment
Parties: Chief Commissioner of State Revenue (Appellant)
Integrated Trolley Management Pty Ltd (Respondent)
Representation:
Counsel:
S Balafoutis SC / D Stretton (Appellant)
R Higgins SC / D Lewis (Respondent)
Solicitors:
Crown Solicitor’s Office (Appellant)
Ashurst Australia (Respondent)

File Number(s): 2023/199686
Decision under appeal

Court or tribunal:

Supreme Court

Jurisdiction:

Equity Division

Citation:

[2023] NSWSC 557

Date of Decision:

25 May 2023

Before:

Parker J

File Number(s):

2021/226540

HEADNOTE

[This headnote is not to be read as part of the judgment]

By contracts between Integrated Trolley Management Pty Ltd (ITM) on the one hand and Woolworths, ALDI and IGA (the clients) on the other, ITM provided trolley collection services by engaging independent contractors (service providers) to locate, collect, and return supermarket trolleys to the clients’ stores. The Chief Commissioner of State Revenue issued ITM with assessment notices with respect to its liability for payroll tax. On 6 June 2021 ITM commenced proceedings in the Equity Division challenging assessment notices issued for the period 30 June 2016 to 30 June 2019. By a judgment handed down on 25 May 2023, Parker J revoked the assessments. The Chief Commissioner appealed from the orders made by Parker J revoking the assessments.

The issue for the primary judge was whether ITM, by procuring the services of independent contractors for the supermarket operators, was an “employment agent” for the purposes of the Payroll Tax Act 2007 (NSW). The main issues on appeal were whether:

the employment agency contracts were the contracts between ITM and the clients or between ITM and the service providers;
an employment agency contract is to be identified solely by its terms, or also by how it operated;
relevance of “indicia” in characterising services provided by ITM as “in and for the conduct of the business” of the supermarkets; and
the relevance of: (i) trolley collection services being a “discrete, defined task”; (ii) trolley collection being an “established market”; (iii) service providers using their own equipment, and (iv) service providers working for more than one client.

The Court held (Basten AJA, Ward P and Payne JA agreeing with additional reasons), allowing the appeal:

As to issue (i) – parties to employment agency contract

The Chief Commissioner having identified the relevant employment agency contracts as those involving ITM and its supermarket clients, and the parties having approached the case on that basis, the primary judge was wrong to assess the tax liability on a different basis: [5], [6], [27], [33]-[36].

Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259; Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744, applied

Where an employer, liable to pay tax on wages, is the client under an employment agency contract, the legislative purpose of Div 8 Pt 3 of the Payroll Tax Act is to impose liability to pay tax on the employment agent: [28].
Section 39 of the Payroll Tax Act provides that “the person who performs work” is the trolley collector, not the “service provider” (ITM). The “work” is the service supplied to the client under the employment agency contract. The express requirement for services to be supplied “to the client under an employment agency contract” supports the conclusion that it is the contract between ITM and the clients which is the employment agency contract: [29].

As to issue (ii) – categorisation of employment agency contract

The primary judge was correct to characterise the employment agency contracts primarily by reference to their terms: [60]–[62].

As to issue (iii) – relevance of “indicia”

The role played by, or weight given to, matters relied on in other cases as relevant indicia in the analysis of whether services are procured “in and for” the conduct of the business of an employment agent’s client will vary from case to case; such indicia cannot replace the statutory test: [2].
The statutory test requires that subcontractors who carry out work for the client should do so in much the same way as would an employee, meaning that the business would involve work having a degree of regularity and continuity: [86].

UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259 applied

Reliance on “indicia” identified in other cases can result in misconstruing the statute. The correct conclusion is that where the services (trolley collection) of the individual subcontractors were provided through the agent (ITM) to allow the clients (supermarkets) to conduct their businesses in the same or similar way as would occur through an employee, the arrangement is within the intended scope of s 37: [93].
Having regard to distinctive uniforms, signing a visitors’ book and using staff facilities, are examples of “indicia” developed in other cases which cannot be supported by the statutory language or purpose. The “in and for” test focusses on the manner in which the services are provided for the client and not upon extraneous matters such as whether the trolley collectors signed a visitors’ books, used Woolworths’ staff facilities, or interacted with staff and customers: [14 (3, 4, 5)]; [99]-[101].

As to issue (iv) – specific considerations

Different ways in which the concept of “in and for” the client’s business have been expressed risk creating semantic distinctions that may put an impermissible gloss on the statutory language: [3]. The employment agency provisions have the purpose of imposing tax liability for payroll tax with respect to workers who are not employees. Customer perceptions about the characterisation of the workers do not determine whether they work “in and for” the client’s business: [14(2)]; [98].

Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058, applied.

There is nothing in the language adopted in UNSW Global that explains why s 37(1) does not apply to services which have a “defined nature” or involve “discrete and defined tasks”, or for which there is an “established market”: [72].

JUDGMENT

WARD P: I have had the considerable advantage of reading in draft the judgment of Basten AJA and the concurring judgment of Payne JA. I agree that the appeal should be allowed and the orders that Basten AJA proposes should be made. I also broadly agree with his Honour’s reasons. I simply add the following observations.
I accept that the role played by, or weight given to, matters relied on in other cases as relevant indicia in the analysis of whether services are procured “in and for” the conduct of the business of an employment agent’s client will vary from case to case; and that such indicia cannot replace the statutory test. However, it should also be noted that what one is commonly presented with, in cases of this kind at first instance, by both plaintiff and defendant, is a veritable shopping list of factors said to be relevant one way or the other to the determination of the ultimate question. It is in that sense that the analysis is one that has been said to be a multifactorial analysis.
I also accept that the different ways in which the concept of “in and for” the client’s business have been expressed have the risk of creating semantic distinctions that may put an impermissible gloss on the statutory language, although again I consider that this is in part a function of responses to or consideration of submissions put by the parties in particular cases. Insofar as criticism has been made in the present case of the concept of workers being “integrated” into the client’s business, I should make clear (if that was not already clear in my earlier decisions to which reference has been made) that this was used in the sense of the question whether the workers were an addition to the work force of the employment agent’s client (i.e., whether they were performing services in and for the conduct of the client’s business) and was not intended as a substitution for or gloss on the statutory test.
Insofar as the primary judge referred to there being some tension between the decision of Kunc J in JP Property Services and my later decision in Bayton (the citations of which are footnoted in Basten AJA’s judgment) (see [188] of the primary judgment in the present case), for the removal of any lingering doubt I should make clear that I did not and do not agree with the conclusion reached in JP Property Services that the fact that the cleaning services were provided after hours meant that the services were not in and for the conduct of the client’s business; nor is the characterisation of the services as “incidental to” the client’s business the relevant test. As Basten AJA correctly notes, I rejected this in Bayton.
As to the present case, I have nothing to add to the reasons of Basten AJA, with which I agree, on the issue as to the proper identification of the employment agency contract. I have had some hesitation as to the question whether the services provided to the employment agent’s client in the present case were “in and for” the conduct of the client’s business, principally because of the evidence that the trolley collection services were provided at some locations for more than one client. However, I accept that there was limited evidence as to that issue. Balancing the factors to which Payne JA has referred in his concurring judgment, I have ultimately concluded that the trolley collection services supplied in the present case were “in and for” the conduct of Woolworth’s business. Hence my agreement with the orders proposed by Basten AJA.
PAYNE JA: I agree with the orders proposed by Basten AJA and with his Honour’s reasons. The following additional reasons are not intended to qualify that agreement. I adopt the same abbreviations used by Basten AJA.
Part 3, Div 8 of the Payroll Tax Act 2007 (NSW) applies to the activities of entities that procure persons to provide labour “in and for the conduct of the business of the employment agent’s client”: UNSW Global Pty Ltd v Chief Commissioner of State Revenue (NSW) [2016] NSWSC 1852; (2016) 104 ATR 577 at [62]. As Basten AJA explains, that language requires the identification of (i) the work to be done by persons who provide the services to a client and (ii) the nature and structure of the client’s business. It is the relationship between the two which determines the application of s 37(1) of the Payroll Tax Act in a particular case.
The relationship between the two matters, correctly identified, no doubt requires an exercise of characterisation. That exercise of characterisation may be described as a “fact-sensitive analysis”. As Basten AJA explains, however, facts found and taken into account for the purpose of one case will have little, if any, precedential value.
In the present case, the implicit assumption underlying much of the respondent’s case was that it was sufficient to discharge their burden of proof to show that the relevant entities also procured persons to provide labour in and for the ordinary conduct of another business. I disagree with that premise and adhere to what I said in Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744, to the effect that White J’s test in UNSW Global should not be overread. By this I meant that the “in and for” test should not be understood as effecting a reading down of s 37 of the Payroll Tax Act beyond what was necessary to decide in UNSW Global. In particular, simply pointing to the fact that the relevant contractors are also providing services in and for another business is not sufficient for the taxpayer to prove that the relevant contractors were not working in and for the business which the Commissioner relied upon for the purposes of s 37 of the Payroll Tax Act. To succeed, a taxpayer must prove that the relevant workers are not working “in and for” the business which the Commissioner relies upon for the purposes of s 37 of the Payroll Tax Act.
The burden of proof also looms large in the present case. What must be proved is that ITM did not procure persons to provide labour “in and for” the conduct of the business of Woolworths, the business which the Commissioner relied upon for the purposes of s 37 of the Payroll Tax Act.
At the relevant level of generality, the Woolworths’ business may be described as the sale by retail of goods to consumers. The business presently relevant is Woolworths’ physical retail stores, rather than its online business. A key part of the retail offering at Woolworths’ retail stores is the provision of trolleys, owned by Woolworths. Those shopping trolleys are made available to retail consumers to collect goods as they shop at the Woolworths’ store. Customers of Woolworths are permitted to use the Woolworths owned trolleys to take goods, once purchased from Woolworths to their cars in adjacent car parks. ITM, in its contracts with Woolworths, agrees to provide workers to provide trolley collection services on a continuous basis during Woolworths’ trading hours from the shopping centre where the 'store is located, including adjacent car parks and loading docks.
It is critical to Woolworths’ business that there is a continuous and plentiful supply of available trolleys for customers to use at each of its retail stores. Under the contract between ITM and Woolworths, ITM procures workers for Woolworths to perform trolley collection services on a continuous basis during Woolworths’ trading hours from the shopping centre where the Woolworths’ store is located. Woolworths, via the ITM contract, exercises a reasonably close control over the activities of the trolley collection workers provided under the ITM contracts. For example, Woolworths mandates that each trolley collection worker is given the Woolworths’ Safety, Health and Environment Trolley Contractors Handbook and complies with its requirements. The Handbook contains prescriptive directions by Woolworths to the workers procured by ITM about how trolley collection services are to be performed.
On all of the evidence I am not satisfied that ITM proved that it did not procure persons to provide labour “in and for the conduct of the business of the employment agent’s client”, Woolworths. To the contrary, the correct conclusion is that the ITM contract with Woolworths was one under which ITM procured trolley collection workers to provide labour in and for the conduct of the business of Woolworths.
The matters relied upon by the taxpayer in this case to discharge its onus of proof were unpersuasive. Those factors were:

Location at which services were provided – The evidence about the location of the trolley collection work is a factor in favour of the Commissioner. The key point is that the critical trolley collection services provided by workers procured under the ITM contract are performed by reference to Woolworths’ trolley storage bays at the relevant Woolworths’ retail store. The key duties of trolley collectors are to locate and return Woolworths’ trolleys to bays at the Woolworths’ retail store, thus providing a continuous supply of Woolworths owned trolleys for use by retail customers at those Woolworths’ stores. The fact that the performance of those trolley collection services necessarily involves travelling between the store and the places in car parks and loading docks where trolleys are left by customers does not affect the conclusion that the trolley collection workers are performing duties in and for Woolworths’ business. The evidence, incorrectly described as irrelevant by the primary judge, of trolley collection services performed by Woolworths’ closest competitor, Coles, underlies this point. It cannot seriously be suggested that staff employed by Coles to do essentially the same task of trolley collection as the workers procured by ITM for Woolworths are not working in and for Coles’ business. The same conclusion applies to Woolworths’ trolley collection staff.

Uniforms – I am not satisfied that the evidence that trolley collection workers at Woolworths wear ITM branded uniforms (or in some cases a sticker saying “visitor”) when performing their trolley collection services bears on the question of whether the trolley collection workers are working “in and for” Woolworths’ business. Of course, the trolley collection workers are employed by sub-contractors to ITM. If the trolley collection workers were not separately employed there would be no occasion to consider the operation of s 37 of the Payroll Tax Act. As Basten AJA points out, customer perceptions about the identity of an employer, about which there was in any event little if any evidence, are unlikely to cast light on the statutory question here. Certainly, those assumed customer perceptions cannot be determinative.

Visitor books – This is a factor, but a weak factor, in favour of ITM’s case. I am not, however, satisfied that the evidence that trolley collection workers at Woolworths sign a “visitor” book at the start of a shift provides a real answer to the statutory question. No doubt Woolworths needs to maintain a record of attendance of its trolley collectors. Keeping that record of attendance does not mean that trolley collection workers are not working in and for Woolworths’ business.

Use of staff facilities – There was scant evidence about Woolworths’ “general staff facilities” and the use made by staff employed by Woolworths of those facilities. I am prepared to assume, in favour of ITM, that “general staff facilities” existed at all Woolworths’ stores and that, generally, trolley collection workers did not use those facilities. This conclusion, however, tells little, if anything, about whether those workers were providing services in and for Woolworths’ business. The “in and for” test focusses on the manner in which the services are provided for the client. I adhere to what I said in BanfirnPty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058 at [25(5)]:

“25 The relevant propositions which emerge from the text of the statute in its context, that context including legislative history and extrinsic materials, have earlier been identified in other decisions of this Court:
…
(5) I agree with Ward CJ in Eq that the question of whether a service provider is working ‘in and for’ the conduct of the client’s business can involve a fact-sensitive analysis with a focus on the manner in which the services are provided for the client.”

Levels of interaction with Woolworths’ staff and customers – This is, at best for the taxpayer, a neutral factor. There was little if any evidence about interaction between trolley collection workers with Woolworths’ staff and customers. An appropriate level of interaction between trolley collectors and Woolworths’ staff and customers was not identified in the evidence. In any event, as I have said, the “in and for” test focusses on the manner in which the services are provided for the client, not upon extraneous interactions with other staff and customers.

Direction and instruction and contractual arrangements – I am not satisfied that the taxpayer proved that trolley collection staff did not take instruction or supervision from Woolworths’ staff or that there was any lack of any contractual provision that would have entitled Woolworths to direct the trolley collectors. As I have said, Woolworths mandated that each trolley collection worker be given the Woolworths’ Safety, Health and Environment Trolley Contractors Handbook and comply with its requirements. The evidence, properly understood, supported a finding that trolley collection workers regularly took instruction from Woolworths’ staff. The primary judge’s finding that “the power to give a direction [to a trolley collection worker] would have been limited to directions having some relevant connection with the discharge of ITM’s function under the contract” tends strongly in favour of the conclusion that the trolley collection workers were providing services “in and for” Woolworths’ business. The ability to give directions in accordance with the contract was extensive and is set out by Basten AJA at [56]. The degree of control reflected in these contractual provisions tends in favour of a finding that the trolley collection services supplied were in and for Woolworths’ business.

Complaints and requests – I have dealt with this factor already in addressing the prescriptive Safety, Health and Environment Trolley Contractors Handbook and the extensive contractual provisions providing a sufficient measure of control for the trolley collectors’ services properly to be characterised as provided “in and for” Woolworths’ business.

Site visits, compliance audits and training by ITM – It may be accepted that ITM provided site visits, compliance audits and training to assist trolley collectors to perform trolley collection services for Woolworths. This does not assist in proving that the services were not provided in and for Woolworths’ business.

Working for multiple stores simultaneously – Despite the prominence of this factor in submissions, there was very limited evidence of trolley collectors acting for more than one supermarket and no evidence about precisely what they did. That evidence was simply the recollection of Mr Vickery “that, at any given time, approximately half a dozen subcontractors in New South Wales performed such other work”. This evidence is unpersuasive. Without further evidence, I am not satisfied that this is a factor tending to show that trolley collection services were not provided in and for Woolworths’ business.

Use of subcontractors’ equipment – As Basten AJA points out, it was not ITM but rather the subcontractors who provided some equipment to trolley collectors. There was, however, a lack of any detailed evidence about the quantity and use of any equipment provided. This factor does not persuade me that the trolley collection workers were not providing services in and for the business of Woolworths.

For these additional reasons, on the whole of the evidence, I am not satisfied that ITM did not procure workers to provide labour in and for Woolworths’ business. The same conclusion applies to the relevant ALDI and IGA contracts.
I agree with Basten AJA about the cleaning contracts here in issue and, in particular, I agree that the suggested extended operation of the UNSW Global test proposed in JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391 should not be followed.
BASTEN AJA: The present appeal, brought by the Chief Commissioner of State Revenue, challenges orders made by Parker J in the Equity Division on 25 May 2023 revoking assessment notices issued from 30 June 2016 to 30 June 2019 by the Chief Commissioner to the respondent, Integrated Trolley Management Pty Ltd (ITM), with respect to liability for payroll tax.^[1]
1. Integrated Trolley Management Pty Ltd v Chief Commissioner of State Revenue [2023] NSWSC 557 (25 May 2023) (“ITM”).
ITM had contracted with supermarket operators to procure services involving collection and return of shopping trolleys to the stores. Those services were supplied by a number of independent contractors. The issue on the appeal was whether in procuring such services for the supermarket operators, ITM was an “employment agent” for the purposes of Pt 3, Div 8 of the Payroll Tax Act 2007 (NSW). The primary judge rejected the Chief Commissioner’s finding that ITM was an employment agent for that purpose.
The primary judge identified the issue in dispute in the following terms:

“117 The case was argued on the basis that the sole issue in dispute was whether the ‘in and for’ aspect of s 37(1), in the sense outlined by White J in UNSW Global,^[2] was satisfied.”
2. UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577.

To state the issue in those terms was, with great respect, fraught with risk: it invited a focus on a gloss with respect to a statutory provision which was appropriately adopted in particular circumstances, rather than addressing the operation of the statutory provision in the circumstances of the present case. Senior counsel for the respondent acknowledged:^[3]

“The correct analysis involves an orthodox consideration [of] the statutory language and the various indicia explained in the authorities that have applied s 37 in the manner identified in UNSW Global as approved by this Court in the first E Group appeal. Those indicia are not themselves the test. They are analytical tools that assist the Court in answering the question posed by s 37 in what is quintessentially a fact-sensitive analysis. Nor is any part of the constructional exercise one of construing UNSW Global.”

It will be necessary to return in due course to the concept of “indicia” and the nature of the analysis required in particular circumstances.

3. CA Tcpt, 24/10/23, p 26(20).

In fact, the judge’s statement of the issue did not fairly reflect the degree of complexity in the reasoning, but may, at least in part, explain why, for the reasons set out below, the result reached was wrong and the appeal should be allowed.

Relevant legal principles

Contractual arrangements

In order to identify the relevant principles, it is necessary to provide a brief conspectus of the contractual arrangements which led to the assessments of payroll tax. These were succinctly identified by the primary judge in the following terms:

“3   The assessments in question relate to contracts which ITM has with three supermarket operators: Woolworths, ALDI and IGA. At the relevant time, the Woolworths contract covered ‘Big W’ and ‘Dan Murphy’s’ stores, and one ‘Thomas Dux’ store, as well as Woolworths supermarket stores. For convenience I will refer to all of these collectively as ‘Woolworths’ stores.
4   Under these contracts, ITM undertakes to the supermarket operators to perform specified ‘trolley collection services’ for them at specified stores. Each supermarket operator owns its own trolleys. The trolleys are made available to customers at bays outside the entrance to the store in question. The services provided by ITM essentially involve returning trolleys taken by customers to the store bays so as to keep those bays replenished at all times. Trolleys are generally collected from where they have been left within the shopping centre or the car park. From time to time, searches may be made of the neighbouring area to collect trolleys which may have been left there (such searches were referred to in the evidence as ‘street runs’).
5   ITM does not itself employ the people who perform the trolley collection services. It engages subcontractors to perform those services. ITM’s subcontractors are a mixture of sole traders, partnerships, and small proprietary companies. Some of these operate as trustees for family trusts. The individuals who perform the actual trolley collection work may thus be sole traders, partners, employees or (in the case of the small proprietary companies) shareholders, directors, or other agents of the company.”

Statutory scheme

The Payroll Tax Act imposes payroll tax on all “taxable wages”: s 6. The term “taxable wages” covers the wages paid (and other benefits provided) by an employer to an employee “for or in relation to services performed by an employee wholly in this jurisdiction”: s 11(1)(a). Liability to pay payroll tax on those wages is imposed on “[t]he employer by whom taxable wages are paid”: s 7.
Importantly for present purposes, the term “employer” is given an expanded operation by Pt 3, Div 8. Section 38 states that “the employment agent under an employment agency contract is taken to be an employer”. Critical to the operation of that provision are the terms “employment agent” and “employment agency contract”, which are defined:

37   Definitions
(1)   For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent.
(2)   However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client.
(3)   In this section—
contract includes agreement, arrangement and undertaking.

By way of identifying the relevant “employees” and “wages”, Pt 3, Div 8 further provides:

39 Persons taken to be employees
For the purposes of this Act, the person who performs work for or in relation to which services are supplied to the client under an employment agency contract is taken to be an employee of the employment agent.

40   Amounts taken to be wages
(1)   For the purposes of this Act, the following are taken to be wages paid or payable by the employment agent under an employment agency contract—
(a)   any amount paid or payable to or in relation to the service provider in respect of the provision of services in connection with the employment agency contract,
….

Section 37 is expressed in terms which may be engaged by any one or more of a possible network of contractual arrangements. As a result, it is possible that in any particular case there may be more than one party which may qualify as an employment agent. Against that possibility, s 41 prevents the imposition of double liability:

41 Liability provisions
Subject to section 42, if an employment agent under an employment agency contract—
(a) by arrangement procures the services of a service provider for a client of the employment agent, and
(b) pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract,
no other person (including any other person engaged to procure the services of the service provider for the employment agent’s client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client.

Identifying the employment agency contract

Thus, there is a question as to whether the “employment agency contract” in the present case was the contract between ITM and a “client” (for example Woolworths), or between ITM and each of the service providers whose services it procured “for” the provision of services for its client. The Chief Commissioner identified the relevant employment agency contracts as those involving ITM and its supermarket clients. There are three considerations which support that conclusion.
First, the purpose of the Division is to impose a tax liability on payment to persons who perform work for the client of the employment agent. The Division is not engaged where the service provider (or, it would seem, its employees) enters an employment contract with the client. Thus, the legislative purpose is to impose payroll tax in circumstances where the party which might have been the employer (and thus liable for tax on the wages paid to its employees) is the client, so that that liability is not removed by the interposition of an employment agency, but is merely transferred to the employment agent. It is the absence of such a contract of employment with the client which engages the Division. It is the client which will make payment for those services, not to persons with whom it has no contract, but to its employment agent. If there is a constructional choice, a purposive approach, mandated by s 33 of the Interpretation Act 1987 (NSW), indicates that the employment agency contract is the contract between the “client” and its “employment agent”. The alternative approach, which would potentially result in a plethora of employment agency contracts, as between ITM and each of the service providers with which it contracted, is inconsistent with the statutory purpose.
Secondly, that is the apparent intention of s 39, giving the statutory terms their ordinary meaning. Although the syntax is awkward, a deemed employee is “the person who performs work”, not the “service provider”. The work is, in effect, the services that are supplied to the client “under an employment agency contract”. Neither the service provider (which may be the party contracting with ITM) nor its staff (however retained) has a contract with “the client”, being the client of ITM. Further, in the circumstances identified by the primary judge at [5], ITM did not have a contract with those “persons”. Although the connecting phrase (“for or in relation to which”) might allow a range of relationships as between the person undertaking the work and the services provided, that reflects the absence of a contract between that person and the client. On the other hand, the express requirement for services being supplied “to the client under an employment agency contract” supports the conclusion that it is the contract between the employment agent and the client which is the employment agency contract.
Thirdly, s 40(1)(a) supports that conclusion. It identifies the deemed wages as the amounts paid or payable “to or in relation to” the service provider “in respect of” the provision of services “in connection with” the employment agency contract. If the contract between the agent and the service provider were the employment agency contract, that deeming provision would refer to amounts paid to the service provider under an employment agency contract.

Ground 1(a): identifying employment agency contracts

Ground 1(a) asserted that the primary judge erred in holding that an employment agency contract “can only exist between the employment agent and the service provider”. Rather, the ground continued, the judge should have held that an employment agency contract “can also exist between the client and the employment agent”. This ground was misstated: the judge did not purport to make a generic proposition, but referred expressly to the circumstances of the assessments before him. In that he was correct. The issue on the appeal was whether he was correct to identify the contracts between ITM and its subcontractors as the relevant employment agency contracts, of which there were “dozens”: at [144].
For the reasons set out above, the better view is that the employment agency contract was, in relation to each assessment in issue, the contract between ITM and its client, namely each of the respective supermarket operators. The primary judge expressly rejected that conclusion in the following passage:

“141 One way of looking at the case assumes that the employment agency contract is the contract between ITM and Woolworths. Seen in this way, the question is primarily a question of characterisation of that contract. If it is an ‘employment agency contract’ then all of the payments under the subcontracts are caught; if it is not, none of them are. That is, I think, the way it was analysed in the Commissioner’s covering letter which accompanied the assessments. Counsel for the Commissioner took the same approach at the hearing.
142 I do not accept this analysis. In E Group (No 2),^[4] Brereton JA said at [7] (emphases in original):
In my opinion, [the question posed in the case: see [100]-[101] above] directs attention not to the arrangements made between the agent and the client, but those between the agent and the service provider, who is in effect deemed to be an employee of the agent for payroll tax purposes. This construction is supported by the specific identification of agent and provider in s 37; the requirement that the contract be one under which the agent procures the services of a service provider; and the reference in s 40 to wages paid or payable by the employment agent to the service provider. An employee agency contract is a contract under which the agent procures the services of a service provider for a client. The client is the person for whom the employment agent procures the services of a service provider – that is, the person who receives the services. In the context of this case, the relevant payments are those made in relation to the guards (service providers) in respect of the provision of their services to E Group Security (client). ... The focus is not the arrangements between the employment agent and the client, but those between the employment agent and the service providers. …”
4. Chief Commissioner of State Revenue v HRC Security Pty Ltd (No 2) [2022] NSWCA 259; 115 ATR 448 (E Group (No 2)).

There were four problems with this approach. First, as senior counsel for the respondent readily accepted, both parties approached the case before the primary judge on the basis that the employment agency contracts were the contracts between ITM and each of the supermarket operators. It was not appropriate for the primary judge to assess a tax liability on a different basis. That was not only a matter of procedural fairness, but followed from the fact that ITM bore the legal burden of proving that the Chief Commissioner was wrong. The judge could not have been so satisfied on a basis not pursued by ITM.
Secondly, although in E Group (No 2) Brereton JA considered that the “focus is not the arrangements between the employment agent and the client but those between the employment agent and the service providers”, that was not the approach adopted by the majority, Griffiths AJA and Simpson AJA.^[5] The reasoning accepted by the primary judge was therefore a minority view; although Brereton JA described it as a “slightly different approach” from that of the majority,^[6] it was in fact fundamentally different in principle, requiring an analysis of different contractual arrangements.
5. E Group (No 2) at [7] (Brereton JA); [68]ff and [96] (majority).
6. E Group (No 2) at [3].
Thirdly, the reasoning was inconsistent with other authorities, including Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue,^[7] decided in 2019. The point is one of some importance because, as s 41 of the Payroll Tax Act recognises, and as explained in Securecorp, it is possible to identify a tax liability in more than one party in a network of contractual obligations.^[8] The Act deals with the problem of potential double recovery by providing that where an employment agent pays payroll tax under s 40, no other person is liable for payroll tax in respect of the same wages. The point may be illustrated by reference to the circumstances of Securecorp, where ownership of shopping malls was vested in a number of “responsible entities” in the Westfield Group. A further company in the group was appointed under a management contract by the responsible entity with respect to a particular shopping centre, to provide cleaning and security services. The manager in turn contracted with Securecorp for the provision of those services pursuant to what was treated in that case as the employment agency contract. Securecorp in turn contracted with service providers, who could be corporations with employees or could be the employees themselves. Securecorp had submitted that, while it supplied services to the management company, the services were ultimately for the benefit of the owner of the shopping mall. It submitted that the reference in UNSW Global to the provision of services in and for the conduct of a business required the identification of the ultimate business which obtained the benefit of those services, described as the “end user”. However, as Payne J explained, the word “client”, used in s 37 of the Act, should not be read down as applicable only to an end user. The employment agency contract required Securecorp to provide security services to the management company, so that Securecorp failed to prove that the persons providing the security services were not working in the management company’s business.^[9] Reliance was placed upon the operation of s 41 to demonstrate that this construction did not give rise to the possibility of double taxation.^[10]
7. [2019] NSWSC 744.
8. Securecorp at [96].
9. Securecorp at [89]-[92].
10. Securecorp at [93].

Fourthly, for the reasons set out above in construing the legislation, the better view is that the employment agency contracts were indeed the contracts between ITM and each of the supermarket operators.
Although accepting that the primary judge erred in approaching the matter on the wrong basis, the respondent nevertheless asserted that this error had not led to a miscarriage of justice, as the arrangements between ITM and the service providers remained relevant to the characterisation of the contract between ITM and its clients, to which the primary judge gave significant, though not exclusive, consideration.
Whilst the existence of error should be accepted, the submission that it did not result in a miscarriage should not. The reason for the latter conclusion requires consideration of a distinction drawn by senior counsel for the respondent between the differing approaches of the parties to the application of s 37 of the Payroll Tax Act. The submission was lucidly explained in the course of the hearing and may helpfully be recounted:^[11]

“The Chief Commissioner in essence contends that this case, so far as it concerns trolley collection, is to be resolved in his favour because of three steps of reasoning. First, supermarkets supply and maintain a pool of trolleys for use by their customers. Second, trolley collection is part of the process by which supermarkets do so. Third, it follows that trolley collectors [are] procured to work in and for the supermarkets’ business. …
That analysis would see the application of s 37 turn on a consideration of the function that the service provider performs and what role that function plays within the client’s business. That is whether the function plays a central or important role within the client’s business or whether it is part of the ordinary conduct of that business.
Section 37 does not call for an analysis of the centrality, importance or ordinary nature of the function performed by the service provider. It does not focus on whether a task is integral to the putative client’s business. Yet the Commissioner attempts … to contend that the s 37 test turns on or is affected by whether the function performed by the service provider is part of the ordinary conduct of the client’s business.”
11. CA Tcpt, 24/10/23, pp 25(40)-26(10).

Counsel for the respondent then identified the alternative approach in the terms set out at [20] above. The qualification foreshadowed in relation to that preferred exercise relates to the use of “indicia” in the course of what is said to be a “fact-sensitive analysis”.

Use of indicia

Counsel was correct to note that “indicia are not themselves the test”’; the question remains, however, what role such “indicia” are to play in the application of the statutory test to particular relationships. To describe a case as requiring a “fact-sensitive analysis” is, in substance, to say that other cases, involving different circumstances, will have little if any precedential value. The fact that a particular indicium was relied upon by a judge in one case, does not of itself indicate whether that indicium was a necessary or sufficient factor, or merely one to which the judge had regard. Further, the fact that it proved relevant in that case does not demonstrate that it will be relevant, or necessary, in another case involving different circumstances.
The point may be illustrated by reference to HRC Hotel Services Pty Limited v Chief Commissioner of State Revenue,^[12] a decision of Ward CJ in Eq relied on by the primary judge. That case involved the provision of housekeeping staff by HRC Hotel Services to hotel clients. One of the submissions for the taxpayer was that the workers provided by subcontracting entities did not work in and for the hotel businesses, but only in and for the conduct of HRC’s business. The Chief Judge addressed the issue as follows:

“153 In my opinion the evidence also compels the conclusion that the services were procured ‘for’ the hotel clients’ businesses in the sense of ‘in and for the conduct of those businesses’. True it is that payment under the hotel client contracts was structured by reference to room ‘credits’. However, in a practical sense the housekeeping staff did form an addition to the hotel’s workforce – they not only wore the hotel branded uniform, but they also liaised with guests and other hotel staff in the services provided by way of the servicing and cleaning of hotel rooms and they were entitled to make use of the hotel staff dining rooms during lunch breaks and the like. On the evidence given by Ms Kelly in cross-examination, it is difficult to see how it would be apparent to the ordinary hotel guest that there was any distinction between, say, a hotel employee responsible for the stocking of items in the hotel room, or answering calls placed to the hotel’s housekeeping telephone number, and a member of the additional staff sourced from Platinum/SWCA performing services in the cleaning of the guest rooms on the hotel premises.”
12. [2018] NSWSC 820; 108 ATR 84.

It may be noted that a number of indicia were identified by reference to the operation undertaken at the hotel. In particular, the workers wore hotel branded uniforms and liaised with guests and other hotel staff, and used hotel staff facilities during breaks. Accepting that each of those factors was a material consideration in reaching the conclusion that the workers were procured for the business of the hotel client, in the final sentence of the paragraph, the judge considered whether any distinction between a hotel employee and a member of the additional staff “would be apparent to the ordinary hotel guest”. While customer perceptions were treated as a relevant indicium in that case, that did not demonstrate a departure from the otherwise appropriate approach of assessing the functions performed by the additional staff in accordance with the contractual arrangements and an objective understanding of their duties. As the primary judge observed in the present context, “I am not sure why the perception of a third party is relevant at all for the purposes of characterising the contract in question.”^[13]
13. ITM at [158].
Furthermore, it may be noted that in each new case there is a tendency for the trial judge to address the statutory test in slightly different language, including by asking, as in the passage set out above, whether the procured staff formed “an addition to”^[14] the client’s workforce, whether their functions were “integral to” the client’s business, whether their functions constituted a “core”,^[15] or “ancillary” function to the client’s business and whether they were “integrated into”^[16] the client’s business. There is no error revealed by the use of different terms which do not replace the statutory language and can usually be understood as a description of what actually occurred in the particular circumstances of the case. Often, the words appear in the summary of submissions. As Ward CJ in Eq stated in Bayton:

“266 I accept that what is required is a fact sensitive analysis and that there may be nuances in the application of the test, as the plaintiffs submit. However, as I indicated earlier, I see no basis for reading into the legislation the requirement that the services provided be integral to the client’s business or “core” services as opposed to “ancillary” or “incidental” services. I cannot see that the provision of cleaning services after the normal hours of business of a commercial client, for example, is any less the provision of a service “in and for the conduct” of the client’s business than the provision of cleaning services during business hours.”
14. HRC Hotel Services at [153]; Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657; 109 ATR 879 at [272], [276]; ITM at [93]-[94], [97]-[98].
15. Bayton at [275]; ITM at [155].
16. HRC Hotel Services at [120], [139]; ITM at [107]-[116], [118].

The focus on earlier judgments gives rise to semantic distinctions of a kind rejected by senior counsel for the respondent in the passages set out at [38] above, as not founded upon the statute. That critique should be accepted, both as a matter of principle, and in its application to the present legislation. As to its application, there is no necessary constraint in s 37(1), on the construction adopted in E Group Security, which requires that there be an existing workforce supplemented through an employment agency contract, nor that employment agency contracts are only covered by the statute where the work to be undertaken is part of a core function of the business.
The point of principle has been articulated on many occasions. As senior counsel for the respondent noted, Lord Reid stated in Broome v Cassell & Co Ltd,^[17]

“that it is not the function of noble and learned Lords or indeed of any judges to frame definitions or to lay down hard and fast rules. It is their function to enunciate principles and much that they say is intended to be illustrative or explanatory and not to be definitive.”
17. [1972] AC 1027 at 1085, cited with approval by McHugh J in Scott v Davis (2000) 204 CLR 333; [2000] HCA 52 at [108].

That statement was not made specifically in relation to statutory construction, but in explaining how the rules of precedent apply in cases of statutory interpretation, Herzfeld and Prince^[18] note Lord Upjohn’s observation in Ogden Industries Pty Ltd v Lucas^[19] that “judicial statements as to the construction and intention of an Act must never be allowed to supplant or supersede its proper construction and courts must beware of falling into the error of treating the law to be that laid down by the judge in construing the Act rather than found in the words of the Act itself”. The authors also refer to the judgment of Windeyer J in Damjanovic & Sons Pty Ltd v Commonwealth^[20] warning of the “old and besetting temptation for lawyers” to prefer the gloss to the text. Windeyer J continued:

“There is often not only a preference for new words instead of the old, but also a mistaken use of analogy. The text becomes submerged in the illustrations.”
18. P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters) at [33.120].
19. [1970] AC 113 at 127.
20. (1968) 117 CLR 390 at 408-409; [1968] HCA 42.

Referring to the process of the common law as explained by Sir Owen Dixon, extra-judicially, Windeyer J continued:

“The process is then one of deduction and subsumption, rather than of imperfect induction. The words of the enactment provide the major premise. The result is not, or ought not to be, the establishment of any secondary principle embodied in new words, but at most the provision of an illustration of the effect in a new setting of the original principle expressed in the original words.”

If these principles govern statements by the highest courts in the land, they should emphatically be adhered to by lower courts in dealing with statements at a similar level in the judicial hierarchy.
As explained in E Group Security, having close regard to the purpose of the legislation, “the preposition ‘for’ is protean and is capable of bearing a very wide range of meanings depending upon context”.^[21] That word, as articulated in UNSW Global, applies to the activities of entities that procure persons to provide labour “in, and for the purpose of, the ordinary conduct of the clients’ businesses”,^[22] the test being identified by this Court in E Group Security at [42] and approved at [46]. That language requires the identification of (i) the work to be done by persons who provide the services to a client and (ii) the nature and ordinary conduct of the client’s business. It is the relationship between the two which determines the application of s 37(1) in a particular case.
21. E Group Security at [46].
22. UNSW Global at [26].
Referring to HRC Hotel Services, senior counsel for the respondent submitted that, while it “could hardly be doubted that the function of housekeeping is essential for a hotel, nor that it is part of the ordinary conduct of the hotel’s business”, the reasoning of the Chief Judge did not turn on those matters. Rather, the submission continued, it turned on what was described as “a multifactorial and multi-perspectival analysis”.^[23] Further, it was said that the analysis focused on “the manner of performance as against one which focuses on that which is performed”.^[24]
23. CA Tcpt, p 27(30), (40).
24. CA Tcpt, p 29(7).
To the extent that the distinction was sought to justify an analysis which turned on no fewer than twelve indicia, the distinction is unhelpful. It may be understood as an example of “over-reading” any necessary gloss on the statutory language.^[25]
25. See Securecorp at [89] (Payne J); E Group Security at [15].
A second illustration may be found in JP Property Services Pty Ltd v Chief Commissioner of State Revenue,^[26] a case to which it will be necessary to return as it formed a fundamental building block in the reasoning of the primary judge. Having noted that in applying the reasoning in UNSW Global the exercise was still based upon the words “for a client” in s 37, and that White J’s exposition of the proper interpretation of the words “is exactly that and is not to be treated as statutory formulation which replaces the words of s 37 itself”,^[27] Kunc J nevertheless continued:

“72 Applying UNSW Global, I conclude that a contract which otherwise meets the description in s 37(1) will be an EAC [employment agency contract] for the purposes of that section if the services are procured ‘for a client of the employment agent’ in the sense that they are procured in and for the conduct of the business of the employment agent’s client. That will be determined by asking whether or not the individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client’s business. Adopting White J’s language: are the individual’s services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee, or are they services which, although provided for the client’s benefit, are not provided by the service provider working in the client’s business?”
26. [2017] NSWSC 1391; 106 ATR 639.
27. JP Property Services at [71].

Whilst denying that this language constituted an inappropriate exegesis, Kunc J held that satisfying the test that the services are provided “in the ordinary conduct of the client’s business” would go beyond the legal meaning of “for a client” and eradicate the distinction drawn by White J.^[28] Given that the phrase was in fact used by White J and approved in E Group Security,^[29] its rejection cannot stand. Kunc J then concluded that the services provided by JP Property Services and its subcontractors, being “out of hours cleaning services” did not satisfy the test in s 37 for that “fundamental factual reason” and the services were properly characterised as “incidental to” the client’s business and not “in or for the conduct of” the client’s business.^[30]
28. JP Property Services at [74].
29. See [49] above
30. JP Property Services at [76] and [79].
In Securecorp, Payne J disagreed both with the description and the application of the test. Asking if the services were “incidental to” the client’s business, imposed an “impermissible gloss on the statute”.^[31] To apply that test by rejecting the operation of the Act on the basis that services provided outside ordinary business hours could not qualify as services provided “in and for the business of the client” should not be accepted. It was rejected in terms by Ward CJ in Eq in Bayton.^[32] While the terms of the employment agency contract must, in each case, be addressed, the characterisation of cleaning and security services as otherwise than services provided in and for the conduct of the client’s business is suggestive of error. It will be necessary to return to this case in addressing the judgment in the present matter.
31. Securecorp at [97].
32. See at [43] above.

Characterising the contract between ITM and the supermarket operators

The contractual materials were set out by the primary judge extensively at [34]-[73], over some 26 pages. It is sufficient for present purposes to identify key provisions: the parties’ submissions in this Court addressed this material only briefly.
ITM had two trolley collection contracts with Woolworths, but it was not in dispute that they were in materially identical terms. The contracts imposed extensive requirements formulated by Woolworths with which service providers who were subcontractors of ITM were required to comply. The respondent did not submit that any different analysis should be applied to the contracts between ITM and ALDI and ITM and IGA. Each related to trolley collection services. ITM also had a separate cleaning contract with ALDI relating to two stores, one in Gunnedah and one in Tamworth. The particular aspects of the cleaning contract which were relied upon by the primary judge will be identified below. The reasoning of the primary judge, putting to one side parts that focused on ITM’s contracts with its subcontractors, otherwise turned solely upon the characterisation of one Woolworth’s contract, key provisions of which were as follows:

Trolley Collection Services Agreement
General terms
…
1   Introduction
1.1   Appointment
The Supplier [ITM] agrees to provide the Services to Woolworths on the terms and conditions of this agreement and the Relevant Law.
1.2   Non-exclusivity
There is no obligation on Woolworths to obtain the Services exclusively from the Supplier.
…
3   Services
3.1    Supply of Services
Subject to clauses 3.2 and 3.3, the Supplier agrees to provide the Services at each Site during the hours specified in Schedule 3, or such other hours as nominated by Woolworths from time to time.
[“Services” were defined in clause 31.1 to mean “the trolley collection services specified in Schedule 1.”]
…
5   Sub-contracting
[5.1 required Woolworths’ consent to each subcontractor.]
…
5.3   Supplier’s obligations
Before engaging or entering into an agreement with a subcontractor, in addition to obtaining Woolworths’ written consent under clause 5.1 (Consent), the Supplier agrees to ensure:
(a)   the suitability of each subcontractor to assist in performing the Supplier’s obligations (including sufficient insurance coverage);
(b)   that the assistance that the subcontractor will give in performing the Supplier’s obligations will meet the standards required under this agreement; and
(c)   that it monitors and audits the subcontractor for compliance with the standards required under this agreement at such frequency as notified by Woolworths from time to time.
…
9   Performance Management Process (PMP)
This clause applies in respect of Services carried out by the Supplier at all Sites other than the Big W Sites.
(a)   General: Without limiting clause 25 of this Agreement and in addition to compliance audits under clause 10 (Compliance audits), Woolworths may issue an Improvement Notice to the Supplier in respect of any non-compliance with the Supplier’s obligations under this Agreement.
(b)   Consequences of failure to comply with Improvement Notice:
(i)   If the Supplier does not rectify the areas of non-performance within the time stipulated in the Improvement Notice, Woolworths will issue an “At Risk Notice” to the Supplier, substantially in the form set out as Attachment B. If the Supplier fails to meet its obligations under the Agreement, Woolworths may immediately terminate the Agreement in whole or in part in respect of the applicable Site(s).

…
12 Woolworths Policies
12.1 Compliance
The Supplier will ensure that all the Supplier Representatives who have access to any Woolworths Premises are aware of and comply with all Woolworths’ policies, security arrangements, requirements and restrictions notified to the Supplier including those listed in table below (“Woolworths Policies”):

…
12.2   Visitor's Book
The Supplier must ensure that all Supplier Representatives who have access to any Woolworths Premises sign in and out in the Visitors Book (located at the front of the store) for the start and finish of every shift.
…
12.5   SH&E Trolley Contractors Handbook
(a)   The Supplier will ensure that all employees, subcontractors and employees of subcontractors:
(i)   are provided with a copy of the Safety, Health and Environment Trolley Contractors Handbook …;
(ii)   have read the handbook;
(iii)   have had the rules contained in the handbook explained to them; and
(iv)   have signed the acknowledgment form at the back of the handbook, before they attend any of the Woolworths Premises to commence work.

(b)   The Supplier must ensure that the Service Provider Manager acknowledgment form signed by the Supplier is returned to Woolworths within 2 Business Days of signing the agreement and all other acknowledgment forms that have been signed are made available to Woolworths on request.
…
12.8   Non-compliance
(a)   If Woolworths informs the Supplier in writing that in its opinion, the Supplier or its Representatives are:
(i)   not providing the Services in compliance with the Woolworths Policies or Relevant Law; or
(ii)   conducting the work in such a way as to endanger the health and safety of the Supplier's or Woolworths' representatives, employees, subcontractors' employees, plant, equipment or materials,
then the Supplier must promptly remedy the breach and Woolworths may direct that all Services be suspended until the breach is remedied.

(b)   During any period of suspension, Woolworths will not be required to make any payment to the Supplier.
(c)   If the Supplier fails to rectify any breach for which the Services have been suspended under clause 12.8(a), or if the Supplier's performance has involved recurring non-trivial breaches of health and safety, Woolworths may, at its option, terminate the agreement immediately without any further obligation to the Supplier.
13   Equipment
13.1   Provision, maintenance and storage
The Supplier must:
(a)   provide and maintain in safe working order, at its own cost and in accordance with all Relevant Laws, all machinery, equipment, vehicles, tractors, trailers and other materials necessary for the performance of the Services; and
(b)   store the equipment in areas designated by the Woolworths store manager or the retail centre manager when it is not being used.
13.2   Registration, roadworthiness and specifications
(a)   Where vehicles, tractors and trailers are used, the Supplier must ensure those vehicles are:
(i)   duly registered;
(ii)   roadworthy;
(iii)   fitted with seatbelts for drivers and passengers;
(iv)   have Australian Standard AS 1636.1 approved roll cages where appropriate at all times;
(v)   fitted with, and maintain restraints to restrict trolley movement; and
(vi)   fitted with, and maintain noise suppressant mufflers and sponge floor matting to minimise noise.

(b)   Details of registration and insurance must be forwarded to Woolworths prior to the commencement of the Services and provide certificates of currency for such licences and permits upon Woolworths' request.
13.3   Training and licensing
The Supplier must ensure that only trained, competent and suitably licensed persons operate the equipment.
…
16   Staff requirements
16.1   Key requirements
(a)   The Supplier agrees to ensure that:
(i)   its staff are fit and proper persons and are properly qualified to perform their tasks in accordance with the guidelines set out in the Safety, Health and Environment Handbook;
…
(iv)   its staff are suitably and neatly dressed when performing the Services (allowing for weather conditions), comply with all OH&S requirements and clearly display its company logo or name;
…

(b)   The Supplier agrees to use its best endeavours to provide the same personnel to perform the Services at each Site during the Term.
…
(e)   The Supplier must ensure that no less than the applicable award wages are paid to its Representatives working on the Sites.
(f)   Subject to clause 16.1(e), the Supplier must ensure that all its Representatives working on the Sites are paid on time and to the full amount of their entitlement.
(g)   The Supplier must ensure that at least one Site representative can clearly understand instructions, requests or requirements from and communicate with Woolworths Representatives for the purposes of performing all or any part of the Services.
…
Schedule 1    Trolley Collection Services
1    Main Collection Area
The Supplier must provide the following trolley collection services:
1.1    Zones
The Main Collection Area is divided into the four following zones.
(a)    Zone 1: all areas within the retail centre in which the Woolworths Premises is situated, including car parks, loading docks, specialty shops, stairwells and fire escapes;
(b)    Zone 2: all areas outside Zone 1 and within the perimeter of a 1 kilometre circle around the Woolworths Premises including Hot Spots as determined by Woolworths from time to time;
(c)   Zone 3: all areas outside Zones 1 and 2 and within a perimeter of a 2 kilometre circle around the Woolworths Premises including Hot Spots as determined by Woolworths from time to time; and
(d)    Zone 4: all areas outside Zones 1, 2 and 3,
(‘Main Collection Area’).
1.2    Supplier to provide map
On the commencement of performing the Services the Supplier must submit to the store manager, for approval, a map for each of the Sites set out in Schedule 2 which shows the Main Collection Area, highlights each of the four Zones, Hot Spots and identifies a route for trolley collection street runs (‘Collection Map’). The store manager may notify changes to the Collection Map from time to time in their absolute discretion.
2    Trolley Collection Frequencies
The Supplier must provide a continuous supply of trolleys for the use of customers during trading hours by collecting trolleys throughout the Main Collection Area as follows:
(a)    Zones 1 and 2: collect trolleys on a continuous basis during trading hours;
(b)    Zone 3: collect trolleys at least once daily or as required from time to time by the store;
(c)    Zone 4: collect trolleys as required by the store manager from time to time.
The Supplier must increase the relevant trolley collection frequencies during peak trading periods or as required by the store manager.
3    Trolley Collection Bays
The Supplier must collect the trolleys into the Site's external trolley bays and feed clean and dry trolleys to the internal trolley bays.
4    Trolley Collection Quotas
The Supplier must ensure that:
(a)   the internal trolley bays are holding the full quota of trolleys (to be determined by the Supplier and the store manager on the commencement of the Services) at the commencement of trading each day;
(b)    the internal trolley bays hold no less than 75% of the full quota of trolleys during trading hours;
(c)    the full quota of trolleys at both internal and external bays are fully secured at the close of trade or soon afterwards;
(d)    where there are multiple Woolworths brands on the same Site, the relevant branded trolleys must be returned to the correct brand's internal trolley bay. The Supplier must not place different Woolworths branded trolleys in the same trolley bay.

Issues on appeal

The grounds of appeal relied upon by the Chief Commissioner were unhelpfully identified in three categories involving (i) the construction of s 37(1), (ii) the application of the “in and for” test in relation to trolley collection services and (iii) the application of the test in relation to cleaning services. A more coherent approach is to deal with the issues raised under each ground broadly in the order in which they were addressed by the primary judge.
Some aspects of the primary judge’s reasoning have already been identified: other aspects will be addressed in the course of considering the grounds of the appeal and submissions relating thereto.

Ground 1(a): characterisation of employment agency contract

Ground 1(a) has already been addressed because it was necessary to determine what was the employment agency contract in order to identify the relevant provisions.

Ground 1(b): operation under employment agency contract

Ground 1(b) alleged error on the part of the judge in characterising the contract solely by reference to the terms of the contract and without considering evidence of how the parties operated under the contract.
Two paragraphs of the primary judgment at [146] and [147] were impugned. These followed the judge’s conclusion that the relevant contracts were those between the agent and the subcontractors. As that (erroneous) conclusion was expressly relied upon in aspects of the subsequent reasoning, it is unnecessary and unhelpful to address those aspects of the ensuing paragraphs as to the operation of the contracts. Nevertheless, the judge’s reasoning that “[t]he essential question therefore seems to be one of characterisation of the written contracts” did not reveal error. He did not exclude all aspects of the evidence as to the manner in which the contracts were carried into effect, but described “the relevance of some of the evidence” as “questionable”.^[33]
33. ITM at [146].
Further, some matters relied on as relevant to the operation of the contract may have also addressed the commercial context. For example, it was a term of the contract that Woolworths owned the shopping trolleys, which may also be seen as a contextual matter giving rise to various obligations designed to protect the trolleys from abuse or loss, which was an important function of the trolley collection services. On the other hand, the statement by the judge that he did not see that Woolworths’ ownership of the trolleys “makes any real difference”^[34] was to dismiss an important contextual element which was relevant to the characterisation of the functions to be performed by ITM. The supposed lack of relevance may have followed from the erroneous conclusion that the contracts under consideration were those between ITM and the subcontractors.
34. ITM at [158].

Grounds 1(c) and 2(d): working for third parties

Grounds 1(c) and 2(d) took issue with the finding that ITM’s subcontractors could, and some did, perform work for more than one store within a shopping centre containing a Woolworths supermarket. The grounds identified error as arising in the following passage in the judgment:

“160 Also important is the fact that ITM’s subcontractors could, and in some cases did, perform work for more than one store at the same shopping centre. It provides a practical illustration of the independence of their businesses from Woolworths’ business (and indeed ITM’s business). The point made by counsel for the Commissioner about casual employees working for different employers does not answer this. Everyone accepts that a casual employee might work on Monday for one employer and on Tuesday for another. But what is under consideration in the present case includes a ‘service provider’ working for multiple ‘clients’ simultaneously. I find that hard to fit into s 37.”

The reasoning in this paragraph was unpersuasive. First, this aspect of what the service providers in fact did turn on the terms of the subcontracts between ITM and the service providers, and not on the agreement between ITM and Woolworths. There was nothing in that agreement (or certainly nothing relied upon in submissions) which required that the service providers not provide services otherwise than for the purposes of the contract between ITM and Woolworths. Again, the error results from adopting the wrong focus for the analysis.
Secondly, the reasoning introduces the concept of “independence” of the subcontractor’s business from the client’s business. But that element is inherent in an employment agency arrangement; it cannot be a basis for denying its existence. That concept would also seem to deny that a deemed employee could work part-time for a client; however, part-time employment is not excluded from the basic coverage of the Payroll Tax Act.
If the issue is limited to the case of a trolley collector working simultaneously for two separate shops, there was no finding as to the significance of such an arrangement for the employment agency contract between ITM and Woolworths. The logic of the finding as to “working for multiple ‘clients’ simultaneously” turns in part on the implied absence of divisibility of the work, and hence of control. If the arrangement were permitted (and presumably the trolley collector’s wages calculated on a part-time basis), the employment agency contract would not cease to satisfy the requirements of s 37(1). As the appellant submitted, there are many examples of persons working under an agency contract for more than one deemed employer. If the arrangement were not permitted by Woolworths, then ITM might be in breach of contract if it permitted its sub-contractors to operate on that basis. The nature of any dual activities was simply not explored: where the onus lay on ITM to demonstrate error on in the assessment, the lack of detail in both the evidence and the finding based on it is problematic.
Further, the calculation of the wages of a part-time employee for the purposes of payroll tax was not a matter explored in the evidence or on appeal. If there were a difficulty in allocating payments, that difficulty may well suggest an inconsistency between the arrangement posited of “simultaneous” work for multiple clients and the obligations of ITM under its contract with Woolworths. It does not cast doubt on the contractual arrangements between ITM and Woolworths.
The errors identified by the Chief Commissioner in this paragraph should be accepted. Again, the errors demonstrate the consequence of focusing upon the relationship between the service providers and ITM, or the service providers and their employees, rather than the relationship between the employment agent and its client.

Ground 2: characterising the trolley collection services

Ground 2 identified error in treating the following factors as “relevant or significant” namely that (a) trolley collection services were a “discrete, defined task”,^[35] (b) trolley collection is an “established market”,^[36] and (c) ITM’s subcontractors (as opposed to individual trolley collectors) provided their own equipment for the trolley collection services.^[37]
35. ITM at [157].
36. Ibid.
37. ITM at [159].
The respondent submitted that [157] in the primary judgment should be read as a whole and that the focus of the reasoning appears from the first sentence:

“157 I also consider that the defined nature of the task done by the trolley collectors, and the associated maintenance of demarcation, are significant factors in this case. Some stores were served by a street run service only. But for all stores the provision of the specified service was a discrete, defined task. What is important is that there appears to be an established market within which trolley collection contractors operate and which extends well beyond the three supermarket operators in the present case. ITM is only one of the contractors in that market.”

The respondent’s approach may be accepted, but the question remains whether the first sentence reveals error when regard is had to the following explanatory aspects of the paragraph. It is difficult in principle to understand why the “defined nature of the task” undertaken by trolley collectors, and the fact that there may be an established market for such services, has any significant bearing on the characterisation of the services to be supplied by ITM to the client, for the purposes of s 37(1) of the Payroll Tax Act.
Rather, there is nothing in the language adopted by White J, even by way of judicial exegesis, which explains why s 37(1) does not apply to services which have a “defined nature” or involve discrete and defined tasks, or for which there is an established market. One might be pressed to identify many services which could not be so categorised.
Three further propositions derived from the reasoning of the primary judge are relevant in this context, as “factors identified by the parties in their submissions”.

“154   In my view, the fact that the trolley collection services involved activities which take place outside Woolworths’ premises is significant. … Substantially, the whole of the task took place away from the Woolworths staff and did not require any supervision by, or coordination with, them. …
155   It may be accepted that a ready supply of trolleys for customers is an important, and perhaps vital, part of the conduct of Woolworths’ business. …
156   In the present case, I would character Woolworths’ business as one of selling goods by retail using a supermarket format. That is how its business income is derived. It may be accepted that stacking the shelves should been seen as an activity ‘in and for’ that business: see JP Property Services at [90] … . The collection of trolleys may be for the benefit of the business, but in the sense that it is one of the conditions which must be satisfied for the business to be carried on. But, in my view, it is no more ‘in and for’ the business than the delivery, by truck, of the goods to be sold in the business.”

No doubt the location at which services are to be carried out may, in some contexts, be material. In the present circumstances, it carried little weight; indeed, it tended to support the Chief Commissioner’s case. The supply of trolleys was to be maintained during opening hours in Woolworths’ “internal trolley bays”.^[38] This was not conduct remote from Woolworths’ premises; to the extent it commenced away from Woolworths’ premises, that was because Woolworths’ customers had (as expected and largely as permitted) removed the trolleys from its premises.
38. Trolley Collection Services Agreement, Sch 1, cll 3, 4.
The statement at [155] should be accepted, but the distinctions drawn at [156] are without substance. The proposed distinction between collecting trolleys and delivery of goods by truck might have warranted further analysis. Suffice it to say that there appears to have been no evidence as to whether Woolworths adopted a business system which involved a central logistics hub from which deliveries were made by truck to individual supermarkets. Without knowing more it is impossible to say whether delivery by truck, if undertaken by service providers, would fall outside the terms of s 37(1). Indeed, the risk of unexplored analogies is that they may ignore provisions of the legislation directed at the very issues they raise, such as the “Contractor provisions” in Pt 3, Div 7 of the Payroll Tax Act.^[39]
39. See, for example, Chief Commissioner of State Revenue v Downer EDI Engineering Pty Ltd [2020] NSWCA 126; Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470.
Ground 2(c) asserted that the primary judge erred by treating as relevant or significant the fact that ITM’s subcontractors (as opposed to individual trolley collectors) provided their own equipment for the trolley collection services, referring to [159] in the primary judgment.
Clause 5 of the agreement between ITM and Woolworths provided for subcontracting, with Woolworths’ consent. Pursuant to cl 12.5, ITM was required to ensure that all employees, subcontractors and employees of subcontractors were provided with the Safety, Health and Environment Trolley Contractors Handbook prepared by Woolworths. Under its contract with Woolworths, ITM was required to provide and maintain “all machinery, equipment, vehicles, tractors, trailers and other materials necessary for the performance of the services” and to store the equipment in areas designated by Woolworths: cl 13.1.
Having rejected the relevance of Woolworths’ ownership of the trolleys at [158], the primary judge continued:

“159 What I do think is important about the ownership arrangements is that the subcontractors were responsible for supplying and maintaining the equipment needed to collect the trolleys, some of which was quite substantial. That is a typical indication of an independent contractor conducting its own business. The subcontractors’ charges would not have consisted entirely of wages and on-costs for individual trolley collectors. Their charges would have included a component representing the costs of financing and depreciating, or leasing, the equipment in performing the services.”

Two points may be made with respect to this reasoning. First, there was no doubt that the service providers were subcontractors of ITM. The structure of s 37(1) is entirely consistent with the concept of service providers entering into subcontracts with the employment agent. Indeed, as has been noted, and as reflected in the ground of appeal, the statute draws a distinction between service providers and the persons who perform work for or in relation to which services are supplied to the client: see ss 37(1) and 39.
Secondly, the fact that the subcontractors were said to be responsible for supplying and maintaining the necessary equipment to collect the trolleys only appeared by reference to the terms of the subcontracts; the obligation to provide such equipment was imposed on ITM under the ITM contract with Woolworths. That is, the judge’s reliance on this factor turned upon the error identified above of the focus on the contracts between the agent and the service providers, rather than the contract between the agent and the client. But even disregarding the last point, the issue would be as to the amount payable for wages rather than demonstrating that the employment agent did not have an employment agency contract with Woolworths. No such issue was raised by the appellant.
The complaints raised by ground 2 should be upheld.

Ground 3 – relevant “indicia” not referred to

Ground 3 referred to (but did not identify) “relevant indicia” which should have led to the conclusion that the trolley collection services provided by ITM to its supermarket clients were provided “in and for” the conduct of the businesses of those supermarkets.
In addressing this ground, the respondent’s written submissions stated:

“43 Importantly, the focus of the test is not whether the services performed by the service provider are integral to the client’s business, in the sense that the business could not operate without those services, but whether the workers were incorporated, or added, into the business and workforce of the client … . It is not correct to ask whether or not the client is able to operate its business without the services provided by the service provider. … The focus of the inquiry is on the manner in which the service provider provides the services, and whether that manner of provision of services is indicative of the service provider being integrated into the client’s workforce and working in much the same manner as the client’s employees.”

Each of the phrases (or indicia) relied upon by the respondent may be identified in a decision of a single judge in explaining his or her reasoning for reaching a particular conclusion. But the reasoning by the primary judge does not turn upon a distinction between the nature of the service and the manner in which it was provided. If the terminology referred to in fact demands a focus on “the manner in which the service [provider] provides the services”, that is an unjustified gloss on the statutory text. However, it may be doubted that the judgments in which such language was adopted carried any such implication.
Had the analysis been directed to the contract between the employment agent and the client, reference would have been made to the obligation of ITM under Sch 1 to that agreement to “provide a continuous supply of trolleys for the use of customers [of Woolworths] during trading hours”, to ensure “the internal trolley bays are holding the full quota of trolleys… at the commencement of trading each day” and to maintain a particular quota of trolleys in holding bays during trading hours.^[40] That contract also made ITM liable for compliance by service providers with requirements under the contract and directions given by Woolworths’ representatives.^[41]
40. Trolley Collection Services Agreement, Sch 1, cll 2, 4.
41. Ibid, cl 16(1).
In addressing the application of the statutory test, as explained in UNSW Global and accepted by this Court in E Group Security, the Chief Commissioner emphasised that the individuals who worked for the client should do so in much the same way as would an employee of the client. That meant that the business would involve work having a degree of regularity and continuity, and where the nature of the work was to a significant degree under the control and direction of the client. So long as the qualifiers are maintained, this approach should be accepted.
The primary judge noted the submission by the Chief Commissioner in the following terms:

“130 Counsel next submitted that an important factor was the continuity and regularity of the service being provided. The trolley services were provided for as long as the Woolworths stores were open and operated continually during the period of store opening. ITM’s practice was to give continuity to the same subcontractors at the same stores, if possible. There was also an obligation on the subcontractors to use their best endeavours to ensure continuity of the staff who worked as the actual trolley collectors under a subcontract.”

The Chief Commissioner also submitted that one could test the nature of the services and their relationship with the business by inquiring whether such services were, or might have been, supplied by employees of the client. The judge dealt with that submission in the following terms:

“164 Finally, I should deal with the submission from counsel for the Commissioner that the trolley collectors’ work could have been, and to some extent was, carried out by Woolworths employees.
165 As counsel acknowledged, such a submission, at least at a broad level, is available in every case. To apply such a test therefore tends to beg the question. In terms, the ‘in and for’ test under s 37 does not refer to it. In some factual situations, the fact that the service providers are undertaking the same work as was formerly (cf Bayton at [273]), or is currently (cf HRC Hotel at [153]), done by the client’s employees, may illustrate features of the work which make it ‘in and for’ the client’s business. Otherwise, I find it difficult to see how such circumstances are relevant.”

With respect, that reasoning should not be accepted. No doubt it was true that the test could be applied in every case, but that did not beg any question, unless it could be said that the answer must be the same in every case. Clearly the answer would not have been favourable to the Commissioner in UNSW Global, because an independent expert assessment could not have been properly undertaken by an employee of the clients. The answer to such a question might well be instructive and the question should have been addressed.
To say that the “in and for” test does not refer to “it” is ambiguous. First, there is a danger in identifying the test under s 37(1), as construed in UNSW Global, as the “in and for” test. The language used by White J in UNSW Global was “a contract under which a person procures the services of another person in and for the conduct of the business of the employment agent’s client”.^[42] Given the purpose of the provisions with respect to employment agency contracts, consideration of how the client might conduct its business, and thus whether it might have conducted its business by employing workers directly, to carry out the services obtained through the agency agreement, can be seen as a potentially valuable inquiry as to the application of the section in a particular case.
42. UNSW Global at [62].
Further, if the question is legitimate in circumstances where the same work was “formerly” done by employees of the client, why it is not legitimate where no such circumstance arose, is difficult to understand. In substance, to compare the situation the subject of dispute with the hypothetical circumstances of direct employment by the client will serve to emphasise the importance of various features of the arrangement, including the degree of control which would be exercised in each case, whether employees would be maintained on a regular and continuous basis and whether the nature of the services would be different. Had such a test been applied in the present case, a high level of similarity between the situations should have been accepted, given the proper construction of the agreement between ITM and its clients.
The explanation for the judge’s approach to this issue may be found in an earlier discussion as to whether it was appropriate to ask if the workers providing the services were “integrated into” the client’s workforce. Having said that it was not necessary to determine that question,^[43] the judge continued:

“149 In applying the ‘in and for’ test formulated by White J, I think it is important to look at the origin of that test. His Honour was concerned by the possibility that, read literally, s 37 might have the effect of converting fees paid to persons who were independent contractors, operating their own businesses, into deemed wages. His Honour considered that this could not possibly have been contemplated by the Parliament: see UNSW Global at [47], [49]; E Group (No 1) (Court of Appeal) at [46]. It follows, in my view, that when his Honour referred, in formulating the ‘in and for’ test, to the business of the client, he was drawing a distinction between the client’s business on the one hand, and a business operated by the service provider on the other: see UNSW Global at [64]-[65] …. Independent contractors operating their own businesses who were retained by a client through an intermediary, would remain independent contractors operating their own businesses and therefore could not be seen as undertaking the relevant work ‘in and for’ the business of the client.” [Emphasis added.]
43. ITM at [148].

Again, with respect, some of the language used in this passage expresses the test too broadly and without qualification by reference to the circumstances of UNSW Global. That is one of the problems which can arise where a gloss on a statute results in judicial exegesis being construed as if it had replaced the statutory language. For example, the breadth of the statement made in the first two sentences is not supported by either of the authorities cited. The conclusion then reached is contrary to the conclusion in UNSW Global, where White J stated:

“64 One of the hallmarks of an independent contractor is that he or she carries on his or her own business. But sometimes that is done, or is said to be done, by the individual, in substance, working for the client in the same way as would an employee of the client. Where the services of the individual are provided through the intermediary, that is, the employment agent, to help the client conduct its business in the same way, or much the same way, as it would do through an employee, then the arrangement is within the intended scope of the section.
65 But where the services, although provided for the client’s benefit, are not provided by the service provider working in the client’s business, the arrangement does not fall within the intended scope of the provision. In substance, when the Chief Commissioner’s oral submissions are read with his contentions referred to at [26] above, this was conceded by the Chief Commissioner.”

Indeed, as senior counsel for the respondent properly accepted, “one might characterise someone as legally an independent contractor but nonetheless [as] satisfying the ‘in and for’ test in s 37”.^[44]
44. CA Tcpt, p 31(17).
The final sentence in [149] is stated at a high level of generality which, if taken at face value, may explain why a comparison with how an employee might operate in the same business must be rejected. If so, the underlying premise is unsound.
Finally, it should be noted that the respondents sought to identify a number of errors in the Chief Commissioner’s statements of principle. Most have been addressed in the foregoing discussion, but the following have not.
First, reliance was sought to be placed upon evidence that ITM’s contractors staff wore distinctive uniforms. The submission was not made by reference to any finding of the primary judge, nor was there a notice of contention seeking to rely upon it. Furthermore, the fact that reliance was placed upon evidence of the actual operations, rather than the employment agency contract, was arguably misconceived. As noted above, the ITM contract with Woolworths did in fact impose a requirement that the staff providing the services were suitably dressed and display a distinctive company logo or name.^[45]
45. Trolley Collection Services Agreement, cl 16.1(a)(iv).
Suggestions in earlier cases that wearing a distinctive uniform was a factor demonstrating that the persons were not “integrated into” the client’s workforce tend to demonstrate the inappropriateness of using the term “integrated into” in relation to a client’s business. As already noted, the purpose of the employment agency provisions is to impose liability for payroll tax with respect to payments to persons who are not employees. There is no explanation in the cases as to why that purpose is not properly served where it is made clear to third parties that the persons are not employees. That they are not employees of the client is a condition of the application of Pt 3, Div 8; an express indication of that fact can hardly be an indicator of its non-application. In short, the wearing of a distinctive uniform is an example of an indicium developed in the cases which finds no support in the statutory language or the statutory purpose, and should be avoided.
In similar vein, the respondent noted that the staff were required to sign a visitor book. Again, reliance was placed upon evidence that that occurred in practice but, as set out above, the requirement is to be found in the employment agency contract.^[46] On one view, that factor operates in favour of the view that there is a degree of integration into the client’s workforce. That is because the implicit comparison is with the position of employee: although there was, it appears, no evidence as to the arrangements for Woolworths own employees, it is inconceivable that they were not required to record in the company’s records their arrival and departure times (amongst other things). As the persons providing the service were not staff paid by Woolworths directly, they would of course not sign on as Woolworths’ employees.
46. Ibid, cl 12.2.
Finally, submissions were made in relation to the use of staff facilities which, the respondent conceded, was permitted to trolley collectors. Again, no reference was made to any reliance by the trial judge on such a consideration. The submission provided a further demonstration of the risks of relying on indicia which have been identified in earlier cases, and of relying upon evidence of how an employment agency contract operated in practice, even to a quite trivial level of personal hygiene, in relation to persons providing services.
None of these additional matters casts any doubt on the conclusions and analysis set out above. In its reliance on so-called “relevant indicia”, ground 3 was apt to mislead; nevertheless the challenge to the primary judge’s ultimate finding should be upheld.

Ground 4: cleaning services

Ground 4 was in the following terms:

“4 The primary judge erred in finding that the regular on-site cleaning services provided by ITM to ALDI were not provided in and for the conduct of ALDI’s business because they were ‘not directly related to the sale of goods’: [ITM] [188]-[189]. His Honour should have found, consistent with authority, that incidental services such as cleaning can occur ‘in and for’ the conduct of a business, and that they did so here.”

There was no suggestion in this Court that if the Chief Commissioner’s appeal were to be upheld with respect to the agreement between ITM and Woolworths in relation to trolley collection services, any different result would be obtained in relation to ITM’s arrangements with ALDI and IGA for trolley collection services. It is necessary, however, to deal separately with the arrangements between ITM and ALDI for the provision of cleaning services.
The arrangements were informal and were at first constituted by an exchange of emails. The arrangements related to ALDI stores in two country locations. The arrangements in relation to Tamworth were sustained for a period of months only, in 2015, but a formal written agreement was entered into with respect to an ALDI store at Gunnedah which agreement operated from July 2016 until September 2018.^[47]
47. ITM at [7], [185].
The judge dealt with this issue by following one authority and preferring it to another. He adopted the reasoning of Kunc J in JP Property Services where it was concluded that after-hours cleaning services did not fall within the scope of the employment agency provisions of the Payroll Tax Act in that case. The judge noted that Ward CJ in Eq had reached a different conclusion in Bayton Cleaning,^[48] in which the Chief Judge dismissed an appeal from assessments of Bayton as a cleaning services provider to corporate and commercial clients and to aged care and health sector clients.
48. See fn 14 above.
The primary judge dealt with the question of inconsistency in the following passage:

“187   Counsel for the Commissioner also relied upon the decision of Ward CJ in Bayton, noting that, in that case, which concerned hotel, commercial, and aged care/health cleaning services, her Honour reached the opposite conclusion from Kunc J. Counsel submitted that some of her Honour’s reasoning was inconsistent with some of that employed by Kunc J. For their part, counsel for ITM contended that her Honour’s decision was distinguishable: they noted in particular that the ITM cleaners used their own distinctive uniform whereas that was not necessarily the case in Bayton. Also, ITM assumed sole responsibility for management, direction, and control of the employees, who were not directed by ALDI as the client.
188   I agree that there may be some tension between the two decisions. But Ward CJ did not directly consider Kunc J’s conclusion or express disagreement with it. Additionally, the fact that the cleaning services were provided after hours was not the only element in Kunc J’s decision; his Honour also relied on the fact that the cleaning was not done to protect members of the public while they were shopping and therefore was not directly related to the sale of goods.
189   In these circumstances, I think the best course for me is to apply the decision of Kunc J of JP Property Services. In my view, that means rejecting the assessments so far as they relate to the ALDI cleaning services.”

This reasoning should not be accepted. Bayton was decided some two years after JP Property Services, and the reasoning of the Chief Judge included some 19 references to the judgment of Kunc J in JP Property Services. No adequate reason was given for disregarding it. In any event, for the reasons explained above, in key respects JP Property Services should not be followed.
Although the primary judge provided no basis for his conclusion with respect to the cleaning services provided by ITM, other than to apply “the decision of Kunc J in JP Property Services”, there was no notice of contention seeking to support the conclusion on any other basis. In written submissions, ITM identified the fact that individuals who undertook the cleaning were those who collected trolleys, and wore distinctive uniforms distinguishable from ALDI staff. ITM also stated that it was “solely responsible for the management, direction and control of the cleaners”. However, while it was true that the agreement between ITM and ALDI placed responsibility on ITM for the manner in which the cleaners carried out their work, ITM was also required to “comply with all reasonable instructions and directions given by ALDI stores, and with ALDI stores’ standards and operating policies and procedures notified to you, from time to time”.^[49]
49. Agreement, pars 3.2 and 3.3(a).

In the absence of any full argument as to whether the clause imposing responsibility on ITM for the management of the cleaners prevented the agreement being an employment agency agreement, and in circumstances where the respondent accepted that there was error in applying JP Property Services,^[50] there is no basis for upholding the decision of the primary judge in this respect.
50. Tcpt, p 24(10).
Although senior counsel for the respondent placed some weight on the wearing of distinguishing uniforms, there was no submission that the wearing of such uniforms was required under the employment agency agreement.^[51] In principle, the fact that staff who were not employees were required to wear distinguishing uniforms said little, if anything, of substance as to their substantive functions under an employment agency contract. Whether the conduct of the employment agent in requiring its subcontractors or employees to wear particular uniforms could remove liability for a tax which was otherwise payable pursuant to the contractual arrangements between the parties may be doubted. However, that possibility need not be determined in this case.
51. ITM’s contract with Woolworths made similar provision, but rightly nothing was said to turn on this.

Conclusions

For the reasons given above, the appeal must be upheld and the assessments of the Chief Commissioner reinstated. The following points may be made in summary form in support of that conclusion. First, the application of s 37 must be assessed by reference to the terms of the employment agency contract relied upon by the Chief Commissioner as the basis of the assessment under challenge. In principle, that will be the agreement between the employment agent and its client. Generally, the actual operation of the agreement, including arrangements between the employment agent and its service providers and between the service providers and the persons performing the work will not form a necessary part of the analysis, and will provide little guidance as to the characterisation of the employment agency contract. The primary judge was correct to focus upon an objective analysis of the contract, although he looked to the wrong contractual relationship.
Secondly, whilst context may be important to a correct understanding of a employment agency agreement, there is no reason to suppose that in most cases a “fact-sensitive analysis”, going beyond an analysis of the contractual arrangements and the nature of the client’s business, will be necessary.
Thirdly, whilst consistency in judicial application of the statutory test, and certainty as to its operation, are important values to be pursued, the search for “indicia” in prior cases dealing with different circumstances will rarely be of assistance. In particular, careful analysis of the language used in applying the test by trial judges cannot, and should not, be relied upon as establishing a legal principle. What the case law may establish is, for example, that cleaning services are generally something necessarily carried out for the conduct of many businesses and will, where the subject of an employment agency agreement, readily be found to fall within the scope of the employment agency provisions in the Payroll Tax Act. Whether they are carried out during business hours or after hours will rarely be a relevant consideration, except to the extent that the nature of the service and the nature of the business suggest otherwise. Similarly, because trolley use, and therefore maintenance of the availability of trolleys for customers was part of Woolworths’ business, the fact that trolley collection might involve work outside Woolworths’ premises was of no significance.

Orders

The Court should make the following orders:

Allow the appeal and set aside orders (1) and (2) made in the Equity Division on 25 May 2023 and the order as to the costs made on 26 June 2023.

In lieu thereof order that the proceedings in the Equity Division be dismissed with costs.

Order that the respondent pay the appellant’s costs of the appeal.

**********

Endnotes

Decision last updated: 13 December 2023

Medium Neutral Citation:	Chief Commissioner of State Revenue v Integrated Trolley Management Pty Ltd [2023] NSWCA 302
Hearing dates:	24 October 2023
Date of orders:	13 December 2023
Decision date:	13 December 2023
Before:	Ward P at [1]; Payne JA at [6]; Basten AJA at [17]
Decision:	(1) Allow the appeal and set aside orders (1) and (2) made in the Equity Division on 25 May 2023 and the order as to the costs made on 26 June 2023. (2) In lieu thereof order that the proceedings in the Equity Division be dismissed with costs. (3) Order that the respondent pay the appellant’s costs of the appeal.
Catchwords:	TAXES AND DUTIES – payroll tax liability – employment agency contract – contract for trolley collection and cleaning services – identifying the employment agency contract – contract between agent and client – separate contracts between agent and service providers – onus of proof on tax payer STATUTORY INTERRETATION – payroll tax liability – employment agency contract – procuring services for client – when service provider works “in and for” the business of the client of the agent – use of “indicia” – reliance on factors considered in other cases
Legislation Cited:	Interpretation Act 1987 (NSW), s 33 Payroll Tax Act 2007 (NSW), ss 6, 7, 10, 11, Pt 3, Divs 7, 8, ss 35, 37, 38, 39, 40, 41
Cases Cited:	Banfirn Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 1058 Bayton Cleaning Co Pty Ltd v Chief Commissioner ofState Revenue [2019] NSWSC 657; 109 ATR 879 Broome v Cassell & Co Ltd [1972] AC 1027 Chief Commissioner of State Revenue v Downer EDIEngineering Pty Ltd [2020] NSWCA 126 Chief Commissioner of State Revenue v E Group Security Pty Ltd (No 2) [2022] NSWCA 259; 115 ATR 448 Damjanovic & Sons Pty Ltd v Commonwealth (1968) 117 CLR 390; [1968] HCA 42 HRC Hotel Services Pty Limited v ChiefCommissioner of State Revenue [2018] NSWSC 820; 108 ATR 84 JP Property Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWSC 1391; 106 ATR 639 Ogden Industries Pty Ltd v Lucas [1970] AC 113 Scott v Davis (2000) 204 CLR 333; [2000] HCA 52 Securecorp(NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744 Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577
Texts Cited:	P Herzfeld and T Prince, Interpretation (2nd ed, 2020, Thomson Reuters)
Category:	Principal judgment
Parties:	Chief Commissioner of State Revenue (Appellant) Integrated Trolley Management Pty Ltd (Respondent)
Representation:	Counsel: S Balafoutis SC / D Stretton (Appellant) R Higgins SC / D Lewis (Respondent) Solicitors: Crown Solicitor’s Office (Appellant) Ashurst Australia (Respondent)
File Number(s):	2023/199686
Decision under appeal	Court or tribunal: Supreme Court Jurisdiction: Equity Division Citation: [2023] NSWSC 557 Date of Decision: 25 May 2023 Before: Parker J File Number(s): 2021/226540