Nationwide Towing and Transport Pty Ltd v Commissioner of State Revenue

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE
COMMERCIAL COURT
TAXATION LIST

S CI 2017 02964
S CI 2017 02965
S CI 2017 02966
S CI 2017 02967
S CI 2017 02968

NATIONWIDE TOWING & TRANSPORT PTY LTD (ACN 088 026 706)

EASTERN VAN SERVICES PTY LTD (ACN 090 167 552)

RE’S ROADSIDE RECOVERY PTY LTD
(ACN 006 627 710)

First Appellant

Second Appellant

Third Appellant

COMMISSIONER OF STATE REVENUE

Respondent

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	24 April 2018
DATE OF JUDGMENT:	23 May 2018
CASE MAY BE CITED AS:	Nationwide Towing & Transport Pty Ltd & Ors v Commissioner of State Revenue
MEDIUM NEUTRAL CITATION:	[2018] VSC 262

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TAXATION AND REVENUE – Services performed by persons who ordinarily performed services of that kind to the public generally – Payroll Tax Act 2007 s 32(2)(b)(iv)

TAXATION AND REVENUE – Nature of appeal – Hearing de novo, judicial review or some other form of appeal – Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 – Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue [2011] VSC 104; (2011) 85 ATR 120 – Mould v Commissioner of State Revenue [2014] VSC 268; (2014) 98 ATR 579 – Taxation Administration Act 1997 s 106

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APPEARANCES:	Counsel	Solicitors
For the Appellants	R Merkel QC E M Nekvapil	JRT Partnership Pty Ltd
For the Respondents	C J Horan QC C M Pierce	State Revenue Office

HIS HONOUR:

Introduction

These proceedings are a series of appeals under s 106 of the Taxation Administration Act 1997 (“the TAA”) which arise from the Appellants’ objections to assessments under the Payroll Tax Act 2007 (“the Payroll Tax Act”).[1]
[1]Notice of Objection (19 May 2015).

On 8 December 2017, this Court ordered that the following question be tried as a separate and preliminary question, a question which has been stated for determination under r 47.04 of the Supreme Court (General Civil Procedure) Rules 2015:[2]

Is an appeal under s 106 of the TAA against a determination of the Commissioner … of a taxpayer’s objection involving sections 32(2)(b)(iv), 32(2)(c), 32(3), 35(2), 37(1), 37(2), 41, 46(1), 46(2) and 79 of the Payroll Tax Act and sections 28 and 30(3) of the TAA an appeal or appeals by way of:
(a)       a hearing de novo;
(b)       a judicial review of the decision; or
(c)       some other form of appeal?
[2]Orders made by the Honourable Justice Croft on 8 December 2017, Order 1.

Factual and procedural background

On 24 March 2015, the Commissioner of State Revenue (“the Commissioner”) notified the Appellants of assessments under the Payroll Tax Act of tax they were liable to pay for the financial years ending 2010, 2011, 2012, 2013 and 2014 (“the Assessments”).[3]
[3]Result of Tax Investigation to Nationwide Towing & Transport Pty Ltd (24 March 2015); Result of Tax Investigation to Eastern Van Services Pty Ltd (24 March 2015); Result of Tax Investigation to Re’s Roadside Recovery Pty Ltd (24 March 2015).

The Appellants were dissatisfied with the Assessments and, on 19 May 2015, lodged a written objection with the Commissioner (“the Objection”),[4] as they were entitled to do under the provisions of s 96(1)(a) and (c) of the TAA.
[4]Notice of Objection (19 May 2015).

The primary substantive ground of objection is set out in paragraph 14(a), (b), and (c) of the Objection (“the Primary Ground”).[5] The Primary Ground related to payments by the Second Appellant (“EVS”) to its contractors, and impugned 89.7%[6] of the total amount of the Assessments.
[5]Appellants’ Submissions on Separate Question (9 February 2018), [3].
[6]$528,055.29 of a total primary tax of $588,714.40.

In essence, the Primary Ground was asserted that the Assessments should not have included payments by EVS to its contractors, because:[7]

(1) the Commissioner should have been satisfied that the services performed by the contractors were services performed by persons who ordinarily performed services of that kind to the public generally in that financial year, within the meaning of s 32(2)(b)(iv) of the Payroll Tax Act; and therefore
(2) the payments to the contractors were not made for or in relation to the performance of work relating to a ‘relevant contract’ as defined in ss 31 and 32 of the Payroll Tax Act; and therefore
(3) those payments could not be taken to be ‘wages’ by operation of s 35(1) of the Payroll Tax Act.

[7]Appellants’ Submissions on Separate Question (9 February 2018), [4].

On 12 November 2015, a delegate of the Commissioner gave notice of the determination of the Objection, in accordance with s 103(1) of the TAA, having considered the Objection and, among other things, disallowed the Primary Ground under s 101(1) of the TAA.[8]
[8]Notice of Determination on Objection to Payroll Tax Assessments 91598826, 91598834, 91598842, 91598850 and 91598868 (Assessments 1 to 5) (12 November 2015) (“Notice of Determination”).

The Commissioner, in the notice of determination of the Objection, gave reasons for disallowing the Primary Ground, which, among other things, included that the Commissioner was not satisfied that the services performed by the contractors were services performed by persons who ordinarily performed services of that kind to the public generally in the relevant financial year, within the meaning of s 32(2)(b)(iv) of the Payroll Tax Act.[9] For convenience, this reason for disallowing the Primary Ground of Objection is referred to as “the Commissioner’s non-satisfaction”.
[9]Notice of Determination, 15–16.

More particularly, the grounds upon which the Objection was disallowed are helpfully summarised by the Commissioner as follows:[10]
[10]Respondent’s Submissions on Separate Question (23 February 2018), [7].

1the registration of the Third Appellant (Re’s) as a member of the Nationwide Payroll Tax Group (the Group) is effective from 1 August 2011 because one individual has acted as the sole director of each of the First Appellant (Nationwide), the Second Appellant (Eastern) and Re’s at all relevant times since that date, and the Appellants had not shown any basis for the exercise of the discretion to exclude Re’s from the Group;
2the tow-truck drivers identified as contractors by Nationwide were properly characterised as common law employees, or alternatively, if characterised as contractors, the circumstances did not attract the contractor exemptions in any event;
3the management fees paid to the companies identified by Nationwide as providers of management services were paid either to common law employees or interposed entities and as such constituted taxable wages and, in any event, were not contractor payments or paid under employment agency contracts;
4on the assumption that the contractors identified by Eastern were properly characterised as such, the circumstances did not enliven any of the contractor exemptions and did not support the contention that services were relevantly provided pursuant to employment agency contracts;
5on the assumption that the contractors identified by Eastern were properly characterised as such, the Appellants had not established that any portion of the relevant contractor payments was attributable to the costs of materials and equipment;
6the Appellants had not established that they took reasonable care to comply with the Payroll Tax Act or that their tax defaults occurred because of circumstances beyond their control, and there was no basis for any further remission of penalty tax;
7there was no basis for any further remission of interest, because premium interest was remitted in full on the assessments and market interest is recovered only to meet the financing costs of revenue improperly lost; and
8the management fees paid by Nationwide and Eastern to Re’s in the period 1 July 2009 to 31 July 2011 constituted taxable wages because they were paid either to common law employees or to interposed entities; were not paid under employment agency contracts; and, if characterised as contractor payments, did not attract any contractor exemption.

On 17 December 2015, the Appellants, being dissatisfied with the determination of the Objection, requested in writing, in accordance with s 106(1) of the TAA, that the Commissioner treat their objection as an appeal and cause it to be set down for hearing at the next sittings of this Court.[11] On 22 December 2017, the Appellants filed a summary of the evidence proposed to be given on their behalf in these appeals, subject to the outcome of the determination of the separate question.[12]
[11]Request to appeal to the Supreme Court of Victoria (17 December 2015).
[12]Outline of Evidence (22 December 2017).

The Appellants contend that the reasons for determination by the Commissioner disclose a legal error affecting that determination in that the Commissioner was not satisfied of the matter in s 32(2)(b)(iv) of the Payroll Tax Act. On this appeal, the Appellants contend that:[13]

(1)       on the material before the Commissioner, the Commissioner’s failure to be satisfied of the matter in s 32(2)(b)(iv) was affected by a legal error of the kind identified by Dixon J in Avon Downs Proprietary Ltd v Federal Commissioner of Taxation[14]; and
(2)       as a consequence, the Supreme Court should:
(a)       set aside the Commissioner’s decision to disallow the Primary Ground; and
(b)       remit the Objection to the Commissioner for a new determination in accordance with law.

[13]Appellants’ Submissions on a Separate Question (9 February 2018), [8].

[14](1949) 78 CLR 353 at 360, 362-363.

It was made clear at the commencement of the hearing of the separate and preliminary question that the ground of objection now left extant with respect to the five assessments for each of the financial years to which they apply is as set out in paragraphs 14(a) and (b) and paragraph 17 of the Objection.[15] For present purposes, it is helpful to set out the substantive grounds of objection contained in these paragraphs, as follows:[16]
[15]Transcript, 1–3, 30.
[16]Notice of Objection (19 May 2015) [14], [17].

(a) The payments (purported taxable wages) made by EVS to each of the Contractors in the years of assessment were not made for or in relation to the performance of work relating to a ‘relevant contract’ within Division 7 of the Payroll Tax Act 2007. It follows that (i) EVS could not be taken to be an ‘employer’ within section 33, (ii) the Contractors could not be taken to be ‘employees’ within section 34, and (iii) the amounts paid by EVS to the Contractors in the years of assessment could not be taken to be ‘wages’ within section 35.
(b) Without limiting the generality of ground (a), the payments (purported taxable wages) are excluded from the scope of Division 7 because they were made by EVS in the course of its business to each of the Contractors who supplied EVS with services for or in relation to the performance of work where the Commissioner was satisfied or should now be satisfied that those services were performed by the Contractors who ordinarily perform services of that kind to the public generally in each of the years of assessment within section 32(2)(b)(iv) of the Payroll Tax Act 2007.
…
17. Further or alternatively, in the circumstances and particularly the making of and reliance upon the earlier determinations, the Commissioner should:
(a) Be satisfied that the Taxpayer (or a person acting on behalf of the taxpayer) took reasonable care to comply with the requirements of the Payroll Tax Act 2007 and determine, under section 30(3) of the TAA, that no penalty tax is payable in respect of the purported tax default; and
(b) Consider it appropriate to remit, under section 28 of the TAA, any interest payable as included in the Assessments and any further interest that may accrue on amounts outstanding under the Assessments.
…

Consequently, the provisions of the Payroll Tax Act which are now in issue are ss 30(3), 32(2)(b)(iv), 33 and 34, as indicated in these “Substantive Grounds”. Nevertheless, as will become clear in the reasons which follow, the critical provisions for the purposes of the preliminary or separate question are the provisions of s 32(2)(b)(iv) of the Payroll Tax Act.

The jurisdictional issue arising is whether the Supreme Court has the power, on an “appeal” under Part 10 of the TAA, to determine that contention in the Appellants’ favour and grant the relief set out in the preceding paragraph. The Appellants submit that, on the proper construction of Part 10 of the TAA, the nature of an appeal under s 106 of that Act is such that the Court has both the jurisdiction and power to grant that relief.[17] The Commissioner, on the other hand, contends that a s 106 appeal on an objection to an assessment based on s 32(2)(b)(iv) of the Payroll Tax Act “would be determined by way of a de novo hearing”.[18] In other words, the Commissioner contends that, on appeal, the Court must determine whether the Court, as opposed to the Commissioner, must be satisfied of the matter in s 32(2)(b)(iv), on the evidence before it.[19]
[17]Appellants’ Outline of Submissions on Separate Question (9 February 2018); Transcript, 9–10.
[18]Respondent’s Submissions on Separate Question (23 February 2018), [25(1)]; Transcript, 30–1.
[19]Respondent’s Submissions on Separate Question (23 February 2018), [19]–[20].

Statutory provisions

The critical provisions of the Payroll Tax Act are those contained in s 32(2)(b)(iv) which, together with some legislative context, are as follows:

Division 7 – Contractor provisions
…
32. What is a relevant contract?
(1)In this Division, a relevant contract in relation to a financial year is a contract under which a person (the designated person) during that financial year, in the course of a business carried on by the designated person—
(a)supplies to another person services for or in relation to the performance of work; or
(b)has supplied to the designated person the services of persons for or in relation to the performance of work; or
(c)gives out goods to natural persons for work to be performed by those persons in respect of those goods and for re-supply of the goods to the designated person or, where the designated person is a member of a group, to another member of that group.

(2)However, a ‘relevant contract’ does not include a contract of service or a contract under which a person (the designated person) during a financial year in the course of a business carried on by the designated person—
(a)is supplied with services for or in relation to the performance of work that are ancillary to the supply of goods under the contract by the person by whom the services are supplied or to the use of goods which are the property of that person; or
(b)is supplied with services for or in relation to the performance of work where—
(i)those services are of a kind not ordinarily required by the designated person and are performed by a person who ordinarily performs services of that kind to the public generally; or
(ii)those services are of a kind ordinarily required by the designated person for less than 180 days in a financial year; or
(iii)those services are provided for a period that does not exceed 90 days or for periods that, in the aggregate, do not exceed 90 days in that financial year and are not services—
(A)provided by a person by whom similar services are provided to the designated person; or
(B)for or in relation to the performance of work where any of the persons who perform the work also perform similar work for the designated person—

for periods that, in the aggregate, exceed 90 days in that financial year; or
(iv)those services are supplied under a contract to which subparagraphs (i) to (iii) do not apply and the Commissioner is satisfied that those services are performed by a person who ordinarily performs services of that kind to the public generally in that financial year; or

…

The appellate function of the Court is conferred by Part 10 of the TAA. The most relevant provisions in the present context are ss 106(1)(a), 109 and 112, which provide:

106 Right of review or appeal
(1)If—
(a)a taxpayer is dissatisfied with the Commissioner’s determination of the taxpayer’s objection; or
…

the taxpayer, in writing, may request the Commissioner to refer the matter to the Tribunal or to treat the objection as an appeal and cause it to be set down for hearing at the next sittings of the Supreme Court.

…
109 Grounds of review or appeal
On a review or an appeal—
(a) the taxpayer’s case is limited to the grounds of the objection; and
(b)the Commissioner’s case is limited to the grounds on which the objection was disallowed—

unless the Tribunal or Court otherwise orders.
…
112 Supreme Court appeals
(1)On the hearing of an appeal by the Supreme Court, the Court may make any order it thinks fit and may by order confirm, reduce, increase or vary the assessment or decision.
(2)The costs of the appeal are in the discretion of the Court.

Nature of an appeal under s 106 of the TAA
Nature of an appeal as a question of interpretation

It is uncontroversial between the parties that the nature of the “appeal” to the Supreme Court under s 106 of the TAA must be ascertained as a matter of proper construction of the provision of Part 10 of the TAA having regard to their text and context.[20] Contrast to an appeal on a question of law from a decision of the Victorian Civil and Administrative Tribunal under s 148 of the Victorian Civil and Administrative Tribunal Act 1997 (“VCAT Act”), an appeal to the Supreme Court under s 106 of the TAA takes place where there will not previously have been any hearing at first instance.[21]
[20]SZTAL v Minister for Immigration and Border Protection (2017) 91 ALJR 936 at 940-1.
[21]See Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd (1976) 135 CLR 616 at 619-22; Turnbull v New South Wales Medical Board [1976] 2 NSWLR 281 at 297-8.

In BSA Ltd v Victorian WorkCover Authority,[22] Garde J determined a preliminary question as to the nature of an appeal under s 85 of the Workplace Injury, Rehabilitation and Compensation Act 2013 and, in so doing set out the relevant principles for determining the nature of an appeal:[23]
[22][2016] VSC 435.
[23]BSA Ltd v Victorian WorkCover Authority [2016] VSC 435 [21]-[24].

21In Walsh v Law Society (NSW), the plurality of the High Court observed:
An appeal is a creation of statute. There are various forms of appeal. Accordingly, it is always important, where a process called ‘appeal’ is invoked, to identify the character of the appeal and the duties and powers of the court or tribunal conducting it.

22The six forms of appeal are listed in Turnbull v NSW Medical Board:
(1)appeals to supervisory jurisdiction;
(2)appeals on questions of law only;
(3)appeals after a trial before judge and jury;
(4)appeals from a judge in the strict sense;
(5)appeals from a judge by way of rehearing; and
(6)appeals involving a hearing de novo.

23In Fox v Percy, the plurality of the High Court referred to the types of appeal defined by Mason J in Builders Licensing Board v Sperway Constructions (Syd) Pty Ltd:
(i)an appeal stricto sensu, where the issue below was right on the material before the trial court;
(ii)an appeal by rehearing on the evidence before the trial court;
(iii)an appeal by way of rehearing on that evidence supplemented by such further evidence as the appellate court admits under a statutory power to do so; and

(iv)an appeal by way of a hearing de novo.

24In Dwyer v Calco Timbers Pty Ltd, a proceeding also arising from accident compensation legislation, the High Court said that these categories are not a closed class. Particular legislative measures may use the term ‘appeal’ to identify a wholly novel procedure or one which is a variant of one or more of those described. The Court added that ‘it is the proper construction of the terms of any particular statutory grant of a right of appeal which determines its nature’.
[citations omitted]

In determining the proper construction of the provisions of Part 10 of the TAA, the Court is required to give the words of those provisions “the meaning that the legislature is taken to have intended them to have”.[24] In that process, “the starting point for the ascertainment of the meaning of [the provisions] is the text of the statute whilst, at the same time, regard is had to [their] context and purpose”.[25]
[24]Project Blue Sky v Australian Broadcasting Authority (1998) 194 CLR 355 at 384 [78] (McHugh, Gummow, Kirby and Hayne JJ).
[25]SZTAL v Minister for Immigration and Border Protection (2017) 91 ALJR 936 at 940-1 [14] (Kiefel CJ, Nettle and Gordon JJ).

The Commissioner does, however, contend that the Appellants’ submissions seek to erect a false dichotomy between appeals and reviews under s 106 of the TAA, treating the former as proceedings by way of judicial review confined to legal error.[26] The Appellants place undue weight, the Commissioner says, on the reference in the statutory provisions to the Commissioner being “satisfied” of certain matters, without any analysis of the matters in respect of which such satisfaction is to be formed.[27] The Commissioner submits that the most recent and authoritative consideration of these issues in the context of appeals under s 106 of the TAA is that in Mould v Commissioner of State Revenue (“Mould”).[28] In that case, Ginnane J rejected submissions made by the Commissioner that, it is submitted, were in some respects analogous to those pressed by the Appellants in the present case.[29] Properly understood, the Commissioner contends, the decision in Mould does not support the Appellants’ contentions.[30] The earlier decision of Pagone J in Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (“Conte”)[31] can, it is said, be distinguished on the basis that it involved a challenge to the exercise of an administrative discretion entrusted to the Commissioner to “de-group” related companies for payroll tax purposes, and does not stand for a general proposition that all appeals to the Supreme Court under s 106 of the TAA are proceedings by way of judicial review.[32] For the reasons which follow, I do not accept the Commissioner’s submissions in this respect and regard Conte as a more analogous and relevantly indistinguishable decision in the present circumstances.[33]
[26]Respondent’s Submissions on Separate Question (23 February 2018), [5]; Transcript, 32–4.
[27]Respondent’s Submissions on Separate Question (23 February 2018), [5]; Transcript 30, 55.
[28][2014] VSC 268; (2014) 98 ATR 579; Respondent’s Submissions on Separate Question (23 February 2018), [5].
[29]Respondent’s Submissions on Separate Question (23 February 2018), [5].
[30]Respondent’s Submissions on Separate Question (23 February 2018), [5].
[31]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue [2011] VSC 104; (2011) 85 ATR 120 at 122–4 [2]-[5].
[32]Respondent’s Submissions on Separate Question (23 February 2018), [5].
[33]See below, [33]-[36].

Moreover, the Commissioner contends that the Appellants mischaracterise the Commissioner’s position as “confining” the Court to merits review and as precluding the Court from addressing legal error arising from an assessment.[34] The Commissioner says that he does not contend that the Court has no jurisdiction or power in an appeal under s 106 of the TAA to determine whether the Commissioner’s failure to be satisfied of the matters set out in s 32(2)(b)(iv) was affected by legal error.[35] However, the Commissioner says that the question is whether the Court is confined or limited to that question, and is unable to grant any relief other than to set aside the Commissioner’s decision to disallow the objection and to remit the objection to the Commissioner for redetermination.[36] The Commissioner submits that the Court can resolve legal questions such as those concerning the proper construction of s 32(2)(b)(iv) of the Payroll Tax Act, but can also apply the statutory criteria to the facts in order to determine whether the exemption is made out on the evidence admitted in the appeal (which may include, but is not necessarily limited to the material that was before the Commissioner).[37] Ultimately, the Commissioner submits that it remains the choice of the taxpayer whether to seek to rely on additional evidence that was not before the Commissioner, or whether to argue that the statutory criteria are met on the material that was before the Commissioner.[38] As will be seen from the reasons which follow, I accept that the taxpayer has a choice, but that it is between a de novo hearing before the Victorian Civil and Administrative Tribunal or a more limited review proceeding before the Supreme Court.
[34]Respondent’s Submissions on Separate Question (23 February 2018), [6], citing Appellants’ Submissions on Separate Question (9 February 2018), [8]-[9], [49], [53].
[35]Respondent’s Submissions on Separate Question (23 February 2018), [6].
[36]Respondent’s Submissions on Separate Question (23 February 2018), [6].
[37]Respondent’s Submissions on Separate Question (23 February 2018), [6]; Transcript 48–56.
[38]Respondent’s Submissions on Separate Question (23 February 2018), [6]; Transcript 30–1.

So the position reached is that it is clear from the text of s 106 of the TAA that a taxpayer is entitled to have an objection “treated as an appeal” and that the Supreme Court has power to hear “an appeal”,[39] but the text does not directly provide an answer to the core question in this proceeding: what is the nature of that appeal? Consequently, it is necessary to have regard to context and purpose of this legislation. In this respect, it is helpful to consider three contextual elements put forward by the Appellants as being of particular significance in this process.[40] The first is authorities on antecedent provisions; the second, the significance of the choice between review by the Victorian Civil and Administrative Tribunal and a Supreme Court appeal; and the third is the Supreme Court’s supervisory role.[41]
[39]Section 106 and 109 of the Taxation Administration Act 1997.
[40]Appellants’ Submissions on Separate Question (9 February 2018), [25] et seq.
[41]Appellants’ Submissions on Separate Question (9 February 2018), [25] et seq.

Authority on antecedent provisions

It is, again, uncontroversial that in interpreting a provision of a piece of taxation legislation, regard may be had to decisions in respect of predecessor provisions of that legislation, which were not materially different.[42] It is not suggested, however, either in these proceedings or in the authorities to which reference is made, that this process is a licence to disregard clear words used in current legislative provisions. Nevertheless, as indicated, the difficulty arises in the present proceedings because s 106 of the TAA, though providing for “an appeal”, does not contain express provisions which describe or define the nature of that appeal.
[42]Spriggs v Federal Commissioner of Taxation (2009) 239 CLR 1 at 17 [53] (French CJ, Gummow, Heydon, Crennan, Kiefel and Bell JJ). See also the observations in Perry Herzfeld, Thomas Prince and Stephen Tully, Interpretation of Legal Sources (Thomson Reuters, 2013) at 287, second paragraph.

In relation to the current legislative regime, the first significant matter in terms of this contextual element is the legislative history of, and contextual background to this regime. In that regard, the Appellants rely on what is said to be strong authority on the construction of the antecedents of Part 10 of the TAA, to the effect that if:[43]

(1) a taxpayer’s objection was disallowed on the basis of a state of satisfaction entrusted to the relevant taxation commissioner; and
(2) the taxpayer elected to have its objection treated as an appeal, rather than referred to an administrative tribunal for review;
then the taxpayer had to demonstrate legal error on the part of the Commissioner in order to succeed.

[43]Appellants’ Submissions on Separate Question (9 February 2018), [27].

In Avon Downs Pty Ltd v Federal Commissioner of Taxation (“Avon Downs”),[44] Dixon J determined the nature of an appeal under Div 2 of Part V of the Income Tax Assessment Act 1936 (Cth), which relevantly provided:
[44]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353.

Division 2. Reviews and Appeals
185.A taxpayer dissatisfied with any assessment under this Act may, within sixty days after service of the notice of assessment, post to or lodge with the Commissioner an objection in writing against the assessment stating fully and in detail the grounds on which he relies:
…
186.The Commissioner shall consider the objection, and may either disallow it, or allow it either wholly or in part, and shall serve the taxpayer by post or otherwise with written notice of his decision.
187.A taxpayer dissatisfied with the decision may, within sixty Application for days after such service, in writing request the Commissioner either-
(a) to refer the decision to a Board of Review for review; or
(b)to treat his objection as an appeal and to forward it either to the High Court or to the Supreme Court of a State.

…
189.If within sixty days after receiving the request accompanied by the fee of one pound the Commissioner does not refer the decision or forward the objection, the taxpayer may at any time thereafter give him notice in writing to do so, and the Commissioner shall within sixty days after receiving the notice refer the decision or forward the objection to a Board or Court accordingly:
…

190. Upon every such reference or appeal –
(a) the taxpayer shall be limited to the grounds stated in his objection; and
(b) the burden of proving that the assessment is excessive shall lie upon the taxpayer.

…
192.A Board of Review shall have power to review such decisions of the Commissioner, Second Commissioner or a Deputy Commissioner as are referred to it under this Act.
193.-(1.) For the purposes of reviewing such decisions, the Board shall, subject to this section, have all the powers and functions of the Commissioner in making assessments, determinations and decisions under this Act, and such assessments, determinations and decisions of the Board, and its decisions upon review, shall for all purposes (except for the purpose of objections thereto and review thereof and appeals therefrom) be deemed to be assessments, determinations or decisions of the Commissioner.
…
195.-(1.) Upon every reference to the Board, it shall give a decision in writing and may either confirm, reduce, increase or vary the assessment.
(2.) Upon the request of the Commissioner or the taxpayer, made at the hearing, the Board when giving its decision shall state in writing its findings of fact and its reasons in law for the decision.
…
197.Where, at the request of the taxpayer, the Commissioner has treated his objection as an appeal and forwarded it to the High Court or the Supreme Court of a State, the appeal shall be heard by a single Justice or Judge of the Court.
…
199.-(1.) The Court hearing the appeal may make such order as it thinks fit, and may by such order confirm, reduce, increase or vary the assessment. The costs of the appeal shall be in the discretion of the Court.
…

The Appellants’ objection in Avon Downs had been disallowed on the basis that the Federal Commissioner of Taxation was not satisfied of the matter specified in s 80(5) of the Income Tax Assessment Act 1936 (Cth). Section 80(5) of that Act was concerned with the state of voting power attaching to shares at the end of the year of income. It was held that it was for the Commissioner and not the Court to be satisfied as to the state of voting power at that particular time. Thus, Dixon J said:[45]

But it is for the commissioner, not for me, to be satisfied of the state of the voting power at the end of the year of income. His decision, it is true, is not unexaminable. If he does not address himself to the question which the sub-section formulates, if his conclusion is affected by some mistake of law, if he takes some extraneous reason into consideration or excludes from consideration some factor which should affect his determination, on any of these grounds his conclusion is liable to review. Moreover, the fact that he has not made known the reasons why he was not satisfied will not prevent the review of his decision. The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception. If the result appears to be unreasonable on the supposition that he addressed himself to the right question, correctly applied the rules of law and took into account all the relevant considerations and no irrelevant considerations, then it may be a proper inference that it is a false supposition. It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law.

In the alternative, or additionally, Dixon J went on to say that he was “not prepared to find that the Commissioner’s refusal to be satisfied upon the issue formulated by s 80(5) [was] due to any such misapprehension, mistake, misconception, unreasonableness or miscarriage of judgment as would authorize me to interfere and set aside his conclusion.[46]

[45]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360; and as to a more recent formulation, see Wilkie v Commonwealth (2017) 91 ALJR 1035, especially at 1055 [109].

[46]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 362-3.

Avon Downs is a particularly important authority in the present context because of the similarity in structure between the provisions of the Income Tax Assessment Act 1936 (Cth) considered in that case and the provisions of and structure of Part 10 of the TAA; a matter which was discussed by Deputy President Macnamara (as his Honour then was) in Baranov v State Revenue Office (“Baranov”)[47] in terms of the structure of Part 10 of the TAA: [48]

… of objection followed by referral at the election of the taxpayer either to the Supreme Court or to an administrative Tribunal is ultimately based upon the structure for appeals and reviews originally provided for in the Commonwealth Income Tax Assessment Act 1936. That structure was adopted at the State level when the Taxation Appeals Act 1972 established the Victorian Taxation Board of Review upon the model of the Commonwealth Taxation Boards of Review. The same structure was adopted when the Victorian Taxation Board of Review was abolished and its jurisdiction incorporated into the new Administrative Appeals Tribunal established by the Administrative Appeals Tribunal Act 1984 and finally when that jurisdiction was given to this Tribunal under the Victorian Civil and Administrative Tribunal Act. The present structure is as previously noted set out under the Taxation Administration Act.

[47][2008] VCAT 2652.

[48]Baranov v State Revenue Office [2008] VCAT 2652 at [33].

When the Victorian Parliament enacted the Taxation Appeals Act 1972, it is clear from both the text and the parliamentary debates[49] that the scheme for appeal and review was modelled on Div 2 of Part V of the Income Tax Assessment Act 1936 (Cth). More particularly, this Victorian legislation established the Victorian Taxation Board of Review, and amended the provisions of a number of Victorian taxing Acts to emulate the Commonwealth scheme. An example is provided by the following provisions which were substituted for provisions which then appeared in the 1971 Pay-roll Tax Act:[50]
[49]See, for example, Victoria, Parliamentary Debates, Legislative Assembly, 21 March 1972 at 4288 (Dick Hamer, Chief Secretary); Legislative Assembly, 22 March 1972 at 4417-4418 (Mr Hamer); Legislative Assembly, 11 April 1972 at 4753-4754 (Tom Edmunds); Legislative Assembly, 11 April 1972 at 4756 (Ian McLaren); Legislative Assembly, 11 April 1972 at 4756 (Ian McLaren); Legislative Council, 18 April 1972 at 4998-4999 (Murray Byrne, Minister for Public Works).
[50]Cited in the Appellant’s Submissions on Separate Question (9 February 2018) [33].

33. (1) An employer who is dissatisfied with the decision of the Commissioner on an objection made by that employer may within 60 days after service on him of notice of that decision or within such further time as the Commissioner may allow—
(a)in writing request the Commissioner to refer the decision to the Victorian Taxation Board of Review; or
(b)in writing request the Commissioner to treat his objection as an appeal and to cause it to be set down for hearing at the next sittings of the Supreme Court.

(2)The Commissioner shall within 60 days of the request refer the decision for review or cause the objection to be set down for hearing accordingly.
33A. (1) Upon any review or appeal under this Act, unless the Court or Board otherwise orders, the objector shall be limited to the grounds stated in his objection and the Commissioner shall be limited to the grounds upon which he has disallowed the objection.
…
33B. (1) Subject to sub-section (2), where a decision is referred to the Victorian Taxation Board of Review, the Board shall review the decision, and may confirm reduce increase or vary the decision assessment or determination.

…
(3)For the purpose of reviewing the decision assessment or determination, the Board shall have all the powers and functions of the Commissioner in making decisions assessments and determinations under this Act and such decisions assessments and determinations of the Board and its decisions upon review shall for all purposes (except for the purpose of objections thereto and review thereof and appeals therefrom) be deemed to be decisions assessments and determinations of the Commissioner.
…
33C. (1) On the hearing of an appeal by the Court, the Court may make such order as it thinks fit and may by such order confirm reduce increase or vary the assessment.
(2)The costs of the appeal shall be in the discretion of the Court.

I accept that when the Victorian Parliament enacted the Taxation Appeals Act in 1972, it should be taken to have been aware of the construction given to the equivalent provisions of the Income Tax Assessment Act 1936 (Cth) by Dixon J in Avon Downs.[51] Moreover, on 7 January 1972, less than three months before the First Reading of the Taxation Appeals Bill,[52] Barwick CJ, Menzies, Windeyer and Owen JJ allowed an appeal from a decision of Walsh J, each essentially reasoning that his Honour erred in an appeal under the Income Tax Assessment Act 1936 (Cth) by failing to properly adopt the approach described by Dixon J in Avon Downs.[53] By way of example, Owen J, with whom Windeyer J agreed, said:[54]

On the appeal to Walsh J, it was for the taxpayer to show that the assessment was wrong and the onus lay upon it to establish that, on the material before the Commissioner, he had failed to address himself to the question which the subsection formulates or had made some mistake of law, or taken some extraneous reason into consideration or had excluded from consideration some factor which should have affected his determination (Avon Downs … per Dixon J. …).

[51]For example, during the debates, Tom Edmunds, the member for Moonee Ponds, reported that one judge had described the procedure on taxation appeals to the Supreme Court as “’an unsatisfactory procedure’ and another [had] referred to it as ‘an awkward, expensive, dilatory and generally unsatisfactory method of appeal’”: see Victoria, Parliamentary Debates, Legislative Assembly, 11 April 1972 at 4753-4754 (Mr Edmunds). Those drafting the bill may also be realistically assumed to have considered the High Court decisions about the nature of the scheme they were copying.

[52]Victoria, Parliamentary Debates, Legislative Assembly, 21 March 1972 at 4287 (Mr Hamer, Chief Secretary).

[53]Commissioner of Taxation (Cth) v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 at 44-62.

[54]Commissioner of Taxation (Cth) v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 at 59.

A few years later, in Ballarat Brewing Co Ltd v Commissioner of Pay-roll Tax (Vic)[55] (“Ballarat Brewing”) Gray J heard an appeal to this Court under the provisions of ss 33, 33A, 33B and 33C of the amendments made to the 1971 Pay-roll Tax Act, a de-grouping decision by the Commissioner of Pay-roll Tax under the de-grouping provisions that preceded those considered by Pagone J in Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (“Conte”).[56] His Honour held that:^[57]

it is clearly established that in cases where the taxpayer’s liability depends upon whether the Commissioner is or is not ‘satisfied’ of a particular state of facts, the appellant must show that the Commissioner’s decision miscarried upon the material before him.
The question which arises in such a case was stated by Dixon J in Avon Downs … at 360 …
I am satisfied that in order to attack the Commissioner’s “satisfaction” or the lack of it on a particular matter, no fresh evidence can be looked at until it is shown by the appellant that the Commissioner’s judgment miscarried in one of the ways stated by Dixon J in [Avon Downs].

[55](1979) 10 ATR 228.

[56](2011) 85 ATR 120.

[57]Ballarat Brewing Co Ltd v Commissioner of Pay-roll Tax (Vic) (1979) 10 ATR 228 at 235-6.

As Deputy President Macnamara observed in Baranov, there is a clear and direct lineage from the provisions of Division 2 of Part V of the Income Tax Assessment Act 1936 (Cth) through the facsimile provisions introduced in Victoria by the Taxation Administration Act 1972, to the present operative provisions of Part 10 of the TAA.[58] Thus, for the preceding reasons, it is my view that enacting the appeal provisions in Part 10 of the TAA, Parliament should be taken to have intended them to have the meaning expounded by Dixon J in Avon Downs and Gray J in Ballarat Brewing.
[58]Appellants’ Submissions on a Separate Question (9 February 2018), [35].

The Commissioner placed particular reliance on the decision of Ginnane J in Mould on the basis that his Honour held that the nature of the appeal provided by section 106 of the TAA depends on the character of the decision of the Commissioner against which the appeal is brought.[59] The principles or approach the Commissioner contends flow from this case are:[60]

(1) If the determination of an objection involves the application to the facts of ‘objectively stated statutory criteria’ in order to determine whether or not tax is payable, the appeal will be a de novo hearing on the evidence before the Court.[61]
(2) By contrast, where an assessment or decision involves the exercise of an administrative discretion or the formation of a state of mind by the Commissioner, the appeal will ordinarily be in the nature of judicial review of the Commissioner’s decision, requiring the demonstration of legal error: see Conte,[62] which involved a challenge to the exercise of a statutory discretion to ‘de-group’ related companies for payroll tax purposes.

[59]Transcript, 53; Respondent’s Submissions on Separate Question (23 February 2018), [10]; Mould v Commissioner of State Revenue (2014) 98 ATR 579 at 588, [35]. Compare Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (NSW) (2011) 245 CLR 446.

[60]Respondent’s Submissions on Separate Question (23 February 2018), [10].

[61]Mould v Commissioner of State Revenue [2014] VSC 268 at [45]-[47], referring to Feez Ruthning v Commissioner of Pay-Roll Tax [2003] 2 Qd R 41 at 48 [19], [22].

[62]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 122–4 [2]–[5].

Moreover, the Commissioner submits that the approach adopted by Ginnane J in Mould is consistent with the statutory context of Part 10 of the TAA, including:[63]

(1)       s 106, which relevantly provides that the taxpayer may request the Commissioner ‘to treat the objection as an appeal and cause it to be set down for hearing at the next sittings of the Supreme Court’, and that the Commissioner must ‘cause the objection to be set down for hearing accordingly’ – in other words, the subject matter of the appeal is the objection as opposed to the Commissioner’s determination under s 101 of the TAA;
(2) this is underlined by the fact that the right to have an objection treated as an appeal under s 106 of the TAA can arise in the absence of any determination by the Commissioner, namely, if 90 days have passed since the objection was received by the Commissioner;
(3) further, under s 109 of the TAA, the Court may make orders that the taxpayer’s case is not limited to the grounds of the objection, i.e. the taxpayer may rely on a ground of objection that has not been considered by the Commissioner in any determination under s 101 of the TAA;
(4)       s 110 imposes an onus on the taxpayer to prove its case on an appeal; and
(5)       s 112 confers wide powers on the Court to “make any order it thinks fit”, including to “confirm, reduce, increase or vary the assessment or decision”.[64]

[63]Respondent’s Submissions on Separate Question (23 February 2018), [11].

[64]The reference in s 112 to an ‘assessment or decision’ reflects the fact that the subject of an objection may be an assessment under the Taxation Administration Act 1997, or a decision of the Commissioner under the Payroll Tax Act: see Taxation Administration Act, s 96(1)(a), (d).

Returning to Conte, it will be recalled that the appellant objected to assessments made by the Commissioner on the basis that the appellant and another entity constituted a group.[65] Specifically, the appellant in that case objected on the basis that the Commissioner should have exercised the power under s 9A(1J) of the Pay-roll Tax Act 1971 and s 79 of the Act to “de-group” the entities. Each of those powers was conditioned on the Commissioner being “satisfied” of specified matters. The Commissioner gave reasons (as required by s 103(2) of the TAA) for not being satisfied of those matters.
[65]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 122 [1].

Justice Pagone dismissed the appeal. His Honour’s dispositive reasoning is conveniently summarised as follows:[66]
[66]Appellants’ Submissions on a Separate Question (9 February 2018), [17].

(1)Where:
(a)Parliament has conditioned a taxpayer’s payroll tax liability on the Commissioner being satisfied of a matter specified in the Payroll Tax Act 2007; and
(b)the Commissioner has disallowed an objection on the basis that the Commissioner is not satisfied of that matter;

then to succeed on an ‘appeal’ under Pt 10 of the Taxation Administration Act 1997, the appellant must establish an error affecting the Commissioner’s state of non-satisfaction, of the kind identified by Dixon J in Avon Downs. [67]
(2)The Commissioner disallowed the objection because the Commissioner was not satisfied of the matters specified in s 9A(1J) of the Pay-roll Tax Act 1971 and s 79 of the Payroll Tax Act 2007, which were conditioned on the Commissioner being satisfied of the specified matters.[68]
(3)Therefore, to succeed on the appeal, the appellant had to show an error of the kind identified in Avon Downs.[69]
(4)As (unlike in Avon Downs) the Commissioner gave reasons for disallowing the objection, the Court had to look to those reasons to see whether there had been a legal defect of the requisite kind.[70]
(5)The appellant could not demonstrate, in the reasons, a legal error of the kind identified in Avon Downs.[71]

[67]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360; Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 123-124, [4]-[5].

[68]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 124 [6].

[69]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 360; Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 125-6, [10].

[70]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 126 [10]-[11], 128 [15].

[71]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 127-129 [12]-[17].

Conte cannot, in my view, be distinguished from, what may be described as, the Avon Downs line of authority. The Commissioner submits that it can, because s 79 of the Payroll Tax Act confers a discretionary power, conditioned on a state of satisfaction.[72] I reject these submissions for the following reasons:[73]
[72]Transcript, 51; Respondent’s Submissions on Separate Question (23 February 2018), [24.1].
[73]Appellants’ Reply on Separate Question (9 March 2018), [3].

(1) The ‘de-grouping’ provisions at issue in Conte were in the nature of a discretionary power, conditioned on a state of satisfaction.
(2) Conte applied the principle articulated in Avon Downs (which must also be taken to have been understood by the Parliament that enacted the TAA)[74] to the formation of the state of satisfaction, not the exercise of the discretion. Justice Pagone observed: [75]
The provision in [Avon Downs], like those in question in this appeal, left it to the Commissioner, and not to the court, to be satisfied about certain matters. … Critical to the ‘de-grouping’ sought by Conte is that the Commissioner (and on review, the tribunal) rather than the court, be satisfied about certain matters.

For Conte to succeed in an ‘appeal’ to the court what must be shown is an error by the Commissioner in his reaching, or not reaching, a state of satisfaction.
(3) Avon Downs concerned a provision that was not in the nature of a discretionary power, but turned solely on a criterion conditioned on the Tax Commissioner’s satisfaction.[76] The subject-matter of that criterion turned on ‘the application of objective statutory criteria which [were] capable of application and determination by the [High Court]’,[77] as demonstrated by the alternative line of reasoning engaged in by Dixon J. [78]
(4) The dispositive reasoning in Conte—when properly understood as an application of Avon Downs to the TAA—cannot be distinguished and applies to the present appeal. As the Commissioner effectively endorses Conte,[79] there is no basis for considering whether Pagone J was clearly wrong. In any event, for the preceding reasons I am of the opinion that there is no basis to depart from the decision of Pagone J.
(5) Further, by reason of the legislative history of the provisions with which these proceedings are concerned, Parliament should be taken to have understood that conditioning s 32(2)(b)(iv) of the Payroll Tax Act 2007 on the Commissioner being ‘satisfied’ would result in an appeal to the Supreme Court on the basis of legal error of the kind identified in Avon Downs.

[74]Respondent’s Submissions on Separate Question (23 February 2018), [26]-[36].

[75]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 123 [4].

[76]Section 80(5) of the Income Tax Assessment Act 1936 (Cth), inserted by s 10 of the Income Tax Assessment Act 1944 (No. 3, 1944), provided “notwithstanding any other provision of this section, in the case of a taxpayer which is a private company within the meaning of Division 7 of this Part, no loss incurred by the company in any year prior to the year of income shall be an allowable deduction unless the company establishes to the satisfaction of the Commissioner that, on the last day of the year of income, shares of the company carrying not less than twenty-five percentum of the voting power were beneficially held by persons who beneficially held shares of the company carrying not less than twenty-five per centum of the voting power on the last day of the year in which the loss was incurred”.

[77]Respondent’s Submissions on Separate Question (23 February 2018), [4.3].

[78]Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353 at 363-5. By contrast, s 32(2)(b)(iv) of the Payroll Tax Act 2007 involves “a degree of subjectivity”: see Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194 at 205 [20].

[79]Respondent’s Submissions on Separate Question (23 February 2018), [24.1].

Moreover, by conditioning s 32(2)(b)(iv) of the Payroll Tax Act on the Commissioner’s state of satisfaction, Parliament has invoked “an ‘established drafting technique’ which has for more than a century been ‘used to make the holding of a particular state of mind by the repository a precondition to the performance of a duty or to the exercise of a power’.”[80] As has been recognised in a line of cases, it is no part of the role of a court, in reviewing that state of satisfaction, to determine “objectively ascertainable facts” as to which the Commissioner ought be satisfied.[81] That is consistent with Mould, where Ginnane J recognised the significance in Avon Downs and Conte of Parliament making the relevant criteria turn on the satisfaction of the Commissioner.[82]
[80]Wilkie v The Commonwealth (2017) ALJR 1035 at 1053 [98].
[81]Appellants’ Reply Submissions on Separate Question (9 March 2018), [4]; see Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 and Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611.
[82]Mould v Commissioner of State Revenue (2014) 98 ATR 579 at 588–9 [36]–[38]

The Commissioner further contends that there is nothing in the legislative history or contextual background to Part 10 of the TAA which requires a contrary approach.[83] In particular, it is said that neither the fact that the Victorian Civil and Administrative Tribunal is endowed with the powers and functions of the “decision-maker” (here, the Commissioner),[84] nor the fact that a taxpayer may elect to have an objection referred either to the Tribunal or to the Supreme Court, necessitate the conclusion that an appeal to the Supreme Court is confined to judicial review of the legality of the Commissioner’s determination of the objection or the legality of the assessment.[85] Consequently, it is said that while the Court may not “stand in the shoes” of the Commissioner in relation to the exercise of administrative discretions, the powers conferred on the Court by s 112 of the TAA are nevertheless wide and well adapted to the conduct of a de novo hearing of all issues of fact and law.[86] It should, however, be observed that the broad powers conferred on the Court by s 112 of the TAA in relation to appeals equally well accommodate appeals of a more limited nature as contended by the Appellants.[87] As is clear from the provisions of Part 10, the general empowering provisions of s 112 are to accommodate appeals of whatever nature coming before the Court which are subject to the provisions of that part. The broad provisions of s 112 are clearly intended to ensure that the Court is empowered to dispose of those appeals as the Court thinks appropriate—but always having regard to the nature of the particular appeal. Thus, to work from the general empowering provisions of s 112 as a means of characterising the nature of appeals under Part 10 is both to “put the cart before the horse” and to ignore the position that appeals under Part 10 may be very different in character, depending on their nature and the statutory environment from which they arose.
[83]Respondent’s Submissions on Separate Question (23 February 2018), [12].
[84]Victorian Civil and Administrative Tribunal Act 1997, s 51.
[85]Transcript, 45.
[86]Transcript, 45.
[87]Respondent’s Submissions on Separate Question (23 February 2018), 12; Transcript, 44–5.

As a general proposition, I accept that the application of statutory criteria to the facts in order to determine the correct amount of a taxpayer’s liability is a function that is equally capable of being conferred on and exercised by a court or an administrative tribunal. However, this general proposition does not, in my view, advance the resolution of the critical issue in these proceedings. Moreover, the decisions of the courts and the Victorian Civil and Administrative Tribunal to which reference has been made do not support the Commissioner’s position either in terms of legislative history, the provisions of Part 10 of the TAA or the relevance and effect of the interpretation of analogous provisions, particular those contained in the Income Tax Assessment Act 1936 (Cth).

In the latter respect, the Commissioner made particular reference to the nature of an appeal to the Federal Court from the disallowance of an objection to an income tax assessments (under s 14ZZ(c) of the Taxation Administration Act 1953 (Cth)).[88] This was considered in Kajewski v Commissioner of Taxation,[89] where Drummond J concluded that the taxpayer was entitled to challenge the correctness of both the amount of the assessment and any of the particulars of the assessment, referring to Brennan J in Deputy Commissioner of Taxation v Richard Walter Pty Ltd (“Richard Walter”) who stated that:[90]
[88]Respondent’s Submissions on Separate Question (23 February 2018), 14.
[89](2003) 52 ATR 455 at 457-61 [3]-[13].
[90](1995) 183 CLR 168 at 198.

[t]he procedures in Pt IVC of the Administration Act expose an assessment to correction if the application of the general provisions of the Act to the facts as found establishes that the assessment was excessive.

Drummond J noted that:[91]
[91]Kajewski v Commissioner of Taxation (2003) 52 ATR 455 at 459 [6].

it has long been accepted that it is necessary for the taxpayer to prove, by proper evidence put before the appeal Court, what is the correct amount of the taxpayer’s taxable income in respect of which the Commissioner should have made his assessment … [s]ubject only to s 14ZZO(a), the taxpayer is, in general, entitled to put before the appeal court evidence that may not have been before the Commissioner and to seek the Court’s decision on whether, on all the evidence before it on the appeal, an assessment different in amount from that issued by the Commissioner should issue.

Drummond J described the appeal as one: “against the factual and legal determinations made by the Commissioner in issuing the particular assessment in which the taxpayer has an extensive right to put additional evidence before the Court”.[92] Nevertheless, as the Commissioner observes in his submissions,[93] Drummond J accepted that there was “a limitation on the jurisdiction of the Court on an appeal under provisions of the kind now contained in Pt IVC to interfere with an appealable objection decision in so far as that decision may be based upon the formation of an opinion confided by the statute to the Commissioner”, referring to Avon Downs.[94] The Commissioner says further that, even in this situation, once the Court decides that the Commissioner’s opinion was affected by an error of the kind identified in Avon Downs, it may be open to the Court to determine what opinion ought to have been formed by reference to all of the material before the Court,[95] having regard to the width of the powers conferred on the Court in disposing of the appeal (which extend to reducing, increasing or otherwise varying the assessment).[96] As Brennan J said in Richard Walter:[97]

The jurisdiction of the Federal Court on appeal from, or of the Administrative Appeals Tribunal on review of, a decision on an objection extends to every issue which affects the amounts ultimately included in the taxable income or tax liability of a taxpayer. If any of these issues be resolved in favour of the taxpayer, an amendment of the assessment so as to reduce the taxable income or the tax liability of the taxpayer must follow.

The width of the powers conferred on the Court does not, however, assist in determining the nature of the appeal in relation to which those powers may be exercised. Rather, as indicated previously, this is to put the cart before the horse in terms of the analysis.[98]

[92]Kajewski v Commissioner of Taxation (2003) 52 ATR 455 at 459 [8].

[93]Respondent’s Submissions on Separate Question (23 February 2018) [14].

[94]Kajewski v Commissioner of Taxation (2003) 52 ATR 455 at 460 [10] [emphasis added].

[95]See Kolotex Hosiery (Australia) Pty Ltd v Federal Commissioner of Taxation (1975) 132 CLR 535 at 567-568, 576-577.

[96]Respondent’s Submissions on Separate Question (23 February 2018) [14]; Transcript, 59.

[97](1995) 183 CLR 168 at 199; see also Federal Commissioner of Taxation v AusNet Transmission Group Pty Ltd (2015) 231 FCR 59 at 64 [14].

[98]See above, [37].

The Commissioner also seeks to support this position on the basis that there is judicial authority in South Australia that supports the view that an appeal to the Supreme Court under s 92 of the Taxation Administration Act 1996 (SA) may be characterized as an appeal de novo.[99] These cases do not, however, raise the issue critical in the present proceedings, as the South Australian legislative context in which they were decided did not raise the possible application of the approval of Dixon J in Avon Downs and its subsequent line of authority.
[99]Respondent’s Submissions on Separate Question (23 February 2018), [16]. Cyril Henschke Pty Ltd v Commissioner of State Taxation (2008) 104 SASR 1 at 13 [36]; see also Port Augusta Medical Centre Pty Ltd v Commissioner Of State Taxation [2011] SASC 31 at [16]-[17]; Balgra Office Enterprises Pty Ltd v Commissioner of State Taxation [2008] SASC 50 at [20]-[21].

Building on these submissions, the Commissioner contends that although containing a reference to the Commissioner’s satisfaction (in relation to one component of one of the requirements for an exemption), s 32(2)(b)(iv) involves the application of objectively stated statutory criteria to the facts as agreed or determined by the Court.[100] Those criteria do not, the Commissioner says, involve the exercise of any administrative discretion, and are capable of application and determination by the Court in the exercise of its original jurisdiction under s 106 of the TAA.[101] Thus, it is submitted that the mere reference in a taxing provision to the satisfaction of the Commissioner cannot of itself confine the Court to judicial review of the Commissioner’s subjective state of mind on grounds of legal error.[102] This, it is said, is illustrated by the decision in Mould itself—where the relevant exemption under s 67 of the Land Tax Act 2005 turned on whether the Commissioner had determined (on an application made by the taxpayer) that the land was used solely for the business of primary production. Moreover, it is observed by the Commissioner that many of the exemptions under the Land Tax Act 2005 are expressed by reference to the Commissioner’s satisfaction of certain matters.[103] The position thus put by the Commissioner is said to be consistent with the approach that was adopted in Drake Personnel Pty Ltd v Commissioner of State Revenue.[104] That case concerned predecessor provisions in the Pay-roll Tax Act 1971 similar in terms to s 32(2)(b)(iv). Both the parties and the Court (at first instance and on appeal) proceeded on the basis that the Court stood in the Commissioner’s shoes for the purposes of the application of those provisions.[105] While Phillips JA noted that no point had been taken in that case about the nature of the appeal,[106] the decision in Drake Personnel shows that the Court was prepared to proceed on that basis. However, as discussed further in the reasons which follow, this decision does not, in my view, assist the Commissioner.[107]
[100]Transcript, 56; Respondent’s Submissions on Separate Question (23 February 2018) [10], [19].
[101]Respondent’s Submissions on Separate Question (23 February 2018), [12].
[102]Transcript, 67.
[103] Transcript, 54–5.
[104](1998) 98 ATC 4915; 40 ATR 304.
[105]Drake Personnel Pty Ltd v Commissioner of State Revenue (2000) 2 VR 635 at 643 [21].
[106]Drake Personnel Pty Ltd v Commissioner of State Revenue (2000) 2 VR 635 at 643 [21].
[107]See below, [51]-[52].

Moreover, though of course not decisive in these proceedings, reference should be made to the Commissioner Revenue Ruling PTA021,[108] as follows:
[108]Commissioner of State Revenue, Exemption for contractors ordinarily rendering services to the public, PT A021 1 July 2007.

Exemption for contractors ordinarily
rendering services to the public
Payroll Tax Act 2007
Revenue Ruling PTA021
Preamble
The Payroll Tax Act 2007 (the Act), which commenced on 1 July 2007, rewrites the Pay-roll Tax Act 1971 and harmonises the payroll tax legislation in Victoria and NSW.
…
Ruling
In exercising his discretion under section 32(2)(b)(iv) of the Act, the Commissioner needs to be satisfied that the contractor:
•provides the services in the course of conducting a genuine independent business, and
•ordinarily renders those services to the general public.

The mere fact that a contractor works on a succession of jobs for different principals does not mean that these criteria are satisfied. It is necessary to consider the steps undertaken by the contractor to create an independent business (i.e. to obtain work from clients other than the principal in question).
To seek an exemption under section 32(2)(b)(iv) of the Act, a principal is required to apply to the Commissioner for a private ruling. Details on how to apply for a private ruling are set out in Revenue Ruling GEN.009.
In making his determination, the Commissioner will review the contractor’s business and consider factors including (but not limited to):
•the use of a business name by the contractor
•the extent and nature of advertising undertaken by the contractor
•the range of clients serviced by the contractor
•the extent and nature of plant and equipment provided by the contractor in execution of the services
•the engagement of staff or sub-contractors by the contractor
•the use of business premises by the contractor
•the method of operation of the business (such as tendering for jobs)
•the potential for entrepreneurial risk
•the nature of contracts entered into (e.g. formal long term or informal rolled over contracts)
•the history of the formation of the contractor’s business
•how the contractor won the contract
•whether work is performed on separate contracts concurrently
•the nature of the contractor’s business and the type of services provided
•whether the contractor bears the cost and responsibility for faulty materials or workmanship
•whether the contractor quotes competitively for jobs on an all inclusive basis (all labour and materials), and
•whether the contractor merely charges for services on an hourly rate and adds on the cost of materials.

None of the above factors is conclusive on its own. The above is not an exhaustive list of factors that the Commissioner will take into account in exercising his discretion under section 32(2)(b)(iv) of the Act, he will also consider any other matters that are relevant to his decision.
…

This Ruling is clearly consistent with the position now put by the Appellants.
The significance of a choice between a Victorian Civil and Administrative Tribunal review and a Supreme Court appeal

The second contextual matter raised by the Appellants is the significance of: first, the choice given to the taxpayer by s 106 of the TAA whether to request that the Commissioner refer “the matter” to the Victorian Civil and Administrative Tribunal or treat the objection as an appeal and cause it to be set down for hearing at the next sittings of the Supreme Court; and secondly, the distinction between the functions of those two bodies under Part 10 of the TAA.[109]
[109]Appellants’ Submissions on Separate Question (9 February 2018), [37].

Pagone J, in Conte, commenced by observing that the option and choice given to the taxpayer by Parliament in s 106 of the TAA was “not without important significance”.[110] His Honour observed that s 106 gave the appellant a choice between reference to the Victorian Civil and Administrative Tribunal, which then “stands in the shoes of the Commissioner” on review, and treating the objection as an appeal to the Supreme Court, which does not then “stand in the shoes of the Commissioner” on appeal.[111] A relevantly similar choice is given to the taxpayer under the Income Tax Assessment Act 1936 (Cth).
[110]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 122 [2].
[111]Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 122–3 [2], [3].

This dual pathway approach to the provision of mechanisms to enable a taxpayer to review or appeal assessments has been maintained, consistently, in Victorian legislation, both as between different and complementary statutory provisions and also over time.

Under earlier legislation, the Victorian Taxation Board of Review was given “all the powers and functions of the Commissioner in making assessments, determinations and decisions” under that legislation and “such assessments, determinations and decisions of the Board and its decisions upon review [were] for all purposes … deemed to be assessments, determinations or decisions of the Commissioner”.[112] As Deputy President Macnamara noted in Baranov, that Board was abolished and its jurisdiction incorporated into the Administrative Appeals Tribunal, and when the then taxation administration legislation was repealed by the Administrative Appeals Tribunal Act 1984.[113] That jurisdiction is now exercised by the Victorian Civil and Administrative Tribunal under Part 10 of the TAA. Section 111(4) of the TAA provides that the powers conferred on that Tribunal by s 111(3) of that Act are in addition to its powers and functions under the TAA and the VCAT Act.
[112]Taxation Appeals Act 1972, ss 19D(3), 28(3), 33B(3), 33E(3), 37B(3).
[113]Baranov v State Revenue Office [2008] VCAT 2652 [33].

Section 48(b) of the VCAT Act provides that the Victorian Civil and Administrative Tribunal’s review jurisdiction is invoked by “a decision-maker referring a decision to the Tribunal under an enabling enactment in accordance with s 69 for review of the decision”. The TAA is an enabling enactment, and the Commissioner a decision-maker, as defined in s 3 of the VCAT Act. Section 51(1)(a) of the VCAT Act provides that, in exercising its review jurisdiction in respect of a decision, the Victorian Civil and Administrative Tribunal “has all the functions of the decision-maker”; “function” is defined in s 3 of the VCAT Act to include “jurisdiction, power, duty and authority”. Moreover, s 51(3)(a) of the VCAT Act relevantly provides that “a decision of a decision-maker as affirmed or varied by the Tribunal, or a decision made by the Tribunal in substitution for the decision of a decision-maker … is deemed to be a decision of that decision-maker”.

In Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue,[114] Gzell J rejected an argument that an appeal under the Taxation Administration Act 1996 (NSW) (“the NSW TAA”) from a de-grouping decision of the NSW Chief Commissioner of State Revenue under the Pay-roll Tax Act 1971 (NSW) had the character described by Dixon J in Avon Downs, holding instead that the appeal was in the nature of a full merits review. In so doing, His Honour distinguished Ballarat Brewing, saying:[115]

Reference was made to Ballarat Brewing … where Gray J adopted the approach of Dixon J in Avon Downs to the exercise of discretion of the Victorian Commissioner of Pay-roll Tax with respect to the grouping of the taxpayer with another company.
It was appropriate for his Honour to do so. The legislation with which he was concerned adopted the same dichotomy between the powers of the court and the powers of a tribunal that were in the provisions of the Income Tax Assessment Act 1936 (Cth) with which Dixon J was concerned.

[114](2009) 77 ATR 394.

[115](2009) 77 ATR 394 at 411-412 [149]-[150].

In contrast to Ballarat Brewing and the Victorian legislative regime, the NSW TAA conferred identical powers on the New South Wales Supreme Court and the Administrative Decisions Tribunal to “review” a decision of the NSW Commissioner. Thus, in rejecting the adoption of the Avon Downs characterisation, Gzell J said:[116]

The powers in the [NSW TAA], s 101 are quite different from the powers of a court on appeal under the Income Tax Assessment Act 1936 (Cth). They are specific and include the power to make an assessment or other decision in place of the assessment or decision the subject of the review. And any dichotomy between the powers of the Supreme Court and the powers of the Administrative Decisions Tribunal has been abrogated. The powers on review are the same for court and tribunal.

Section 101 of the New South Wales TAA conferred identical powers on “[t]he court or tribunal dealing with the application for review”: which were very similar to the powers of the Victorian Civil and Administrative Tribunal under s 51 of the VCAT Act.

[116]Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue (2009) 77 ATR 394 at 413 [165].

Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue was appealed, and the New South Wales Court of Appeal allowed an appeal, adopting an Avon Downs approach wherever the determination under review turned on a state of satisfaction. The Court of Appeal decision was, in turn, reversed by the High Court on appeal. In the course of argument, Crennan J observed that s 101 of the NSW TAA “evokes merits review”.[117] The High Court unanimously endorsed the reasoning of Gzell J at first instance, and held that reliance by the Court of Appeal on Avon Downs was misplaced, substantially for the reasons given by Gzell J.[118] The High Court also referred to observations in the second reading speech with respect to the relevant provisions of the NSW TAA that suggested an intention by the legislature to confer “concurrent jurisdiction” on the Administrative Decisions Tribunal and the New South Wales Supreme Court, so as to offer a choice between the “cheap and flexible review mechanisms offered by the [Administrative Decisions Tribunal]” and the “expertise of the Supreme Court”.[119]
[117]Tasty Chicks Pty Limited v Chief Commissioner of State Revenue (NSW) [2011] HCATrans 255 at 9, lines 293-5, 309.
[118]Tasty Chicks Pty Limited v Chief Commissioner of State Revenue (NSW) (2011) 245 CLR 446 at 453 [18] – 454 [20].
[119]Tasty Chicks Pty Limited v Chief Commissioner of State Revenue (NSW) (2011) 245 CLR 446 at 455 [21].

In my view, the reasoning of Gzell J, as endorsed by the High Court, is entirely consistent with the reliance by Pagone J in Conte on the significance of the distinction in Part 10 of the TAA between the functions of the Victorian Civil and Administrative Tribunal, in exercise of its review jurisdiction, and the functions of the Supreme Court on an “appeal”. In my view, this is reinforced when one contrasts the position under the New South Wales legislation which was considered by Gzell J and the provisions of Part 10 of the Victorian legislation, the TAA. Under the provisions of Part 10:[120]
[120]Appellants’ Submissions on Separate Question (9 February 2018), [47]–[48].

(1)       A person wishing to have a “cheap and flexible review” can apply to the Victorian Civil and Administrative Tribunal and have a relatively simple procedure and hearing. This enables many people to represent themselves,[121] or companies they control.[122]
(2)       A person wishing to have a merits review with the expertise of a judge of the Supreme Court, represented by senior and junior counsel, and a more formal, adversarial contest, can also apply to the Victorian Civil and Administrative Tribunal, and have a hearing of that kind.[123]
(3) If specific expertise is required and the President of the Victorian Civil and Administrative Tribunal is not available or does not possess the relevant expertise, a Supreme Court judge may be appointed on an ad hoc basis to hear any one or more proceedings under the provisions of s 29(1) and (3) of the VCAT Act.[124]
Thus, in Victoria, it is possible for a taxpayer in a complex case, with substantial financial consequences, to have a hearing before a Supreme Court judge either in:[125]
(1)       a merits review, where the Victorian Civil and Administrative Tribunal has all the functions of the Commissioner,[126] including to form for itself states of satisfaction conferred on the Commissioner, and can inform itself on any matter as it sees fit;[127] or
(2)       an appeal, where it can assert legal error by the Commissioner in a confined appellate proceeding, and seek to have the matter remitted to the Commissioner to be re-determined in accordance with law.[128]

Consequently, to construe Part 10 of the TAA as confining the Supreme Court, on appeal, to merits review on a de novo hearing significantly reduces the efficacy of the taxpayer’s choice, as it results in duplication and eliminates the historical choice given to the taxpayer without any clear legislative intention being discerned that Parliament intended that outcome. Accordingly, I am of the opinion that Part 10 of the Victorian legislation, the TAA, should not be construed in the same manner as the New South Wales TAA to confer concurrent jurisdiction on both the Victorian Civil and Administrative Tribunal and the Supreme Court.

[121]For a recent example, see Roach v Commissioner of State Revenue [2017] VCAT 342.

[122]For a recent example, see Motticant Pty Ltd v Commissioner of State Revenue [2017] VCAT 1820, where the applicant company was represented by a director, and the Tribunal constituted by an ordinary member.

[123]For an example of the President of the Tribunal sitting in a review proceeding heard over eight days, with lay and expert evidence and representation by experienced senior and junior counsel, see PTDA & Civic Nexus Pty Ltd v Commissioner of State Revenue [2016] VCAT 1457.

[124]See Premier Building & Consulting Pty Ltd v Spotless Group Ltd [2004] VCAT 1364; Pizza Fellas Pty Ltd v Eat Now Pty Ltd [2017] VSC 226 [1].

[125]Appellants’ Submissions on a Separate Question (9 February 2018) [47].

[126]Victorian Civil and Administrative Tribunal Act 1997, s 51(1)(a).

[127]Victorian Civil and Administrative Tribunal Act 1997, s 98(1)(c).

[128]Relief of that kind is clearly available. Justice Walsh made an order of that kind in Commissioner of Taxation (Cth) v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 at 44, although the appeal was allowed on other grounds. Such an order is also available on merits review: see Behmer & Wright Pty Ltd v Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1090 [22]; VCAT Act, s 51(2)(d) and 51A.

Moreover, Part 2 of Order 7 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 when read with s 109 of the TAA, does suggest a more confined role for the Supreme Court on appeal. This follows, in my view, because the documents filed in the proceeding are limited to: the assessment or decision of the Commissioner; the objection; the Commissioner’s determination of the objection; any other relevant documents in the Commissioner’s possession or control at the time of filing the appeal; and affidavit evidence from the objector setting out the acts, facts, matters and circumstances relating to the assessment or decision to which the objection was made and the ground or grounds upon which the objector relies.[129]
[129]Appellants’ Submissions on Separate Question (9 February 2018) [51].

The Supreme Court’s supervisory role

The third contextual matter raised by the Appellants is, it is contended, the consequences for the proper understanding of the role of the Supreme Court with respect to the privative clause in s 96(2) of the TAA.[130] This provision is that “[n]o court or administrative review body, including the Tribunal, has jurisdiction or power to consider any question concerning an assessment or decision referred to in subsection (1), except as provided by this Part”. In this context, it is submitted that confining the Courts to merit review deprives it of its usual supervisory role in respect of decisions of the Commissioner.[131] More particularly, it is said that ordinarily, the Supreme Court’s supervisory jurisdiction is “the mechanism for the determination and the enforcement of the limits on the exercise of State executive … power”.[132] Thus, it is said, the combined effect of ss 96(1)(a) and (c) and 96(2) of the TAA—at least when understood literally—is that the Supreme Court does not have jurisdiction or power to consider any question concerning an assessment or decision by the Commissioner under the Payroll Tax Act, except as provided by Part 10 of the TAA.[133] Consequently, if the Court has no power on an appeal under Part 10 to review decisions of the Commissioner under the Payroll Tax Act for legal error, then the taxpayer is deprived of the option to seek judicial review of the lawfulness of a decision. It is, however, conceded that there is no danger of Part 10 creating “islands of power immune from supervision and restraint”,[134] if construed as conferring concurrent merits review jurisdiction on the Victorian Civil and Administrative Tribunal and also on the Supreme Court. Nevertheless, and I think correctly on the basis of the preceding considerations, there are cases, like the present case, in which the taxpayer elects to appeal to the Supreme Court for a judicial review hearing where success would result in the matter being remitted for consideration by the Commissioner in light of the Supreme Court’s reasons. Moreover, the construction these provisions as adopted in Conte by Pagone J maintains the choice for an appellant taxpayer whether to seek merits review or legal review of a decision by the Commissioner under the Payroll Tax Act, formed on the basis of a state of satisfaction on the part of the Commissioner. For the preceding reasons, I am of the view that the terms of the legislation itself, the authorities and the contextual matters considered do militate against a construction of the TAA provisions which would remove taxpayer choice in this sense and conflate the two processes, whether in the Victorian Civil and Administrative Tribunal or in the Supreme Court.
[130]Appellants’ Submissions on Separate Question (9 February 2018) [52].
[131]Appellants’ Submissions on Separate Question (9 February 2018) [53].
[132]Appellants’ Submissions on Separate Question (9 February 2018) [53.1]; Kirk v Industrial Court (NSW) (2010) 239 CLR 531 at 580 [98].
[133]Appellants’ Submissions on Separate Question (9 February 2018) [53.2].
[134]Kirk v Industrial Court (NSW) (2010) 239 CLR 531 at 581 [99].

In relation to the nature of the Court’s supervisory role in the more limited appeal which I have found applicable in the present circumstances, it should be observed that the Court is not required to determine for itself whether the Court is satisfied of the matters set out in s 32(2)(b)(iv) of the Payroll Tax Act. Part 10 of the TAA either – on the authority of Avon Downs and Conte – precludes the Court from hearing a merits appeal on the question of satisfaction or, perhaps, enables the Court to hear a merits appeal if the parties proceed on that basis,[135] but it is not necessary to decide that question here, because the Appellants seek only a finding of legal error and remittal for assessment by the Commissioner.[136] I accept that it would be perverse to construe Part 10 as requiring the Court to re-make the decision for itself, when the appellant taxpayer seeks only identification of legal error and remittal for reassessment in accordance with the Court’s reasons.
[135]Respondent’s Submissions on Separate Question (23 February 2018), [4.3], [15].
[136]Appellants’ Submissions on a Separate Question (9 February 2018), [8].

As the Appellants observe, the effect of the Respondent’s Submissions would appear to be that the Court cannot hear an appeal on a ground of legal error affecting the Commissioner’s satisfaction and, if a legal error be found, remit the matter for reconsideration by the Commissioner, even where that is all the appellant taxpayer seeks.[137] One consequence of accepting those submissions would be that the Victorian Civil and Administrative Tribunal — which conducts a de novo hearing — has power under s 51(2)(d) of the VCAT Act to “set aside the decision under review and remit the matter for re-consideration by the decision-maker in accordance with any directions or recommendations of the Tribunal”, whereas the Supreme Court does not, even when it is only reviewing for legal error. Another consequence is that — in effect — a taxpayer can never approach the Supreme Court simply to supervise the legal limits of the Commissioner’s power – even in a case involving an error of law[138] or jurisdictional error.[139] It is compelled to establish the relevant matters, by admissible evidence, to the Court’s satisfaction. In the present appeals, that would require the Appellants to adduce admissible evidence about the individual business situation of 86 individuals, whose businesses are outside the control of EVS. The Appellants’ construction, by contrast, does enable:

(1)this Court to correct any error in the legal approach taken by the Commissioner to forming the state of satisfaction under s 32(2)(b)(iv), as it pertains to EVS’s situation;
(2)EVS to then seek to satisfy the Commissioner, applying the correct legal framework, of the relevant matters (without the need for an extended trial).

This outcome does, in my view, properly effect the scheme and intent of the applicable legislation and, for that reason, is to be preferred. As it was put by the Appellants:
In any event, an order setting aside and remitting is consistent with the Parliamentary intention that s 32(2)(b)(iv) turn on the Commissioner’s satisfaction, rather than the satisfaction of the Court.[140]
[137]Appellants’ Reply on Separate Question (9 March 2018) [2.2].
[138]Minister for Immigration and Ethnic Affairs v Wu Shan Liang (1996) 185 CLR 259 at 275-6.
[139]Minister for Immigration and Citizenship v Li (2013) 249 CLR 357 at 350 [26]–[27] (French CJ); Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at 650–2 [128]-[134] (Gummow J).
[140]See Conte Mechanical and Electrical Services Pty Ltd v Commissioner of State Revenue (2011) 85 ATR 120 at 123 [4], referring to Challenger Listed Investments Ltd v Commissioner of State Revenue (2010) 80 ATR 630 at 643 [29], where his Honour explained why remitter was appropriate. It is for the same reason, presumably, that Walsh J ordered in Commissioner of Taxation (Cth) v Brian Hatch Timber Co (Sales) Pty Ltd (1972) 128 CLR 28 at 43 that the assessment be set aside and the matter remitted to the Federal Commissioner of Taxation for assessment in accordance with the judgment. An appeal was allowed on other grounds (see Primary Submissions, paragraph 32), but Menzies J made observations (at 56) consistent with remitter being appropriate. An unrestrained remitter may not be desirable where the nature of the appeal grounds results in a trial and hearing of all relevant evidence: see the variation proposed by Gibbs J, and made by the Court despite dismissing the appeal, in Federal Commissioner of Taxation v ICI Australia Ltd (1972) 127 CLR 529 at 587, referring to Driclad Pty Ltd v Federal Commissioner of Taxation (1968) 121 CLR 45 at 64. But that is a question about the appropriate exercise of the unquestioned power to remit.

Other decisions under Part 10 of the TAA

As a result of legislative changes, by 1994, the Administrative Appeals Tribunal in Victoria performed the function previously performed by the Victorian Taxation Board of Review. By 1994, the Administrative Appeals Tribunal performed the function previously performed by the Victorian Taxation Board of Review. In Behmer & Wright Pty Ltd v Commissioner of State Revenue (Vic),[141] Presiding Member Pagone heard a matter referred to the Administrative Appeals Tribunal for review, in respect of a determination involving s 3C(1)(e)(v) of the 1971 Pay-roll Tax Act: the direct antecedent of s 32(2)(b)(iv) of the Payroll Tax Act. The Presiding Member observed, correctly in my view, that the effect of the powers conferred by s 33B of the 1971 Payroll Tax Act was that the Administrative Appeals Tribunal itself had to be satisfied that the person rendering the services was one who “ordinarily renders services of that kind to the public generally”.[142] Being satisfied of that matter in respect of certain payments, Presiding Member Pagone set aside the referred decision and remitted it to the respondent for assessment excluding those payments.[143]
[141](1994) 28 ATR 1082.
[142]Behmer & Wright Pty Ltd v Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1088 [16].
[143]Behmer & Wright Pty Ltd v Commissioner of State Revenue (Vic) (1994) 28 ATR 1082 at 1090 [22].

In Drake Personnel Ltd v Commissioner of State Revenue (Vic),[144] Balmford J heard an appeal under Part 10 of the TAA from a decision involving s 3C(1)(e)(v) of the 1971 Pay-roll Tax Act. Her Honour adopted Presiding Member Pagone’s substantive interpretation of s 3C(1)(e)(v).[145] Her Honour also appears to have adopted his procedural approach—of stepping into the shoes of the respondent; it does not appear that her Honour heard argument on the significance of s 33B of the Pay-roll Tax Act to the approach taken by Presiding Member Pagone. In any event, her Honour did not have sufficient evidence to determine the application of s 3C(1)(e)(v), and therefore declined to uphold that aspect of the appeal.[146] The Court of Appeal dismissed an appeal.[147] Justice Phillips noted that s 3C(1)(e)(v) had been raised for the first time by amendment at commencement of trial, the Commissioner never having been asked by the objection to form the requisite state of satisfaction. His Honour referred to Avon Downs, but was content to proceed on the joint position of the parties that the Court stood in the shoes of the Commissioner.[148]
[144](1998) 40 ATR 304.
[145]Drake Personnel Ltd v Commissioner of State Revenue (Vic) (1998) 40 ATR 304 at 314 [41].
[146]Drake Personnel Ltd v Commissioner of State Revenue (Vic) (1998) 40 ATR 304 at 315 [46], 321 [75]; Drake Personnel Ltd v Commissioner of State Revenue (Vic) (2000) 2 VR 635 at 642 [18] (Phillips JA).
[147]Drake Personnel Ltd v Commissioner of State Revenue (Vic) (2000) 2 VR 635.
[148]Drake Personnel Ltd v Commissioner of State Revenue (Vic) (2000) 2 VR 635 at 643 [21].

In my view, as contended by the Appellants,[149] the Drake Personnel decisions do not provide good reason for not following the reasoning of Pagone J in Conte for a variety of reasons. First, the Commissioner had never been asked to form a state of satisfaction under s 3C(1)(e)(v) of the 1971 Pay-roll Tax Act; secondly, the Commissioner did not object to the appellant amending its notices of objection at the commencement of the trial to rely on that provision; thirdly, it does not appear that Balmford J or the Court of Appeal heard any argument as to the nature of an appeal, or on the relevance of Avon Downs or Ballarat Brewing; fourthly, Phillips JA, who wrote the leading judgment for the Court of Appeal, clearly had significant doubts as to the correctness of the Court determining for itself whether it was satisfied of the specified matter, but followed the consent position of the parties; and, fifthly, the dispositive reason for the Court of Appeal’s decision to dismiss the appeal was that the payees were common law employees, such that s 3C(1)(e)(v) was not engaged in any event.[150]
[149]Appellants’ Submission on Separate Question (9 February 2018), [60].
[150]Appellants’ Submission on Separate Question (9 February 2018), [60]; Drake Personnel Ltd v Commissioner of State Revenue (Vic) (2000) 2 VR 635 at 654 [49] (Phillips JA, with whom Ormiston JA (at 638 [4]) and Buchanan JA (at 665 [79]) agreed).

In Mould,[151] Ginnane J did not doubt the correctness of the approach in Conte, where the determination involved a statutory condition that the Commissioner form a state of satisfaction. Indeed, it is correct in my view, that his Honour appeared to accept the correctness of that approach, following consideration of relevant authorities, including Avon Downs and Ballarat Brewing.[152] In my view, the decision of Ginnane J in Mould does, in fact, support the position advanced by the Appellants in the present proceedings. In LIV v Commissioner of State Revenue, Digby J expressed the view that the appellant was not required to identify legal error in respect of the Commissioner’s state of satisfaction as to the matter specified in s 48(1) of the Payroll Tax Act.[153] However, it should be kept in mind that his Honour stressed this view was unnecessary to the decision.[154] In any event, for the preceding reasons, I am of the opinion that the reasoning in Conte should be preferred.
[151]Mould v Commissioner of State Revenue (2014) 98 ATR 579.
[152]Mould v Commissioner of State Revenue (2014) 98 ATR 579 at 587-589 [33]-[43], 590 [47].
[153]Law Institute of Victoria v Commissioner of State Revenue (2015) 101 ATR 899 at 912-5 [66] - [67], [70] -[71].
[154]Law Institute of Victoria v Commissioner of State Revenue (2015) 101 ATR 899 at 912-5 [66] - [67], [70] -[71].

Conclusion

For the preceding reasons, the Court should, in my view, answer the separate question in respect of s 32(2)(b)(iv) of the Payroll Tax Act as contended for by the Appellants.

The parties are to bring in orders to give effect to these reasons. I otherwise reserve the question of costs and will hear the parties further in relation to that issue.

[2018] VSC 262

23 May 2018