Portaplant Australia Pty Ltd v Chief Commissioner of State Revenue
[2008] NSWADT 101
•3 April 2008
CITATION: Portaplant Australia Pty Ltd and anor v Chief Commissioner of State Revenue [2008] NSWADT 101
This decision has been amended. Please see the end of the decision for a list of the amendments.DIVISION: Revenue Division PARTIES: APPLICANTS
RESPONDENT
Portaplant Australia Pty Ltd and Recycled Resources Pty Ltd
Chief Commissioner of State RevenueFILE NUMBER: 076114 HEARING DATES: 25 March 2008 SUBMISSIONS CLOSED: 25 March 2008
DATE OF DECISION:
3 April 2008BEFORE: Block J - ADCJ (Judicial Member) CATCHWORDS: Payroll tax - grouping of corporations MATTER FOR DECISION: Principal matter LEGISLATION CITED: Payroll Tax Act 1971
Payroll Tax Act 2007
Taxation Administration Act 1996CASES CITED: Baxter v Chief Commissioner (1986) 7 NSWLR 122; 86 ATC 4816
CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384
Commissioner of Payroll Tax v RS Elsegood (Sales) Pty Ltd (1983) 1 NSWLR 223
FCT v Roger Crook & Associates Pty Ltd (2005) 142 FCR 273
Re Bolton; Ex parte Beane (1987) 162 CLR 514
Re Minister for Immigration and Multicultural affairs; Ex parte Miah (2001) 206 CLR 57 at 95REPRESENTATION: APPLICANT
RESPONDENT
J Oliver, solicitor
I Young, barristerORDERS: The Applicants were during the relevant period as defined in these reasons correctly grouped and the decision of the Respondent to do so is affirmed.
REASONS FOR DECISION
Part A Background and Introduction
1 The issue to be determined by the Tribunal is as to whether the Applicants were correctly grouped for payroll tax for the tax years ending 30 June 2004, 30 June 2005, and 30 June 2006 and in addition the period commencing 1 July 2006 and ending on 28 February 2007 (collectively referred to as “the relevant period”). On 3 April 2007, payroll tax assessments were issued against the Applicants in respect of the relevant period on the basis that, pursuant to sections 106I(1) and 106I(2)(c)(i) of the Taxation Administration Act 1996 (“TAA”) they had directors in common who had more than 50 percent of the voting power at meetings of directors.
2 The quantity of documentation before the Tribunal is quite extraordinarily large, and to a considerable extent unnecessarily so. The Tribunal had before it the documents (and also supplementary documents) lodged pursuant to section 58 of the Administrative Decisions Tribunal Act 1997. Written submissions in some detail were received from both parties. Witness statements were tendered and admitted as exhibits A1 and A2 respectively by each of the Jacksons (as defined hereafter); in the case of one of the exhibits the annexures attached to the other were inadvertently omitted but nothing turns on this omission; the witness statements are in substantially the same form and neither of the Jacksons was required for cross-examination. It is common cause that in respect of the whole of the relevant period each of the Applicants had only two directors and being Kenneth William Jackson and Thomas James Jackson (collectively referred to in these reasons as “the Jacksons”).
3 In addition to the documents referred to in clause 2 the Applicants submitted a large volume of documentation entitled “Applicants Bundle of Legislation and Texts” containing inter alia statutory material, an explanatory memorandum, a second reading speech, bills and a length report by Warren and another (and referred to as “the Warren report”) and other material, most of which might be referred to aptly as “the extrinsic material”. An agreed statement of facts formed part of the documentation before the Tribunal and at the hearing Mr. Oliver tendered yet another bundle of material entitled “Applicants’ Supplementary Bundle of Legislation.” It must be said that Mr Oliver has plainly made enormous efforts on behalf of his clients but it must also be said that some of the material submitted by him was of limited relevance.
4 There is no dispute of fact between the parties. During the relevant period each of the Applicants had only two directors and being the Jacksons, who are brothers. Portaplant Australia Pty Ltd had two shareholders each holding 50 percent of the issued shares and being Thomas Jackson and T.J & K.W Jackson Nominees Pty Limited as trustee of a Jackson family trust; Recycled Resources Pty Ltd had four shareholders and being the Jacksons and their wives. There is no dispute as to the fact that the Applicants ran separate businesses from separate premises.
5 During the relevant period the grouping provisions in respect of payroll tax were contained in TAA. Prior to 1 July 2002 they were contained in the Payroll TaxAct 1971; they were removed and inserted into TAA as from 1 July 2002. As from 1 July 2007 they were removed from TAA and inserted into the Payroll Tax Act 2007. There is no dispute as to the fact that the legislation with which the Tribunal is concerned is that set out in TAA and cited in Part B below.
6 It is perhaps relevant to note that under the Payroll Tax Act 2007 there is now a general degrouping power (but not where companies are related corporations); there is equally no dispute as to the fact that there was no degrouping provision which would have been relevant in relation to the relevant period for the purposes of this decision.
7 Although each of the parties submitted detailed written submissions the Respondent in his submissions dealt with relevant case law whereas the Applicants did not. During the course of lengthy argument during the hearing and which lasted for nearly 3 hours (most of the time being taken by Mr Oliver) Elsegood (referred to in more detail later in these reasons) was referred to at some length by each of Mr Young and Mr Oliver, and by both of them as favourable to his case. It was in fact favourable only to the Respondent.
8 Because the issue or issues similar to it arise in the Tribunal more often than might be anticipated the Tribunal proposes to deal with the case law and the submissions in rather more detail than might perhaps be thought necessary.
Part B The legislation
9 During the relevant period the applicable grouping provisions were contained in sections 106I(1) and 106I(2) of TAA reading as follows:
10 It will be noted then that sub-sections (c)(i), (c)(ii) and (d) of section 106I(2) set out in the case of a corporation the alternative bases on which corporations can be grouped. The use of the word “or” at the end of each of them indicates that they are alternatives. Sub-section (c)(i) is referred to as “the director grouping provision” and it is the subsection pursuant to which the Applicants were grouped in respect of the relevant period. The Respondent’s case is that the Jacksons were the only directors of each of the Applicants and as such had more than 50 percent of the voting power at meetings of directors.
Section 106I Primary groups of commonly controlled businesses
(1) If a person or set of persons has a controlling interest in each of 2 businesses, the persons who carry on those businesses constitute a primary group.
(2) For the purposes of this section, a person or set of persons has a controlling interest in a business if:
Note: Section 16B of the Payroll Tax Act 1971 allows the Chief Commissioner, for payroll tax purposes, to exclude persons from a group constituted under this section in certain circumstances.
(a) in the case of 1 person—the person is the sole owner (whether or not as trustee) of the business, or
(b) in the case of a set of persons—the persons are together the exclusive owners (whether or not as trustees) of the business, or
(c) in the case of a business carried on by a corporation:
(d) in the case of a business carried on by a corporation that has a share capital—that person or set of persons can, directly or indirectly, exercise, control the exercise of, or substantially influence the exercise of, more than 50 percent of the voting power attached to the voting shares issued by the corporation, or
(i) the person or each of the set of persons is a director of the corporation and the person or set of persons is entitled to exercise more than 50 percent of the voting power at meetings of the directors of the corporation, or
(ii) a director or set of directors of the corporation that is entitled to exercise more than 50 percent of the voting power at meetings of the corporation is under an obligation, whether formal or informal, to act in accordance with the direction, instructions or wishes of that person or set of persons, or
(e) in the case of a business carried on by a partnership—that person or set of persons:
(f) in the case of a business carried on under a trust—the person or set of persons (whether or not as a trustee or trustees of another trust) is the beneficiary in respect of more than 50 percent of the value of the interests in the first mentioned trust.
(i) own (whether beneficially or not) more than 50 percent of the capital of the partnership, or
(ii) is entitled (whether beneficially or not) to more than 50 percent of the profits of the partnership, or
Part C The contentions of the Applicants
11 The written contentions of the Applicants are lengthy and comprehensive; it is convenient to commence by including their content under the heads of “The Ordinary Meaning of section 106I(2)(c)(i)” “Ascertaining the meaning of section 106I(2)(c)(i) by reference to External Material’ and “The Avoidance Bill” (clauses 10 to 25) as follows:
12 The Respondent drew attention in particular to the fact that the Applicants contend, at paragraphs 12 and 13 of their written submissions, that in respect of section 106I(2)(c)(i) of TAA that:
10. Insofar as section 106I(2)(c)(i) applies to a set of persons, it describes the set being entitled. The entitlement is singular. It is submitted that the entitlement ought to be viewed as belonging to the set of persons.
11.Extracts from the Australian Oxford Dictionary of Current English, definitions of set and entitle are at T19(a). "Set" is defined as meaning "a number of things or persons that belong together ... a section of society consorting together or having similar interests". "Entitle" is defined as meaning, "give a just claim ... give a right". The Butterworth’s Concise Australian Legal Dictionary (extracted at T19(b) defines right as follows:
"Generally, a benefit or claim entitling a person to be treated in a certain way. More exact definitions vary according to the theoretical frameworks of the jurisprudential schools. The most frequently used definitions are those of Wesley Newcombe Hohfield, who drew a distinction between rights and liberties ... " [Emphasis added]
12. On the plain interpretation, therefore, it is insufficient for a number of directors to simply be at liberty to consort together. If the directors have not consorted together (or do not conduct themselves for a similar interest), then the directors are not a "set of persons entitled to exercise more than 50 percent of the votes".
13. Adopting the above, it is submitted that the phrase "set of persons entitled to exercise more than 50 percent of the voting power at meetings of the directors of both companies" ought to be interpreted as meaning:
ASCERTAINING THE MEANING OF SECTION 106I(2)(c) BY REFERENCE TO EXTERNAL MATERIAL
"a number of directors consorting together or acting in a similar interest who, by right (rather than liberty) hold and exercise more than 50 percent of the voting power at meetings of the directors of both companies, such that their individual votes ought to be treated as one vote".
14. Rules for interpreting NSW legislation are set out in Part 5 of the Interpretation Act 1987 ("the IA").
15. IA section 33 states that in interpreting an Act, a construction, which promotes the purpose or object underlying the Act, shall be preferred to a construction that would not promote that purpose or object.
16. IA section 34 states that, if material not forming part of the Act is capable of assisting in the ascertainment of the meaning of the provision, consideration may be given to that material' either:
17. Here, the ambiguity is obvious. The Chief Commissioner's interpretation is manifestly different from the interpretation propounded by the Applicants.
(a) to confirm the ordinary meaning of the provision (section 34(1)(a)); or
(b) to determine the meaning if the provision is ambiguous or obscure (section 34(1)(b)(i)); or
(c )to determine the meaning of the provision if the ordinary meaning leads to a result that is manifestly absurd or is unreasonable (section 34(b)(ii)).
18. It is submitted that in order to properly analyse the meaning of section 1061(2)(c)(i), regard must be had to its historical context.
The Avoidance Bill
19. The grouping provisions in the TAA were introduced by the Payroll Tax Legislation Amendment (Avoidance) Bill 2002 ("the Avoidance Bill"), which removed the provisions from the PTA. The relevant parts of the Explanatory Notes to the Avoidance Bill state as follows:
Grouping provisions
At present the Payroll Tax Act 1971 allows certain employers to be grouped together for payroll tax purposes, if the employers or the business that they conduct are in some way related or controlled by the same person or set of persons. The grouping provisions are an anti-avoidance measure. Those provisions are moved to the Taxation Administration Act 1996 (see Schedule 2).
The Payroll Tax Act 1971 also allows the Chief Commissioner of State Revenue to exclude persons from a group in certain circumstances if satisfied that the business carried on by the person is carried on substantially independently of other members of the group. At present, the power to exclude a member from a group is limited to cases where the employer is grouped with another because of the use of common employees. The amendments extend this power to situations where a person who carries on a business as a trustee of a trust is grouped with another person because of the grouping provisions relating to businesses that are controlled by the same person or set of persons.
Grouping provisions
New Part 10A re-enacts and simplifies certain provisions currently contained in Part 4A of the Payroll Tax Act 1971. [Emphasis added]
20. From this, one can make four conclusions:
21. Further conclusions can be drawn from the Second Reading Speech of Ms Meagher, Parliamentary Secretary, made in support of the Avoidance Bill, when she stated:
(a) The grouping provisions are an anti-avoidance measure (this is dealt with further below);
(b) The grouping provisions are concerned with businesses that are controlled by the same set of persons (as opposed to can be controlled by a group of persons);
(c) The Legislature intended to recognise that the grouping provisions ought not to apply, albeit in limited circumstances, to businesses that are carried on substantially independently from one another; and, importantly
(d) With the exception of those provisions relating to trusts, any amendment made by the Avoidance Bill to the terms of the grouping provisions was intended merely to re-enact and simplify the provisions.
22. Therefore, with the exception of those provisions relating to trusts, any amendment made by the Avoidance Bill to the terms of the grouping provisions was intended merely to simplify the provisions, using the Australian Capital Territory legislation as a model.
The existing grouping provisions under the payroll tax legislation assess related employers together as a group to prevent employers from splitting their businesses amongst several legal entities to reduce their payroll tax by claiming multiple threshold deductions. The advisers recommended that the payroll tax grouping provisions be strengthened in relation to trusts, and simplified using recent Australian Capital Territory legislation as a model ... The bill will transfer the simplified grouping provisions from the Payroll Tax Act to the Taxation Administration Act. [Emphasis added]
23. Curiously, no equivalent of section 106I(2)(c)(i) appeared in the PTA.
24.The relevant provision as it appeared in the PTA prior to the Avoidance Bill was section 16D(3)(a), which only applied in the circumstances in which section 106I(2)(c)(ii) of the TAA applies — that is, where a majority of the directors are accustomed or under an obligation to act in accordance with the directions, instructions or wishes of other persons.
25.It would therefore appear that, in merely seeking to simplify the provisions of the PTA, perhaps by accident, the grouping provisions of the TAA were enhanced to apply in situations, which previously were not governed by the grouping provisions of the PTA. One must question whether the Legislature necessarily intended to expand the reach of the grouping provisions (in the way that section 106I(2)(c)(i) does) at all.
13 The Respondent then notes that the requirement of directors “ consorting together or acting in a similar interest ” is repeated by the Applicants in paragraph 13 of their submissions, and that they (the Applicants) contend that this flows from the ordinary meaning of “a set of persons is entitled to exercise” greater than 50 percent voting power”, and that they referred in this regard to selective extracts from the Explanatory Notes and the second reading speech when the grouping provisions were inserted into the TAA.
“if the directors have not consorted together (or do not conduct themselves for a similar interest) then the directors are not a “set of persons entitled to exercise more than 50 percent of the votes”.
14 In the course of his oral submissions Mr Oliver dealt at some length with the meaning to be attributed to sub-section (d); he sought to justify those submissions on the basis that sub-section (c)(i) must be considered in the context of the legislation as a whole and in particular sub-section (d). I do not intend to deal with those submissions by Mr Oliver as to sub-section (d) simply because this case falls to be decided under sub-section (c)(i) (“the director grouping provision”) which is a separate and distinct subsection and thus obviating any need for any particular consideration of either of sub-section (c)(ii) or sub-section (d).
15 Mr Oliver’s contentions can conveniently be put in summary form on the basis that in relation to the director grouping provision a “set of persons’ must be construed so as to refer to two or more persons acting in concert and pursuant to an agreement or understanding obliging them to do so; he referred in particular in this context (although its relevance is not clear to me) to the dictionary meaning of “set” quoted earlier in these reasons and forming part of the Applicants’ written submissions.
16 Mr Oliver then went to refer to the Interpretation Act 1987 in order to contend that the extrinsic material must be referred to because it assists in the ascertainment of the meaning to be attributed to the relevant statutory provision under consideration.
17 He the proceeded to refer to the second reading speech by Ms Meagher (also referred to in the Applicants’ written submissions); that reference was followed by a reference to clause 6.3 of the Warren report at pages 74 and 75 the first part of which reads as follows:
6.3 Grouping — a common approach
Grouping is essential for economic neutrality in the treatment of different businesses under the payroll tax and workers compensation legislation. Neutrality is guaranteed by using broad grouping provisions with effective anti-avoidance capability. The underlying principles within the payroll tax grouping provisions provide a good basis for a common approach.
For workers compensation purposes, grouping must be mandatory to achieve neutrality, as the premium will vary with different entities within the group. In many - cases, the groups will require multi-tariff policies, as they will have business activities in more than one industry classification.
18 Mr Oliver then referred to the Explanatory Memorandum in respect of the comparable ACT legislation on the basis that the legislation in this State was modelled on the legislation in the Territory.
Minor amendments could improve the current payroll tax grouping provisions. The provisions relating to staff being used mainly or wholly for another business are complex and not easy to apply. It is recommended that they be re-written in plain language, as has recently been done in the ACT payroll tax legislation" In addition, although the grouping rules currently cover all types of entities, the provisions relating to trusts should be reviewed to ensure that they are adequate.
As a consequence, it is recommended that the current payroll tax grouping provisions be adopted for workers compensation purposes. This will be a major change to the workers compensation system, and remove a significant and reportedly increasing source of premium avoidance.
19 Mr Oliver contended in particular that sub-section (c)(i) will apply only where the directors holding more than 50 percent of the voting power at meetings of directors act, in accordance with an agreement or understanding, in concert with each other. He cited as a particular and relevant example the case of a single shareholder holding all the issued shares in a company who appoints two directors one being himself and the other his nominee, on the basis that the nominee will be bound to act in accordance with his directions. In the absence of such an agreement or understanding the directors will not be a set and so that the director grouping provision cannot apply. He contended in particular that a search of the ASIC records so as to ascertain who the directors are cannot and should not suffice given the investigative powers available to the Respondent.
Part D Case law
20 One of the leading cases on the proper approach to statutory construction is CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384. In that case, at page 408, Brennan CJ, Dawson, Toohey and Gummow JJ, said in their joint judgment:
21 The context, legislative purpose, mischief and existing state of the law, are clearly set out in two relevant decisions concerning the grouping provisions; they are Baxter v Chief Commissioner (1986) 7 NSWLR 122; 86 ATC 4816 and Commissioner of Payroll Tax v RS Elsegood (Sales) Pty Ltd (1983) 1 NSWLR 223.
“… the modern approach to statutory interpretation (a) insists that the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise, and (b) uses “context” in its widest sense to include such things as the existing state of the law and the mischief which, by legitimate means such as those just mentioned, one may discern the statute was intended to remedy.”
22 In Baxter, Yeldham J said at page 124 of the earlier form of the grouping provisions as follows:
23 In Elsegood , the matter was considered by the Court of Appeal (Hutley, Samuels, and Mahoney JJA) on appeal from the decision of Hunt J at first instance (82 ATC 4066). In that case Samuels JA said at page 226 as follows:
“ Part IVA of the Payroll Tax Act was introduced in 1975. It is obviously designed to prevent the splitting of businesses, and to avoid other devices for the minimising of any liability for payroll tax.”
24 In the same case Mahoney JA at page 229-230 as follows:
“In the present case the literal or descriptive construction is the one which achieves the legislature's intention which is plainly to give the grouping provisions an extensive reach; there are relieving provisions which may be applied if hardship results.”
Part E Further consideration of the contentions
“Tax relief was given by the Act to businesses employing less than a specified number of employees. Attempts have been, or could be, made by larger businesses to obtain that relief by splitting their businesses into a number of smaller or separate businesses, employing no more than the specified number of employees. The remedy adopted by the statute to avoid that mischief was to deny such relief to members of a "group"; to provide for the employees of "commonly controlled" businesses to be deemed to constitute a "group"; to define "group" for this purpose in wide terms so as hopefully to include all who might be involved in the avoidance of the purpose of the legislation; and to deal with such anomalies as might arise because of the wide terms of the definition of "group" partly by specific provisions: section 16E is perhaps directed to this, at least in part; and partly by committing to the Commissioner a discretion which he may exercise so as to remove such anomalies. Section 16H was seen as giving such a discretion.
… In my opinion the Act did adopt the suggested method of preventing the mischief whish was foreseen. That method is one of the recognized methods of dealing with evasion of taxation.”
25 The Respondent contends that the Applicants assert that the wide and “extensive reach” of the grouping provisions to overcome the mischief identified, namely the availability of multiple thresholds for commonly controlled businesses has been relaxed, and moreover relaxed in a manner, which is not objectively apparent from the face of ASIC records, namely, were the directors “consorting together or acting in a similar interest”.
26 The Respondent contends furthermore that the legislative context, history of the provisions, judicial consideration of the grouping provisions and the mischief to be overcome are clear. The Respondent contends that the Applicants’ construction is not consistent with the context, history, purpose and mischief intended to be overcome and defeats their intended, obvious and plain operation.
27 The Respondent contends that the Applicants by necessary implication, assert that the sub-section is to be construed as if it read as follows:
28 The Respondent contends that the wording contained in the preceding clause constitutes a significant rewrite of the director grouping provision. Moreover the Respondent has drawn the Tribunal’s attention to the fact that the precise construction advocated by the Applicants “ consorting together or acting in a similar interest ” was considered and rejected at first instance and by all members of the court in Elsegood . That case was concerned with the predecessor provisions of section 16D(2) and (3)(b) of the Payroll Tax Act 1971 which relevantly provided:
“ … the set of persons [consorting together or acting in a similar interest hold and in fact exercise] … more than 50 percent of the voting power at meetings of the directors of the corporation … ”
29 In Elsegood persons “A” and “B” had a controlling interest in the business of one company. In the second company, person “A” held 75 percent of the shares and person “B” held 5 percent of the voting power. Thus, “A” on his own held greater that 50 percent of the voting power, without “acting together” with B. The taxpayer’s argument was that A and B did not have together, or acting together, a controlling interest, because A had a controlling interest on his own and thus for this purpose did not need B’s vote.
(3) For the purposes of sub-section (2), the same person has, or the same persons have together, a controlling interest in each of two businesses if that person has, or those persons have together, a controlling interest under any of the following paragraphs in one of the businesses and a controlling interest under the same or another of the following paragraphs in the other business ... ''
“(b) a person has, or persons have together, a controlling interest in a business, being a business carried on by a corporation that has a share capital, if that person or those persons acting together may (whether directly or indirectly) exercise, control the exercise of, or substantially influence the exercise of, 50 per centum or more of the voting power attached to voting shares issued by the corporation; ... ”
30 At 82 ATC 4068 Hunt J as first instance stated that:
31 In the Court of Appeal, their Honours Hutley JA and Mahoney JA adopted the ordinary and straightforward construction of the section and applied a pure objective test, not dependant upon any interrelationship or understanding between the persons involved, and in that case shareholders in general meeting. At page 225 Hutley JA, with whose reasons Samuels JA agreed said:
“I should record one matter, if only for the purpose of putting it to one side. It is no part of the appellants' argument that the expression “acting together” requires some element of collusion or concert between the two or more shareholders before those shareholders could be said together to have a controlling interest.”
32 In the same case Mahoney JA stated at page 228 as follows:
“It is clear that the object of the clause is to deal with combinations of voting strength and to identify combinations of selected persons common to companies which have preponderant voting power. It is conceded that acting does not refer to any actual willingness to act together. The personal relations between the individual shareholders in a group do not affect the taxability of the companies.
This very case is an example of a simple way available to defeat the evident purpose of the legislature if the Respondents' construction prevailed.”
33 Accordingly, all four judges who heard the case rejected the contention that the prior section 16D(3)(b) required some element of the persons acting in “collusion or concert”.
“… I think that the provisions of paragraph (b) contemplate that there may be more than one person or group of persons having a controlling interest in the business of a particular company within that paragraph. This may be tested by an example. I shall assume that in a company there are only ten shareholders each of whom may exercise ten votes. In such a company, a number of combinations of persons could together exercise 50 percent or more of the voting power. There is nothing in the paragraph or the section as a whole, which, in my opinion, would warrant the conclusion, that one of such combinations rather than any other should alone be seen as having the “controlling interest” in the business of that company. It therefore follows that each of the combinations of persons able to exercise 50 percent or more of the voting power in the company would under paragraph (b) have a controlling interest in the business of that company.
Once it be accepted that there may be several combinations of persons who may have a controlling interest in the business of a company, I do not think that there is anything in the paragraph or the section warranting the conclusion that a controlling interest in the business of a company, within the meaning of paragraph (b), cannot be held at the same time by an individual and such a combination of persons. In relation to any particular company, a controlling interest may be held by an individual and a combination or combinations of several individuals”
34 The Applicants appear at least implicitly, (and as set out previously), to be contending that grouping will apply only where the directors are “consorting together or acting in a similar interest”. The Respondent contends (and in my view correctly) that the words “acting together” (the words in Elsegood) are more amenable to an interpretation that some element of concert was required. Samuels JA was “at first attracted” to the argument and Hutley JA thought that it had “a certain plausibility” to it. It is clear though that the words, a “set of persons is entitled to exercise” are clearer than “persons acting together” when considering the question of control of more than 50 percent of the voting power. Put in other words the taxpayer in Elsegood was unsuccessful on wording which on a proper reading was at least on a prima facie basis more likely to lead to a favourable result than is the wording in the director grouping provision.
35 The words of section 106I(2)(c)(i) of TAA are clear and unambiguous, and accordingly the decision and reasoning in the Court of Appeal must a fortiori apply. As there is no ambiguity, recourse to extrinsic materials is unnecessary and serves no useful purpose. In any event and even if it were necessary to have regard to the extrinsic materials, the Tribunal does not accept that they assist the Applicants. The fact that legislative provisions were rewritten in order to simplify them cannot be construed as an intention to relax or repeal any of them. The fact that the NSW provisions may have been modelled on the ACT provisions does not have the effect that they must be construed as if they were the same. The extrinsic materials to which the Tribunal was referred at such length point merely to a desire to rewrite the provisions in more comprehensible language, coupled with a desire to eliminate avoidance.
36 Moreover and in any event, the terms of the director grouping provision are altogether clear and “the words of a minister must not be substituted for the text of the law” per Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518 and “the same considerations apply to the words of an Explanatory Memorandum as apply to the words of a Minister”: see FCT v Roger Crook & Associates Pty Ltd (2005) 142 FCR 273 at 278 per French J and Re Minister for Immigration and Multicultural affairs; Ex parte Miah (2001) 206 CLR 57 at 95.
37 If only because there was so much discussion at the hearing of grammatical aspects (and which I need not deal with in any detail) I should, if only for the sake of completeness, refer to the use in the director grouping provision of the word “set” and in respect of which the Applicants provided a dictionary meaning. The word “set” in its context in the director grouping provision did no more than indicate the plural; other words could have been used and the word ‘set” was the one chosen perhaps because it is neutral at least when compared with the term “group” which might perhaps have had an unintended connotation. Once it is accepted that “set” does no more than connote the plural there is no basis for a contention that it will apply only to directors who are bound by agreement or an understanding to vote together. Of course and on a simplistic basis the directors of a company will always have an interest in common and related to the affairs and (hopefully) success of the company of which they are directors. The fact that they may not agree as to what is in the best interests of that company on any particular matter or matters will not generally detract from the fact that they have such an interest in common. Regarded in this fashion the meaning to be attributed to the word “set” and for which the Applicants in their written submissions contend makes at least some sense. But the word ‘set”, construed in this fashion cannot be extended to mean directors who are bound by agreement or understanding to act in relation to the company in the same way.
Part F Conclusion
38 The relevant statutory provision is in all respects clear. Grouping applied, during the relevant period, inter alia where in relation to two or more companies the same directors had more than 50 percent of the voting power at meetings of directors. As to whether at meetings of directors the directors at any time and from time to time acted in concert with each other and thus presumably in the same way and whether in consequence of an agreement or understanding or otherwise was in no way material. In the same context it would not matter if any one or more of them did not vote at all. The section makes it clear that grouping applies where they had the necessary power at meetings of directors, and it is abundantly clear that in relation to the Applicants and during the relevant period the Jacksons, who were the only directors of both Applicants, had that necessary power.
39 It follows that the decision of the Respondent pursuant to which the Applicants were during the relevant period grouped for payroll tax purposes was correct and that decision by the Respondent must be affirmed.
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