Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue

[2019] NSWSC 744

Supreme Court

New South Wales

Medium Neutral Citation:	Securecorp (NSW) Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 744
Hearing dates:	16 May 2019
Date of orders:	21 June 2019
Decision date:	21 June 2019
Jurisdiction:	Equity
Before:	Payne J
Decision:	(1) Summons dismissed. (2) The plaintiff to pay the defendant’s costs.
Catchwords:	TAXES AND DUTIES – payroll tax – liability to taxation – arrangements affecting liability to tax – objections and appeals – review of assessments pursuant to s 97(4) of the Taxation Administration Act 1996 (NSW) TAXES AND DUTIES – payroll tax – employment agency contracts – interpretation of s 37(1) of the Payroll Tax Act 2007 (NSW) – meaning of “employment agency contract” – whether it is only the “employment agent” closest in the chain of contractual arrangements leading up to the procurement of the services of another person or persons (the service providers) for an end user (the client) on whom liability for payroll tax arises
Legislation Cited:	Corporations Act 2001 (Cth), Ch 5C Interpretation Act 1987 (NSW), ss 34(1), 34(2)(f) Payroll Tax Act 2007 (NSW), ss 8-9, Div 8 of Pt 3 Pay-roll Tax Act 1971 (NSW) Pay-roll Tax (Amendment) Act 1987 (NSW) Pay-roll Tax (Amendment) Act 1985 (NSW) State Revenue Legislation (Miscellaneous Amendments) Act 1998 (NSW) Supreme Court Act 1970 (NSW), s 19(2) Taxation Administration Act 1996 (NSW), ss 97(4), 100(3)
Cases Cited:	Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657 Drake Personnel Ltd v Commissioner of State Revenue (Vic) (Supreme Court (Vic), Balmford J, 23 June 1998, unrep) Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503; [2012] HCA 55 Freelance Global v Chief Commissioner of State Revenue [2014] NSWSC 127 H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 Knight Watch Security Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 223 JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391 Norrie v NSW Registrar of Births, Deaths and Marriages (2013) 84 NSWLR 697; [2013] NSWCA 145 Re Bolton; Ex parte Beane (1987) 162 CLR 514; [1987] HCA 12 Smith’s Snackfood Company Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470 Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue of New South Wales (2011) 245 CLR 446; [2011] HCA 41 UNSW Global Pty Limited v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577 Waugh Hotel Management Pty Ltd v Marrickville Council [2009] NSWCA 390
Category:	Principal judgment
Parties:	Securecorp (NSW) Pty Ltd (Plaintiff) Chief Commissioner of State Revenue (Defendant)
Representation:	Counsel: M Condon SC / D Barlin (Plaintiff) S Balafoutis / D Stretton (Defendant)   Solicitors: White Ellis Lawyers (Plaintiff) Crown Solicitor’s Office (Defendant)
File Number(s):	2018/00114715
Publication restriction:	None

Judgment

1. PAYNE J: This is a case arising under s 37 of the Payroll Tax Act2007 (NSW). Securecorp (NSW) Pty Ltd (“Securecorp”) is a provider of security services under contracts with, inter alia, Westfield Shopping Centre Management Co Pty Ltd (“Westfield Management Co”) and Jones Lang LaSalle (NSW) Pty Ltd (“JLL”).

2. On 29 September 2016, the Chief Commissioner issued Securecorp payroll tax assessments on amounts it paid to its subcontractors under security subcontracts for the financial years ended 30 June 2012 to 30 June 2015 (“the relevant period”). It is not in dispute that the subjects of the review are the assessments as opposed to subsequent decisions on the objection. The proceedings are an “appeal” for the purposes of s 19(2) of the Supreme Court Act 1970 (NSW) and s 97(4) of the TaxationAdministration Act 1996 (NSW); the review is a de novo review not limited to the material before the Chief Commissioner: Tasty Chicks Pty Ltd v Chief Commissioner of State Revenue of New South Wales (2011) 245 CLR 446; [2011] HCA 41 at [12]-[22]. The plaintiff bears the onus of proving their case on the balance of probabilities: s 100(3) of the Taxation Administration Act.

3. Although there were a number of issues raised in the pleadings, at the hearing before me, Mr Condon SC who appeared with Mr Barlin for Securecorp, pressed only challenges to the assessments as they related to contracts between Securecorp and Westfield Management Co and Securecorp and JLL.

4. Concerning Westfield Management Co, the contracts between Securecorp and Westfield Management Co related to eight shopping centres. The owners of those centres, usually a responsible entity under a managed investment scheme, had separate contracts with Westfield Management Co, which were also in evidence before me.

5. Concerning JLL, the contracts between Securecorp and JLL related to three office buildings. The owners of those buildings had separate contracts with JLL, which were in evidence before me.

6. Securecorp accepted that the contracts it had with Westfield Management Co and JLL all fell within the language of s 41 of the Payroll Tax Act but submitted that the language should be read down. For the reasons that follow that submission should be rejected and the proceedings dismissed with costs.

Relevant facts

7. Securecorp read the affidavits of John Keith Orr-Campbell sworn on 24 September 2018 and Andrew White sworn on 11 April 2018. Mr Orr-Campbell was the joint managing director of the Securecorp Group until 17 June 2016. He set out in his affidavit the contractual arrangements between Securecorp, its clients and its subcontractors, the process of engaging subcontractors and the licences and insurance required to provide security services. He annexed to his affidavit Securecorp’s financial reports, company tax returns and the relevant contracts between Securecorp, its clients and its subcontractors. Mr White, solicitor for the plaintiff, annexed to his affidavit notices of assessments for the relevant period, a notice of objection to the assessments and various correspondence between Securecorp and the Chief Commissioner. There was no cross-examination of these witnesses. My findings based on the affidavits and documentary evidence are as follows.

8. Securecorp principally provides security services in New South Wales. Some of these security services are provided by Securecorp’s employees. The assessments here in issue do not relate to services performed by Securecorp’s employees. Some of these security services are provided by persons provided by subcontractors. Securecorp engages, via subcontract, other companies who carry out security services for Securecorp’s clients.

9. Securecorp engages its subcontractors as follows:

1. the subcontractor must enter into Securecorp’s standard form Security Services Agreement, which includes terms, inter alia, requiring the subcontractor to comply with all of the head contract terms and provisions and certify that all taxes, wages and liabilities (including payroll tax for the subcontractor’s own employees) are paid;

2. the subcontractor is required to sign a Subcontractor’s Statement making a declaration, inter alia, that the subcontractor has paid all payroll tax due in respect of its employees who have performed work for Securecorp; and

3. the subcontractor provides its own employees to Securecorp at an hourly rate.

Westfield Management Co contracts

10. The relevant contracts between Securecorp and Westfield Management Co relate to eight shopping centres: Westfield Bondi Junction, Westfield Kotara, Westfield Hornsby, Westfield Liverpool, Westfield Miranda, Westfield Mount Druitt, Westfield Penrith, and Westfield Sydney.

11. The registered proprietor of each relevant shopping centre is usually a responsible entity of a managed investment scheme (within the meaning of Ch 5C of the Corporations Act 2001 (Cth)). Each Responsible Entity is responsible, within that shopping centre, as the owner of the land. The owner of each shopping centre engaged Westfield Management Co to provide security services at the shopping centre. In evidence before me were the Property Management Agreements for:

1. Westfield Bondi Junction between Westfield Management Co, Westfield Management Ltd and RE1 Ltd, Westfield Ltd, and Westfield Management Ltd dated 20 December 2010. Westfield Management Ltd (as trustee for the Westfield Sub Trust F) and RE1 (as responsible entity of the Westfield Retail Trust 1) are together the unitholders. Westfield Management Ltd (as responsible entity of the Bondi Junction Trust) is the property owner;

2. Westfield Kotara between Westfield Management Co, Westfield Management Ltd and RE1 Ltd, Westfield Ltd, and Westfield Custodian Pty Ltd dated 20 December 2010;

3. Westfield Hornsby between Westfield Management Co, Westfield Management Ltd and RE1 Ltd, Westfield Ltd, and Perpetual Trustees WA Ltd dated 20 December 2010;

4. Westfield Liverpool between Westfield Management Co, Kent Street Pty Ltd and Westfield Management Ltd, Westfield Holdings Ltd, and Westfield Ltd dated 7 December 2001;

5. Westfield Miranda between Westfield Management Co, National Mutual Life Association of Australasia Ltd, Didus Pty Ltd, and PT Ltd dated 3 April 1990;

6. Westfield Mount Druitt between Westfield Management Co, Westfield Management Ltd and DB RREEF Funds Management Ltd, Stonehenge Pty Ltd, and Westfield Holdings Ltd dated 23 December 2004;

7. Westfield Penrith between Westfield Management Co, GPT RE Ltd and Westfield Management Ltd, Westfield Holdings Ltd, and Westfield Ltd dated 21 December 2005; and

8. Westfield Sydney between Westfield Management Co, Westfield Management Ltd and RE Nominee Co Pty Ltd, and Westfield Ltd dated 20 December 2010.

12. Westfield Management Co engaged Securecorp to provide security services to it to enable Westfield Management Co to provide security services to the owner of the shopping centre. In evidence before me were the Security Services Agreements between Securecorp and Westfield Management Co for:

1. Westfield Bondi Junction dated 1 July 2012;

2. Westfield Kotara dated 1 July 2012;

3. Westfield Hornsby dated 1 July 2012;

4. Westfield Liverpool dated 1 July 2014;

5. Westfield Miranda dated 1 July 2014;

6. Westfield Mount Druitt dated 1 July 2014;

7. Westfield Penrith dated 1 July 2013; and

8. Westfield Sydney dated 1 July 2010.

13. It was common ground that the Property Management Agreements and the Security Services Agreements were relevantly identical for each shopping centre, and that the agreements for Westfield Bondi Junction contained identical terms with the other agreements. Accordingly I will set out the relevant clauses of the Westfield Bondi Junction agreements and treat them as relevant to all of the Westfield agreements.

Contract between Westfield Management Co and the shopping centre owners

14. In relation to Westfield Bondi Junction, there is a Property Management Agreement dated 20 December 2010 between Westfield Management Co (referred to as the Manager), Westfield Management Ltd (as trustee for the Westfield Sub Trust F) and RE1 Limited (as responsible entity of the Westfield Retail Trust 1) (together referred to as the Unitholders), Westfield Ltd, and Westfield Management Ltd (as responsible entity of the Bondi Junction Trust) (referred to as the Property Owner).

15. Clause 1.1 relevantly defines the following terms:

“Contractors means persons employed by the Manager from time to time under contracts for the provision of maintenance, security, cleaning, protection and other services for the Centre under this Agreement.

…

Management Committee means the committee constituted by clause 2.3 of this Agreement.

…

Operating Expenses means the total for each relevant period (wherever incurred) of the outgoings, costs and expenses incurred in respect of the Centre including, without limitation:

…

(vii) the costs of fees, salaries, bonuses, wages, benefits, superannuation, pension payments, workers’ compensation and other insurance premiums, payroll tax, fringe benefits tax and all other costs incurred in the employment of the Centre Employees, Contractors and Consultants for the Centre;”

16. Clause 2.1 states:

“The Unitholders and the Property Owner appoint the Manager to be the sole manager and agent for the purposes of leasing, managing, operating, promoting, maintaining and administering the Centre in accordance with this Agreement.”

17. Clause 2.3.1 states:

“Westfield and RE1 hereby establish a Management Committee. For the period during which the WRT Group and the Westfield Group each hold 50% of the Units in the Bondi Junction Trust, the Management Committee shall consist of 4 members (and 4 alternates in the case of their nominated members being unable to attend) 2 appointed by the WRT Group and 2 appointed by the Westfield Group.”

18. Clause 2.3.14 states:

“The Management Committee shall consider all matters pertaining to the management and ownership of the Centre including recommendations from the Manager to the Management Committee or to the Unitholders and any other duty and function as may be assumed and undertaken by the Management Committee and shall refer to the Unitholders’ Committee any proposal or suggestion of the Manager or any other person as to the effecting of any works which fall outside those works to be undertaken by the Manager in accordance with this Agreement.

Without limiting the generality of the foregoing the Management Committee will subject to the terms of this Agreement:

(a) review and approve Operating and Capital Budgets and consider applications for additional expenditure;

(b) review and approve standard form documents for the Centre;

(c) give directions to the Manager with respect to the effecting of insurances;

(d) in accordance with clause 3.4(b) review and approve non-standard form Leases and Licences where material variations have been made provided that in so doing the Management Committee shall give due consideration to the recommendations of the Manager made in respect of such variations and shall not unreasonably refuse to give its approval thereto;

(e) procure the execution of all Leases in accordance with the procedure for execution of Leases and Licences contained in clause 9.6 of this Agreement;

(f) authorise and direct the Manager in relation to:

(i) all litigation relating to or arising out of the Centre (whether or not the Property Owner is or will be a party to such litigation) including without limiting the generality of the foregoing the recovery of rent or possession from Occupants; and

(ii) the prosecution of claims made under insurance policies arranged by the Manager pursuant to this Agreement.”

19. Clause 3.1 sets out the Manager’s obligations which relevantly include:

“(iv) engage, employ and supervise all Contractors, Consultants and Centre Employees necessary for the performance by the Manager of its Obligations under this Agreement and perform all Obligations under the engagements and contracts;

(v) administer all engagements and employment contracts and arrangements including, without limitation, the deduction of income tax instalments on the Group Certificate method for and the payment of entitlements in respect of holiday pay, sick pay and long service leave under the provisions of any relevant industrial award and any other benefits to the Centre Employees;”

20. Clause 3.2 sets out the Manager’s powers which relevantly include:

“(vii) instruct or retain the Consultants and engage and employ the Contractors and Centre Employees necessary or in the Manager’s opinion desirable to effect management and conduct of the Centre;

…

(b) The Manager will not be liable for failing to perform an Obligation under this Agreement if, on receipt of request to do so from the Manager, the Management Committee has not made a decision or recommendation or provided the Manager with a direction, approval or consent necessary for the performance of that Obligation.”

21. Clause 4.6(b) states:

“… Westfield Limited must withdraw the amount standing to the credit of the Operating Trust Account (less any amount that the Manager in the Manager’s reasonable opinion, directs is necessary to retain in order to ensure that Operating Expenses falling due for payment from time to time can be paid as and when they fall due and the amount (if any) which the Management Committee requires retained as a reserve) and apportion and place those amounts in the Unitholders Accounts in accordance with their respective interests.”

22. Clause 8.1 states:

“Subject to clause 12.15, the Manager must deliver a statement to the members of the Management Committee within 20 calendar days after the end of each calendar month (or within 20 calendar days after the end of such other period as may be agreed between the parties) (period) in the format provided by [Westfield Management Co] in respect of Westfield Bondi Junction as at the date of this Agreement including, without limitation:

…

(p) a list of Occupants, Consultants or Contractors which to the Manager’s knowledge are in material default of their Obligations under their respective Leases, Licences, contracts or arrangements, showing the nature of the default, the steps taken by the Manager to enforce each Lease, Licence, contract or arrangement and the status of each matter;”

23. Clause 8.5 states:

“(a) The Manager must maintain proper and sufficient management accounts and records for the Centre to enable the Manager to efficiently, properly and professionally perform its Obligations under this Agreement and to enable any member of the Management Committee to quickly and easily obtain any information concerning the Centre reasonably required by that member and must keep such management accounts and records for at least 7 years.

(b) Without limiting sub-clause (a), the Manager must keep:

…

(ii) a record of all contracts or arrangements made with Contractors or Consultants containing details of the essential terms of such contracts or arrangements;”

Contract between Westfield Management Co and Securecorp

24. In relation to Westfield Bondi Junction, there is a Security Services Agreement for Westfield Bondi Junction dated 1 July 2012 between Securecorp (referred to as the Contractor) and Westfield Management Co (referred to as the Manager).

25. Clause 1.1 relevantly defines the following terms:

“Contractor’s Employees means the direct employees of the Contractor and the employees of any subcontractor authorised under clause 11.1.

…

Service means the provision of the service specified in Item 6 of Schedule 1 for the Shopping Centre.”

26. Clause 3.1 states:

“The Contractor will supply the Service:

(a) in accordance with the Specification and otherwise at the times and in the manner specified by the Manager;”

27. Clause 4.3 states:

“The Manager may at any time either verbally or in writing inform the Contractor that:

(a) a particular person is not to be employed for any purposes in relation to the Agreement;

(b) a Contractor’s Employee or any other person employed for any purpose in relation to the Agreement must cease providing the Service; and/or

(c) a Contractor’s Employee or any other person employed for any purposes in relation to the Agreement must immediately be removed from the Shopping Centre or other place where the Service is being provided,

and the Contractor will take all reasonable steps to comply with that direction and ensure that the relevant person complies with that direction.”

28. Clause 6 states:

“6.1 The Manager may withhold any payment due to the Contractor if the Contractor is in breach of any provision of this Agreement.

…

6.4 The Contractor must, with each invoice, provide the Manager with the statement as set out in Schedule 6:

(a) that all employees who have at any time been employed by the Contractor have been paid all monies due and owing to them in respect of their employment by the Contractor;

…

(d) that all pay-roll tax payable by the Contractor in respect of wages paid or payable to employees for work done in connection with the Services has been paid;”

29. Clause 11.3 states:

“The Contractor will, at the Contractor’s expense, ensure that all of the Contractor’s Employees working at the Shopping Centre to provide the Service wear a uniform which is approved by the Manager.”

30. Clause 14.3 states:

“The Contractor must not use the Westfield Intellectual Property without the express written consent of Westfield. In the event that the Manager gives its consent to the Contractor using the Westfield Intellectual Property the Contractor may only do so in accordance with the conditions specified by the Manager in giving that consent and on the basis that it:

(a) will only use Westfield Intellectual Property on promotion and advertising approved by the Manager in its absolute discretion and not in any way so as to endorse any other persons, goods or services

(b) not use any of Westfield Intellectual Property in a manner likely to prejudice the distinctiveness of Westfield Intellectual Property or the validity of any registration of Westfield Intellectual Property;

(c) without limiting clause 14.3(b), ensure that it observes and complies with all reasonable instructions, requirements, directions and specifications of the Manager from time to time in respect of the use of Westfield Intellectual Property;

(d) not permit other persons to use Westfield Intellectual Property without the prior written consent of the Manager which consent the Manager can give or refuse in its absolute discretion or grant subject to conditions.”

31. Part A of Sch 2 provides security specifications and operational standards. Clause 1 therein defines the following terms:

“(d) “Contract Security Employees” means persons who are provided by the Security Contractor to conduct security guard and mall management duties at a Westfield Shopping Centre.

…

(g) “Induction” refers to the Centre EHS Induction Program and the Security Officer Induction Process as detailed in the Security Officer Induction Checklist.

i. “Pre Induction Meeting” refers to a Westfield Manager meeting any Security Officer prior to commencing “Primary Induction” for the purpose of assessing the suitability of the candidate to work at the Centre.

ii. “Primary Induction” refers to the initial induction of core Security Officers where essential Westfield Policy, training and site specific information is provided to the Security Officer.

iii. “Secondary Induction” refers to the period after the Security Officers have demonstrated to the Manager an effective knowledge of the “Primary Induction” requirements in which the officers are provided with on the job induction in other relevant areas of operation and training. The labour cost during this period shall be met by Westfield.

…

(l) “Westfield Security Manager” is a Westfield employed Security Manager whose responsibility is to lead and direct the Shopping Centre’s security function. In the absence of a Westfield employed Security Manager, this term refers to the Westfield Centre Manager (or designated representative).”

32. Clause 2 states:

“The Security Contractor operating in Westfield Shopping Centres is responsible for the following supply of service:

2.1 Provide a safe and secure environment for all Westfield staff, contractors, tenants, customers and visitors to Westfield Shopping Centres in accordance with Site Orders and Plans.

…

2.8 Provide advice to Westfield Shopping Centre Management when security risks are identified.

…

2.13 In addition to “Safe” and “Secure” conditions as described in Clause 1 of the Specifications, Core or Ad Hoc Contract Security Officers will perform the following duties:

General Mall Management

Escorting of visitors both front and back of house

Assisting Centre Management staff with customer service related duties and enquiries

Carrying out errands as required

Attending to non security related incidents and tasks

Follow site specific orders and standard operating procedures

Provide first aid where necessary”

33. Clause 3.6.1 states:

“The Contractor will supply uniforms as per Westfield specification and provider at the Contractor’s expense. The Contractor will tailor the uniforms for proper and professional fit. The Contractor will provide the Manager with the name and location of a suitable tailor located within the centre or 1 kilometre of the Centre for emergency repairs and alterations of the uniform. If the Centre Manager, Security Manager or their designee, determines that the uniform requires tailoring, the manager may pay for the alterations and deduct the expense from the next contractor invoice.”

34. Part B of Sch 2 sets out “Guard Training and Induction” and the “Westfield Standard Wardrobe Specifications”, which relevantly states:

“Security personnel are the public face of our company. As such it is paramount that uniform fit is in keeping with a professional tailored look.”

JLL contracts

35. The relevant contracts between Securecorp and JLL relate to three office buildings: 175 Liverpool Street, 161-167 Castlereagh Street and Legion House, and Chifley Tower and Plaza.

36. The owners of those buildings engaged JLL to provide security services at the office buildings. Those contracts were in evidence before me:

1. 175 Liverpool Street – Managing Agency Agreement between JLL and Sicard Pty Ltd dated 16 December 2014, and Property Management Agreement between JLL and Sicard Pty Ltd dated 13 January 2011;

2. 161-167 Castlereagh Street and Legion House – Managing Agency Agreement between JLL and GPT Funds Managements Ltd and The Trust Company (RE Services) Ltd dated 30 July 2011; and

3. Chifley Tower and Plaza – Property Management Agreement between JLL and Reco Bathurst Pty Ltd dated 1 August 2014.

37. JLL then engaged Securecorp to provide security services to it to enable JLL to provide security services to the owners of those buildings. Those contracts were in evidence before me:

1. 175 Liverpool Street – Specialist Services Agreement for Manned Security Services between JLL and Securecorp dated 2 July 2013;

2. 161-167 Castlereagh Street and Legion House – Building Services Contract for Manned Security Services between JLL and Securecorp dated 20 February 2013; and

3. Chifley Tower and Plaza – Specialist Services Agreement for Manned Security services between JLL and Securecorp dated 1 August 2013.

38. I will set out the relevant clauses using the agreements for 175 Liverpool Street as an example, noting that it was common ground before me that the agreements for 161-167 Castlereagh Street and Legion House, and Chifley Tower and Plaza reflect a relevantly identical arrangement.

Contracts between JLL and the building owners

39. In relation to 175 Liverpool Street, there is a Managing Agency Agreement dated 16 December 2014 between JLL and Sicard Pty Ltd (referred to as the Client). Clause 2.1 states:

“The Client appoints JLL, and authorises JLL to act as the Client’s agent, to provide the Services.”

40. Schedule 2 sets out the scope of management services, which includes “Security and patrol services”.

41. There is also a Property Management Agreement dated 13 January 2011 between JLL and Sicard Pty Ltd. Clause 1.1 provides:

“Services means collectively the Leasing Services and the Property Management Services, and includes the leasing, managing, operating and maintenance of the Property.”

42. Clause 3.1 states:

“3.1      Services

The Property Manager must provide the Services in accordance with this agreement. The Property Manager must perform (or where permitted procure the performance of) the Services and all of its other obligations under this agreement in accordance with:

(a) all methods, practices and standards of diligence and care normally exercised by duly qualified and experienced persons in performing comparable services, free of defect or deficiency;

(b) in a proper, businesslike, commercially reasonable manner;

(c) in a timely and efficient manner;

(d) in accordance with the Owner’s Rules and Regulations and as agreed between the parties in writing from time to time and in accordance with all other decisions and requirements of the Owner which are notified to the Property Manager; and

(e) in conformance with all Applicable Laws, including but not limited to holding a current real estate agent’s licence where required to do so under Applicable Law to perform its obligations under this agreement.”

43. Clause 4 states:

“4.1      Property Manager’s employees

The Property Manager must have in its employ at all times a sufficient number of competent, experienced and trained employees licensed where required, to enable it to properly, adequately, safely and economically provide all Services hereunder for the Property.

4.2       Independent contractor

All matters pertaining to the Property Manager’s employees are the responsibility of the Property Manager. The Property Manager must comply with all provisions of Applicable Laws relating to the Property and the Services, including insurance, hours of labour, wages, working conditions, taxes, benefits, and other employer-employee related matters. This agreement is not one of agency, partnership, co-employer or joint employer, but one with the Property Manager engaged independently in the provision of Services as described in this agreement and those Services are provided on its own behalf as an independent the Property Manager. All other matters pertaining to the employment, supervision, compensation, promotion and discharge of the Property Manager’s employees are the responsibility of the Property Manager, which is in all respects the employer of those employees.

4.3       Supervision

The Property Manager must be responsible for the supervision and direction of the Services by its employees and any approved subcontractor and suppliers, and must, if the Owner requests, provide supervisory personnel on the Property acceptable to the Owner to carry out this responsibility. The Owner will not be responsible for and, except as stated in this agreement, will not have control or charge of the Property Manager’s means, methods, techniques, procedures, safety precautions or employment in connection with the Property Manager’s performance of the Services. The Owner may remove any unacceptable personnel of the Property Manager from the Property and the parties agree that the severance expenses (if any), will be borne by the Property Manager unless the removal of any such personnel is requested by the Owner without reasonable cause. In no event must exercise of such right be construed to make the Owner a co-employer.”

44. Schedule 1 sets out the scope of services, including at cl 2.5(a), “security”.

Contract between JLL and Securecorp

45. In relation to 175 Liverpool Street, there is a Specialist Services Agreement for Manned Security Services dated 2 July 2013 between JLL (referred to as agent for the Owner) and Securecorp (referred to as the Specialist Supplier).

46. Clause 4.1(a) states:

“In performing the Services the Specialist Supplier must:

(i) comply with the reasonable Directions of Jones Lang LaSalle relating to performance of the Services in the form and at the time required by Jones Lang LaSalle;”

47. Clause 6.6 states:

“(a) The Specialist Supplier:

(i) must provide personnel with uniforms;

(ii) will be responsible for the cost of providing and maintaining the uniforms to the highest standard;

…

(b) Jones Lang LaSalle may require that the uniforms supplied be specific to the Property. If Jones Lang LaSalle imposes such a requirement, then the Specialist Supplier must provide samples of the Property-specific uniforms to Jones Lang LaSalle for approval at least one month prior to commencing delivery of the Services.”

48. Clause 14.9 states:

“(a) The Specialist Supplier acknowledges and agrees that, subject to clause 14.9(b):

…

(iii) Jones Lang LaSalle (or any new agent appointed under clause 14.9(c)) enters into this Agreement in the capacity of authorised agent of the Owner and, notwithstanding anything contained in this Agreement incurs no liability and accepts no obligation under this Agreement in its own capacity.

(b) In this Agreement, except where expressed to the contrary, any reference to the Owner includes its agents, including without limitation, Jones Lang LaSalle;”

49. Schedule 1 sets out the scope of services under the contract which includes “Security and Safety” and provides specific requirements for “Security Personnel” relating to, inter alia, “Morale”, “Staff Behaviour”, and “Minimum Service and Duties” such as “Adherence to the approved Standing Orders of the Property”.

Securecorp’s submissions

50. Securecorp submitted that the relevant contractual agreements should be characterised as a “chain” of contractual relationships with the following characteristics:

1. Securecorp sources “service providers”, being people who actually perform cleaning and security services (the “providers”);

2. Securecorp contracts with other entities (the “contractors”), being, the Westfield managers, who themselves have contracts (either directly or via other contract(s)) to provide services to others (the “end users”), being the responsible entities; and

3. there are no direct contracts between Securecorp and the end users with respect to the provision of providers.

51. Securecorp submitted that the end user is the entity which takes the ultimate benefit of the workers’ services. It was submitted that the emphasis is on the employment agent closest to the end user. It was submitted that the contractors, in the present case, readily can be, and should be, seen as the employment agent vis-à-vis the end users. They procure the services of the service provider to the benefit of the end user.

52. It was submitted that the expression “end user”, while not contained in the relevant provisions, was used in the second reading speech (as quoted at [76] below) to the State Revenue Legislation (Miscellaneous Amendments) Bill 1998 (NSW) that introduced the precursor to s 37.

53. It was submitted that, for the reasons given by White J in UNSW Global Pty Limited v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577, a literal reading of s 37 would yield an outcome far beyond the mischief to be addressed.

54. Securecorp submitted that White J, in UNSW Global at [49], noted that the provisions should be construed so as not to apply to all arrangements that could fall within their literal terms. Rather, the provisions should be construed in accordance with the legislative intent as ascertained from the statutory context, including the juxtaposition of the employment agency contract provisions with the relevant contract provisions, the legislative history, and the extrinsic materials.

55. Securecorp submitted that the issue is how the Court should mitigate defects in the legislation. It was submitted that the provisions were intended to “secure the traditional tax base”, and not broaden it: UNSW Global at [40].

56. Securecorp submitted that in H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 at [114]-[116], Ward CJ in Eq considered sufficient that the procurement of the services of the service provider be something that is done in order to perform the obligations contained in the asserted employment agency contract. At [152], her Honour stated:

“It is clear from the evidence of the plaintiffs that in order to perform the obligation of cleaning and servicing hotel rooms to the requisite standard (i.e., to produce the required result under the hotel client contracts) it was necessary from time to time for HRC/Housekeeping Solutions to procure the services of additional housekeeping staff under the sub-contracting arrangements in place with the Platinum group companies and/or SWCA. The fact that those services were procured for the purpose of performance of the obligations under the hotel client contracts (and without which services those obligations could not be fulfilled) means in my opinion that the hotel contracts are ones “under which” the services were procured in the sense of the services being required to be supplied for the purposes of those contracts.”

57. Alternatively, Securecorp submitted that it was not procuring the services of the service provider in and for the conduct of the business of the contractors, in the sense that the providers did not help the contractors conduct their business in the same way (or much the same way) that the contractors employees would. It was submitted that the relationship between the contractors and the end users (with respect to the providers) was at least one-step removed.

58. Securecorp submitted that, if more than one employment agent in the chain could be liable for payroll tax in respect of the same services, then arbitrary consequences would follow: an agent who causes workers to be provided to the end user might not be assessed or would be assessed only for such additional amounts as they themselves pay which constitute “wages”; more than one agent might pay payroll tax referable to the same corpus of wages payable under the arrangement or undertaking; and the Act does not provide a mechanism by which one agent in the chain can ascertain whether another agent has paid payroll tax.

59. Securecorp submitted that the words “arrangement” and “undertaking” in s 37(3) deliberately permit recourse to schemes which extend beyond the scope of a particular contract. A “contract” for the purposes of s 37(3) can thus include an “arrangement” by which the responsible entity contracts with the centre manager on terms which contemplate, permit and authorise the latter to provide security from its own resources or via resources sourced elsewhere.

60. Securecorp submitted that s 41 does not dictate a different conclusion. Section 41 proceeds upon the assumption that there may be more than one person who is liable to pay payroll tax, and does not identify the “other person” as being another employment agent for the purposes of the arrangement. It deals with the unexceptional situation, where, as here, the plaintiff would, in the ordinary course, be otherwise liable to payroll tax on wages paid to its employees (for reasons unrelated to the operation of Div 8), and it excuses the plaintiff from that liability.

61. It was submitted that the reasoning of White J in UNSW Global is at least consistent with the construction for which Securecorp contended. It was submitted that this construction gives effect to the purpose of s 37 because it fixes liability on the entity most proximate to the end user, is consistent with Div 8 of the Act as a whole, and most closely accords with Parliament’s intention as articulated by the Minister in the second reading speech. Securecorp acknowledged that, in UNSW Global, White J was not invited, or required, to consider the present issue.

62. Securecorp submitted that White J considered the relevant question to be whether:

1. the service provider is procured to help the client conduct its business in the same way (or much the same way) as the client would through its employees, in which case s 37(1) is engaged; or

2. the service provider is not procured to work in the client’s business (as its employees would ordinarily do), notwithstanding that the services are for the client’s benefit, in which case s 37(1) would not be engaged.

63. Securecorp submitted that, here, the plaintiff provides services for the benefit of the contractor, to allow the contractor (or others that contract above the contractor) to provide the providers services to the end user. In that regard, whether the provider is being used “for the client” must be determined by reference to the closest “employment agent” to the end user, of which the plaintiff is not.

64. Securecorp submitted that White J in UNSWGlobal considered that the question is whether the relevant services are procured by the taxpayer “in and for the conduct of the business” of the taxpayer’s client. It was submitted that the providers (who may be procured by the plaintiff) do not provide services “for” the contractors, but rather, “for” the end users. Whilst the providers providing the services may be for the benefit of the contractors, the relevant test is whether they are enabling the end user (who is not a client of the plaintiff) to conduct its business in the same way (or much the same way) as the end user would have through its employees.

Chief Commissioner’s submissions

65. The Chief Commissioner submitted that the fundamental issue is whether the relevant contracts were “employment agency contract” under s 37 of the Act. It was submitted that Securecorp’s case was put on a narrow basis which touched only one aspect of the definition of employment agency contract. That aspect is whether Securecorp procured the services of its subcontractors “for a client” (or for the clients) of Securecorp.

66. The Chief Commissioner submitted that the effect of Div 8 of the Payroll Tax Act is to impose payroll tax on employment agents who provide the services of third parties to their clients.

67. It was submitted that s 37(1) was interpreted by White J in UNSWGlobal to refer to “a contract under which a person [the employment agent] procures the services of another person in and for the conduct of the business of the employment agent's client”: UNSWGlobal at [62]. It was submitted that White J’s construction was adopted by Kunc J in JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391 at [46], and by Ward CJ in Eq in HRC at [118]. The following propositions were said to be established by those cases about the correct interpretation of s 37:

1. “[T]he employment agency contract provisions were intended to apply to cases where the employment agent provided individuals who would comprise, or who would be added to, the workforce of the client for the conduct of the client’s business”: UNSW Global at [63];

2. “[The issue of whether individuals are working ‘in and for the conduct of the business of the employment agent's client’] will be determined by asking whether or not the individuals provided by the employment agents comprise, or are added to, the workforce of the client for the conduct of the client’s business. … [A]re the individual’s services provided to help the client conduct its business in the same way, or much the same way, as it would through an employee, or are they services which, although provided for the client’s benefit, are not provided by the service provider working in the client’s business?”: JP Property Services at [72], cited in HRC at [107].

68. The Chief Commissioner submitted that previous cases suggest the following indicia for working in and for the conduct of a business:

1. the location of the work performed. Working on site is an indication of working in and for the client’s business;

2. whether the work is of a kind done “in the ordinary conduct of the client’s business”: UNSW Global at [69]. Services are more likely to be provided in and for the conduct of a business if they are necessary for the business, are provided on a regular basis, and/or are provided by a continuous workforce (that is, with reasonable continuity of staff); and

3. whether the work “would otherwise have been done by the [client’s] employees”: UNSW Global at [68].

69. The Chief Commissioner submitted that the issue in this case turns on whether the security staff placed by Securecorp at its clients’ businesses worked “in and for the conduct” of those businesses. If they did, then the remainder of the s 37(1) definition is satisfied, because Securecorp clearly procured the services of its subcontractors to help perform its obligations under the security contracts.

70. The Chief Commissioner submitted that Securecorp’s argument that its arrangements involved a “chain” of contractual relationships and employment agents should be rejected for the following reasons:

1. the word “client” should be given its ordinary meaning. The focus should be on whether Securecorp’s security staff were working in its clients’ businesses. This accords with the approach in UNSW Global at [62]-[65], whereas Securecorp’s focus on “end users” does not;

2. this Court has warned against “the vice of using the language of the second reading speech ... in substitution for the language of the statutory provision under consideration”: Norrie v NSW Registrar of Births, Deaths and Marriages (2013) 84 NSWLR 697; [2013] NSWCA 145 at [82] (Beazley ACJ, Preston CJ of LEC agreeing). Securecorp’s argument not only substitutes the Minister’s term “end user” for “client” in s 37 of the Act, but also construes the term “end user” by reference to Securecorp’s own definition, which appears neither in the Act nor in the second reading speech. This approach is divorced from the text of s 37 and goes well beyond the permissible use of extrinsic material under ss 34(1) and 34(2)(f) of the Interpretation Act 1987 (NSW);

3. second reading speeches are rarely, if ever, of assistance in elucidating the meaning of particular words: Waugh Hotel Management Pty Ltd v Marrickville Council [2009] NSWCA 390 at [140]-[145] (Campbell JA, Hodgson JA agreeing). Here, there is no warrant for taking “client” in s 37 of the Act to mean “end user” in the sense Securecorp uses the term;

4. there could be any number of entities taking the “ultimate benefit” of Securecorp’s services. On Securecorp’s own evidence, its services are provided “for the ultimate benefit of any (or all of) the responsible entity, the tenants and the public at large”. Other beneficiaries could include staff and contractors working at the premises. The construction of s 37 of the Act should not be governed by a nebulous term such as “ultimate benefit” that appears nowhere in the Act;

5. Securecorp’s case appears inconsistent with HRC and JP Property Services. The end users of housekeeping services in HRC were arguably the hotel guests (who pay for accommodation including room cleaning), and the end users of cleaning services in JP Property Services were arguably the supermarket customers (who walk on the cleaned floors). On Securecorp’s analysis, it would appear to follow (contrary to HRC at [153] and JP Property Services at [80]) that an employment agency contract could not possibly exist in such cases, because the HRC housekeepers and JP Property Services cleaners were not working in businesses operated by the “end users” (hotel guests or supermarket customers);

6. it is doubtful that the Westfield property managers are employment agents. The Westfield property management agreements appoint the property managers as sole managers and agents for the purposes of leasing, managing, operating, promoting, maintaining and administering the shopping centres. Thus the Westfield property managers were the operational entities with day to day employees and staff, including security staff, while the Westfield responsible entities were simply owners and lessors. If a choice must be made, it is more accurate to say Securecorp’s security staff were working in the managers’ businesses, not those of the responsible entities; and

7. a choice, however, need not be made, because a person can clearly work in more than one business at the same time: see JP Property Services at [54(5)], [69] citing Freelance Global v Chief Commissioner of State Revenue [2014] NSWSC 127 at [173]; HRC at [143]-[144]. Thus, one can say Securecorp’s staff worked in the businesses of the Westfield managers and of the Westfield responsible entities. There may be more than one client, and more than one employment agent, within a “chain” of contractual relationships.

71. The Chief Commissioner submitted that the effect of ss 37-41 of the Act is that all employment agents in the chain are liable to pay payroll tax, but under certain circumstances, liability is excused under s 41. The intent of s 41 is to ensure that, in the circumstances it describes, double taxation is not imposed on the same set of wages. It was submitted that s 41 does not specify that any particular employment agent is liable to pay the payroll tax, but rather, assumes that, absent that section, multiple employment agents may be liable to pay payroll tax for the same set of wages. It was submitted that the words in parentheses – “any other person engaged to procure the services of the service provider for the employment agent's client as part of the arrangement” – clearly contemplate that the arrangement may involve more than one employment agent (by reason of more than one person procuring the same services). The Chief Commissioner submitted that, if only the employment agent closest to the end user is liable for payroll tax (as Securecorp contends), then the words in parentheses in s 41 would be unnecessary, as there would be no possibility of more than one employment agent being liable. It was submitted that this shows the plaintiff’s construction of s 37 is incorrect, and, that the language of s 41 contemplates multiple employment agents and not simply liability arising under different Divisions of the Act. The Chief Commissioner submitted that a similar argument, that only the employment agent “closest” to the end user is liable to payroll tax, was considered and rejected in Knight Watch at [38]-[61].

72. The Chief Commissioner submitted that s 41 addresses the alleged “arbitrary consequence”, that more than one agent might pay payroll tax in respect of the same services. As for the alleged “arbitrary consequence”, that the Act does not provide a mechanism by which one agent in the chain can ascertain whether another agent has paid payroll tax, the Chief Commissioner submitted that ss 8-9 of the Act creates a self-assessment scheme where the obligation is on taxpayers to ascertain and pay their payroll tax liability. It was submitted that, consistent with that scheme, if taxpayers wish to be exempt under s 41, they may enter into commercial arrangements which ensure some other entity pays payroll tax in respect of the relevant services.

Relevant legislation

73. Division 8 of Pt 3 of the Payroll Tax Act 2007 (NSW) provides:

Division 8 Employment agents

…

37        Definitions

(1)     For the purposes of this Act, an employment agency contract is a contract, whether formal or informal and whether express or implied, under which a person (an employment agent) procures the services of another person (a service provider) for a client of the employment agent.

(2)     However, a contract is not an employment agency contract for the purposes of this Act if it is, or results in the creation of, a contract of employment between the service provider and the client.

(3)     In this section:

contract includes agreement, arrangement and undertaking.

38        Persons taken to be employers

For the purposes of this Act, the employment agent under an employment agency contract is taken to be an employer.

39        Persons taken to be employees

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

…

41        Liability provisions

Subject to section 42, if an employment agent under an employment agency contract:

(a)     by arrangement procures the services of a service provider for a client of the employment agent, and

(b)     pays payroll tax in respect of an amount, benefit or payment that is, under section 40, taken to be wages paid or payable by the employment agent in respect of the provision of those services in connection with that contract,

no other person (including any other person engaged to procure the services of the service provider for the employment agent’s client as part of the arrangement) is liable to pay payroll tax in respect of wages paid or payable for the procurement or performance of those services by the service provider for the client.

…

Legislative history

74. The employment agency contract provisions were considered in Freelance Global Ltd v Chief Commissioner of State Revenue [2014] NSWSC 127 and UNSW Global Pty Ltd v Chief Commissioner of State Revenue [2016] NSWSC 1852; 104 ATR 577 by White J and more recently in JP Property Services Pty Limited v Chief Commissioner of State Revenue [2017] NSWSC 1391 by Kunc J, and by Ward CJ in Eq in both H R C Hotel Services Pty Ltd v Chief Commissioner of State Revenue [2018] NSWSC 820 and Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657.

75. The legislative background to the employment agency contract provisions of the previous legislation (the Pay-roll Tax Act 1971 (NSW)) was considered in Freelance Global at [143]-[148]. Relevantly, his Honour there set out, at [146], what was said by the Minister for Employment and Minister for Finance in 1985 when introducing the Bill that became the Payroll Tax (Amendment) Act 1985 (NSW):

“I turn now to the subject of tax avoidance. It is a most unfortunate fact that in every walk of life there is a small minority of people who, by their unscrupulous behaviour, spoil things for everyone else. Thus it is that there has been a significant increase over the years in the use of artificial schemes and contrived arrangements by taxpayers attempting to avoid their liabilities to taxation. This has occurred in the area of pay-roll tax, just as it has in other more celebrated fields such as income tax.

This bill includes a number of measures which will catch schemes designed to avoid liability for pay-roll tax by severing the employer-employee relationship. Such arrangements have included the use of so-called contractors to replace wages staff. Typical of the situations that are known to exist and are the target of the legislation is the employer who, by arrangement with an employee, enters into a contract for service with the employee’s family trust, partnership or company for the provision of the employee’s services. The employee then performs the services for the employer but his salary is paid to the trust, partnership or company, resulting in the avoidance of pay-roll tax by the employer. Certain contracts will be exempted from liability for pay-roll tax, including contracts in excess of $500,000 where the contractor would need to hire staff and would therefore be liable for pay-roll tax. Bona fide independent contractors will not be caught by the legislation.

A second are [sic] of avoidance that is dealt with by this bill is the use of employment agents. Such agents are being used increasingly by employers, particularly in the recruitment of professional people and also for temporary staff. In some cases it has been claimed, by virtue of the arrangements entered into, that the person whose services are provided is employed by neither the contract agent nor the client. The arrangements entered into have sometimes also involved the use of trusts, partnerships or companies. The legislation will confirm that payments by an employment agent made in respect of the provision of services to a client of the agent are liable for payroll tax.”

76. With effect from 1 January 1988, the legislation was amended (see the Payroll Tax (Amendment) Act 1987 (NSW)), such that the liability for payroll tax for workers engaged through an employment agent (as defined) was borne by the client “using the worker’s services”, rather than by the employment agent. However, there was a subsequent amendment introduced by the State Revenue Legislation (Miscellaneous Amendments) Act 1998 (NSW). This followed the introduction in Victoria of comparable legislation, after the decision in Drake Personnel Ltd v Commissioner of State Revenue (Vic) (Supreme Court (Vic), Balmford J, 23 June 1998, unrep). The change in NSW again placed liability for payroll tax in respect of amounts paid for the services of contractors procured by an employment agent on the employment agent, rather than the client. At the time, the Minister said: [1]

“The Pay-roll Tax Act currently provides that wages paid to temporary staff provided through employment agents are taxable in the hands of the end user of the labour services. An administrative arrangement allows the agent to take responsibility for the tax but only if the end user agrees. Traditionally, the majority of temporary staff have been accepted as common law employees of the end user. Some are deemed to be employees under the relevant contract provisions. The relevant contract provisions are anti-avoidance provisions designed to bring to tax wages paid to persons who are, for all intents and purposes, performing duties similar to those of employees. Recent judicial pronouncements in other jurisdictions have confused the issue of liability to the point that employers and employment agents are unsure of their obligations. The uncertainty has prompted refund claims by employment agents which are likely to reach some $200 million in New South Wales alone. Those claims represent windfall gains for employment agents as the payroll tax would already have been passed on to the clients.

To secure the traditional tax base and make taxpayers [sic] obligations and point of liability absolutely clear, the bill introduces specific provisions relating to payments to workers engaged through employment agents. The agent will now be liable for payroll tax, bringing New South Wales into line with Victoria, Western Australia, South Australia and Queensland. The other jurisdictions do not have specific agency provisions.” (Emphasis added.)

1. New South Wales Legislative Assembly, Parliamentary Debates (Hansard), 14 October 1998, at 8287.

Consideration

77. The relevant principles of construction were not controversial in this case. In Federal Commissioner of Taxation v Consolidated Media Holdings (2012) 250 CLR 503; [2012] HCA 55 at [39], the High Court, quoting Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (2009) 239 CLR 27; [2009] HCA 41 at [47] (Hayne, Heydon, Crennan and Kiefel JJ), stated:

“This Court has stated on many occasions that ‘the task of statutory construction must begin with a consideration of the [statutory] text’. So must the task of statutory construction end. The statutory text must be considered in its context. That context includes legislative history and extrinsic materials. Understanding context has utility if, and in so far as, it assists in fixing the meaning of the statutory text. Legislative history and extrinsic materials cannot displace the meaning of the statutory text. Nor is their examination an end in itself.” (Footnote omitted.)

78. The fundamental issue is whether the relevant contracts were employment agency contracts under s 37 of the Act. That is, whether the contracts between Securecorp and Westfield Management Co and between Securecorp and JLL were contracts under which Securecorp (an employment agent) procures the services of another person (a service provider) for a client of Securecorp.

79. The effect of Div 8 is to impose payroll tax on employment agents who provide the services of third parties to a “client”. Securecorp’s submission is that, on the proper construction of the employment agency contract provisions of the Payroll Tax Act, where there is a chain of contractual arrangements, it is only the “employment agent”, closest in that chain to the “end user” of the services of the person providing the services, who is the “client” upon whom liability for payroll tax arises.

80. In the present case, so the argument goes, as the services of the person supplied by Securecorp are on-supplied under a separate contract by Westfield Management Co and JLL, relevantly, to the owners of the Westfield shopping centres or the owners of the JLL managed buildings, liability for payroll tax is imposed, if at all, on Westfield Management Co and JLL and not upon Securecorp. I have concluded, for the following reasons, that Securecorp’s contention is not correct.

81. Securecorp’s argument relies heavily upon two related limbs. The first is the use of the term “end user” used by the Minister in the second reading speech quoted at [76] above. The second is an attempt to apply the “end user” concept to the language used by White J in UNSW Global of “the business” of the employment agent’s client.

82. That is, the suggested construction provides that the focus in the section is upon the business of the employment agent’s client and that, in identifying the relevant business subject to payroll tax, it is the contract under which services are provided to the “end user” which is subject to payroll tax.

78. As to the first part of the argument, the term “end user” in this context derives from the explanation given by the Minister in circumstances where he was explaining the legislative change that was intended to deal with the effect of the first instance decision in Drake Personnel. The Minister’s use of the term “end user” was, in context, a shorthand explanation for the decision to place liability for payroll tax once again on the employment agent rather than the client of the employment agent. The “client” for this purpose was referred to by the convenient shorthand as the “end user”.

79. Relevant context in construing s 37 of the Payroll Tax Act includes the legislative history and extrinsic materials, including the second reading speech upon which Securecorp places so much reliance. The second reading speech to the State Revenue Legislation (Miscellaneous Amendments) Bill 1998 (NSW) identified the taxing rationale of the provisions as being that “[t]he relevant contract provisions are anti-avoidance provisions designed to bring to tax wages paid to persons who are, for all intents and purposes, performing duties similar to those of employees”. Mr Condon SC accepted in argument that this was the taxing rationale of the provisions. This is an important aspect of context.

80. The term “end user” used by the Minster in the second reading speech is, however, being asked to do too much work by Securecorp. To construe the words in s 37 “the services of another person (a service provider) for a client” as intending to identify an “end user” of the services, who is not a client of the service provider, does violence to the provision. The suggested construction reads into s 37 an irrelevant enquiry, which provides a limitation upon the operation of the section inconsistent with its language and statutory purpose.

81. In any event, care needs to be taken not to read into the legislation (by reference to extrinsic materials) words that one considers that the legislature might have intended. See, for example, Mason CJ, Wilson and Dawson JJ in Re Bolton; Ex parte Beane (1987) 162 CLR 514 at 518; [1987] HCA 12.

82. As to the second limb of Securecorp’s argument, s 37(1) was interpreted by White J in UNSW Global to refer to “a contract under which a person [the employment agent] procures the services of another person in and for the conduct of the business of the employment agent’s client”: UNSW Global at [62]. I have proceeded on the basis, which was common ground before me, that the test described in UNSW Global was the correct one.

83. In Bayton Cleaning Co Pty Ltd v Chief Commissioner of State Revenue [2019] NSWSC 657, Ward CJ in Eq explained:

“[95] The words “in and for the conduct of the business” of the employment agent’s client are not … contained in s 37(1) of the legislation. However, having had regard to the history behind the legislative provisions, as revealed by the extrinsic materials, in UNSW Global White J held that the operation of the statute should be confined by a purposive construction that his Honour considered was permitted by the text (see UNSW Global at [62]) to that effect, for the reason that giving the provisions their natural and ordinary or literal meaning (i.e., that the section simply requires that the services be provided “for” a client) would lead to an “absurd or unreasonable” result and would go far beyond the mischief intended to be addressed (UNSW Global at [46]; [49]).

[96] In UNSW Global, his Honour considered that the employment agency contract provisions were not intended to apply to an entity unless the entity provided individuals “who would comprise, or who would be added to, the workforce of the client for the conduct of the client’s business” (UNSW Global at [63]) or, in other words, persons who are in substance, working for the client in the same way as would an employee of the client (UNSW Global at [64]). His Honour concluded that where the services, although provided for the client’s benefit, were not provided by the service provider working within the client’s business, the employment agency provisions did not apply (UNSW Global at [65]).”

89. Care needs to be taken to ensure that White J’s construction of s 37 in UNSW Global is not over-read. In particular, I do not understand his Honour to have decided that s 37 introduced, as a relevant enquiry, a search for the ultimate “business” where services provided by an employment agent to a client are actually performed. It is a mistake, as Securecorp attempts here, to take one word used by White J in UNSW Global, “business”, and to use that word out of the context in which it was used to read down the meaning of the word “client” used by the statute.

90. Adopting the construction of s 37 identified in UNSW Global, in the way I understand it should be read, provides no support for the suggestion that s 37 requires a search for the “business” of a client in the sense of the ultimate end user of the services provided.

91. Another reason for rejecting the plaintiff’s argument that the only “client” within the meaning of s 37 is the “end user” is that there may be many users of particular services. In Knight Watch Security Services Pty Ltd v Chief Commissioner of State Revenue [2017] NSWCATAD 223 at [84]-[88], Senior Member Isenberg correctly held that security guards whose services the taxpayer procured were working in the businesses of the taxpayer’s clients (or, at least, the taxpayer had failed to show they were not working in those businesses). The same conclusion follows here. The “client”, for the purposes of s 37, is the recipient of services – Westfield Management Co and JLL – even if those firms were not the so-called “end users” of those services.

92. In any event, Westfield Management Co and JLL were “end users” of the plaintiff’s security services because they were the operational entities providing security services to the shopping centre owners and the office building owners in the course of their businesses. Even if I were not satisfied of that matter, Securecorp has failed to prove the relevant contractors were not working in the businesses conducted by Westfield Management Co and JLL.

93. It remains to deal with Securecorp’s submission that, unless its construction of s 37 is adopted, the legislation would give rise to double taxation, inconvenience or even absurd results. The construction I prefer does not produce absurd or even inconvenient results. Section 41 clearly addresses the “arbitrary consequences” identified by Securecorp. Section 41 contemplates that there might be more than one person liable to pay payroll tax and that more than one agent might pay payroll tax in respect of the same services. Otherwise the words in parentheses – “(including any other person engaged to procure the services of the service provider for the employment agent’s client as part of the arrangement)” – in s 41 would not have been necessary. Under the conditions s 41 identifies, liability for payroll tax is then excused. The suggested possibility of double taxation, much less absurdity, does not arise.

94. In any event, as Sackville AJA said in Smith’s SnackfoodCompany Ltd v Chief Commissioner of State Revenue (NSW) [2013] NSWCA 470:

“[245] Mr Leggat SC, who appeared with Mr Young for the Chief Commissioner, submitted that construing s 32(2)(d)(i) in this way gives the exemption an operation that is too wide and could lead to absurd results. Absurdity will rarely be a helpful notion in construing a revenue statute. The question is how the language used by Parliament applies to the particular factual situation.”

95. I agree.

96. There is nothing surprising about a taxing Act which contains a self-assessment scheme where the obligation is on taxpayers to ascertain and pay their payroll tax liability, and there is nothing about the statutory language in s 37 which, in context, leads to unreasonable or unforeseen consequences. Rather, the mischief to which s 37 is addressed is accommodated by leaving it to the Chief Commissioner’s discretion, where there is a situation of multiple employment agents, as to where the imposition of payroll tax should lie. If a taxpayer in such a case who is otherwise subject to payroll tax wishes to protect itself from the payment of that payroll tax, it is, of course, free to enter into commercial arrangements which ensure some other entity pays payroll tax in respect of the relevant services, as Westfield Management Co apparently did here: see cl 6.4 quoted at [28] above. It is unprofitable to speculate, as Securecorp invited me to, about any possible incentives created in structuring arrangements through a series of intermediate contractual arrangements which might have the effect of avoiding payroll tax liability.

97. Before leaving this case, the Chief Commissioner submitted that, while not crucial to the present case, one aspect of the decision of Kunc J in JP Property Services is problematic. At [79]-[80] and [92], Kunc J appeared to suggest that if “incidental” services are provided outside of ordinary business hours, then they are not provided “in and for the conduct of a business”. I am unable to agree. The introduction of a requirement that services provided not be “incidental” to a client seems, with respect, to involve an impermissible gloss on the statute. An accountant providing after-hours technical support is, in my view, working in and for the conduct of the accounting firm. It is an irrelevant enquiry to ask, in addition, whether the services provided are provided outside normal trading hours. Much less is it relevant to enquire whether the services provided are “incidental” services. Nothing in s 37(1) or in White J’s construction of s 37 refers to “core” or “incidental” services and the enquiry suggested is not one that I would adopt.

Conclusion and orders

98. I have concluded that Securecorp’s challenge to the assessments based on what I have termed the “closest to the end user” argument does not succeed. Applying the test articulated in UNSW Global and applied in JP Property Services and HRC to the present facts, I am satisfied that Securecorp’s respective contractual arrangements are arrangements “under which” it (as an employment agent) procures the services of security staff for a client of Securecorp. There is the requisite connection between the contractual arrangements and the provision of services in and for the conduct of the respective clients’ businesses.

99. For the foregoing reasons Securecorp’s application to revoke the relevant assessments should be dismissed.

100. The orders of the Court are:

1. Summons dismissed.

2. The plaintiff to pay the defendant’s costs.

**********

Endnote

Decision last updated: 21 June 2019